Trading with point and figure

- Quiet start to the week, focus on digesting BIS quarterly review and China
property prices, awaiting Carney and US NAHB Housing Market Index; markets
in pre-FOMC vigil mode

- US NAHB Housing Market Index: expected to hold at level indicating solid
demand, a reminder to keep perspective on any Starts and Home Sales weakness

- Week Ahead: All eyes on Fed, modest week for statistics, busy week for
policy and politics, watch corporate bond supply

- Charts: USD and GBP TWI, CNY vs USD and CNY, US HY spread vs. UST 10yr

..........................................................................

********************
** EVENTS PREVIEW **
********************

A quiet day to start this data light, but policy intense week, with China's Property prices and the US NAHB Housing Market Index the highlights of the data schedule. This should give plenty of time to run through the usual treasure trove of market information and analysis to be found in yesterday's BIS quarterly review. The US NAHB survey is seen little changed at a very solid 67 (AUg 68), thus offering a timely reminder that any weakness in other housing indicators, Housing Starts and Existing Home Sales are due this week, they signal structural headwinds rather than a drop in demand. In FX markets, a close eye needs to be kept both on some only very tentative signs that the USD may have found a base, as well as on the CNY, whereby the contrast between its performance vs EUR and USD needs to be borne in mind. The latter applies not only only to the previously noted point about how a strong EUR vs. the CNY has clearly not even vaguely dented EU/Eurozone exports to China, while a sharper correction vs. the USD has implications both for China's appetite for commodities, FX reserves and its extensive foreign liabilities. On the policy side, Carney's speech at the IMF HQ tops the agenda, and he will likely trot out the same line as he and his MPC colleagues did last week, about a rate hike being possible in coming months.


RECAP - The Week Ahead - preview highlights: 18 to 22 September 2017

- The FOMC meeting will be the focal point for a week that is light on economic data, with the BoJ policy meeting, the week ending elections in New Zealand and Germany, a key note speech by PM May on Brexit, and the UN General Assembly providing the other event highlights.

- Statistically the US has Import Prices and a run of Housing data, and along with Japan, Eurozone and the USA flash PMI readings. The UK looks to the delayed Retail Sales, PSNB and CBI Industrial Trends survey, while Germany has its ZEW survey, with Japanese Trade, China Property Price and NZ Q2 GDP the other potential highlights.

- In what is a busy week for central bank meetings, markets anticipate that the Fed will keep rates unchanged (with a December rate hike now seen as 50/50), but announce that it will commence balance sheet reduction at a pace of $10 Bln per month in Q4. The statement will doubtless keep the option of a December rate hike clearly on the table, but markets will as ever hone in on the 'dot plot', with many expecting the likes of Brainard to perhaps adjust their trajectory lower. The Fed will doubtless note that the impact of the hurricanes will make incoming data over the next couple of months somewhat more difficult to forecast, but the focus will be on any changes (likely to be tweaks) to its inflation forecasts, and the statement language (for July statement see https://www.federalreserve.gov/newsevents/pressreleases/monetary20170726a.htm ). The BoJ is not expected to make any changes to its policy parameters, not offer any hints that it might takes its foot off the pedal in terms of monetary policy accommodation, perhaps noting that it intends to ensure that any emergent upward pressure on JGB yields due to less accommodative policy parameters elsewhere will be resisted. It will inevitably concede that it may take longer for CPI to reach its target, and for some upward pressure on wages to emerge, but that it remains determined to achieve its targets. Elsewhere, rates are seen on hold in Hungary, Indonesia, Kenya, Paraguay, Philippines and Taiwan, but a further 25 bps rate cut is expected in South Africa, even if the case for caution given political uncertainties is all too obvious, and indeed the dubious benefit of a rate cut to an economy beset by a mountain of structural problems.

- Germany's election is being seen by most market participants as something of a non-event: "Merkel wins again, so what?" In truth while the CDU/CSU will beat the SPD by a very clear margin, the fact of the matter is that up to 20% of the vote may go to the extremes of the AfD and Die Linke, neither of whom would be considered as coalition partners. At a push, there may be the chance of forming a CDU/FDP coalition, though Frau Merkel's distrust of the occasionally brash Christian Lindner is well documented, and it seems more likely that the two options will be either another grand coalition with the SPD, which will take a long time to thrash out, or the so-called Jamaica (Black, Green, Yellow) of 3-way coalition with the Greens and the FDP, where trying to find common policy initiatives will be extraordinarily challenging. In all likelihood, given these challenges, a new govt may only be formed in December, which obviously will put a brake on Brexit negotiations and M Macron's hopes of establishing a reform path for the EU and the Eurozone.

- A relatively busy week for govt bond supply, though it is corporate (IG and HY) bond supply which may demand greater attention, given the deluge of supply month to date has already seen $88.5 bln of USD IG supply and near to $20 Bln of HY, all seemingly easily absorbed, though suggesting a degree of indiscriminate desperation in the world of reach for yield and duration.


from Marc Ostwald
 
ftse
7220 if yu can get it
decent pivot area
should be bulls there
for a mini swing trade
could be wrong...lol
 
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