Trading with point and figure

DAX

CARE..

33u4t8w.png
 
- Digesting busier Asia data run - China inflation, Japan Orders, UK RICS
House Prices & German Trade; awaiting US Claims, barrage of ECB speak,
Rate decisions in Malaysia, Mexico, Peru & Philippines; UK 5-yr and US 30-yr
sales; UK political woes, US tax reform prospects and Trump Asia trip
the overarching themes

- China CPI/PPI: modestly higher than expected, but unlikely to prompt
policy changes

- Japan Orders: expected Q4 more significant than m/m drop, underlying
CapEx momentum rather weaker than anticipated, but Japan Inc cash
mountain should underpin

- Bank of Korea and RBNZ offer two further pointers to less central bank
policy accommodation

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

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

Finally a day with rather more in the way of economic data, even if the primary items - Japan Orders, UK RICS House Prices & German Trade - have already been published, with US weekly jobless claims and Mexican CPI ahead. Trump's visit to China will obviously be a focus in event terms, along with a deluge of ECB speakers, and rate decisions due in Malaysia, Philippines, Mexico and Peru, while the US rounds off this week's refunding with $15.0 Bln of a new 30 yr, and the UK re-opens its 2023 Gilt. The European Commission also publishes its forecast update for EU economies, which will certainly see a number of upgrades in GDP terms. Otherwise the overarching themes will inevitably be the prospects for delivery on US tax reforms, with the House and Senate versions of the bill seemingly on an increasingly divergent path, as will heightened tensions in Saudi Arabia and the Lebanon, though the perhaps most notable proximal point of risk being UK politics.

Of the overnight news, the higher than expected China CPI (1.9% y/y) and PPI (6.9%) are unlikely to have any implications in PBOC policy terms, with the rise in CPI primarily driven by unwind of Food price base effects (-0.4% y/y vs. Sept -1.4%), with Non-Food Prices at 2.4% offering a better reflection of the underlying trend. The rise in PPI was equally unsurprising given the rise in energy and other industrial raw material prices, in no small part driven by the authorities' anti-pollution measures. It is always unwise to over-interpret one month's move in Japanese Private Machinery Orders, and the -8.1% m/m against forecast of -1.8% is less significant than expectations that Orders will fall 3.4% in Q4, which suggests that the underlying trend is not as strong as many had been assuming. That said, the gargantuan pile of cash sitting on the balance sheets of Japan Inc could surely be put to much better use, given that domestic demand is reasonably strong, and the global economy is in good health. The summary of opinions of the October BoJ meeting offers another strong hint that with Japanese equity indices rising sharply, a rethink on its QQE ETF purchases may not be far away. This fits with a narrative of an evolving shift to a less accommodative in central bank policies, not only in the G7, but also more broadly, with the Bank of Korea again hinting at a near-term rate hike, and New Zealand's RBNZ also edging the timing of its first rate hike forward at its meeting last night. The UK RICS House Prices survey signalled ongoing weakness in the housing market, with the headline balance dropping to +1 from +6, and rather more significantly most regions expecting flat or negative demand in the near-term, with house price expectations slipping deeper into negative territory at -11 from -8. However UK economic news is clearly being subordinated by political developments, with the already very shaky looking May govt at risk of imploding, which not only bodes poorly for Brexit negotiations, just at the point where the EU is sounding more accommodative, but will have investors very concerned that a general election might usher in a neo-Chavista Labour govt.

from Marc Ostwald
 
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