Trading with point and figure

dax

33oqjia.png
 
- Digesting Japan Wages, UK spending surveys and German Trade & Production,
awaiting US NFIB Small Business Optimism & JOLTS Job Openings; Kashkari
the only Fed speaker; busy day for Eurozone bond auctions, US 10 yr and
US 3-yr also on tap; API oil inventories

- US NFIB Small Business Optimism: seen rising modestly after November's
surge - focus on prices, hiring and investment intentions

- UK BRC / Barclaycard surveys: rather divergent, but a case of 'apples'
and 'pears', underlying trend somewhere between the two

- Japan Wages: starting to see some emergent upward momentum, jump in
bonuses should trickle down to basic pay going into 2018

- German Trade and Production: better than expected, but hardly surprising
given well documented strength seen across the board

- Charts: USD/JPY and JGB 10/30 yr spread

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

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

There is slightly more statistical 'meat on the bone' of today's data schedule. On the 'to digest' are Japan Labor Cash Earnings, UK BRC Retail Sales and German Trade and Industrial Production, while ahead lies the US NFIB Small Business Optimism & JOLTS Job Openings along with Mexican CPI. Event wise, there is little more than some Fed speak from arch Fed dove Kashkari, following from marginally dovish comments from Bostic, and still modestly hawkish leaning suggestions on inflation targeting from Rosengren and Williams. But it will be a busier day is in prospect for govt bond supply, via way of 10 & 30-yr Austria Bunds, Dutch 7-yr DSL, German 7-yr Inflation-Linked Bund in the Eurozone, while the UK sells 10-yr Gilts and the US kicks off its 3-part refunding with $24.0 Bln of 3-yr. It is also API oil inventories day, which are expected to see Crude stocks drop for an eighth consecutive week by 4.1 Mln bbls, with Gasoline stocks seen up 2.7 Mln and Distillates up 900K. As far as the NFIB Small Business Optimism survey goes, it is notable that the consensus looks for a further rise to 108.0, after a sharp jump to 107.5 from 103.9 in November, unusual in so far as some form of mean reversion would normally be anticipated, and by extension suggest a good deal of confidence that the momentum in the US economy is being sustained.

Of the overnight day, the Japan wages data offer further positive signals in trend terms, with total Labor Cash Earnings picking up a little further to a still modest 0.9% (vs Oct 0.6%). Eminently the gains were paced by overtime pay and special bonus payments (the latter being absolutely critical when the December readings are published), but indicative of employers looking to ensure they keep workers, given a very tight labour market and the consequential shortage of labour skills in the pool of available labour. The latter also implies a trickle down into basic wages for 2018. Markets in Tokyo were clearly more focussed on the BoJ's modest cut to the volume (JPY 10 Bln each) of its 10-25 yr & 25-40 yr JGB purchases, prompting speculation that the BoJ may be close to either raising its 10-yr yield target or reducing its QQE volumes. In truth, it may be rather more the case that it is trying to help financially repressed JGB fund managers, by allowing the long end of the curve to steepen modestly, particularly as the 10/30 yr spread has flattened some 8 bps since mid-October, which may seem modest to outside observers, and in line with trends elsewhere, but is substantial in a local market context - see the attached chart.

As for the two UK Retail surveys overnight from the BRC and Visa, which were quite sharply divergent, there are two simple observations: a) they do not measure the same thing, the BRC being pure retail spending, while the Barclaycard is overall consumer spending, i.e. including leisure activities; b) they also cover slightly different survey periods, which is material in so far as leisure spending would have been subdued in the Christmas holiday period (not covered by the Barclaycard measure). As such the truth about the overall private consumption picture lies somewhere between the two, but still clearly indicative of the well documented woes of the High Street, as well as the ongoing pressure on household spending due to negative real wage growth.

Better than expected German Trade and Production data affirmed what is already well known, i.e. that the German economy is in rude health, with Production rebounding from October's drop fo 1.2% m/m to post a 3.4% m/m gain, despite a drag from the energy sector; overall production thus maintains the 1.0% q/q pace seen since July. German Trade stats were also much better than expected with Exports rebounding 4.1% m/m (f'cast 1.2%), and Imports up 2.3% (vs. f'cast 0.4%). That said this also mirrors the quarterly pattern that has emerged of late, with the 2nd month of the quarter generally being much stronger than month one or three, as such December data will be critical for ascertaining what sort of contribution Net Exports will make to Q4 GDP.

from Marc Ostwald
 
move down from 13410 area
bounce at 13380
13400 became rez on bounce...
and in again
tight stop
 
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