Trading with point and figure

kiwi today

2s9aced.png
 
Morning all,

Having missed a lot of yesterday's move up on EG, I'm hoping to redress a bit of that today - plus (of course!) the odd pip or two on a nice little piggy-back trade on the Dax, courtesy of the dynamic duo 007 and ML:)

I see the chart as bullish but with a p/b to .8875 quite likely. I'm tied up today, so I'm going to leave an order in at that price with a target of .9020
 

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- Digesting China Trade and Lending data, Fed Dudley slap down on US tax
reforms and German preliminary coalition agreement, awaiting US CPI,
Retail Sales, start of Q4 earnings season and Fed speak from Rosengren

- China Trade data: import deceleration catches attention, not as dramatic
when put in broader context, record 2017 Trade surplus with US

- US CPI: food and gasoline likely to weigh on headline; autos, shelter
and medical costs pivotal for core

- US Retail Sales: seen posting modest but solid gain across all metrics,
some downside risks for headline, but chain stores may boost core
measures

- Charts: China Trade and China Soy imports

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

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

There was never any doubting that today was the high watermark for the economic data schedule, with the China Trade readings to digest ahead of Swedish CPI and US Retail Sales and CPI, with the events schedule being rather modest via way of some Fed speak from Rosengren (following on from the admirable mauling Dudley gave to the US tax reform) and the USDA's WASDE crop reports (see: http://www.cmegroup.com/education/usda-crop-reports.html ). NATFA developments will be closely watched, but at least the formidable Canada Foreign Minister Freeland, one of the few major country politicians with a statesman-like pedigree, clarified those observations that rattled markets. i.e. Canada is going into the next round of NAFTA talks 'preparing for the worst, and hoping for the best', and has put forward some 'creative solutions' for some of the major sticking points, but taking the US threat to quit NAFTA from the outset of negotiations seriously. The message to the US appears to be simple from Freeland: negotiate properly or leave! Today also marks the start of the Q4 earnings season with the usual array of financials getting things under way, and particular focussed on disclosure on the winners and losers from the Trump tax reforms. Last but not least, a deal is said to have been reached in Geemany for a framework for the CDU/CDU and SPD to continue formal coalition talks, which should lead to a government being formed at the very latest by March.

** China - Dec Trade Balance **
- Taken in isolation the USD denominated China Trade data would suggest some loss of momentum in domestic demand, with imports eking out a much smaller than expected rise of 4.5% y/y, while Exports beat forecasts rising 10.9% against expectations of 10.9%, resulting in a much higher than projected $54.69 Bln Trade surplus, and a highly politically sensitive record 2017 trade surplus with the USA of $275.81 Bln. But a closer look at some of the key contributing factor from December's commodity imports, and the overall 2017 CNY denominated Trade data advises against over-interpretation. Strength in LNG and Soy imports were wholly unsurprising, the former still a function of catching up after October's production and delivery hiccough, the latter paced by the drive to curb pollution via switching households from coal to gas. The dip in raw materials imports such as Iron Ore, Copper and Aluminium underlines that the November surge was always going to prove to be something of an outlier, particularly given the fact that construction activity slows substantially in winder months, the more so given the clampdown on overcapacity in a number of sectors. The 2017 CNY denominated Exports (10.8%) and Imports (18.7%) highlight just how strong the momentum in the economy has been during the year (Q4 GDP is due next Friday and forecast at 6.7% y/y vs. Q3 6.8%), and that while it will slow going into 2018 given all the curbs that have been put in place, it has like Europe proved to be far more resilient than most forecasters expected at the start of last year.

** U.S.A. - December CPI & Retail Sales
- Following from a food related miss on Import Prices and a Trade Services and Food miss on PPI, today's headline CPI forecast to rise 0.2% m/m 2.1% y/y, down from November's 2.2%, with core CPI also seen up 0.2% m/m for an unchanged 1.7% y/y, with the risks seemingly skewed to the downside due to the reports earlier in the week, even if the read across from the latter to CPI is often poor. Outside of the obvious potential for some drag from Food prices, and a dip in gasoline price, a close eye needs to be kept on Housing (OER), where there has been a modest deceleration in recent months, though at 3.2% y/y, this is a key contributor to keeping core CPI higher than headline, while the recently quite choppy profile to medical costs will be a further wild card. Retail Sales are forecast to post a rise 0.4% m/m on all headline and core measures, following on from a bumper 1.0% m/m ex-Autos and 0.8% m/m headline in November, which would point to a very solid contribution to Q4 GDP from Personal Consumption. Given the drop in gasoline prices, and quite substantial promotional activity in the auto sector (constraining the contribution from the volume pick-up relative to November), the risks on the headline look to be to the downside of forecasts, while strong chain store sales impart some upside risk to core measures.


from Marc Ostwald
 
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