Trading with point and figure

dow
needs to stay above 26100/trendline

2lwnjo2.png
 
- Digesting small hawkish tilt to FOMC statement; Manufacturing PMIs
dominate schedule, US Auto Sales, Construction Spending and jobless
Claims; Czech rate decision; India Budget: France/Spain bond sales;
further flood of corporate earnings

- Manufacturing PMIs: UK and Eurozone expected to remain robust; Asia
still very mixed: US ISM likely to dip as Orders edge back from
14-yr high

- US Auto Sales: seen dipping vs December, up fractionally on year
as incentives continue to support

- US Construction Spending: further solid gain expected, underlying
trend best in 2 1/2 years

- Charts: US Consumer Confidence Stock price expectations; WTI; Fed
rate probabilities; US 5/30 & 10/30 yr yield spreads

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

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

A new month kicks off with an all too familiar calendar of statistics dominated by Manufacturing PMIs from around the world, with Korean Trade and UK Nationwide House Prices to digest ahead of US Q4 Non-farm Productivity, Weekly jobless claims, Construction Spending and Auto Sales. The events schedule is relatively meagre, featuring India's key election year Budget, an expected 25 bps rate hike in the Czech Republic along with French and Spanish debt auctions. Corporate earnings will remain plentiful with pride of place likely to go to BBVA, Daimler, Roche, Royal Dutch Shell & Unilever, with the US watching for Alibaba, Alphabet (Google), Amazon, Apple, ConocoPhillips, Mastercard, Time Warner, UPS & Visa. Following on from the re-election of EU sceptic president Zeman at the weekend, the Czech National Bank is seen hiking rates a further 25 bps to 0.75%, in the wake of a sustained pick-up in inflation and indeed solid growth, and despite the recent strength of the CZK.

** World - January Manufacturing PMIs **
- That the world's Manufacturing sector is in overall good health should by now be obvious to all, and while the flash Eurozone readings did edge back from December levels, they were robust by any historical standard, and this is also expected to be confirmed by the Spanish and Italian readings. Asia has by contrast seen a rather mixed picture with Japan solid, but the likes of China, India and South Korea signalling rather weak momentum, as has been the case for some months, though generally showing some improvement vs. December. The UK reading should continue to signal a solid pace of sector growth, benefitting from strength on the continent, and seeing one of its best periods of sustained expansion for many a decade. The US Markit Manufacturing PMI matched its recent high at 55.5, but continues to lag the more reliable ISM measure, which is seen edging down to 58.6 from December's 59.3, more than likely due to a setback in the Orders measure from December's 14-yr high of 67.4.

** U.S.A. - January Auto Sales / Dec Construction Spending **
- January Auto Sales are expected to moderate further, but remain at an historically robust level at 17.30 Mln SAAR vs. December's 17.76 mln, with a potential drag from the big freeze in the early part of the month. The anecdotal evidence from sector specialists JD Power and LMC Automotive look for a 17.2 Mln pace, with incentives and discounts continuing to provide support and indeed said to reach the highest level on record, though it should also be added that average prices are also likely to be at record levels. Construction Spending is seen rising a further 0.5% m/m, which would mark a run of five consecutive gains, the best for 30 months, and echoing the strong data for investment in housing and to a lesser extent business structures seen in last week's Q4 GDP.

Updated: ** U.S.A. - FOMC statement **
- As expected, the FOMC opted to hold rates and stick to as much of the text from the December statement as was possible, though obviously having to jettison the references to the statistical noise around hurricane effects. The tweaks to the statement on inflation were on balance had a marginally hawkish tilt.

a) January: "Market-based measures of inflation compensation have increased in recent months but remain low; survey-based measures of longer-term inflation expectations are little changed, on balance."
vs December: "Market-based measures of inflation compensation remain low; survey-based measures of
longer-term inflation expectations are little changed, on balance."

b) a) January: "Inflation on a 12-month basis is expected to move up this year and to stabilize around the Committee’s 2 percent objective over the medium term. "
vs December: Inflation on a 12-month basis is expected to remain somewhat below 2 percent and to stabilize around the Committee’s 2 percent objective over the medium term."

The statement on the economy dropped the references to hurricane effects and simply observed: "Gains in employment, household spending, and business fixed investment have been solid, and the unemployment rate stayed low." There were unsurprisingly no dissents, and a 25 bps March rate hike (to 1.50-1.75%) is pretty much baked in the cake, barring some major surprises on economic data, or a meltdown in risk assets. In rates market terms, the immediate challenge is for the extra $42 Bln of Treasury issuance, the bulk of which will be short-dated (2/3-yr) to be absorbed. This should not be a major challenge for a market which has a voracious appetite for bonds, largely due to demographics and increasing pressure on US and other pension funds to match liabilities. However it does it imply further bear flattening on the treasury curve, and it may start to crowd out some corporate borrowers, with January's total USD Investment Grade Corporate issuance at $130 Bln, well down on last year's record $176 Bln. As a counterpoint, it is also well worth noting that yesterday's Consumer Confidence report posted an all-time high for those expecting stock prices to increase!


from Marc Ostwald
 
Morning boss.

Nice climb overnight. I am long from yesterday.

Sent from my Moto G (4) using Tapatalk
 
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