Trading with point and figure

Trade tensions and Russia sanctions fall-out cast long shadow over busier
day for data & events; digesting mixed UK consumer spending surveys and
French Production data, soft Norway CPI, awaiting Italy Production, US
PPI & NFIB survey; plenty of Fed/ECB speakers and busy day for govt
bond auctions via UK, Eurozone and US

- China/US: Xi speech dials back on combative trade talk, throws ball
back in US court to engage in constructive negotiations

- US NFIB Small Business Optimism: marginal correction from 45-yr high
expected, focus on selling prices, outlook optimism and hiring
difficulties

- US PPI: Food and some energy components seen restraining headline, core
vulnerable to potential for heavily weighted but volatile Trade Services
rebound, low industrial materials weighting likely to have less impact,
but gentle acceleration in Capital Equipment worth watching

- Charts: RUB vs. WTI Oil future and USD Libor/OIS spread

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

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

Today is not short of data or events, but what is on offer may well be found wanting in terms of their 'market moving' quotient. Statistically, there are the UK BRC Retail Sales (better than expected at 1.4% y/y, though countered by the soft Barclaycard Retail Spending survey), Norwegian CPI (weaker than forecast at headline & core at 2.2% & 1.2% y/y) and French Industrial Production (solid headline masking a further 0.6% m/m drop for Manufacturing) to digest. Ahead lies Italian Industrial Production, and this afternoon's US NFIB Small Business Optimism and PPI. Central bank speakers are plentiful with Dallas Fed's Kaplan 'warming the seat' for ECB's Nowotny & Visco, Norges Bank's Olsen and Atlanta Fed's Bostic. This week's busier schedule of govt bond supply gets under way with the UK re-opening its 2057 conventional Gilt, three Eurozone sales (Austria 10 & 20-yr, Dutch 7-yr and a tiddler 8-yr German Inflation-linked Bund), while the US sells 30 Bln of 3-yr Treasury notes and $45 bln of 4-week T-Bills (a further $10- Bln reduction in size terms vs. prior week) . But with China/US trade tensions still at the top of markets' agendas, the relatively conciliatory (in trade terms) Boao Forum address by China President Zi should offer some short-term comfort. Meanwhile the fall-out from the US sanctions on Russia are gaining plenty of traction in market reaction terms, as such the official schedule will have to surprise to have anything more than a passing impact. It is probably worth observing that the dive in the Rouble and Russian asset prices is probably more a reflection of overweight positioning becoming severely challenged, rather than reflecting a genuine panic, the key question is whether this evolves into a self-feeding rout, or gradually finds some stability. The RUB certainly looks very vulnerable, but would have to breach the 2017 high of 61.60 to signal a break out of the 55.50-61.50 range that has been place since January 2017. In terms of China President Xi's speech, it ostensibly dialled down on combative rhetoric, and was very wide ranging, though rather unspecific in terms of proposed reforms, with the proposed lowering of tariffs on autos and the raising of foreign participation limits in the sector, and the opening up of the financial sector to foreign participation not really being the sort pf 'playing field levelling' measures that the US and EU would like to see, given domestic participants have a stranglehold on both sectors already. Nevertheless it can be construed as offering an olive branch to the US, and putting the ball back in the US' court.

** U.S.A.. - March PPI / NFIB Small Business Optimism **
- While there is justification for some concern about a loss of momentum in the Eurozone economy, that is not the case in the US in terms of business activity, with the only relevant point about the expected dip in today's March NFIB Small Business Optimism to 107.0 is that it follows a new all-time (45-yr) high in February of 107.6, which saw a new high in expected Selling Prices and Expect Better Economy, and continued strength in CapEx plans, and labour demand indicators. Eminently concerns about trade tariffs cast a shadow, and may prompt a sharper than expected setback, however much depends on whether these actually crystallize. PPI should garner a little more attention this month, even if tomorrow's CPI will carry much greater weight with markets. The key elements of today's PPI area likely to be a drag from Food, and some energy products, as reflected in projections of a very subdued 0.1% m/m headline rise. Core PPI is seen raining 0.2% m/m with a number of potential wildcards starting with the heavily weighted (ca. 20.0%) and volatile Trade Services, which is due a bounce after two consecutive monthly drops. Machinery Prices have been showing some signs of accelerating higher in recent months, though not at the pace implied by PMIs or indeed the NFIB survey. There has also been some speculation that the steel and aluminium tariffs may exercise some upward pressure, though anecdotal evidence suggests that pricing in the sector has become inconsistent, and industrial metals have a very low weighting in final demand PPI.
from Marc Ostwald
 
DOW

1z31d6x.png
 
Long USDCAD at 1.2653 Target 1.2690
 

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