Trading with point and figure

- A busy data for data, events and earnings, though markets seemingly
largely impervious: China GDP, Sales, Production & FAI to be digested
ahead of UK Wages and labour data, US Housing Starts and Production;
Macron and Merkel to speak on Euro area reform; Quarles testimony to
be eyed for tax cut impact on bank capital needs and some easing of
regulations

- China data signal solid Q1 performance, though Production boost likely
short-lived, but likely to be offset by further rebalancing

- UK labour data: further uptick in wages seen affirming May rate hike
expectations, some care required given favourable base effects; FLS
Employment seen dipping on seasonal factors and bad February weather

- US Housing Starts: expected to climb as low home sale inventories
support, Permits set to affirm robust outlook despite structural
headwinds

- US Industrial Production: resources and utilities set to support
headline, Manufacturing to see mean reversion after February surge

- Charts: China GDP trends, GDP vs FAI & GDP contributions;
China and Japan US Treasury holdings and WTI oil future
..........................................................................

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

The day's schedule is choc full of data, events and corporate earnings. The question is whether these impinge on markets that appear to be largely impervious to newsflow. Statistically there are China's Q1 GDP and monthly activity data along with Singapore Exports to digest ahead of UK wages and employment, Germany's ZEW survey, US Housing Starts and Industrial Production, and Canada's Manufacturing Sales. In event terms, the RBA minutes to a raft of Fed speakers including testimony from Quarles on Fed Banking Supervision (with the focus on how the stress tests will treat the impact of the tax reforms on projected capital needs in focus), with most of the remaining speakers on policy outlook having spoken recently, while Macron (and probably Merkel) speak on EU reform and Trump meets with increasingly beleaguered Japan PM Abe. On the earnings front there are reports from ABF in the UK, while the US looks to Goldman Sachs, Charles Schwab, IBM, Johnson & Johnson and United Health.

** China - Q1 GDP, March Retail Sales, Industrial Production & FAI **
- The details of today's GDP and indeed the monthly indicators require some attention, above all in terms of current and future trends. A modestly weaker than expected 1.4% q/q was still enough to keep y/y GDP at 6.8% y/y, though the (seemingly unlikely) steady profile in y/y over the past three quarters will be treated with some scepticism, but it does appear to evidence some further rebalancing away from the industrial sector to private consumption, tech and services. The boost to Q1 Industrial Production (6.8% y/y) looks to have been largely due to winter pollution controls ending, and as such this is likely to drop back in coming quarters, particularly as some fresh pollution related measures have been imposed. Construction Investment is clearly slowing, primarily as local govts put the brakes on infrastructure projects, primarily due to efforts rein in debt, though also some questions about the value and viability of some of these projects. On the other hand Property Investment remains robust at 10.4% y/y, though this may prove to be overstated given that Property sales slowed to 3.6% (vs. Jan-Feb 4.1%), though the easing in long-term CNY interest rates in recent months has clearly offered some support. Last but not least while Urban Fixed Asset Investment (FAI) did slow to 7.5% y/y, the key Private Sector FAI measure accelerated yet again to 8.9% y/y (vs. Feb 8.1%), and there is evidence to suggest that pollution controls continues to provide a significant boost via investment in environmental protection, for example in alternative energy and better (i.e. less polluting) waste disposal, as but two examples. There remains a still very difficult path for the authorities to negotiate in terms of curbing leverage and debt levels, while at the same time not choking the economy's credit impulse, and there are obviously questions about how trade tensions with the US will evolve and impact the economy going forward. GDP is likely to slow to around 6.5% y/y as 2018 progresses.

** U.K. - February/March labour data **
- As noted previously, the UK labour data has a new slot in the ONS schedule to allow MPs enough time to scrutinize the data ahead of tomorrow's PM Question Time, which also pushes the CPI release until tomorrow. Be that as it may, markets will probably only pay attention to the Average Weekly Earnings readings, which are ostensibly expected to continue their recent clearly upward trajectory, with headline seen at 3.0% from 2.8% y/y, and the ex-Bonus measure at 2.8% from 2.6% y/y, which if CPI projections are correct would imply headline real earnings at 0.3% y/y, hardly overwhelming, but at least positive for a second consecutive month, though still around 7.0% below 2007 levels (in real terms). The extent to which this reflects base effects will only become clear in coming months, but for what it's worth, headline earnings dropped from a 2.7% y/y pace in November 2016 to 2.1% in February 2016. FLS Employment data are expected to remain very choppy (in part related to the ebb and flow of seasonal hires), with the Dec-Feb reading seen dropping back to 55K, that follow prior readings of 168K and 88K, mirroring patterns seen in the same months the past two years, but also predicated by February's bad weather. The ILO Unemployment Rate is forecast to be unchanged at its cyclical low of 4.3%, where it has been for 6 of the 7 past months. It should be noted that the most recent strength in the GBP owes rather less to rate expectations, and far more to the usual seasonal inflows of foreign dividend payments (above all from continental Europe corporates).

** U.S.A. - March Housing Starts and Industrial Production **
- Housing Starts are projected to have rebounded 2.4% m/m to a 1.266 Mln SAAR after a larger than anticipated dip to 1.236 mln, with Permits seen remaining very elevated on any historical basis at 1.325 Mln, underlining continued upward pressure from low levels of Existing Home inventories, and despite the persistence of developers bemoaning a lack of suitable plots for development (in demand hotspots), shortages of skilled labour and indeed raw materials supplies. As with the UK, a rather more enlightened and decisive approach from municipal planners is primarily what is required. Industrial Production looks to be predestined to 'mean revert' after jumping 0.9% m/m in February, with the consensus looking for 0.4% m/m, with Manufacturing likely to be sluggish given the dip in Hours seen in the labour data, though this would follow an impressive 1.2% m/m in February; mining/resources output (i.e. Oil) should continue to make a very strong contribution, and the colder March weather should also boost utilities output. Capacity Utilization also requires attention, with a further pick-up to 77.9% from February's 3-yr high of 77.7%, though still some way off the 80.0% level that would be expected to see capacity constraints feed into higher prices.


from Marc Ostwald
 
dentist007 said:
Dax...lagging

dunno why


2zs2vk0.png
Click to expand...

in our 12500 rez area now
 
dentist007 said:
imho....above 24700 is prev supp/rez
24640 is supp area starts


24700-25K is prev rez wodge...should be strong rez there
24640 is where it starts to get a tad nasty.ie a negative signal
Click to expand...

24700-25K area for the open
not sure what happens next
 
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