Trading with point and figure

SPX

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- Powell testimony front and central; UK Wages & Employment, US Industrial
Production & NAHB Housing top data run; UK FPC testimony follows RBA
admission of concern on household debt levels; US Corporate Earnings
and German 2-yr sale; API Crude inventories

- UK labour data: wages seen little changed, Employment growth and Vacancies
expected to remain strong

- Powell testimony: set to reiterate strength of economy, while noting
still sluggish wage growth, focus on comments on 'neutral rate', risks
from trade tensions, and regulatory adjustments

- US Industrial Production: solid bounce from somewhat aberrant May drop,
risks to upside of consensus

- Charts: WTI vs Brent; Sugar; Lumber; USD Corp / EM bond spread indices
and Atlanta Fed GDPnow estimate

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

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

- Once again markets have a relatively busy schedule of data to digest along with Fed chairman Powell's semi-annual testimony on the US economy and monetary policy, but whether any of this will really have more than a passing impact is debatable. Statistically, there are Singapore 'Exports and China Property Prices to digest ahead of UK labour data, US Industrial Production and NAHB Housing Index along with Canada's Manufacturing Sales. The US Corporate Earnings schedule offers rather more in the way of non-financials to accompany Goldman Sachs latest quarterly report, with CSX, Johnson & Johnson and UnitedHealth likely to be among the headline makers. There will also be heightened sensitivity in the oil markets to this evening's API Crude & oil product Inventories (and tomorrow's EIA version) after yesterday's story that the US and EIA are considering a release of strategic oil reserves; the consensus sees a 3.5 Mln draw on Crude, a 400K draw on Gasoline and an 800K increase on Distillates. Outside of Powell's testimony, there are the overnight RBA minutes, which highlighted just how concerned the RBA is about how a rate hike might impact heavily indebted households. The latter will also be a point of interest when Carney and his FPC colleagues testify on the BoE's latest Financial Stability Report, with considerable time also likely to be devoted to the impact of Brexit on the financial sector, and how well it is prepared to withstand the consequences.

** U.K. - May/June labour data **
- For all the uncertainties relating to the Brexit negotiations, there is no evidence that this has been impinging on UK labour demand, though it could be credibly argued that it might be a lot stronger if there was no Brexit cloud. Be that as it may the wages data will be the focal point, though Average Hourly Earnings are not anticipated to make a compelling case for a rate hike, with headline seen unchanged at 2.5% y/y, and ex-Bonus to dip to 2.7% from 2.8%. That said the ILO Unemployment Rate is seen at its cyclical multi-decade low of 4.2%, and FLS Employment posting a solid 115K gain, marginally below the 126K 6-month average, while Vacancies are unlikely to stray far from last month's record 818K. However the talking point in the UK will inevitably centre on last night's Brexit legislation vote which leaves the UK with what is essentially an even more unworkable negotiating position than the already deeply flawed 'Chequers agreement'. In terms of the way that the Brexit stars are aligning, the range of possible outcomes seem to being reduced to a) what I have termed an 'accidental hard Brexit' as the UK govt persists in negotiating with itself, unable to find a unified negotiating position, or b) a withdrawal of Article 50, which may seem improbable and likely to spark something akin to a civil war, but probably the only other viable option, given the array of alternative proposals will simply never pass muster with the EU, and indeed are inferior outcomes that inhibit any UK government's ability to run the country.

** U.S.A. - Powell testimony **
Powell's testimony to the respective Senate and House Committees follows the already published prepared testimony that offered no real surprises, underlining an overall very positive outlook, though also noting sub-par wage growth see https://www.federalreserve.gov/monetarypolicy/2018-07-mpr-summary.htm . Today's Senate committee hearing typically sees a somewhat less self-aggrandizing line of questioning than tomorrow's House version, but outside of what might be said on regulatory reform, it is rather difficult to see what might prove to offer fresh insights that are genuinely market moving. However newswire headlines often run the risk of skewing what has actually been said, and inevitably there may be the one or other 'tape bomb' on wages or the global economic outlook (above all trade tensions), which may be taken out of context, above all by markets that have become specialized in 'wishful seeing' and 'wilful blindness'.

** U.S.A. - June Industrial Production / July NAHB Housing Index **
- May's Industrial Production proved very disappointing at -0.1% m/m, with Manufacturing Output posting an even sharper -0.7% m/m, though this did follow April's very strong 0.9% and 1.8% m/m respectively, with a sharp fall in auto output (-6.5% m/m) and NatGas (-9.1%) accounting for much of the May fall, which had been partially flagged by the May labour reports Average Weekly Hours. The latter posted a solid rebound in June, and along with a very solid run of June manufacturing surveys, accounts for consensus projections of a headline rise of 0.5% m/m, and 0.7% for Manufacturing Output. The NAHB Housing Market Index has ploughed a relatively, but solid range of readings for some months, and is expected to be unchanged at 68. A close eye will be kept on the 6-month Sales Outlook that dipped to 76 in June from 77, with homebuilders bemoaning a a sharp tariff related rise in lumber prices, though the latter have tailed off quite sharply since May's spike (see chart).

from Marc Ostwald
 
Morning!

Busy this week. I'm actually doing some work* this week (shock! horror!) and hope to have my palm crossed with silver**

Amazed, entertained... but not quite as delighted as Putin by yesterday's antics of the leader of the free world. Attila should start a Trump thread to replace the Brexit one - which incidentally could be substantially improved by elevating it to saga status (Beowulf style, not Old Farts in the sun) with a translation into Anglo-Saxon.

Have fun chaps:p

*work
wəːk/Submit
noun
1.
activity involving mental or physical effort done in order to achieve a result.
"he was tired after a day's work in the fields"
synonyms: labour, toil, exertion, effort, slog, drudgery, the sweat of one's brow; industry; service; informalgrind, sweat, donkey work, spadework, elbow grease; informalgraft, fag; informalyakka; archaictravail, moil
"he was tired after a day's work in the fields"

**more likely: saliva
 
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