Trading with point and figure

Ditto Dax

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Ostwald, Marc
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07:28 (1 hour ago)
to Marc

- Busier day for statistics, but central banks, above all ECB, and
corporate earnings likely to dominate; Korea GDP, German Ifo/GfK,
US Durables, Goods Trade, Claims, Pending Home Sales and KC Fed;
Norway, Turkey rate decisions; US 7-yr auction

- Germany Ifo: street whisper skewed to downside of consensus following
PMIs, read across often unreliable

- ECB: guidance unlikely to be refined or sharpened; Italy, Spain likely
to feature along with Capita Key review

- Norges Bank: likely to stick with rate trajectory and projections

- Turkey rates: TCMB likely very relieved by TRY rally, oil fall, allowing
it to pause

- US Durables / Goods Trade: core Orders seen rebounding, Trade deficit
seen little changed on month, sharply wider on quarter; outcomes may
prompt Q3 GDP forecast tweaks

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

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

While the data schedule has a number of first division items, the day is likely to be dominated by central bank meetings and yet another deluge of corporate earnings. Statistically there are the South Korea Q3 GDP and German PfK consumer Confidence to digest ahead of the Ifo Business Climate, while the US has Durable Goods Orders and advance Goods Trade Balance along with weekly jobless claims, Pending Home Sales and KC Fed Manufacturing survey. The ECB tops the run of central policy meetings, though the Norges Bank and Turkey's TCMB will also be closely watched, and there is also some, BoJ, Fed and BoE speak. The US concludes this week's refinancing with $31 Bln of 7-yr T-Notes, while earnings highlights in Europe are likly to include Anheuser-Busch, Bankinter, Daimler, Equinor, Lloyds Bank, Mediobanca, MTU Euro Engines, Nokia, Orange, Puma and SE Banken. Across the pond, a bumper run sees reports amongst others from Ally Financial, Alphabet (Google), Amazon, Celgene, Conoco Philips, Eastman Chemical, Gilead Sciences, Hershey, Intel, Keurig Dr Pepper, KKR, Mattel, Merck & Co, Newmont Mining, Praxair, Raytheon, Stanley Black & Decker, Twitter, Union Pacfic, Valero Energy, Waste Management & Western Digital.

** Germany - October Ifo Business Climate **
- Following on from the unexpectedly sharp drops in both PMIs (Mfg 52.3 from 53.7, Services 53.6 from 55.9), today's Ifo Business Climate is forecast to dip to 103.2 from 103.7, but remain above July's low of 101.7, though the PMIs will inevitably skew the market estimate to the downside, above all the Expectations index (forecast 100.4 from 101.0). As noted previously, the PMIs are often a rather unreliable predictor of the Ifo, though the extent of the PMI fall does suggest that an unexpected rise is rather improbable, even though the Bundesbank's monthly report on Monday appeared to suggest that business activity has improved of late, and that the summer slowdown was largely related to auto sector woes.

** Norway - Norge Bank rate decision **
- Norges Bank is expected to hold rates 0.75%, after initializing a hiking cycle in September, and will likely continue to signal that a follow-up move will come in March 2019, with one further hike seen by the end of 2019. The unexpected dip in August mainland GDP (-0.2% m/m vs. July +0.3%) is expected to have been transitory, and overall likely to remain above its trend and potential rate, while underlying CPI remains around target. The relatively shallow rate trajectory to a large extent dictated not by concerns that divergence with the ECB rate path might drive the NOK sharply higher, but rather the high level and still relatively rapid growth in household debt, and by extension consumer spending would likely to suffer were the central bank to adopt a more aggressive stance on rates.

** ECB Council meeting **
- Another ECB meeting looms at which questions about Italy, and most probably Spain following stamp duty ruling (still subject of yet another review) may well eclipse monetary policy considerations. It is expected that the ECB will not want to burn its bridges and confirm that it will end QE in December, and it may discuss but not necessarily announce whether it is looking at conducting a 'twist' operation on its reinvestment. The press conference will also likely see some questions about the ECB's review of its "Capital Key", which is its benchmark for its QE purchases, and would appear likely to see Italy lowered, given the woeful profile of Italian GDP through much of this decade. For all that the PMIs and other data points across the Eurozone haev been disappointing, excepting notably labour market indicators, the ECB is unlikely to want to alter its assessment of the risks to the outlook being roughly "balanced", despite its emphasis that trade tensions are a very real risk. Of particular market interest will be whether it refines its rates guidance (not before H2 2019), particularly following those comments from new council member Rehn last week suggesting that he favours a first rate hike in Q4, contingent on growth and inflation being broadly in line with staff projections.

** U.S.A. - September Durable Goods / Advance Goods Trade Balance **
- The outcome of both of these may prompt some last minute tweaks to projections for tomorrow's advance Q3 GDP estimate (consensus 3.3% SAAR), perhaps all the more so as two of the biggest wildcards are likely to be the size of the drag from Net Exports, and inventories. Durable Goods are expected to see a drag from aircraft with headline seen at -1.5% (vs. August +4.4%, boosted by aircraft), but core measures are projected to rebound 0.4/0.5% after prior flat and -0.9%, though it is the shipments component (forecast +0.4% m/m vs. Aug -0.2%) which will be key for any GDP tweaks. The Goods Trade Balance is projected to narrow fractionally to $-75.1 Bln from August's $-75.45 Bln, but this would still leave the Q3 balance some $22.6 Bln wider at $222.6 Bln than Q2, which was flattered by producers trying to beat the introduction of tariffs.

** Turkey - TCMB rate decision **
- Turkey's central bank will be very relieved that with the TRY rallying in the wake of the release of US Pastor Brunson, and oil prices pulling substantially from their highs, it can take its foot off the rate hike pedal (current 24.0%) despite another larger than expected surge in CPI and PPI in September, and more obviously focus on stabilizing the banking sector, and hope that the economy starts to recover from the recent shocks.


from Marc Ostwald
 
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