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Ostwald, Marc
Attachments
08:30 (18 minutes ago)
to Marc

- Political risk, global growth fears and oil meltdown still the overarching
themes, as markets digest Japan Manufacturing PMI fall and await German
Ifo survey; US kicks off busy week for Coupon and bill issuance with 20-yr
and 3 & 6 month T-bills

- German Ifo: weak Manufacturing PMI predicates expected dip, though would
still be above 2018 low, and at levels indicating solid growth, even if
trend clearly softening

- Brexit "deal" ushers in real test for May, seemingly likely to fail in
parliament, with outlook thereafter shrouded in very thick fog

- Italy: Salvini opting for usual EU 'fudge' tactics? Leaves future of
coalition in doubt

- Russia/Ukraine: once again Putin seemingly opting for military conflict
to bolster sliding approval ratings due to pension reforms

- Charts: WTI vs. Brent Oil futures; Fed rate probabilities by meeting

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** EVENTS PREVIEW **
********************
The week gets off to a slow start in terms of data, with the overnight flash Manufacturing PMI form Japan to digest ahead of Germany's Ifo Business Climate, with little else likely to distract markets from the overarching themes of the oil market meltdown, Brexit, Italy and US/China Trade relations, though a renewed escalation of Russia/Ukraine tensions may well need to be added to that list. The latter looks to be yet another Putin play of instigating some form of military conflict, to try and reverse the sharp fall in his approval ratings, which have dropped sharply due to the proposed pension reforms (raising pension age and contributions). On the data front, the Japanese Manufacturing PMI fall was primarily predicated on weak Domestic Orders, and a marginal setback in Export Orders, and adds to the overall market sense of foreboding on the global economic outlook. The German Ifo Business Climate is also forecast to fall to 102.3 from October's 102.8, still marginally above the year's low of 101.8 in July. However in proper perspective terms, it should be remembered that any reading above 100 is indicative of a solid if unspectacular pace of activity, and that the cyclical high for the index was 105.4 last November, per se the drop over the year has been rather modest, even if the trend is clearly lower. As for oil markets, today's bounce will have to get far more traction if it is to signal that we may be approaching a base for oil prices. On the political front, the EU approval of the Brexit agreement ushers in the real challenge for PM Mya, i.e. that it seems very unlikely that it will get parliamentary approval, and what emerges in terms of a political landscape assuming that it is rejected. As for Italy, Salvini appears to be signalling some flexibility on the 2.4% budget deficit, which smacks of the usual EU 'fudge' process, though the question is whether he is looking to push back on spending measures that 5Star have demanded to achieve a compromise, which would be the rough equivalent of throwing 5Star "under the bus" in electoral terms, and thus again begs the question of whether this coalition has mcuh of a future.



from Marc Ostwald

 

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pivot

 

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Bitcoin

 

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Dow index to gap up at the open into rez

 

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overshot our rez.. a tad

 

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indices in rez
do we consolidate and go higher
get sold off
or just pump


???????

 

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Dow updated

 

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Dow index to gap up at the open into rez

our top line became support

 

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Mornin folks

 

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Digesting negative Trump rhetoric on China Trade and poor French Consumer
Confidence surveys, awaiting Italy confidence surveys and UK CBI
Distributive Trades ahead of US Consumer Confidence and House Prices;
politics still ruling the roost, markets catching breath after roller
coaster; US to sell 5-yr & 2-yr FRN

- US Consumer Confidence: modest setback expected, equity market sell-off
volatility likely to be at least partially offset by still strong labour
demand and fall in gasoline prices

- ECB: Draghi again hints at downside risks, but clear ECB wants to end
QE before shifting position on balance of risks to outlook

- Charts: US Labour Market Differential; Eurozone CPI vs. Brent Crude vs.
UN FAO Food Price Index

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

A much busier day in terms of data and events has Japan Services PPI and very poor French Consumer Confidence to digest ahead of confidence surveys in Italy and the UK CBI Distributive Trade Survey, but pride of place will like go to US Consumer Confidence, which is accompanied by FHFA and S&P CoreLogic House Prices. The events schedule has a raft of ECB, BoE & Fed speakers, even if the various political narratives of the moment will continue to provide the main mood music. The overnight political news underlines that the prospects for a lessening of US/China trade tensions look to be fairly remote, while the suggestion in the Times that the hard Brexiteer camp might be prepared to support PM May's Brexit agreement smacks of the ugliest form of political opportunism, in so far as the gamble may well be that once Mrs May has stood down, the threat of an election or a second referendum would have been largely overcome, and they can unpick what has been agreed during the process of negotiating a new Trade agreement. To say that this really is about as antithetical to acting in the national interest would be an understatement, not to mention the obviously underhanded nature of such an approach. As for markets, a form of stasis appears to be materializing, perhaps a signal that the worst of the rout of the FOMO and TINA fraternity may have largely run its course, but with year-end looming in the headlights, bargain hunting among the detritus of the Q4 rout in risk assets will likely be minimalistic. Draghi's comments yesterday once again hinted at rather than signalled that the ECB is leaning towards acknowledging that the risks to the outlook are more to the downside than the upside, as the attached chart comparing headline Eurozone CPI with the UN FAO Food Price index and Brent Crude future also attests. However it is increasingly clear that they want to end the QE programme (though not reinvestments), and would look to TLTROs to inject further liquidity along with pushing back on the rate hike timeline thereafter, if required.

** U.S.A. - November Consumer Confidence **
- The consensus looks for a relatively modest setback to 135.8 from October's 137.9, per se still close the year's high. In terms of the drivers, the equity market sell-off is obviously a key negative, but may well be largely offset by a very tight labour market and the drop in gasoline prices. That said the Labour Market differential (Jobs plentiful minus hard to get) has risen some 10.0 points over the past 6 months to stand at its best level (32.7) since January 2001, and to a degree looking as it is vulnerable to setback. Given that the rise in mortgage rates is now something of a headwind to housing market affordability and by extension demand (notwithstanding expectations that today's House Price Indices will still post rises), the risks looks to be modestly to the downside of the consensus, even if this would obviously leave the index at very high levels by any historical standard.

From Marc Ostwald

 

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stuck...

 

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