Trading with point and figure

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Ostwald, Marc
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08:21 (35 minutes ago)
to Marc

- Busy day for statistics and central banks; digesting Japan Retail Sales,
Oz Business Investment and Swiss Q3 GDP, awaiting UK Credit & Secure Lending,
EC Confidence surveys, Canada Current Account, US Personal Income/PCE,
Claims and Pending Home Sales; FOMC minutes and raft of ECB, Fed & Norges
Bank speakers; Italy to auction 5 & 10-yr; Brexit fog casts long shadow

- UK Consumer Credit: seen rebounding in nominal terms, but decelerating
again in yr/yr terms, Mortgage Lending seen remaining elevated despite
lacklustre housing market

- US Personal Income/PCE: solid gains expected, aggregate income growth
set for fresh cyclical high, PCE to confirm slower pace than strong Q3

- US Pending Home Sales: first back to back gain in 6 months expected,
but y/y trend seen remaining negative

- US FOMC minutes: overshadowed by Powell rhetorical shift, debate on
neutral vs restrictive, and financial conditions in focus

- Chart: GS US Financial Conditions Index

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

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

As markets await month end and the key weekend G-20 meeting, there will be a deluge of data, FOMC minutes and a plethora of ECB, Fed and Norges Bank speakers to offer some distractions, along with the BoE's Brexit economic impact assessment, while Italy conducts its end of month 5 & 10-yr BTP auctions. Statistically Japanese Retail Sales (rebounding sharply, proving that recent weakness was weather and natural disaster related) and Swiss Q3 GDP (contracting 0.2% q/q unexpectedly, on the back of a big drag from exports: Goods -4.2% q/q, Services Exports -0.6%) are to be digested, while ahead lie UK Consumer Credit & Mortgage Lending, EC Confidence surveys, Canada's Q3 Current Account and US Personal Income/PCE, weekly jobless claims and Pending Home Sales, while tonight has Japan's Tokyo CPI, Unemployment and Industrial Production.

** U.K. - Oct Consumer Credit / Mortgage Lending **
- September's sharper than expected deceleration in Consumer Credit growth (£800 Mln vs. exp. £1.2 Bln, down to 7.7% y/y, lowest since early 2015) was accompanied by a bump higher in Mortgage Lending (£3.9 Bln. exp. £2.9 Bln), despite anecdotal evidence from the housing market remaining decidedly downbeat. The October is seen rebalancing modestly with Consumer Credit expected to rebound to £1.0 Bln (though slowing further in y/y terms as a £1.4 Bln falls out of the comparison for October 2017), with Mortgage Lending seen dipping to £3.5 Bln. Given that the latest BoE lending survey highlighted tighter lending standards ahead, the risks may well be to the downside of forecasts, especially as survey evidence points to households become more unsettled and cautious due to Brexit related uncertainty. This data will of course be largely ignored, given the continued signals that the UK/EU Brexit deal still looks like a non-starter in terms of being passed in parliament, and a very foggy outlook for what happens if the vote either fails or is withdrawn, all of which will be compounded by the discussion around yesterday's govt and BoE Brexit economic assessment reports.

** U.S.A. - Oct Personal Income/PCE, Pending Home Sales & Initial Claims **
- Today's run of US data are likely to be a case of being how they are 'spun' in terms of the outlook for 2019, rather than an assessment of the monthly/weekly performance. Thus as much as both Personal Income and PCE are both forecast to post a solid 0.4% m/m rise, echoing the Retail Sales and Average Hourly Earnings, an as expected outturn will doubtless garner the comment that as much as they are good, they still confirm Q4 Personal Consumption will slow relative to the very robust 3.9% seen in Q3, even though the more salient point may be that aggregate growth in Income would actually rise to a cyclical high of 5.5%. As for Pending Home Sales, the expected 0.5% m/m (same pace as September) would be the first back to back m/m rise in this measures since March, and as the expected -2.8% y/y attests only claws back some of the weakness over spring and summer, and may well be flattered by hurricane effects. As for weekly jobless claims, a slight drop to 220K from a five month high of 224K is expected, though some of the melodramatic analyses suggesting that the trend over the past month indicates a significant weakening of labour demand are only worthy of opprobrium, above all given the fact that the Labour Market Differential in Tuesday's Consumer Confidence hit a fresh cyclical and indeed 17-yr high.

** U.S.A. - November FOMC minutes **
- To an extent many swill probably view today's minutes as being somewhat historical following Powell's rhetorical shift yesterday to suggesting that rates are currently a 'just below' neutral, as against 'a long way from' neutral as recently as October. That said, those comments obviously did not embellish on whether the FOMC collectively believes rates need to get to neutral, before pausing, or whether the FOMC needs to err to the side of being restrictive. It will be the debate on that topic for which today's minutes will be scoured, and a good deal attention also needs to be paid to any discussion on Financial Conditions, the more so given yesterday's Fed Financial Stability Report - https://www.federalreserve.gov/publications/files/financial-stability-report-201811.pdf - which was replete with references to a number of asset classes looking overstretched, and the potential for a more violent sell-off, due to still high levels of risk appetite, and even with the Fed maintaining its very gradualist and clearly signalled approach to policy tightening.


from Marc Ostwald
 
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