Trading with point and figure

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weakness.....so it dumped

 

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start again

 

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held on p/b

 

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our 25850 been a hummer
up and down

 

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Mornin folks ☕☕☕☕🆒🆒🆒🆒

 

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Dax into the open

 

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Dow...tricky

 

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DAX
areas marked

 

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Dow
a tad bullish
48 hours of data

 

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lining up

 

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cable updated

 

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a tad more bullish

 

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UJ in rez

 

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updated

 

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pop..??

 

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Good Morning: The Long & the Short of it and The Bigger Picture - 8 May 2019 - ADM ISI

Ostwald, Marc

08:50 (6 minutes ago)

to Marc

- Digesting China Trade, UK BRC Retail Sales, German Industrial Production
and RBNZ rate cut, with corporate earnings dominating the rest of the
day's schedule. Brazil rates seen on hold; Germany, Portugal and US to
auction debt

- China Trade: still hefty, but non LNY related distortions, trend rate
still at best flat

- German Industrial Production: much better than expected, but heavily
flattered by mild winter boost to Construction

- UK BRC Sales much better than expected, but flattered by base effects

- Volatility spike a welcome wake-up call, though forward measures assume
move is transient.... ?

- Charts: CNY spot & 1-yr NDF, VIX, CVIX and JPM EM FX index

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

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

Today's schedule of economic data and events is very much a case of digesting the overnight run, with the rest of the day's schedule being rather meagre, though it will be another busy day for corporate earnings. On that 'to digest' list are China Trade, UK BRC Retail Sales and German Industrial Production, and in central bank terms: the BoJ minutes, along with RBNZ rate cut and Bank of Thailand decision to hold rates. Ahead lie the elections in South Africa, an expected no change rate decision in Brazil, along with Govt bond auctions in Portugal (10 & 15 yr), Germany (5 yr) and US (30-yr). Among the highlights in terms of corporate earnings are likely to be Honda and Toyota; Commerzbank , Siemens, Terna, UBI & Wirecard; Bunge, Fox, Marathon Petroleum, Walt Disney and Barrick Gold. UK political developments and US/China trade negotiations will remain good for many of the unscheduled market moving headlines, with the Conservative Party's 1922 committee holding a meeting at which it will decide with a change to the rules on its leadership challenges, as MPs and members look for a way to unseat Mrs May.

Initial thoughts on China's Trade data are that while they emphasize that the March surge was largely Lunar New Year effect related, there are still hefty distortions in this month's data on a number of levels. The rebound in soybean imports was driven by importers delaying shipments to capitalize on the VAT cut as of 1 April, i.e. not related to US/China trade negotiations. Crude OIl Imports were robust, but appear to be a case of refiners stockpiling supplies from Iran ahead of the end of the US waiver in May, though underlying growth remains solid, just not as high as this data implies. Meanwhile the weakness in Copper Imports runs counter to expectations of some strength due to the ban on scrap copper imports, but are likely to have been depressed by disruptions at the Las Bambas mine in Peru. So overall the profile on Trade growth is at best flat, and we will see in coming months whether it may even be negative, with much obviously depending on the now 'knife edge' trade negotiations with the US.

UK BRC Retail Sales were much stronger than expected, but got a hefty boost from Easter timing effects, and it is worth taking note that the BRC observe that they were below retailers' expectations. An honourable mention for BoE's Haldane who appears to have handed out a barely disguised slap to governor Carney, in suggesting that it was "deeply arrogant" to assume financial markets or other forecasters are definitely wrong on the BoE rate outlook; and while Carney did not say that they were definitely wrong, he clearly signalled that what is currently discounted on UK rates under-clubs the rate trajectory. German Industrial Production also beat expectations at +0.5% m/m against a forecast of -0.5% m/m, which took the more reliable trend 3-mth/3-mth trend rate also up to 0.5%, however the details highlight that most of the gain was in Construction, benefitting above all from a mild winter, and ex-Construction the 3-mth rate was flat, a clear improvement on the past 6 months, where it has been around -1.0% to -1.5%. However that Construction strength will likely have borrowed from Q2, and thus a relatively sharp deceleration during Q2. It will obviously help to boost Q1 GDP, but this is unlikely to signal a sustained rebound in overall GDP during the rest of the year, even if growth should remain in positive territory.

In market terms, the spike higher in volatility in many financial asset classes, perhaps most notably the US VIX, and predicated on China / US trade war fears is to a large degree long overdue given the prior signs of deep seated complacency. However the inversion of the VIX futures curve does suggest that most are assuming that this will not be sustained, though that may be more a function of conditioning rather than any well-reasoned rationale, outside of the obvious point that it does imply rates curves will depressed and very, which per se drives investors into riskier assets after sell-offs. Much may depend on what happens with the CNY, which has been clearly jolted out of a tight range for much of the year, and that lack of volatility clearly permeated the FX market as a whole in the Jan-Apr period. Much depends obviously on the outcome of the US/China talks, but if the 1-yr CNY NDF is a guide, then a sustained drop in the CNY is not being discounted, even if this is partly a function of the low level of Chinese short-term interest rates, with the O/N Repo rate dropping to just 1.04% overnight.

 

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popped
excellent