Trading with point and figure

Dentalfloss · Jul 5, 2019

Dollar...trend break
gone a tad bullish

Dentalfloss · Jul 5, 2019

Dentalfloss · Jul 5, 2019

Good Morning: The Long & the Short of it and The Bigger Picture - 5 July 2019 - ADM ISI

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Ostwald, Marc

08:34 (2 hours ago)

to Marc

- Digesting encouraging Japan Household Spending, but more German orders
misery, awaiting US and Canada labour data; busy week ahead for major
data

- US Labour data: payrolls seen rebounding from weak May, though still
signalling slower overall pace of employment growth; Unemployment
rate seen holding near 50-yr low; Wage growth solid but still modest

- Canada labour data: seen underlining strength of labour demand, and
likely Fed/BoC divergence

- Charts: EMEA 2-yr yields, Dalian Iron Ore future

- Audio preview:
https://www.mixcloud.com/MOstwaldADM/adm-isi-morning-call-5-july-2019/

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** EVENTS PREVIEW **
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While the focus today will be on the US labour market data, there are a number of other key data items to digest from the overnight Japan Household Spending and just published German Factory Orders & French Trade Balance, through to Canada's labour data. The events schedule is rather sparse, with a smattering of BoJ and ECB speak, and nothing from the Fed. In terms of the overnight data, the contrast between the very robust Japan Household Spending (4.0% y/y vs. expected 1.5% y/y), and yet another large downside surprise on German Factory Orders (-2.2% m/m -8.6% y/y vs. expected -0.2%/-6.2%) is glaring, and above all emphasizes that the world manufacturing sector is going through a very sharp retrenchment, with the weakness concentrated in non-Eurozone Orders (-5.7% m/m, following two months of solid gains 5.4% & 4.1%) and Capital Goods (-2.8% m/m following 0.7% & 1.3% in prior months. Questions for the day relates to the attached table of 2-yr EMEA govt bond yields where even Croatia has a negative 2-yr yield: a) is it any surprise that there is such a strong propensity to buy every dip in risk assets, and chase yield in peripheral govt bonds; b) is the fact of there being EUR 5.3 Trln of negative yielding bonds in Europe perhaps an indication that what is actually going on is a stealth 'debt jubilee'?

Next week's schedule is the typically busy for week two of the month, with US & China CPI and PPI, China Trade & Monetary Aggregates; UK monthly GDP, Industrial Production, Index of Services & Trade; Eurozone and national Industrial Production data; German Trade; Japan Orders & Wages. This will be accompanied by the June FOMC & ECB minutes, testimony from Powell to the House Financial Services Committee and a raft of other Fed speakers, an expected no change BoC rate decision, while the BoE publishes its latest Financial Stability Report.

** U.S.A. / Canada - June Labour market reports **
- As has been well document, US labour data have certainly lost some of their previous cache as the number one data report globally, but there will be considerable sensitivity to this month's report, after the big downside surprise of 75K in May, and a slightly lukewarm rebound in the June ADP Employment. The consensus looks for a rebound in headline Payrolls to 160K (Private 150K), and revisions needing to be closely watched. Average Hourly Earnings are forecast to post a 0.3% m/m rise to inch the y/y rate back up to 3.2%, with the Unemployment Rate seen holding at its cyclical low of 3.6%. While probably less sensitive in terms of market reaction, other key elements will be whether there is any improvement in the Labor Force Participation Rate (seen unchanged at 62.8%, and well below the recent high of 63.2%), and the Underemployment Rate, which hit an 18-yr low of 7.1% in May. The data could be somewhat pivotal in terms of the markets' very one-sided view on the Fed's rate trajectory, above all as a better overall set of numbers and a very belated, and perhaps more emphatic Fed pushback (above all in Powell's testimony next week) against the market rate expectations risks 'upsetting the apple cart', and doubtless would unleash a lot of market whingeing about deficient Fed' rate 'guidance', not to mention the usual barrage of feckless, inane and manipulative tweeting from the US President. North of the border in Canada, the run of upside surprises on Canadian economic data (jobs, growth, inflation, orders) has been impressive, with a further 10K increase in Employment expected after a very solid run, excepting March (weather), of +27.7K, 106.5K, -7.2K, +55.9K and +66.8K since the start of the year. The Unemployment Rate is expected to edge up from a 43-year low of 5.4% in May to 5.5%, the Participation Rate to hold at 65.7%, while Average Hourly Wages are seen edging up to 2.7% y/y from 2.6%. Another strong report would perhaps raise the risk of the BoC sounding a little less neutral next week than at its previous meeting, though unlikely to re-introduce a clear indication that it expects the next move in rates to be higher.