Trading with point and figure

Dentalfloss · Oct 15, 2019

in supp now

Dentalfloss · Oct 15, 2019

Yes sir

Dentalfloss · Oct 15, 2019

Dentalfloss · Oct 15, 2019

Good Morning: The Long & the Short of it and The Bigger Picture - 15 October 2019 - ADM ISI

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Ostwald, Marc

09:02 (7 minutes ago)

to Marc

- Digesting China CPI & PPI, RBA minutes, awaiting UK labour data, German
ZEW survey and Canada Home Sales; plenty of Fed and BoE speakers, as IMF/
World Bank autumn meetings get under way; US Q3 earnings kicks off with
usual raft of major banks reports

- UK labour data expected to confirm solid labour market, despite Brexit
uncertainty

- China inflation - outside of Food prices, inflation pressures very subdued

- US/China Trade & Brexit: reality remains that little progress has been
made, but at least all sides still talking, even if enormous hurdles remain

- Audio preview:
https://www.mixcloud.com/MOstwaldADM/adm-isi-morning-call-15-october-2019/

- Chart:
China CPI breakdown

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** EVENTS PREVIEW **
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There is data, there are central bank speakers and the US Q3 earnings season gets under way with the usual rash of financials getting things underway, but US/China Trade and Brexit talks will still be the key override factors. Statistically there are the UK labour data, Germany's vacuous ZEW survey and Canadian housing data to accompany the overnight China CPI and PPI, with a raft of Fed and BoE speakers also on hand as the IMF/World Bank Autumn meetings get under way (ending Saturday. Perhaps more importantly the US Q3 earnings gets under way, with financials as ever dominating the day's calendar - JP Morgan Chase, Citi, Goldman Sachs & Wells Fargo, as Factset observes: "For Q3 2019, the estimated earnings decline for the S&P 500 is -4.6%. If -4.6% is the actual decline for the quarter, it will mark the first time the index has reported three straight quarters of year-over-year earnings declines since Q4 2015 through Q2 2016." This serves as a reminder that the S&P500 may only be a few percentage points below its all-time high, this is wholly due to the permafrost of financial repression rather than a reflection of a buoyant economy and / or corporate sector. Govt bond supply takes the form of 2-yr from Germany and 10-yr in the UK, while the US sells 3 & 6-month T-Bills. In passing, a gentle reminder that last week's Fed announcement that it will be buying $60 Bln per month of T-Bills is QE or stealth QE, but rather testament to the fact that the Fed has lost control of domestic money markets, and this measure may in fact create a different set of problems, given that the Fed will likely be crowding out Money Market Funds out of T-Bills, which could well lead to distorting flows from that sector.

In terms of the day's data, Chinese CPI came in slightly above forecast at 3.0% y/y vs. an expected 2.9% and August's 2.8%, but this was paced mostly by pork prices, which accelerated to 69.3% y/y from August's 46.7%, leaving Food Prices up 11.2% y/y. However Non=-Food CPI at 1.0% y/y and PPI falling deeper into negative territory at -1.2% y/y vs. August -0.8% y/y, underline that domestic demand remains weak, despite the hefty borrowing by local governments to fund infrastructure projects, which appears to be having little spill over into the wider economy. This above all puts some context to China's (apparent) pledge to increase imports of US agricultural produce into an appropriate context, namely that this is something that China ahs to do to stem the devastating impact of Asian Swine Fever, as well as the fact that China remains a country that has a structural deficit in terms of grains. As such what has been agreed in 'phase one' is a positive. But given the fact that the tariff increase has only been postponed, it serves as a reminder that the gap between the USA and China on the thornier subjects such as intellectual property rights, industrial subsidies and enormous barriers to entry into Chinese, remains very large.

The UK has labour data, which remain a very clear positive in terms of the UK economy given the seemingly interminable Brexit uncertainty, with the consensus looking for an unchanged Unemployment Rate at 3.8%, and a modest 26K increase in Employment, while Average Earnings are expected to remain at their cyclical high of 4.0%. While clearly welcome, the fact remains that Brexit uncertainty remains very large, and for all of the optimism engendered by the continued intense talks to try and forge some form of agreement ahead of the EU Summit on Thursday, though more likely by the end of month deadline, it remains far from clear a) that the huge hurdles in respect of Northern Ireland can be overcome, and b) even if they are, it remains very unlikely that any solution will find a majority in the UK's sclerotic parliament, and even a general election may well end up only delivering more gridlock.

========================== ** THE DAY AHEAD ** ===========================

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