Trading with point and figure

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

Political risk continues to blow through the global economy and financial markets like a whirlwind, with the brutal crackdown following Turkey's failed coup bringing yet more instability to the cauldron that is the Middle East. The day's schedule is minimalist with the Ocean Day holiday in Japan thinning activity in Asia, while the overnight Singapore Exports and China Property Price reports and the US NAHB Housing Market Index are the only items of note statistically, while the EU/GCC Foreign Ministers' meeting, and speeches by BoE's Weale and ECB's Linde top the policy agenda. The US Q2 earnings winds up a notch, featuring among others: Bank of America, EMC, Hasbro, IBM and Netflix. The US NAHB Housing Market Index is seen unchanged at a solid 60, and this and the rest of the week's housing data will likely underlining that the sector remains in very good health.

As the attached USD/TRY chart highlights, markets clearly prefer the certainty of Erdogan and relatively high Turkish rates/yields in these financially repressed times, with the TRY back in its recent range, and Friday's spike now just a blip. The political pressure on the Turkish central bank to ease policy will also increase exponentially, and rate cuts will likely weigh heavily on the TRY. Be that as it may, it is worth remembering Turkey is highly dependent on Tourism, and the failed coup and the ensuing clampdown will hardly serve to improve the attached chart on Foreign Tourist Arrivals; it will also hardly encourage business related FDI. While there are many questions about who was behind the coup, there should be no doubting Erdogan's ambitions to restore its Ottoman Empire era power, and per se further unravel the disastrous Sykes-Pichot arbitrary division of the Middle East.

The Softbank bid for ARM Holdings will give the GBP a further boost, and help to offset the negative news flow in respect of UK Retail footfall since June 23, as well as the Deloitte survey of CFO's planning to cut capital spending (probably heavily influenced by emotions, with a less emotionally tinged picture only likely to emerge in 3 to 6 months). While Softbank emerging as the bidder has clearly come as something of a surprise (and there will be speculation about a counter bid from the likes of Apple, for whom ARM is a key supplier), the attached chart of ARM's share price restated in JPY clearly highlights the motivation. But from a longer term perspective, this is another negative for the UK's capital account, the more so as ARM is US$ earner.

Recap: The Week Ahead - Bullet point highlights - 18 to 22 July 2016

- ECB meeting - no changes expected, incoming data mixed, likely to be lots more 'Brexit uncertainty' mentioned; Q&A likely to a lot of questions about Italian bank risks and 29 July ECB stress test results

- US: a) Fed goes into 'purdah' ahead of July 27 FOMC meeting; b) housing data and Philly Fed survey top modest run of data; c) Q2 Earnings cranks heavily into gear (see schedule attached); d) Republican convention to officially nominate Trump, who is also due to announce his VP choice.

- G7 flash PMIs - main focus on UK, where Markit will publish a one off flash reading, to give an early idea of post Brexit sentiment, but this may well be rather too heavily tinged with 'emotional' responses

- UK: plenty of data to digest - CPI, RPI, PPI, ONS House Prices, Unemployment, Average Earnings, Retail Sales and PSNB - but will be largely 'historical', though probably underlining that Q2 GDP was actually quite good. A close eye needs to be kept on the labour report's Vacancies reading (May last 749K, close to all-time highs)

- Japan: markets looking for further clues on what Abe and Kuroda are going to come up with as a 'stimulus package' (BoJ meets on 29 July)

- China hosts G-20 meeting of Finance Ministers and Central Bankers, starting Friday

- Oil - closely watching oil products for direction, and also looking to EIA annual energy outlook

- Govt bond supply: relatively busy week in Eurozone with Belgium, Germany, Spain and France auctions; the UK sells 2039 Gilt and the US sells new 10-yr TIPs. (see attached diary)

- Central Banks: outside of ECB: a) RBNZ provides an update on its economic assessment which will follow Q2 CPI; b) Turkey's TCMB is expected to narrow its rate corridor again with another 50 bps O/N Lending Rate cut; c) Brazil (14.25%), Ghana (26.0%) and Indonesia (7.0%) central banks are seen on hold.

- Visegrad group meeting - could perhaps send some signals on central European countries' views on EU/Brexit negotiations

from Marc Ostwald
 
This is a very tricky one this - dax posted a pretty big fade of thursdays high. that's pretty bearish for me. dunno where it's going.
 
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