Trading with point and figure

oil/wti over the last month..in major rez

29xgpdl.gif
 
- Digesting China Trade, Japan GDP, UK RICS House Prices, shock API crude
inventories slide, Beige Book; all eyes on ECB meeting, new staff
forecasts; Eurogroup meeting, US jobless claims and EIA crude inventories
also in focus

- China Trade: welcome return to Import growth perhaps more a function of
CNY fall, commodity price rebound

- ECB: no changes expected to main policy parameters, PSPP tweaks seen,
CPI forecasts likely unchanged, GDP forecasts possibly shaded lower

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

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

The Eurozone takes centre stage today, via way of the ECB policy meeting and staff forecasts along with a Eurogroup meeting, which will warn Greece that further bail-out funds dispersal is contingent on reforms being passed. There will also be some discussion about setting up a so-called 'crisis fund', which would apparently be there to mitigate pressure on the ECB in times of crisis, particularly in terms of the "need for unconventional measures". It has also been suggested it might also be used to develop as an 'insurance' fund to combat unemployment, echoing a recent proposal by Italian PM Renzi. Statistically the overnight China Trade data, UK RICS House Price Balance along with the modest revisions to Japanese Q2 GDP, which was accompanied by the latest Economy Watchers Survey and Current Account, while the only likely market mover on the rest of the day's economic schedule will be US weekly jobless claims, though the steep slide in the API crude inventories data overnight will put the focus on the more closely watched EIA measures at 15:30 BST. In respect of the China Trade data, while exports were better than expected, they were still down year on year, but markets will likely focus on that first y/y rise in Imports in 21 months, which suggests that the Chinese authorities' stimulus efforts are getting some traction, even if it is ill advised to over-interpret to over-interpret one month's data, especially Chinese Trade statistics, and also given base effects on prices in the commodity arena, and above all last August's sharp CNY fall vs. USD.

** Eurozone - ECB policy meeting **
- The consensus looks for no change in official rates at today's meeting, and sees little prospect of a move any time soon, which is essentially the message that ECB has been sending for some months. There is rather more speculation about what might happen in terms of its QE programme. The consensus does not expect the ECB to increase the EUR 80 Bln total target volume for its QE purchases either at this meeting, or indeed going forward; however it is expected that it will extend the end March 2017 earliest end data to end September 2017 at one of its Q4 meetings. Technical changes in terms of what is eligible for QE purchases are expected, with a widening of the current 2 to 30 yr maturity spectrum mooted. Eminently the inclusion of even shorter-dated debt is rather moot in so far as so much of this debt is on a yield below the -0.4% Deposit rate cut-off, but markets are clearly betting on an extension at the longer end if yesterday's fresh record low yield on 30-yr Bund below 0.4% is anything to go by. It also seems quite likely that the ECB may well hike the maximum amount that it can hold in any one bond issue from the current 33%. A change to the capital key rule for Government bond purchases looks highly unlikely now or in the near future, but on the corporate bond side, there is more than a little merit in considering purchases of senior financial debt, given its heavy weighting in terms of overall EUR denominated issuance, though critics would certainly accuse the ECB of this being a thin veiled bail-out of Euro area banks. This meeting will also bring a fresh set of staff forecasts, though HICP forecasts are expected to be maintained (2016 0.2%, 2017 1.3%, 2018 1.6%), and if GDP forecasts (2016 1.6%, 2017 & 2018 1.7%) are changed it is expected to a marginal 0.1% to one or other year. As such there would clearly be no justification for changing policy settings, even if the easing bias will be clearly maintained by emphasizing that risks to the forecasts are clearly to the downside, and that the ECB will act if necessary. Eminently there will be the usual exhortations to banks to clean up their balance sheets, and for governments to enact structural reforms and use whatever fiscal leeway there is, with some reference likely to be made to the platitudes issued by the recent G20 meeting.


from Marc Ostwald
 
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