Trading with point and figure

same data/close plot
turned even nastier

sdfuaq.gif
 
Focus on deluge of major US data, UK Retail Sales, SNB and BoE policy
meetings provide the preamble; France and Spain top auctions; equity
and oil derivatives expiries also in focus

- UK Retail Sales: reactive correction to July surge expected, anecdotal
evidence and CPI imply some downside risks

- SNB rate decision: policy to remain on hold, forecasts in focus

- MPC rate decision: stronger run of data and proximity to recent
testimony means no change and few fresh insights

- US Retail Sales: Autos to weigh on headline, core measures seen eking
gains; clothing and housing/building goods the wild cards

- US PPI: seen rising marginally after sharper than expected July fall,
but pointers from Import & Export prices suggest downside risks

- US Industrial Production: utilities output expected to offset fall
in Manufacturing; NY & Philly Fed surveys also in focus after ISM slide

- Risky credit indices starting to show some sings of wilting after
long-dated govt bond yield rise

- Charts: USD 3mth LIBOR/OIS spread, US 2/10 yr spread, JPM EMBI spread,
30-yr JGB yield, WTI future

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

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

The deluge of major US statistics dominates the day's schedule, which also sees central bank policy meetings in the UK, Switzerland and Chile, with the overnight Australian labour data and UK Retail Sales also due. France (4 & 5-yr OATs; 5 & 9-yr I-L) and Spain (6, 10 & 14-yr) top the list of government bond auctions, while equity markets will be positioning themselves for tomorrow's quarterly futures and options expiries, and it is also monthly expiry in the oil options market, which appeared to be pacing yesterday's even choppier futures trade. For the time being 30-yr JGB yields appear to have found a ceiling around 0.60%, with the uncertainty about next week's Sept 20-21 BoJ meeting outcome, and perhaps the memory that shorting JGBs has been one of the gold medal contenders for 'widow maker' trades for more than 20-years. It is however interesting to note that both the JPM EMBI bond spread and the US High Yield Bond ETF appear to be responding to the pause in the seemingly incessant reach for yield and/or duration, as can be seen from the attached charts.

** U.K. - Aug Retail Sales / Sept MPC meeting **
- Even if the BRC Retail Sales and Visa Consumer Spending readings had not seen a marked slowdown from July, forecasts for today's official Retail Sales would have assumed a reactive correction to the July surge (1.5% m/m), with the consensus looking for a -0.4% m/m headline and -0.7% m/m ex-auto fuel. But that would still leave headline sales up a very solid 4.8% y/y or 5.4% ex-auto fuel, even if the primary concern is that this is unsustainable given Average Earnings growth is running at 2.4% y/y and consumer Credit at 10.1% y/y. The risks would appear to be to the downside of forecasts, in so far as the elements that kept CPI in check have less bearing on the adjustment for Retail Sales' volumes, with rises in Food and Durables CPI implying a drag. Be that as it may, even a weaker than expected outturn would hardly be cause for the MPC to consider cutting rates again this month, or adding to its QE programme. Today's meeting is considered to be something of a non-event, with incoming data proving to be relatively robust, and it would be stretching the bounds of the BoE's credibility to change its assessment of the outlook between last week's testimony and today's policy meeting.

** Switzerland - SNB policy meeting **
- SNB quarterly monetary policy review is unsurprisingly expected to keep policy settings unchanged, and to emphasize that the SNB can intervene anytime to quell any CHF strength, which it still sees as very overvalued at current levels. Still it will be interesting to see if there are any forecast changes, with CPI ticking up to -0.1% y/y in August and Q2 GDP turning out way above forecasts at 0.6% q/q 2.0% y/y.

** U.S.A. - Retail Sales, PPI, Industrial Production, NY/Philly Fed surveys **
- Outside of tomorrow's CPI, today's deluge completes the run of major data ahead of the FOMC meeting. Given the problematic that the FOMC's 'data dependency' is in many ways bogus, in so far as the committee is quite deeply divided by what should act as a trigger for a further marginal removal of its extreme policy accommodation, and the likelihood that today's readings will certainly be mixed, perhaps their significance should not be overplayed. That said, it could influence the tone of the statement in terms of the economic outlook. Headline Retail Sales are expected to be little changed (-0.1% m/m) for a second month, with the drop in Auto Sales acting as a drag in contrast to July, but ex-Autos & other core measures should get a boost from higher gasoline prices amid strong gasoline demand. The wildcard items will again probably be Apparel and Furniture/Garden Equipment, above all given some very sharp revisions from provisional readings in recent months, for example June Apparel originally reported as -1.0% m/m but revised to Flat, as well as inherent volatility, e.g. Building/Garden Equipment July -0.5%, June +4.2%, May -2.6%. As for PPI, a modest rise of 0.1% m/m rise is expected across all measures after Energy and Trade services pace the July falls; the pointers from yesterday's Import and Export Prices, which showed falls in many key sub-categories, imply some downside risks both for today's PPI and tomorrow's CPI. As for Industrial Production, the sharp fall in Manufacturing Hours (-0.6% m/m) in the labour report predicates forecasts of -0.2% for the headline, despite an offset from higher utilities output from hot weather, with Manufacturing Output seen down 0.3% m/m; the pointers from the ISM survey would suggest downside risks, if they are to be believed, though the Markit PMI suggested otherwise. The latter ISM slide will perhaps heighten interest in the first regional manufacturing surveys for September from the NY & Philly Feds, which are seen marginally firmer and weaker respectively, but at levels which continue to signal subdued levels of activity.

from Marc Ostwald
 
had to spend a bit more time this morning on charts
new negative bias ...had to confirm that
still....it could be a bear trap...lol
 
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