Les CFD sont des instruments complexes et sont accompagnés d’un risque élevé de pertes financières rapides en raison de l’effet de levier. 67 % des comptes d’investisseurs particuliers perdent des fonds en tradant des CFD avec ce fournisseur. Vous devez vous demander si vous comprenez comment fonctionnent les CFD et si vous pouvez vous permettre de courir le risque élevé de perdre votre argent.
La semaine à venir : Un nouveau mois apporte un nouveau rapport sur les salaires non agricoles.
Un nouveau mois apporte un nouveau rapport sur les salaires non agricoles. Les marchés espèrent que le gros raté d’août n’était qu’un coup de chance. Les banques centrales d’Australie et du Kiwi préparent également de grandes déclarations tandis que l’OPEP+ se réunit pour ses pourparlers politiques d’octobre.
Diminution ou absence de diminution, le rapport de vendredi sur la masse salariale non agricole est toujours important pour les États-Unis.
Les marchés chercheront à voir s’il y a un renversement de fortune sur le marché du travail Américain après que l’impression d’août soit tombée bien en deçà des attentes. NFP a totalisé 275 000 en Août, manquant aux attentes du marché de 750 000.
Le taux de chômage avait légèrement baissé à 5,2 % tandis que la main-d’œuvre au marché du travail était restée inchangée à 61,7 %. Les gains horaires ont augmenté de 0,6 % en août, dépassant les prévisions du marché d’une hausse de 0,3 %.
Nous savons que Jerome Powell et la Fed aiment un rapport solide sur l’emploi. Mais nous savons également que, indépendamment des données de septembre, la diminution des données est en cours, probablement en novembre. Bien sûr, si le rapport de ce vendredi est vraiment choquant, cela peut causer une ride dans les plans de réduction de la Fed, mais tous les indicateurs suggèrent que nous sommes sur la bonne voie pour une réduction prochaine.
Cependant, le président de la Fed, Powell, pense toujours que les États-Unis sont encore loin de la place confortable où il aimerait l’emploi.
S’exprimant la semaine dernière, Powell a déclaré : « Ce que j’ai dit la semaine dernière, c’est que nous avions pratiquement réussi le critère de réduction. J’ai clairement indiqué que nous sommes, à mon avis, loin de répondre au critère de l’emploi maximal ».
Quand cela viendra-t-il ? Selon une récente enquête menée par l’Association Nationale pour l’Économie d’Entreprise, 67 % des économistes participants pensent que les niveaux d’emploi atteindront les niveaux d’avant la pandémie d’ici la fin de 2022. Un peu moins d’un tiers pensent que la reprise de l’emploi n’aura pas lieu avant 2023.
Il y a encore un long chemin à parcourir vers le rétablissement. Nous avons cependant vu plusieurs cas en 2021 où la masse salariale non agricole bondit après un mois précédent décevant.
Le bond de Janvier à Février, par exemple, a vu un bond de -306 000 NFP à +233 000. La masse salariale non agricole est passée de 269 000 à 614 000 entre avril et mai 2021. Il y a un précédent ici.
Plus de 7,5 millions d’Américains ont également vu leur aide au chômage pandémique coupée. Les paiements complémentaires de 300 $ ont été interrompus début septembre alors que le gouvernement commence à réduire l’aide fiscale. Cela pourrait-il être un catalyseur pour plus d’embauches ? Peut-être verrons-nous dans l’impression de la masse salariale non agricole de vendredi.
En dehors des États-Unis, les deux principales banques centrales des Antipodes devraient faire leurs plus récentes déclarations de taux cette semaine.
En commençant par l’Australie, le gouverneur Phillip Lowe et ses collègues semblaient s’orienter vers une politique plus flexible lors de la réunion de septembre de la Banque de réserve d’Australie. En tant que tel, les marchés n’anticipent pas de changements drastiques en octobre.
Nous avons vu les taux rester aussi bas qu’ils l’ont été l’année dernière en Australie. La RBA reste déterminée à s’engager pleinement à ne pas augmenter le taux de trésorerie « jusqu’à ce que l’inflation réelle se situe durablement dans la fourchette cible de 2 à 3 pour cent ».
La déclaration de Septembre a révélé des changements nuancés.
Le taux de trésorerie et le taux de contrôle à trois ans sont tous restés à 0,1 %, mais le libellé du programme d’achat d’obligations a été modifié. À l’origine, il devait être révisé au plus tard en novembre, après avoir été ramené à 4 milliards de dollars australiens par semaine en juillet. Désormais, il sera au moins maintenu à ce niveau jusqu’en Février 2022.
Fondamentalement, tout cela signifie que le rythme des achats d’actifs RBA ne va pas ralentir avant février prochain. Après la réunion de Juillet, on pensait que la Banque commencerait à examiner les achats d’obligations tous les trois mois avant de les supprimer complètement au cours de l’année. Cela ne ressemble pas encore au cas.
Pourtant, nous ne nous attendons pas vraiment à un feu d’artifice lorsque la RBA publiera son relevé de taux d’octobre mardi matin.
Les marchés ont peut-être plutôt anticipé des mouvements plus bellicistes de la Banque de réserve de Nouvelle-Zélande, mais les récents commentaires du gouverneur adjoint Christian Hawksby suggèrent que toute discussion sur une hausse majeure des taux de trésorerie est prématurée.
« Les banques centrales dans le monde ont tendance à suivre une trajectoire lissée et à maintenir leur taux directeur inchangé ou à évoluer par incréments de 25 points de base », a déclaré Hawksby, mettant fin à toute idée d’une hausse de 50 points de base du taux de trésorerie de 0,25 % de la Nouvelle-Zélande.
Au lieu de cela, il est susceptible de suivre une trajectoire incrémentielle avant de porter les taux à 1,5 % d’ici la fin de 2022.
Mais, comme toujours, une grande ombre du COVID-19 plane sur la politique budgétaire néo-zélandaise. Le pays est récemment revenu au confinement après une augmentation des cas du variant Delta. Bien qu’il recommence à réapparaître, le petit nombre d’incidents a peut-être suffi à donner la frousse à la RBNZ.
Selon Reuters, les marchés tablent sur une probabilité de 60 % d’une hausse des taux mercredi lorsque le gouverneur Orr prendra la parole.
Enfin, l’OPEP et ses alliés se réunissent lundi, une fois de plus, pour leur réunion mensuelle et leur rendez-vous politique.
Avec des prix élevés et une demande avec eux, nous assisterons probablement à l’approbation d’une plus grande production à venir. L’OPEP+ s’est engagée à pomper 400 000 b/j supplémentaires chaque mois jusqu’à la fin de l’année prochaine alors qu’elle cherche à récupérer les pertes induites par la pandémie.
Selon le rapport mensuel de septembre sur le marché pétrolier, l’OPEP+ estime que la demande dépassera les niveaux de 2019 d’ici la fin 2022.
Avec le brut Brent poussant vers 80 $ au moment de la rédaction, les États-Unis tirent la sonnette d’alarme sur le prix de l’essence. Les États-Unis ont historiquement bénéficié du prix du pétrole beaucoup moins chers que certains autres pays développés et de tout ce qui est considéré comme inacceptable par Joe Sixpack et Joe Biden.
Le président a déclaré que les États-Unis étaient actuellement en pourparlers avec l’OPEP pour augmenter davantage les volumes pour couvrir cela – en ignorant peut-être le fait que le schiste américain est prêt à ajouter au moins 800 000 b/j aux approvisionnements mondiaux une fois qu’il sera opérationnel.
L’OPEP+ est de toute façon sa propre créature. Tout ce qu’il fait est dans l’intérêt de ses États membres, de ses alliés et des prix mondiaux du pétrole dans son ensemble. Nous ne savons pas si les plaidoyers de Biden tombent dans l’oreille d’un sourd, mais je ne serais pas surpris de voir l’OPEP-JMMC s’en tenir à son propre programme en octobre et au-delà.
Principales données économiques
|Mon 04-Oct||All Day||OIL||OPEC-JMMC Meetings|
|Tue 05-Oct||4.30am||AUD||RBA Rate Statement|
|3.00pm||USD||ISM Services PMI|
|Wed 06-Oct||2.00am||NZD||Official Cash Rate|
|2.00am||NZD||RBNZ Rate Statement|
|1.15pm||USD||ADP Nonfarm Employment Change|
|3.30pm||OIL||US Crude Oil Inventories|
|Thu 07-Oct||3.30pm||GAS||US Natural Gas Inventories|
|Fri 08-Oct||1.30pm||CAD||Employment Change|
|1.30pm||USD||Average Hourly Earnings m/m|
|1.30pm||USD||Nonfarm Employment Change|
|Tentative||USD||Treasury Currency Report|
Week Ahead: Q1 earnings season kicks off on Wall Street
Earnings season gets underway on Wall Street as the big banks get the ball rolling this week. Meanwhile traders are looking at the latest inflation and retail sales figures from the US and a central bank interest rate decision from New Zealand taking place amid the country’s housing boom.
Coming after fresh record highs for the S&P 500 and Dow and expectations for a major cyclical bounce back for the US economy in Q2 and Q3, this week marks the start of an important corporate earnings season for the market. April is historically a strong month for the market and traders will be looking to corporate updates to power further gains for stocks. However, the market is well priced for earnings to pick up this year already – in fact the 6% rise in the bottom-up EPS estimate for Q1 is the largest on record, according to FactSet.
Big banks including JPMorgan, Bank of America, Morgan Stanley, Wells Fargo and Citigroup get the season off to the customary start. Financials have been on the up as bond yields rose in the first quarter and the sector has outperformed the broader market.
In addition to the earnings updates and forecasts for the next quarter, market participants will be paying close attention to what the bank CEOs say about the outlook for the US economy and the recent uptick in bond yields which ought to be supportive of bank earnings. In his annual letter to shareholders sent last week, JPMorgan boss Jamie Dimon was very bullish on the US, saying the economic boom could easily run into 2023. Whilst he called stock market valuations are “quite high,” he said a multi-year boom may justify current levels.
A big question facing the market right now is whether inflation is coming – prices are set to rise on a year-on-year basis as the base effects from the pandemic last year play out. But that is not the same as sustained inflation that could pressure central banks into raising rates before the recovery is complete. US CPI inflation figures are due on Tuesday. Last month’s 0.4% increase was in line with expectations but was the last ‘easy’ data point as base effects are set to take effect now. The Labor Department said its consumer price index increased 0.4% in February after rising 0.3% in January. For March the increase is expected to be markedly higher as sharp price declines at the start of the pandemic last year feed through the calculations.
RBNZ rate decision
No change expected to the cash rate of 0.25% and there are no updates to forecasts nor a press conference. However, the Reserve Bank of New Zealand meets amid a housing price boom and slowing momentum in economic indicators. The ANZ business survey released on Thursday showed confidence sliding further to –8.4 whilst details on the activity side were flat to weaker. Cost and inflation pressures were said to be ‘intense’ with pricing expectations hitting a new high on data going back to 1992.
Major economic data
|Mon 12 Apr||15:30||CAD||BOC Business Outlook Survey|
|18:01||USD||US 10yr Bond Auction|
|Tue 13 Apr||Tentative||CNH||China Trade Balance|
|13:30||USD||US CPI Inflation|
|18:01||USD||US 30yr Bond Auction|
|Wed 14 Apr||03:00||NZD||RBNZ Rate Statement|
|10:00||EUR||EZ Industrial Production|
|15:30||WTI/Brent||US Crude Oil Inventories|
|19:00||USD||Fed Beige Book|
|Thu 15 Apr||02:30||AUD||Australia Unemployment|
|13:30||USD||US Retail Sales|
|13:30||USD||Philly Fed Manufacturing|
|13:30||USD||US Unemployment Claims|
|15:30||Nat Gas||US Natural Gas Inventories|
|Fri 16 Apr||03:00||CNH||China GDP|
|13:30||EUR||EZ Final CPI Inflation|
|15:00||USD||UoM Consumer Sentiment|
Key earnings data
|14-Apr||JPMorgan Chase & Co.||Q1 2021 Earnings|
|15-Apr||UnitedHealth Inc.||Q1 2021 Earnings|
|15-Apr||Bank of America Corp.||Q1 2021 Earnings|
|15-Apr||PepsiCo Inc.||Q1 2021 Earnings|
|16-Apr||Reliance Industries Ltd Dematerialised||Q4 2021 Earnings|
|14-Apr||Wells Fargo & Co.||Q1 2021 Earnings|
|12-Apr||Tata Consultancy Services Limited||Q4 2021 Earnings|
|16-Apr||Honeywell||Q1 2021 Earnings|
|15-Apr||Citigroup Inc.||Q1 2021 Earnings|
|16-Apr||Morgan Stanley||Q1 2021 Earnings|
|15-Apr||Charles Schwab||Q1 2021 Earnings|
|15-Apr||BlackRock Inc.||Q1 2021 Earnings|
|14-Apr||Goldman Sachs||Q1 2021 Earnings|
|17-Apr||HDFC Bank Ltd Registered Shs||Q4 2021 Earnings|
|15-Apr||U.S. Bancorp||Q1 2021 Earnings|
|15-Apr||BB&T Corp Registered Shs||Q1 2021 Earnings|
|16-Apr||PNC Financial Services Group Inc.||Q1 2021 Earnings|
Week Ahead: US consumer confidence shaky while rising yields impact markets
Looking forward to the week ahead we see US consumer confidence on shaky ground, despite more stimulus coming soon. Rising yields will also potentially have big implications for the markets. Elsewhere, New Zealand’s economy looks like its gaining strength ahead of the RBNZ rate statement, while Airbnb leads large caps reporting next week with its first earnings call as a publicly traded company.
US consumer confidence doesn’t look so confident
Ahead of the official US consumer confidence figures posted next week, it appears consumer sentiment has fallen in February so far.
Preliminary data revealed a drop in the University of Michigan’s consumer confidence index from a reading of 79.0 for January to 76.2 in February against a consensus of 80.5-80.8.
Low income households, i.e. those with an annual income of $75,000 or lower, appear to be driving sentiment lower. Only 23% of households in this grouping said their finances had improved since 2014, and 71% said they had made gains in their income.
What’s interesting, according to Survey Director Richard Curtain, is that consumer confidence has dropped against the previous month, despite Joe Biden preparing the mother of all stimulus packages. $1.9 trillion in relief is on its way, which will put, at minimum, $1,400 apiece into US consumers’ pockets, plus extra support for small businesses. $900bn was also doled out to lower income households in December 2020.
Support is on its way, but at the moment, consumer sentiment looks like it’s in the doldrums.
Rates & equities react to steepening yields
As rates have sold off, yields have steepened, which may have consequences for asset classes like FX, equities, and maybe even crypto currencies.
Last Tuesday, Treasury yields had their biggest gain in 3 months. 10s rose 9 basis points, reaching the highest since February above 1.3%.
As our Chief Market Analyst Neil Wilson has previously reported, there are some important factors at play here creating inflationary impetus, notably:
- A heavy volume of pro-cyclical fiscal stimulus
- Ultra-loose monetary policy
- Pent-up demand
- A savings glut
European stocks are sliding as concerns around interest rates feed into investors’ thinking with the speed of the change in absolute yields catching them off guard. UK Inflation rose from 0.6% in December to 0.7% in January, due to rising costs as the cost of furniture and household goods, restaurants and hotels, food, and transport.
Gold has also weakened on higher yields.
Essentially, this is one to keep track of, as rising yields as implications across the investment and finance world.
RBNZ Rate announcement – No change on the Kiwi front
The Reserve Bank of New Zealand (RBNZ) makes its rate statement next week amidst expectations that no major rate changes are coming.
New Zealand’s economy has been one of the more resilient in the year of the pandemic. Swift, strong lockdown and border control measures limited damage caused by Covid-19, which has put New Zealand in a better than expected economic position.
The New Zealand Dollar (NZD) enjoyed a great 2020, making significant strides against the pound, euro, and US dollar, reacting well to a turbulent first half of the year, which included a big sell off.
It’s now expected that no further stimulus is needed for New Zealand. Commentators also believe that negative rates are not going to be implemented by New Zealand’s central bank either.
Australia New Zealand Banking Group, one of the country’s top lenders, does not expect a rate change by RBNZ, in part due to the strength of the NZD, but also because the country’s labour market is in a good position too.
New Zealand’s labour rate fell to 4.9% in the last quarter, somewhat unexpectedly, with labour underutilisation in some key sectors falling too. Government stimulus in some areas of the economy is helping cover shortfalls in others, which is a boon for employers, a boon for workers, and a boon for the economy as a whole. Exports have also remained supportive.
Essentially, the outlook in the short term is still good for New Zealand. Some predict OCR rates will begin rising in 2024. Inflation is predicted to rise to 2.5% by June but may scale back to 0.8% in the following year. Let’s keep an eye on New Zealand, but it may not be wise to expect a massive overhaul in monetary policy at next week’s statement.
Airbnb’s first earnings as a publicly traded company
Airbnb went public in December 2020 and will make its first ever earnings call as a publicly traded company on February 25th.
Of course, any earnings will have to be viewed through the pandemic prism. According to its S1 filing, Airbnb’s gross booking volumes had fallen 39% year-on-year 2020, totalling $18bn, while revenues dropped 32% for a total of $2.5bn in the 9 months up to September 2020. Mandatory lockdowns struck in key economies like the US, EU, and UK in April 2020, which bought personal travel to a halt.
But Airbnb does have enormous brand recognition, which may be helping its shares and business do better than peers. Its market cap of about $120bn outstrips its rival online holiday rivals like Expedia ($22bn), Tripadvisor ($5bn) and even Booking.com ($91bn). Listings have stayed relatively stable, for instance, dropping only 2% across the pandemic with 5.6m registered in September 2020 against 5.7m in December 2019.
Long-term stays (bookings over 28 days) were down only 13% y-o-y in April 2020, traditionally the worst month for hotel bookings, but showed y-o-y growth between May and September of that year.
A project $3.2 trillion market opportunity may keep investors looking to Airbnb. According to commentators, Airbnb has very strong potential in its three key offerings:
- $1.8 trillion – Short-term stays
- $210 billion – Long-term stays
- $1.4 trillion – Experiences
What is more, Airbnb had 247 million guests in 2019, accounting for 3.8% of the estimated 6.5 billion global paid overnight trips that year. If it can capture just 10% of the potential market, Airbnb could net $340 billion in sales a year.
This will be an interesting earnings call to say the least. We’ll be able to register the impact of pandemic on Airbnb and see if its fundamentals are strong enough to weather the storm.
The outlook may be good already. Investor confidence seems high. Airbnb shares soared 200% after it went public, and as of February 15th, they were trading around their record level.
Major economic data
|Tue Feb 23||3.00pm||USD||CB Consumer Confidence|
|Wed Feb 24||1.00am||NZD||Official Cash Rate|
|1.00am||NZD||RBNZ Monetary Policy Statement|
|1.00am||NZD||RBNZ Rate Statement|
|1.00am||NZD||RBNZ Press Conference|
|3.30pm||USD||US Crude Oil Inventories|
|Thu Feb 25||1.30pm||USD||Prelim GDP Q/Q|
|3.30pm||USD||US Natural Gas Inventories|
Key earnings data
|Mon 22 Feb||Berkshire Hathaway||Q4 2020 Earnings|
|Palo Alto Networks||Q2 2021 Earnings|
|Tue 23 Feb||Home Depot||Q4 2020 Earnings|
|Square||Q4 2020 Earnings|
|HSBC||Q4 2020 Earnings|
|Thomson Reuters||Q4 2020 Earnings|
|Wed 24 Feb||NVIDIA||Q4 2021 Earnings|
|Lowe’s||Q4 2020 Earnings|
|Royal Bank of Canada||Q1 2021 Earnings|
|Budweiser||Q4 2020 Earnings|
|National Bank of Canada||Q1 2021 Earnings|
|Puma||Q4 2020 Earnings|
|Thu 25 Feb||Salesforce||Q4 2021 Earnings|
|Airbnb||Q4 2020 Earnings|
|Vale||Q4 2020 Earnings|
|Toronto-Dominion Bank||Q1 2021 Earnings|
|Moderna||Q4 2020 Earnings|
|Bayer||Q4 2020 Earnings|
|Dell||Q4 2021 Earnings|
|HP||Q1 2021 Earnings|
|Etsy||Q4 2020 Earnings|
|Telefonica||Q4 2020 Earnings|
|Fri 26 Feb||Deutsche Telekon||Q4 2020 Earnings|
|BASF||Q4 2020 Earnings|
Week Ahead: Tesla Battery Day to spark investor interest
Tesla hosts its long-awaited and much-hyped Battery Day on Tuesday, with investors eyeing a possible game-changing technology announcement. Meanwhile the economic data stream flows with flash PMIs for the Eurozone, a Reserve of Bank of New Zealand interest rate decision and the weekly US jobs report.
Fed chair Jay Powell and Bank of England governor Andrew Bailey are both due to speak in the coming days after last week’s FOMC and MPC meetings.
Tesla Battery Day
Tesla’s 2020 annual meeting of stockholders will be held on Tuesday, September 22, 2020, at 13:30 Pacific Time. Immediately after this meeting, Tesla will hold the Battery Day event, which has been generating equal amounts of speculation in the shares as in what CEO Elon Musk may be about to reveal.
Our full guide to the event can be found here.
How is the economic recovery going?
Is the global economic recovery losing momentum? Whilst the snapback after lockdowns was the easy bit, it’s going to be much harder to get back to 2019 levels. Marginal gains are becoming harder to come by and some high frequency economic indicators are starting to level off. Eurozone PMIs for instance, have started to soften.
The latest round of flash manufacturing and services surveys for the Eurozone, UK and US are due on Wednesday. Meanwhile traders will be watching the weekly US jobless claims numbers as closely as ever on Thursday, while US durable goods orders on Friday offer a useful leading indicator of business demand.
How are central banks responding?
Last week the Federal Reserve and Bank of England signalled they are ready to do more as required and interest rates are set to stay low for a long time. This week sees the Reserve Bank of New Zealand in action after the country posted its worst recession in decades.
The country’s economy shrank by 12.2% between April and June, the steepest decline since the current system of measurement began in 1987 as strict national lockdown measures crippled activity.
The RBNZ has been looking at negative rates with assistant governor Christian Hawkesby saying last month that the central bank is “preparing the groundwork” for additional policy tools, which include negative rates. Will they make the leap now, or will they gauge that the economy will bounce back thanks to the very low number of cases?
Highlights on XRay this Week
Read the full schedule of financial market analysis and training.
|15.00 UTC||21-Sep||Tesla Battery Day Preview|
|17.00 UTC||21-Sep||Blonde Markets|
|17.00 UTC||22-Sep||Webinar: Identify Trends and Choose Technical Indicators|
|14.45 UTC||24-Sep||Master the Markets|
|17.00 UTC||24-Sep||Election2020 Weekly|
Key Events this Week
Watch out for the biggest events on the economic calendar this week. A full economic and corporate events calendar is available in the platform.
|22-Sep||Kingfisher – Half-Year Results|
|14.00 UTC||22-Sep||Eurozone Consumer Confidence|
|02.00 UTC||23-Sep||Reserve Bank of New Zealand Rate Decision|
|07.15 – 08.00 UTC||23-Sep||Eurozone Flash Services / Manufacturing PMIs|
|Pre-Market||23-Sep||General Mills – Q1 2021|
|08.30 UTC||23-Sep||UK Flash Services / Manufacturing PMIs|
|14.30 UTC||23-Sep||US EIA Crude Oil Inventories|
|23.50 UTC||23-Sep||Bank of Japan Meeting Minutes|
|08.00 UTC||24-Sep||German Ifo Business Climate|
|Pre-Market||24-Sep||Accenture – Q4 2020|
|12.30 UTC||24-Sep||US Weekly Jobless Claims|
|14.30 UTC||24-Sep||US EIA Natural Gas Storage|
|After-Market||24-Sep||Costco Wholesale Corp – Q4 2020|
|11.00 UTC||25-Sep||Bank of England Quarterly Bulletin|
|12.30 UTC||25-Sep||US Durable Goods Orders|
Gold makes fresh highs, equities retreat to middle of ranges
Gold broke out to fresh multi-year highs above $1770 as real Treasury yields continued to plunge. US 10-year Treasury Inflation Protected Securities (TIPS) dipped to new 7-year lows at –0.66% and have declined by 14bps in the last 6 days. The front end of the curve has also declined more sharply in the last couple of sessions, with 2-year real rates at –0.81%. Indeed, all along the curve real rates have come down with the 30-year at –0.14%.
Gold has also found some bid on a softening dollar in recent days, with the dollar index down 1% in the last two sessions. Fears that global central banks are fuelling a latent inflation boom with aggressive increases in the money supply continue to act as the longer-term bull thesis for gold.
Gold climbs on falling bond yields, fears of long-term inflation bubble
As previously discussed, gold is a clear winner from the pandemic. Gold was initially sold off in February and the first half of March as a result of the scramble for cash and dollar funding squeeze. Since then gold has made substantial progress in tandem with risk assets since the March lows because of central bank action to keep a lid on bond yields. The combination of negative real yields and the prospect of an inflation surge due to massively increased money supply is sending prices higher.
Whilst the Covid-19 outbreak is at first a deflationary shock to the economy, the aftermath of this crisis could be profoundly inflationary. Gold remains the best hedge against inflation which may be about to return, even if deflationary pressures are more pronounced right now.
Covid-19 second wave fears keep stocks range bound
Stocks are a little shaky this morning after a strong bounce on Tuesday. European markets opened lower, with the FTSE 100 slotting back under 6,300 at the 61.8% retracement, which called for a further retreat to the 50% zone around 6220. The DAX is weaker this morning and broke down through support at 12,400, the 61.8% level.
The Dow is holding around 26,100 and the 50% level of the pullback in the second week of June, while the S&P 500 is finding support on the 61.8% level around 3,118. Equity markets continue to trade the ranges as investors search for direction on how quickly the economy will recover and whether second waves threats are real.
On the second wave, the US looks clearly to have suffered a new, and in the words of Dr Fauci, ‘disturbing surge’ in cases. Virus hotspots like Texas, Florida, California and Arizona are seeing cases soar. Such is the worry the EU may ban Americans from travelling to its member states. Tokyo has also reported a spike in cases, whilst Germany is locking down two districts in North Rhine-Westphalia and there has been an outbreak in Lower Saxony.
On stimulus, Treasury Sec Steve Mnuchin said the administration is looking at extending the tax deadline beyond July 15th and is seriously looking at additional fiscal support to build on the $2.2tn Cares Act.
Dollar retreats, RBNZ decision hits NZD
In FX, the dollar has been offered this week, allowing major peers to peel back off their lows. GBPUSD has regained 1.25, while EURUSD has recovered 1.13. The kiwi was offered today after the Reserve Bank of New Zealand left rates on hold but said monetary policy easing would need to continue. The RBNZ said it will continue with the Large Scale Asset Purchase programme of NZ$60b and keep rates at 0.25%. The central bank noted that the exchange rate ‘has placed further pressure on export earnings…[and] the balance of economic risks remains to the downside’.
Crude off multi-month highs, mixed on API data
WTI (Aug) pulled back having hit its best level since March, dropping beneath the $40.70 level that was the Jun 8th peak, but remained clinging to $40. Prices have slipped the near-term trend support. Again, I’m looking at a potential double top calling for a pull back to $35. However, the fundamentals are much more constructive, and indicate a stronger outlook for demand and supply than we had feared in May.
API data showed inventories rose 1.7m barrels last week, gasoline stocks declined by 3.9m barrels, while distillate inventories fell by 2.6m barrels. Crude stocks at the Cushing, Oklahoma, fell by 325,000 barrels for the week. EIA figures today are forecast to show a build of 1.2m barrels.
Chart: Gold up over 20% from its March low
Negative rates: not now Bernard
Not Now, Bernard is a children’s story about parents who don’t pay attention and don’t notice their son has been gobbled up by a monster, which they duly allow into the house. One could make parallels with central banks and the monstrosity of negative rates.
Last week a strange thing happened: Fed funds futures – the market’s best guess of where US interests will be in the future – implied negative rates were coming. The market priced in negative rates in Apr 2021. It doesn’t mean they will go negative, but the market can exert serious gravitational pull on Federal Reserve policy. Often, the tail wags the dog, and the market forces the Fed to catch up. Of course, given the vast deluge of QE, it’s not always easy to read the bond market these days – central bank intervention has destroyed any notion of price discovery.
Now this is a problem for the Fed. Japan and Europe, where negative rates are now embedded, are hardly poster children for monetary policy success. Nevertheless, the President eyes a freebie, tweeting:
“As long as other countries are receiving the benefits of Negative Rates, the USA should also accept the “GIFT”. Big numbers!”
The Fed needs to come out very firmly against negative rates, or it could become self-fulfilling. Numerous Fed officials this week are trying their best to sound tough, but they are not brave enough to dare sound ‘hawkish’ in any way. Minneapolis Fed president Neel Kashkari said Fed policymakers have been ‘pretty unanimous’ in opposing negative interest rates, but he added that he did not want to say never with regards to negative interest rates.
It’s up to Fed chair Jay Powell today to set the record straight and make it clear the Fed will never go negative, or the US will go the way of Japan and Europe. Powell has to push very hard against this market mood. Too late says Scott Minerd, Guggenheim CIO, who believes the 10-year yield will eventually hit -0.5% in the coming years. Powell speaks today in a webinar organized by the Peterson Institute for International Economics. If he doesn’t lean hard on the negative rate talk it will cause a fair amount of mess on the short end.
UK 2yr yields turn negative, RBNZ doubles QE
Another strange thing happened this morning – UK interest rates also went negative. The 2yr gilt yield sank to an all-time low at -0.051% as markets assessed how much stimulus the UK economy is going to need (more on this below).
Inflation may or not be coming; deflation is the big worry right now as demand crumbles. The Covid-19 outbreak, or, more accurately, the response by governments, creates a profoundly deflationary shock for the global economy. Just look at oil prices. And yet, as central banks approach the precipice of debt monetization and Modern Monetary Theory, inflation could be coming in a big way.
So, we move neatly to the Reserve Bank of New Zealand (RBNZ), which last month said it was ‘open minded’ on direct monetisation of government debt. Today’s it has doubled the size of its bond buying programme but kept rates at 0.25%. The kiwi traded weaker.
German judge slams ECB
Sticking with central banks, and Peter Huber, the German judge who drafted the constitutional court’s controversial decision was reported making some pretty stunning remarks about the European Central Bank. Speaking to a German publication he warned the ECB is not the ‘Master of the Universe’, and, according to Bloomberg, said: ‘An institution like the ECB, which is only thinly legitimized democratically, is only acceptable if it strictly adheres to the responsibilities assigned to it’. These are pretty stunning and underline the extent to which this decision upends the assumption of ECJ oversight in the EU and over its institutions. Remarkable.
US stocks tumble on talk of lockdown extensions
US stocks had a dismal close, sliding sharply in the final hour of trading as Los Angeles County looked set to extend its stay at home order for another three months and Dr Fauci warned of reopening too early. The S&P 500 fell 2% and closed at the session low at 2870. The close could leave a mark as it broke support and we note the MACD crossover on the daily chart. European markets followed suit and drove 1-2% lower – this might be the time for the rollover I’ve been talking about for the last fortnight.
Pound off overnight lows after Q1 GDP decline softer-than-expected
Sterling is softer but off the overnight lows after less-bad-than-feared economic numbers. GBPUSD traded under 1.23 having tested the Apr 21st swing low support at 1.2250 ahead of the GDP print. The UK economy contracted by 5.8% in March. However, the –1.6% contraction in Q1 was less than the –2.2% expected, while quarter-on-quarter the economy contracted -2% vs –2.6% expected. GBPUSD bounced off its lows following the release, but upside remains constrained and the bearish MACD crossover on the daily chart still rules. We know it’s bad – the extension of the furlough scheme does not indicate things will be back to normal this year.
Oil markets are still looking quite bullish. A number of OPEC ‘sources’ yesterday suggested the cartel would stick to the 9.7m bpd cuts beyond June. API figures showed a build of 7.6m barrels, though there was a draw on stocks at Cushing, Oklahoma of 2.3m barrels. Gasoline inventories fell 1.9m barrels, but distillates continued to build by 4.7m barrels. EIA inventory data is later today is expected to show a build of 4.8m barrels.
RBNZ on hold, US CPI on tap, UK & EU update on growth
With the UK starting 2020 by leaving the EU and striking out on its own, markets would like to see that it ended 2019 on a strong economic footing when preliminary Q4 data is released. The data for most Eurozone members will be the second reading; the preliminary estimates showed expansion of just 0.1% as strong growth in Spain helped to offset contractions in France and Italy. Germany’s Q4 reading will be the flash estimate – analysts expect the Eurozone powerhouse to post a contraction of -0.1%.
RBNZ – Easing cycle is over
A round of strong labour market data last week has markets pricing in stronger odds that the RBNZ is done with its easing cycle. Unemployment dropped to 4% in Q4 and the underutilisation rate, which measures the labour market’s untapped capacity, fell to an 11-year low of 10% in December.
While the Chinese coronavirus outbreak is the latest economic headwind for markets and central banks to contend with, the strength of the domestic data should see the RBNZ confident enough to stand pat and see how the situation develops.
Last month’s CPI reading showed the fastest pace of annual inflation in eight years, but a closer look at the numbers revealed some big weaknesses. Month-on-month, price growth slowed to 0.2% from 0.3% in November, core CPI slowed to 0.1% from 0.2%. Average earnings grew just 0.7% in 2019. More soft readings like this will support the market view that Fed policy will remain on hold until well into H2.
Earnings – Kraft Heinz and NVIDIA
Top reports this week will be Kraft Heinz before the market opens on February 13th and NVIDIA after the closing bell the same day. KHC has had a bad start to 2020, declining around 9% even as the S&P 500 and Nasdaq hit fresh record highs. The company is facing weakening demand and a lack of free cash with which to innovate.
Coronavirus fears caused a small stumble in NVIDIA’s continuing rally, with the stock quickly recovering. China accounts for around a quarter of the chipmaker’s revenue, so management may warn that the virus could dent demand in this key market. EPS of $1.66 is expected on revenue of $2.96 billion – both hefty increases on the same period a year ago.
(All times GMT)
01.30 GMT 10-Feb China Consumer Price Index
06.30 GMT 11-Feb Daimler – Q4 2019
09.30 GMT 11-Feb UK Preliminary GDP (QoQ) & Manufacturing Production
Pre-Market 11-Feb Hasbro – Q4 2019
After-Market 11-Feb Lyft – Q4 2019
01.00 GMT 12-Feb RBNZ OCR Decision & Monetary Policy Statement
07.00 GMT 12-Feb Softbank – Q3 2019
15.30 GMT 12-Feb US EIA Crude Oil Inventories
After-Market 12-Feb Cisco – Q2 2020
07.00 GMT 13-Feb Barclays – Q4 2019
Pre-Market 13-Feb The Kraft Heinz Company – Q4 2019
13.30 GMT 13-Feb US Consumer Price Index
15.30 GMT 13-Feb US EIA Natural Gas Storage Data
After-Market 13-Feb NVIDIA – Q4 2020
13-Feb Airbus – Q4 2019
07.00 GMT 14-Feb Germany Preliminary GDP (QoQ)
10.00 GMT 14-Feb Eurozone Flash GDP (QoQ)
13.30 GMT 14-Feb US Retail Sales
15.00 GMT 14-Feb US Preliminary UoM Consumer Sentiment Index