The US$ was little changed on Friday, with the DXY just 0.8% lower through the session, and the action was once again mostly in the stock markets, which finished the week on a generally positive note following on from a better than expected return in the September Retail Sales and some hopeful news on a Covid vaccine.
The US indices ended the day mixed with the DJI and S+P both up by around 0.3% after the Retail Sales figure easily beat expectations of 0.5% for the month by coming in at 1.5%mm, suggesting that the economy remains in good shape and helped to ease trader concerns about a slowdown in the recovery. The Nasdaq lagged, down by 0.28% on the day. Of particular interest, the ASX looks to have broken out of its 5 month consolidation and seems to be set to head higher, probably in anticipation of some action at the next RBA meeting on November 3rd, where an easing is now beginning to be priced in.
In terms of a Covid-vaccine, Pfizer Co. said on Friday that it will apply for emergency US approval of its Covid-19 vaccine in November, which did its bit to underpin the markets.
In terms of the political games ahead of the November 3rd election, despite little progress on the ongoing stimulus talks, traders seem to believe that it is a matter of when, rather than if, further federal aid is on its way after Nancy Pelosi suggested earlier in the week that a fiscal package will be rolled out before January.
FX traders seemed to take the news in their stride and there was little movement of any real interest. Sterling was in focus after the UK PM Boris Johnson said that the UK should prepare for a no-deal Brexit and that negotiations with the EU were “over” unless there was a fundamental change in the mindset in Brussels. Sterling chopped around but traders seem to have become exhausted by the never-ending Brexit headlines, and Cable finished the week at 1.2925, while also ending unchanged against the Euro (0.9065). Neither the FTSE nor the EUStoxx50 seemed too bothered, and each saw a 1.6% rally on Friday.
Elsewhere, the Euro traded briefly below 1.1700, but then bounced to 1.1745 before settling in the middle of its tight range, while both the Aud and the Nzd ended the week on a heavy note, weighed down by the prospect of an RBA rate cut on November 3rd and ahead of the NZ election.
In the commodities sector, both Gold and Silver gave up around 0.5% while oil remains in a tight range, holding on just above 40.00pb.
Looking ahead, the calendar is rather thin for the coming week and the US election, stimulus talks and vaccine hopes will dominate the action. There will also be a plethora of central bank speakers, beginning Monday, with a lot on the agenda but with Fed Chair Powell in focus.(Speakers: Lagarde (x3), De Guindos, Mersch, Lane (ECB) Bailey, Cunliffe, (BOE), Powell, Williams, Clarida (Fed).
The week begins today on Monday with the Australian New Home Sales for August and the China Q3 GDP (exp +3.2%qq, +5.2%yy), the September Industrial Production (exp +5.8%yy), Retail Sales (exp +1.8%yy), Fixed Asset Investment (exp +0.8%yy) and the press conference. The rest of the day will be left to the central bank speakers. Tuesday will see the RBA Minutes of the October meeting, while the PBOC will provide their monthly interest rate adjustment. From the US will come the September Building Permits/Housing Starts. Wednesday will see the Preliminary Australian Retail Sales while Europe will be another busy one of EU central bank speakers as well as the UK CPI, PPI, RPI. Thursday will be thin until the US when the weekly jobless claims and the Kansas Fed Mfg Activity will be in focus while Friday will begin with the NZ Q3 CPI before the global flash Mfg/Service/Composite PMIs steal the headlines for the rest of the day, beginning with Australia and heading onto the EU/UK and the US. There is meant to be another Presidential Debate on Friday but who knows whether that will take place – we shall see. Have a good week.
Economic data highlights will include:
Mon: NZ Business PSI, China Q3 GDP, Industrial Production, Retail Sales, Fixed Asset Investment, NBS Press Conference, German BuBa Monthly Report, EU Construction Output, US NAHB Housing Market Index, Speeches; Lagarde (x3), De Guindos, Mersch, Lane (ECB) Bailey, Cunliffe (x2), (BOE), Powell, Williams, Clarida (Fed)
Tue: NZIER Business Confidence, RBA Minutes, RBA’s Kent Speech, German PPI, EU Current Account, US Building Permits, Housing Starts, Global Dairy Trade Index, API Weekly Crude Oil Stock Inventory
Wed: Australian WBC Leading Index, Retail Sales, NZ Core Personal Income/Spending, UK CPI, PPI, RPI, BOE Speaker; Ramsden, EIA Weekly Crude Stocks Change
Thur: RBA Speaker; Debelle, NAB Australian Business Conditions/Confidence, Japan All Industry Activity Index, UK CBI Distributive Trade Survey – Orders, US weekly jobless claims, Existing Home Sales, Kansas Fed Mfg Activity,
Fri: NZ Q3 CPI, Australian Flash Mfg PMI, Japan CPI, US Presidential Debate, UK Retail Sales, Consumer Confidence, EU/UK/US Flash Mfg PMIs
Market moves, in brief:
FX: DXY 93.06 (-0.06%)
Bonds: US10Y; 0.741% (+0.91%), German 10Y; -0.622% (-1.90%), UK 10Y; 0.178% (-1.00%), Australian 10Y; 0.742% (-4.53%), NZ 10Y; +0.545% (-1.98 %), China 10Y; 3.215% (-0.36%)
Stock Indices: DJI; +0.44%, S+P; +0.26%, NASDAQ; -0.28%, EUStoxx50; +1.65%, FTSE100; +1.59%, Shanghai Composite; +0.13%, ASX200SPI: +0.35%
Metals: Gold $1900 oz (-0.44%), Silver $24.15 oz (-0.60%), Copper $3.0620 lb (-0.76%), Iron Ore $xxxx per tonne (NYMEX) (xxx%),
Oil: WTI $40.72 pb (-0.20%)
Trend Table: October 17, 2020
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|1 Week||Possible Topping Formation||Turning Neutral||Turning Neutral||Possible Basing Formation||Possible Topping Formation||Possible Topping Formation|
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|1 Week||Possible Basing Formation||Up – Overbought||Turning Neutral||Turning Lower||Turning Lower||Neutral|
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