MORNING ROLL CALL

May 18 • Morning Roll Call • 44 Views • No Comments

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USA equities crash due to Trump scandal, U.S. dollar follows suit, by losing all its post election gains, gold surges.

We make no apologies for repeating our contention that in the ‘new between-the-lines1normal’, post Trump election era, we now have to be hyper-aware of a new paradigm, were market analysis is concerned. Fundamental and technical analysis, however carefully crafted and diligently applied, can be rendered useless by one errant tweet from Trump, or references to his rather bizarre form of high office ‘management’.

Wednesday witnessed the greatest market turbulence his election has caused, with rumours circulating that his behaviour is so bad he could now be threatened with criminal charges, or face impeachment. Markets quickly deduced that his chances of executing any of his reflation trade policy ideals, are now close to zero, hence the banking sector, which had witnessed equitable rises of over 20% in 2017, sold off sharply by 3%.

The VIX (the volatility index) jumped by the highest value witnessed, since the UK’s Brexit referendum result in June 2016. The DJIA closed down 372 points (1.72%), SPX down 1.82% and the NASDAQ dropped by 2.57%, from the record high posted yesterday, its biggest single day drop since June 2016. Bank and tech shares led the sectors’ rout across the three main U.S. equity markets.

USD/JPY ended the day down 2% at approx. 110.76. Yen surged versus many of its peers, as a consequence of poor industrial production and machine orders data, suggesting that the BOJ will continue with yen stimulus. EUR/USD was up circa 0.8% at 1.1159, USD/CHF closed the day out at circa 0.9875, with GBP/USD ending the day at 1.2969, up circa 0.5%.

Gold surged due to its safe haven appeal; the precious metal ended the day up 2% at $1260 per ounce, pushing back up through its 200 SMA (simple moving average, on a daily time frame), at 1245. WTI oil continued its recent recovery; adding circa 0.6%, to end the day at circa $48.86 per barrel, it also pushed through the 200 SMA during its highest point during the New York session, which is positioned at 49.26, whilst threatening to breach the critical, psyche level and handle, of $50 a barrel.

In terms of relevant USA economic calendar news on Wednesday, crude oil inventories didn’t fall as much as forecast, coming in at -1753, versus expectations of -2673. Mortgage applications for last week mirrored the recent fall in house building permits; by coming in at -4.1%, a significant miss from the positive reading expected.

Europe’s markets also sold off during Wednesday’s sessions; STOXX 50 down 1.57%, FTSE down 0.25%, CAC down 1.63% and the DAX down 1.35%. Similar to the USA; there was little in the form of negative fundamental data to cause the sell off, the mean reversion came as a consequence of negative sentiment from the USA. The UK’s jobless total and unemployment levels have fallen according to official ONS data, UK wages fell to 2.1% growth YoY. Eurozone construction shrunk by -1.1% in March, whilst CPI came in as forecast, at 1.9% YoY.

Economic calendar events for May 18th, all times quoted are London GMT time.

08:30, currency impacted GBP. Retail Sales (YoY) (APR). In a lob sided service driven economy such as the UK’s, retail sales are critically important, a reading of 2.6% is expected to match the previous reading for March.

12:30, currency impacted USD. Initial Jobless Claims (MAY 13). Weekly jobless claims in the USA are expected to nudge up to 240k, from the 236k recorded last week.

12:30, currency impacted USD. Philadelphia Fed. (MAY). The Philly Fed index is expected to fall to 18.5, from the 22 reading registered in April.

17:00, currency impacted EUR. ECB’s Draghi Speaks in Tel Aviv. Although listed as a potential high impact event, it’s unlikely that Mario Draghi will be giving a speech concerning the ECB policy (regarding the Eurozone), in Tel Aviv.

 

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