With corporate earnings season effectively over, the tax cuts initiative unlikely to be made law (in the form Trump wanted) any time soon and the December FOMC rate setting meeting beginning to focus minds, investors in U.S. equities have been struggling to justify reasons to bid markets up over recent days. Doubts are also beginning to emerge regarding the ability and reasons for equity markets to rise any further, as global growth appears to have stalled, as evidenced by recent poor Chinese data, causing the main markets to reach three week lows and many other global equities to recede from recent record highs.
Adding to the sense of concern, several key hard data releases for the USA economy delivered benign, or weak results on Wednesday; CPI (inflation) came in as forecast at 2% YoY, advanced retail sales rose by 0.2% in October, whilst weekly and average hourly wage earnings came in up 0.4% YoY, both missing forecasts of a 0.6% rise. The sustained level of inflation and relatively steady series of hard data results over recent weeks, should provide the necessary reason for the various Feds, who form the FOMC, to fulfil their Q2 commitment; to raise the key interest rate three times in 2017.
WTI oil fell by circa 0.8% on the day, to approx $55.40 per barrel. The dollar index recovered some of its earlier losses during the day, to end the session close to flat, whilst USD/JPY whipsawed through a wide bearish range; falling through S3, recovering to S1, then falling back through S2, to end the day down circa 0.7%.
Eurozone economic calendar news centred on the trade balance surplus figure for September, which beat expectations, by coming in at €25b, ahead of the prediction of €21b. Despite a lack of negative data, the leading European indices continued the mean reversion witnessed over recent days. However, it must be noted that, for example, the DAX has made considerable gains over recent months; rising from 12,000 in late August, to reach record highs of circa 13,525 in October and closing at circa 13,000 on Wednesday, the YoY gains are still approx. 21%. The euro experienced mixed fortunes versus its main peers on Wednesday; up versus sterling and the U.S. dollar, flat versus the Swiss franc and down marginally versus yen.
Sterling fell versus its peers after the U.K. official stats agency the ONS reported the latest employment and unemployment data. Despite unemployment remaining close to recent record lows at 4.3%, the ONS posted a job loss metric of -14k for Q3, versus expectations of the creation of 50k jobs. Wage rises are running at circa 2.2% per annum, significantly below the 3% inflation figure. The inference analysts and investors have drawn, is that job creation (and the U.K. government and data sources have been highly creative with their schemes and methodology), may finally be running out of road, as there’s very little slack left in what (to all intents) is now a full employment economy. The U.K. pound fell versus the euro and rose versus the U.S. dollar.
U.S.DOLLAR
USD/JPY crashed through S3 at circa 12pm U.K. time, eventually printing a daily low of 112.81, before recovering to S1, to then slip back through S2 closing the day out down circa 0.7% at 112.8. It must be noted that yen made considerable gains versus the majority of its peers during Wednesday’s trading sessions. USD/CHF initially breached S1, to then recover, ending the day down circa 0.2% at 0.988. USD/CAD breached R1, ending the day up circa 0.3% at 1.276.
EURO
EUR/USD maintained (and added to) the considerable gains made on Tuesday, closing the day out up circa 0.2% at 1.178, having at one point breached R1. EUR/GBP also gave up some of its gains, having breached R1 whilst posting gains of 0.4%, the pair ended the day up 0.1% at 0.894. Price appears to be experiencing some expected resistance to the key handle of 90.00, having rejected it several times over recent days. Versus CHF and JPY the euro lost circa 0.2%, versus AUD and CAD the single bloc currency generated gains of circa 0.2%.
STERLING
Shortly after the publication of the latest employment/unemployment stats for the U.K. sterling fell versus its peers, however, the pound regained its losses, closing out up against most of its peers. GBP/USD initially breached R1 early in the European trading session, to then sink through the daily pivot point, eventually ending the day up circa 0.2%, at 1.316. Versus AUD, CAD and CHF the pound made gains. GPB/JPY whipsawed through a tight bearish range, falling through S2, to them recover to S1, closing down approx. 0.3% at 148.5.
GOLD
XAU/USD breached R1 reaching a four week high as New York’s markets opened, to eventually give up its gains as the session continued, ending the day resting close to the daily pivot point, at circa $1277 per ounce, down approx 0.2%. Having fallen considerably yesterday, the 100 DMA sited at $1278, is still acting as a key technical indicator for investor decision making.
EQUITIES SNAPSHOT FOR NOVEMBER 15th
• DJIA closed down 0.59%.
• SPX closed down 0.55%.
• FTSE 100 closed down 0.56%.
• DAX closed down 0.44%.
• CAC closed down 0.27%.
KEY ECONOMIC CALENDAR EVENTS FOR NOVEMBER 16th
• GBP Retail Sales Ex Auto Fuel (YoY) (OCT).
• EUR Euro-Zone Consumer Price Index (YoY) (OCT F).
• USD Initial Jobless Claims (NOV 11).
• USD Import Price Index ex Petroleum (MoM) (OCT).
• USD Export Price Index (YoY) (OCT).
• USD Industrial Production (MoM) (OCT).
• USD Manufacturing (SIC) Production (OCT).
• NZD BusinessNZ Manufacturing PMI (OCT).
