Archives of “April 2, 2019” day

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Theresa May: We need a further extension of Article 50 that ends when deal passed, offers cross-party approach

  
  Analysis

May outside Downing

  • May wants an extension until a deal is passed
  • Says is taking action to break the logjam
  • We are looking for a plan to leave with
  • Offers cross-party approach
  • Need unified approach with Labour, if we can’t agree to that would agree to a set of arrangements to put to the House
  • We can and must try to find a compromise
  • Would try and complete legislating by May 22
  • EU has said the withdrawal deal will not be reopened
  • Focus will be on future relationship in new talks
Cable rose above 1.31 briefly but is now just back below.
May’s offering to sit down with Corbyn and will try to come to a consensus and then put something to the EU next week. The next move goes to Corbyn. My guess is he rejects her deal and continues to let her hang herself.
She also didn’t mention another meaningful vote, perhaps accepting that it’s not going to happen without help from Labour.
In short, she will: 1) Seek an Article 50 extension which ends when MPs agree on a deal – 2) Hold talks with Corbyn to find compromise on the Political Declaration 3) If those talks fail, give MPs a vote on Brexit choices agreed them both 4) “Abide” by what MPs agree
In short: “Save me Obi Wan Corbyn, you’re my only hope.”
Obi Wan Corbyn

European shares end the session with decent gains

  
Analysis, Global Indices

UK FTSE likes the lower GBPUSD (ignore Brexit mess)

The European shares are ending session with decent gains, led by the UK FTSE which is higehr by 1.07%. Traders like the lower GBP I guess.
The provisional closes are showing:
  • German DAX, +0.66%
  • France’s CAC, +0.34%
  • UK’s FTSE, +1.07%
  • Spain’s Ibex, +0.44%
  • Italy’s FTSE MIB, unchanged
  • Portugal’s PSI 20, up 0.55%

The benchmark 10 year yields are ending mostly lower (the exception is the Italian 10 year).  The German 10 year remains below the 0.0% rate. The high yield reached -0.025% in trading today.

The benchmark 10 year yields are mostly lower in trading today

USDJPY goes sideways with the 200 day MA as the ceiling

  
Analysis, Forex

Tiny trading range of 17 pips

The USDJPY is in the midst of a tiny 17 pip trading range. That is well below the 56 pip 22-day average range.   The good news is buyers and sellers are not losing much.  The bad news is they are not making much either.
Tiny trading range of 17 pips
Technically, the high has a ceiling at the 200 day MA. Yesterday, that MA (see green line overlay on the hourly chart at 111.45) stalled the rally. The high in the Asian session today, also stalled at that MA level. The London high has only gotten to 111.416.   The lows today have come in at 111.28 to 111.287 (four separate lows – see red circles).
Something has to give. Look for a break.  Which way?  Honestly….I have no clue. It would just be a guess given the market price action.   The “market” doesn’t know. I don’t know either.
The US yields are lower to day after the sharp run higher yesterday but only by about 2 bps in the 10 year (that is a slight negative usually).   US stocks are modestly changed with the Dow down and the S&P and Nasdaq holding onto small gains (neutral.  The USDJPY can move higher with runaway stocks to the upside and lower on runaway stocks to the downside, but that is not happening so far).
So look for the break and some sort of extension of the 17 pip trading range at some point.

The USD is the strongest. The GBP is the weakest.

  
Analysis, Forex

The JPY is stronger

As the North American traders enter for the day, the USD is the strongest while the GBP is the weakest.   The GBP was hit after the “no” votes after the close yesterday.  Everyone says they want a no-deal, but they cannot agree on anything.  So the drama continues.   The USD and JPY are stronger with perhaps some flight to safety flows.
Looking at the ranges and changes, the USDJPY, USDCHF, EURUSD, and USDCAD are barely moving with ranges from low to high of 17 toof 32 pips.  That is not a lot.  The AUDUSD moved lower overnight after the RBA decision and statement (unchanged on rates but downside risk increased) and has a decent range (at least it is above the 22 day average). The GBPUSD is trading at lows for the day as it moves to new lows as I type. It has a range of about 100 pips so far.  Other GBP pairs are also trading at the GBP low extremes.
In other markets:
  • The Bitcoin rocket was lit, as the  digital currency rose to $5121 on Coinbase from a low of $4127.20. The price is currently trading at $4783.19 up $654.70.  The midpoint of the move up today comes in at $4645.22. I always like to see the miidpoint to be a barometer for a trend move.  Stay above keeps that hope alive. Move below and the buyers in the upper half start feeling worried. So far the 50% has held (see chart below)

  • spot gold is trading up $1.20 or 0.09% at $1288.96
  • WTI crude oil futures are trading at $.29 or 0.47% at $61.88
IN the premarket for US stocks the futures are implying small changes
  • Dow industrial average -0.42 points
  • NASDAQ, +7 points
  • S&P +1.9 points
In the European stock markets, major indices are higher with the UK FTSE liking the lower GBP:
  • German DAX, +0.6%
  • France’s CAC, 0.48%
  • UK’s FTSE, +1.08%
  • Spain Ibex, +0.33%
  • Italy’s FTSE MIB, unchanged

 

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Chinese PMI data : Chinese stimulus working

  
Analysis, Economy

Good signs for global growth from China’s PMI data

Shanghai

Sunday’s overnight session saw both the official Chinese PMI and the Caixin measure return to expansion in March confirming that the stimulus program is capable of boosting the Chinese slowdown. This return to expansion will also settle nerves around the Global outlook which was sparked by the weak PMI data out of Germany and the US last month. Incidentallythat weak reading of 44.7 was revised down further to 44.1 on April 1. Also, Justin reported on Germany’s engineering sector halving their output in 2019. See here for the details.

The MSCI Asia pacific index showed a 25% increase in the 18 months after the last time official PMI data rose back above 50 in 2016. Look at the chart below for the connection between the Chinese PMI data and the MSCI Assia Pacific Index.

Good signs for global growth from China's PMI data

All we need know is Brexit to be sorted, German manufacturing to pick up and Trump and Xi to sign a great deal. To coin a New Zealand phrase, ‘What are the chances?’

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Nikkei 225 closes lower by 0.02% at 21,505.31

  
Analysis, Global Indices

Tokyo’s main index surrenders earlier gains in tepid session for Asian equities

NKY 02-04

Equities sentiment in Asia dwindled in the last hour as stock gave up early gains with major indices now near flat levels on the day. Despite more optimistic risk tones to start the day after yesterday’s solid performance in Wall St, risk sentiment is more mixed as bond yields are holding lower to begin the day alongside US equity futures.

This should keep risk assets guessing as we begin the European morning. USD/JPY holds near flat levels in a narrow range at 111.34 currently.

Bitcoin spikes by more than 10% to over four-month highs

  
Analysis, BITCOIN

Price breaks out of its narrow range since December

Bitcoin

I’m trying to look for reasons for the move higher here but I’m really not seeing any (the usual ‘pump and dump’ move perhaps?). Price now cracks above the $4,600 level as I’m typing this.
Update: The $4,700 level is gone now too.
Here’s what things look like in the bigger picture:
Price has been trading narrowly since December with highs being limited around the area just under $4,200. But the break here isn’t only significant in that sense but price is now contending with a break above the 200-day MA (blue line) for the first time since March last year.

Economic data coming up in the European session

  
  Analysis

Good day, everyone! Hope you’re all doing well as we prepare for the start of European trading in a couple of hours’ time. Risk sentiment is looking slightly more measured today with equities slightly higher while bond yields holding a little lower. Meanwhile, currencies are tepid but we have seen the pound fall after Westminster once again failed to reach a majority in indicative votes overnight.

The session to come has little on the agenda in terms of economic releases but expect more Brexit headlines as well as plenty of focus on the risk theme in trading this week.
0630 GMT – Switzerland March CPI figures
Prior release can be found here. The release here should confirm that core inflation remains subdued and that would just mean the SNB is nowhere near to normalising policy and won’t be able to do so unless the ECB does.
0830 GMT – Australia announces its 2019-20 federal budget
This is arguably one of Australia’s more important budget announcements in quite a while as it will be an ‘election budget’. The election is set to take place around the second or third week of May so this would represent the shortest budget-to-election run-up we have seen in the country. Anyway, the budget should show a surplus with the key item being income tax cuts (worst kept secret basically). The fiscal boost here – despite being a politically driven agenda – should help provide relief to the Australian consumer on issues like household debt and wage pressures, so it could potentially give the aussie a nudge higher upon release.
0830 GMT – UK March construction PMI
Prior release can be found here. With the manufacturing sector not performing too well – yesterday’s print was very much masked by stockpiling – construction activity is expected to show a similar trend. Expectation here is for it to stay in contraction territory. Either way, the data release here is very much secondary in terms of driving pound sentiment. It’s still all about Brexit right now.
0900 GMT – Eurozone February PPI figures
Prior release can be found here. A lagging indication of inflationary pressures since we already had March CPI figures yesterday. As such, this is very much low-tier data.
That’s all for the session ahead. I wish you all the best of days to come and good luck with your trading!

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