Archives of “October 2019” month

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Reminder: Monday is a partial holiday in North America. What’s open and closed

  
  Analysis

It’s Columbus Day

It's Columbus Day
Everyone is waiting in anticipation of US-China news but we’re not likely to have all the details until after markets are closed for the week.
The additional complication is that Monday is a holiday in certain markets. In the US it’s Columbus Day and that’s a federal holiday. However both the Nasdaq and New York Stock Exchange are open so it will be a normal trading day for stocks. The CME is also open.
The exception is in fixed income. SIFMA, the Securities Industry and Financial Markets Association, has recommended that the bond market be closed.
The holiday means that there is no US economic data or central bank speakers. The Congress is also not in session.
In Canada, markets will be completely shut. It’s the Thanksgiving holiday and that means skeleton staffs, which could add some volatility in the Canadian dollar, which is the second-best performer today after the pound.

The two-day rally in the pound was the largest in a decade. Here’s why

  
Analysis, Forex

That’s a big rally

That's a big rally
Cable has rallied to 1.2655 from 1.2206 yesterday on signs and hopes for a Brexit deal. That 450 pip, 3.75% rally is the largest two-day gain since the financial crisis.
The huge rally reflects two dynamics:
1) There are genuine signs of a deal
With Conservatives polling in majority territory, there probably wasn’t any benefit to forcing a UK election. That would just lead to fresh negotiations with an emboldened Conservative party and a real chance of a no-deal Brexit. That would have also given the EU worries about stoking exit parties elsewhere.
So they came to the table and leaned on Ireland to get something done. We’re still far from the finish line and Parliament remains a significant hurdle but there is a real chance of a deal. Morgan Stanley moved it up to 55% from 35% today.
2) Positioning is extremely short
The latest CFTC data is due shortly but last week’s report showed a net short of 77,000 futures contracts among speculators. That’s a very large position that’s been in place for a long time. It’s possibly a hedge but undoubtedly predicated on the risks around a no-deal Brexit and/or continued uncertainty. Today’s rally puts GBP/USD at the highest since June 26. Everyone who has sold since then is now underwater and the speed of the move will surely have caused significant pain.
What’s next?
Positioning is stretched here in the short term and fundamentals will continue to dominate. Barring any news on Monday, I could see some jitters and a slip back to 1.2600 and the Sept highs but that looks like a good spot to buy. However I’d caution that everything is subject to change based on any leak and headline and the weekend is a big risk that’s suddenly a two-way risk.

US Indices ended the day with gains but well off highs

  
Analysis, US Market

Buy the rumour, sell the fact. Major indices closing near intraday lows.

Perhaps a little buy the rumour selll the fact.  Nevertheless, the major US stock indices are ending the day with decent (over 1%) gains in trading today. It is just not as good AND the major indices are ending nearer the intraday lows for the day.
The final numbers are showing:
  • S&P index, +32.13 points or 1.09% at 2970.26, The high reached 2993.28
  • NASDAQ index up 106.257 points or 1.34% at 8057.04. The high reached 8115.797.
  • Dow industrial average rose 330 points or 1.25% at 26814. The high reached 26975.
Below is a view of the low, high and close % changes.
Buy the rumour, sell the fact. Major indices closing near intraday lows.

GBPJPY is the biggest mover today. Soars toward 2019 midpoint/200 day MA

  
Analysis, Forex
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After an early ping pong pause at target levels, the pair shot higher.

In a post yesterday (on other GBP pairs technicals) I outlined levels of importance for the pair after the sharp moves higher.   Below is the chart from that post.
After an early ping pong pause at target levels, the pair shot higher.

At the end of yesterday and into the Asian session, the price of the pair ping-ponged between the 134.60 level above and the 133.86-99 level below.  The price based one last time at the support area (yellow area), broke above the 134.60 level and did not look back.  This is what that looked like:

GBPJPY on the hourly
What now?
Taking a broader look at the daily chart, the pair has moved above swing levels and currently is testing the 50% retracement of the 2019 trading range at the 137.702 level. The price is also trading at the highest level since June 2019.  There is some pause around the midpoint. However, the buyers still remain in control, and the lure of the 200 day above at 138.588, may be the magnet target for the move.
GBPJPY on the daily
The GBPJPY is getting a double boost from hope for Brexit and hope from US/China (that is propelling stocks and yields higher).  That is the right cocktail for the explosive currency pair.

European shares end the day (and the week) with solid gains

  
Analysis, Global Indices
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Global hope on Brexit and a US/China deal

The major European indices are ending the day (and the week) with solid gains. The provisional closes are showing:
  • German DAX, up 2.7%. That is the best day cents January 4
  • France’s CAC, up 1.7%
  • UK’s FTSE, up 0.7%
  • Spain’s Ibex, up 1.7%
  • Italy’s FTSE MIB, up 1.8%
For the week, the major indices are also ending with decent games.  Provisional changes for the week are showing:
  • German DAX, +4.1%
  • France’s CAC, +3.2%
  • UK’s FTSE, +1.22%
  • Spain’s Ibex, +3.28%
  • Italy’s FTSE MIB, +3.1%

In the European debt market, the benchmark 10 year yields are mostly higher with UK yields soaring by 12.1 basis points on hopes for a Brexit deal.

UK yields have soared by 12.1 basis points today
Looking at the yield chart for the 10 year in the UK, the yield moved above its 100 day moving average today for the 1st time since little looks above in April and May (that failed).  The last extended time above the 100 day MA was back in November 2018 (at much higher levels).
The UK 10 year yield

China is offering to completely remove the requirement for forced joint ventures by Jan

  
  Analysis
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Fox Business report

From Fox’s Edward Lawrence:
China is offering to completely remove the requirement for forced joint ventures by Jan 2020. The Chinese would like to see if further tariffs could be suspended or rolled back. We will see if that is enough for the US Trade Team

China set to remove ownership cap on financial firms starting next year

  
  Analysis
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This could be in part what is helping stocks to rally further

The Chinese Securities and Regulatory Commission has announced that they will scrap foreign ownership limit on futures companies starting from 1 January 2020.

Meanwhile, they will also remove the foreign ownership limit on fund management firms from 1 April 2020 and a similar cap on securities companies from 1 December 2020.
This is part of the opening up process and is welcome news for risk even if it comes at a time when markets are waiting on the outcome of trade talks.
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