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Twaz overbought...as we said many hours ago
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Week Ahead: Data & Events - Preview & Highlights - 27 to 31 January 2020 - ADM ISI


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Ostwald, Marc
Sun, 26 Jan, 19:12 (12 hours ago)

to Marc





The Week Ahead - Preview:

The leitmotif of financial markets in recent years has been that the flood of central bank liquidity and the accompanying financial repression of ultra low interest rates predicates a focus on flows, rather than economic or political realities. The Coronavirus epidemic serves as a sharp reminder of our mortal vulnerability and the limitations of our collective knowledge, which may just swing the pendulum of sentiment from greed back to fear. It will certainly be the dominant theme in what will be a busy week for data and events. The observation that 'printing money ad infinitum is no panacea for all that ails this world' would appear contextually apposite.

Aside from month end, there are the FOMC and the finely balanced BoE policy meetings, along with a deluge of corporate earnings in the US, Asia and Europe, and representing many bellwether companies across all sectors. It also features US, French, Spanish, Italian and Eurozone advance Q4 GDP readings, and provisional CPI in Germany and the Eurozone. The US also has more Home Sales metrics, Durable Goods, Consumer Confidence and Personal Income & PCE, while Japan looks to CPI, Industrial Production and CPI, and China has NBS PMIs. On the political front, there will be Sunday's election result in Italy's Emilia Romagna region to digest, and the official departure of the UK from the EU on Friday, although in reality the "transition period" until the end of 2020 means that there will be little in the way of immediate change. There is a potentially key two day meeting of the OECD to discuss taxing the digital economy, a key issue in the context of trade wars and protectionism, above all US/EU relations. The US EIA follows the IEA in publishing its annual World Energy Outlook. A busy-ish week for govt bond auctions is led by the US with $133 Bln of couponed paper, with Italy selling up to EUR 9.0 Bln total of BTPs, I-L & Zeros, German & Canada 5-yr, UK 10-yr and Japan 2 & 40-yr.

- While trade tariffs have clearly impacted US manufacturing and agriculture, Thursday's Q4 advance GDP is expected to paint a picture of steady, moderate growth at 2.2% SAAR vs. Q3 2.1%, with the regional Fed GDPnow estimates all pointing to downside risks (Atlanta/St Louis 1.8%, NY 1.2%). Compositionally PCE is seen slowing to 2.2% from Q3 3.2%, with Trade (advance Goods estimate for Dec due Wednesday) providing another boost (ca. 0.7-0.9 ppts) along with housing investment, offsetting a continued drag from business investment and inventory shedding in manufacturing; agricultural exports could well be a wild card. Durable Goods are projected to get a boost from aircraft, after a hefty drag in November (0.9% m/m vs. Nov. -2.1%), but growth in core ex-Transport and Non-defence Capital Goods ex-Aircraft are seen remaining subdued (0.3% / 0.1%). Consumer Confidence is expected to pick up to 128.0 from 126.5, with a rising equity market, falling gas & utility prices and solid labour demand continuing to underpin sentiment. Both New and Pending Home Sales are likely to echo last week's strong Existing Home Sales, with weakness in Existing Home supply (inventories) boosting the former, but also requiring more attention. Personal Income & PCE monthly data will have been pre-empted by the GDP release, with the Chicago PMI, more regional Fed surveys and Case Shiller House Prices also scheduled. As previously noted the (non-partisan) Congressional Budget Office (CBO) has been among the most reliable of forecasters of the US economy for many a decade, and with the Treasury Budget deficit ballooning, Tuesday's annual CBO U.S. budget and economic outlook demands attention.

The Coronavirus epidemic renders this week's only Chinese data, the NBS PMIs null and void, because responses were collected prior to the outbreak becoming an epidemic, along with the ensuing wide scale shutdowns, with a strong likelihood that the Lunar New Year holidays will be extended as part of the efforts to try and contain its spread. As of Saturday, China's transport ministry estimated that holiday period travel was down 28.8% vs. the same LNY day last year, breaking out as Railway transport -41.5%, Roads -25% & Passenger Flights -41.6%. The next point to consider is also the likely huge impact on tourism from China to the rest of the world, which the attached chart from the Economist on growth in tourism spending abroad more than adequately highlights, despite being somewhat dated. This then spills over into how efforts internationally to curb risks of the virus spreading impact activity globally. This is leaving aside any consideration of a) the psychological impact on consumers of the situation escalating even more rapidly, or b) the medium-term aspect of how China's authorities react in economic policy terms to counter its impact on an economy. which was already facing a wide array of well documented economic challenges. As a 'backgrounder', the 2018 UNWTO report on global tourism can be found here:
https://www.e-unwto.org/doi/pdf/10.18111/9789284419876

In the Euro area, the week gets under way with Germany's Ifo survey, with a further recovery expected to 97.0 from December's 96.3, paced largely by Expectations (94.9 vs. Dec 93.8), and doubtless some hope of an upside surprise given the better than expected PMIs, even if the usual warning about the 'read across' on a month to month basis being unreliable. But the main point of focus will be the Q4 GDP readings on Friday, given that the accompanying provisional CPI data are likely to underline that any pick-up will be marginal, and certainly not implying a reason to substantially alter inflation projections (in either direction). As for Q4 GDP, Austria, Belgium & Lithuania kick off the first batch on Thursday, with Friday's run expected to see France posting 0.2% q/q (vs. Q3 0.3%), Spain 0.4% (unch), Italy 0.1% (unch) and the Eurozone also unchanged in q/q terms at 0.2%, but dipping to 1.1% from 1.2% y/y. Eurozone M3, EC Confidence surveys and German Unemployment are also due.
 


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The leitmotif of financial markets in recent years has been that the flood of central bank liquidity and the accompanying financial repression of ultra low interest rates predicates a focus on flows, rather than economic or political realities. The Coronavirus epidemic serves as a sharp reminder of our mortal vulnerability and the limitations of our collective knowledge, which may just swing the pendulum of sentiment from greed back to fear. It will certainly be the dominant theme in what will be a busy week for data and events. The observation that 'printing money ad infinitum is no panacea for all that ails this world' would appear contextually apposite.
 
Morning all,

Fun times again.

Not going to do much today with the Cac.....maybe if we get nearer to 5850 (low this a.m 5910 odd)

Taken a punt on EasyJet at 1410 on the basis of sizeable support around 1400. No TP atm bu thinking of 1450 possibly.
EASYJ_200127_08h15_5x3.png
 
Long x 1 3770 . Wide stop. No TP.
Done for the week.
ATB to all for a good w/e

Nicely underwater on this one. Low of 3720, now 34 odd. As I don't see this as being an end of the world scenario, I'll just hang on to this for the moment. Stop at 3700 - hoping it's unnecessary.
 
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Taken a punt on EasyJet at 1410 on the basis of sizeable support around 1400. No TP atm but thinking of 1450 possibly.
................
Non-p&f_ly - On a fundamental (but not extreme) basis: unless things get rapidly worse with the virus and it spreads into Europe enough to disrupt life as much as it already has/is in China then we could see that the short-haul airlines actually do quite well and the share price recover suddenly and substantially.

Long-haul and affected region airlines will be a different story so we could be seeing some aircraft order cancellations which again could favour soften prices and help out intra-European lines. ...and of course, there's oil too.....
 
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