Trading with point and figure

Dentalfloss · Dec 12, 2018

dentist007 said:
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Dentalfloss · Dec 12, 2018

Good Morning: The Long & the Short of it and The Bigger Picture - 12 December 2018 - ADM ISI

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Ostwald, Marc
08:46 (1 minute ago)

to Marc

- Brexit saga deepens as May faces leadership challenge and positive noises
around US/China Trade likely to run data and other scheduled events
off the park: Japanese Orders to digest ahead of Sweden, US CPI; India
Industrial Production and CPI, ECB speakers, OPEC Oil Market Report;
Brazil rate decision; UK 30-yr I-L and US 10-yr auctions

- US CPI: Energy expected to weigh on headline, but some offset from food;
slowing house prices, apparel, medical care and air fares the other key
swing factors

- India CPI/Production: falling inflation, output rebound both positive
signals, but state election results and RBI leadership the focal points
in the near term

- Brazil rates: no change expected with inflation well behaved, growth
weak and unemployment high

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** EVENTS PREVIEW **
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While equity and risk asset sentiment will doubtless continue to 'dance' to the ebb and flow of headlines on US/China trade negotiations, Brexit and the Conservative party leadership challenge, along with Italy (and now France) budget headlines may also provide some specific mood music. Otherwise the schedule of data has Japan's Private Machinery Orders to digest ahead of a run of CPI readings from South Africa, India (which also has Industrial Production) and most importantly the U.S.A. In event terms there are a few ECB speakers, OPEC's monthly Oil Market Report and rate decisions in Brazil, Georgia and Iceland, while the UK sells a modest £500 Mln of 2048 Index-Linked Gilts and the US $24 Bln of 10-yr Treasuries. Forecasts for Indian CPI and Industrial Production look for the former to drop decisively lower to 2.56% y/y from 3.31%, and for Industrial Production to shift decisively higher to 6.0% y/y from 4.5%, both of which would (if correct) offer encouraging signals on the economic outlook. However with the resignation of Patel as RBI governor to be replaced by an outright government 'stooge' Shaktikanta Das, who will doubtless try to ensure that rest of the RBI board 'tows the line' on whatever may be demanded of it by PM Modi and Finance Minister Jaitley, there are now major questions over its independence, above all if there were further resignations, and perhaps all the more worrying given the sizeable defeat that Modi's BJP suffered in three of the 5 state elections. Brazil's BCB is expected once again to keep rates at the all-time low of 6.50% for a sixth time, with inflation well contained at 4.05% (below the 4.50% midpoint of BCB's 2018 target range), unemployment very high and growth at best sluggish.

** U.S.A. - November CPI **
- CPI is projected to be flat m/m terms on the drop in gasoline prices, thus dropping the y/y rate to 2.2% from 2.5%, by contrast core CPI is expected at a very 'usual' 0.2% m/m to edge the y/y rate up to 2.2% from 2.1%. Yesterday's higher than expected PPI was paced above all by Services and Food, with Energy unsurprisingly acting as a drag, but outside of the likely counterbalancing forces of Food (up) and Gasoline prices (down), the pointers for CPI were limited, and Housing (OER), which is showing some signs of slowing, Medical Care and Medicines are likely to be the key drivers, with Apparel and Airfares the wildcards. In their current mood, markets will probably be more sensitive to a downside than an upside miss, though with noises around US-China Trade taking one of its positive turns, the more salient point is whether the 'risk on' rally gets derailed by bad positioning, as appears to be the case given the very high amplitude volatility that has been so evident in recent weeks (and amplified by the appalling liquidity conditions that underpin (or rather do not underpin) markets.