Trading with point and figure

will it hold../?

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Ostwald, Marc
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08:19 (10 minutes ago)
to Marc

- Busier day for data and events has Norway GDP to digest ahead of UK labour
data, ZEW and US NFIB Small Business Optimism, though Italy Budget re-
submission and Brexit negotiations may well overshadow; plenty of Fed &
ECB speakers; Italy, Netherlands and Germany auctions; market chatter
may also focus on yesterday's US equities' 'Crime & Punishment' moment

- UK labour data: expected jump in headline Average Weekly Earnings more
a case of base effects than supporting Broadbent's assertion on wage
growth getting traction; Employment seen rebounding modestly

- Japan Q3 GDP: expected contraction mostly due to natural disasters, but
fact of BoJ balance sheet now being larger than nominal of greater note?

- Chart: Japan Nominal GDP vs. BoJ balance sheet

..........................................................................

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** EVENTS PREVIEW **
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A busier day awaits in data and events terms, though the overarching themes of global growth concerns, knife edge Brexit negotiations and the EU/Italy 'set to' over the 2019 budget (an 'updated' version is due today) may relegate the rest of the schedule to 'bystander' status. In data terms, the UK has its run of labour market data, and there is the pointless but market sensitive German ZEW survey (seen edging down on both measures)), the US has NFIB Small Business Optimism (seen close to multi-decade high) and Treasury Budget and tonight brings the first of the week's 'big hitter' data points via way of Japan's preliminary Q3 GDP. As OPEC steps up its indirect verbal intervention on oil prices, a close eye will be kept on its monthly oil market report, and there are another rash of Fed and ECB speakers, as well as a number of Riksbank speeches. But as has been the case for some time, it will be how the draft Brexit treaty that Barnier has stated is nearly ready to present to the UK cabinet is received, with the noises from the UK over the past 3 days not offering much in the way of reason for optimism that it will pass muster in parliament, even if the cabinet does approve it 'with heavy heart' (pace some Brexiteer ministers). Meanwhile Italy heads the run of govt bond auctions today via way of a max EUR 5.0 Bln of 3, 10 & 20-yr BTPs, the Netherlands hold a small auction of its 2042 DSL, while Germany sells EUR 4.0 Bln a new 2-yr Schatz. But market chatter will above all be focussed on yesterday's US equity market sell-off, which had all the hallmarks of a Dostoyevsky 'Crime and Punishment' moment, being led by Apple, and Goldman Sachs, along with GE and elsewhere the slide in BAT on the back of the mooted US ban on menthol cigarettes. Then there is the question about what markets should make of the fact that the Bank of Japan's balance sheet is now larger than Japan's total nominal GDP, which can only be termed a poster child for the inefficacy of quantitative easing, and the zombification of economies that it has brought with it, above all when politicians refuse to address and implement structural reforms (however unpopular they might prove to be in the first instance).

** U.K. - September/October labour market report **
- While obviously heavily subordinate to Brexit negotiations, today's report is expected to show the Unemployment Rate unchanged at its more than 40 year low of 4.0%, with Employment expected to recover from summer weakness with a rise of 35K. But as ever, the focus will be on Average Weekly Earnings, where the headline is expected to play catch up with the ex-Bonus measure, rising to 3.0% y/y from 2.7%, and ex-Bonus to be unchanged at a nine year high of 3.1%. However that uptick owes a lot to a benign base effect in September 2017 (dipping to 2.2% from 2.4%, but thereafter 2.5%), and it remains to be seen whether BoE's Broadbent's assertion yesterday that UK wage growth is getting some upward traction will actually prove correct (notwithstanding the Brexit wildcard).

** Japan - Q3 prov. GDP **
- Headline GDP is expected to fall -0.3% q/q, or -1.0% SAAR, with the contraction owing much to the series of natural disasters, as evidenced by a projected -0.2% for Personal Consumption and a very tepid 0.1% q/q in Business CapEx (tepid in so far as survey data points to continued underlying strength) and to a much lesser extent a small drag from Net Exports (External Demand seen deducing 0.1 ppt). While tomorrow's expected German GDP contraction is perhaps more worrying, the Japanese reading will still play into current concerns about the global growth outlook, even if a solid rebound in Japan should be expected in Q4.


from Marc Ostwald
 
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