Trading with point and figure

OIL
lookin a tad overbought

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Ostwald, Marc
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08:30 (32 minutes ago)
to Marc

- Services PMIs dominate schedule as markets digest another shocker set
of inflation readings from Turkey; US ADP Employment also slated: UK
PM May conference speech plus no less than 5 Fed speakers top the
events schedule; rate decisions in Poland, Romania, Albania & Iceland

- Turkey CPI: much higher than expected, though well flagged by Monday's
Istanbul CPI; pipeline pressures as represented by surging PPI still
huge, but sliding economic activity leaves TCMB in a difficult place

- Services PMIs: Europe / UK readings seen little changed at much more
solid levels than Manufacturing sector; US Non-Manufacturing ISM seen
dipping after August rebound, but overall picture still very robust

- US ADP Employment: consensus forecast pitched around recent average,
labour demand still very robust, though skills gap clearly
presenting headwinds

- Charts: Turkey CPI, TRY spot and historical volatility and US ADP
Employment vs. Private Payrolls

--- PLEASE NOTE THERE WILL BE NO GOOD MORNING TOMORROW --

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

********************
** EVENTS PREVIEW **
********************

A busier day beckons with Services PMIs, Turkish CPI and US ADP Employment topping the data schedule, once the BRC Shop Price report has been digested. On the events side of the equation, UK PM May delivers her speech to conclude the Conservative Party annual conference, there are no less than five Fed speakers, along with a run of expected no change monetary policy decisions in Albania, Iceland, Poland and Romania. The latter two will doubtless signal little urgency to hike rates despite strong growth, though the contrast in CPI terms is very sharp with Polish CPI very well contained at 2.0% y/y and core at 0.9% y/y, while the Romanian CPI continues to rise at a rapid rate (Aug 5.06% y/y vs. July 4.56%), suggesting that the BNR is well behind the curve with rates still very low at 2.50%. Meanwhile China remains closed for National Day, while Germany is closed for Deutsche Einheitstag (Unity Day) and South Korea for National Foundation Day.

** Turkey - September CPI **
- The belatedly emphatic TCMB rate hike (+625 bps to 24.0%) did at least stop the rot in the TRY, though that recovery has faltered in recent days, as well it might given the sharp rise in the Istanbul CPI (4.04% m/m) reported on Monday suggested that the risks for today's national CPI were to the upside of the consensus for 3.4% m/m 21.1% y/y (Aug 17.9% y/y), and as such the much stronger than expected 6.3% m/m 24.52% y/y should have come as little surprise, with core CPI also soaring higher to 24.05% y/y from August's 17.2%, and PPI (10.9% m/m 46.2% y/y) confirming that pipeline pressures remain enormous. How the TCMB responds to this given the sharp fall in the Manufacturing PMI (42.7 vs. 46.4) and a whopping -68.0% y/y in Auto Sales remains to be seen. The fact that President Erdogan is now urging the public to report 'unusual' price hikes, and threatening to raid stores that hike prices, is a sure sign of desperation. The relatively muted reaction of the TRY (see chart) may not prove to be that durable, though it does imply that some of the measures to keep the rout in check are proving to be quite effective, as well as suggesting that positioning is already very short.

** World - Sept Services PMIs **
- Having digested Monday's generally quite downbeat Manufacturing PMIs, today's Services PMIs are expected to sustain stronger levels by comparison, and in most cases a forecast to see little or no change relative to August for Spain (52.5 actual vs forecast 52.9 and Aug 52.7) and Italy (53.8 vs. 52.6), while confirming the stronger than expected flash reading in Germany (56.5), and the setback in France (54.5). For the UK, the drop in the Construction PMI (52.1 vs. 52.9) is probably of greater relevance than Monday's Manufacturing uptick (53.8 vs. 53.0), with the consensus looking for 54.0 from 54.3, but all of these continue to point an economy expanding around its currently estimated potential GDP rate of 1.5% y/y, which given the Brexit related uncertainties is not bad. Eminently the story in the US stands in sharp contrast to much of the rest of the developed world, with the Non-manufacturing ISM seen marginally lower at 58.0, still robust by any historical standard, and the lesson from a relatively choppy set of readings this year is not to over-interpret single month changes, e.g. June through August saw 59.1 followed by 55.7 and 58.5 (and as ever a reminder that the read across from the Employment sub-index to Payrolls is far from a good one).

** U.S.A. - September ADP Private Employment **
- As is usual, the consensus for Payrolls and the ADP are the same at 184K (or similar), and deviate little from the recent average, and the read across from ADP to the official data, above all directionally in m/m terms should not be 'finessed' - as per the attached chart for the past year. As noted in the week ahead, an area that requires particular attention will be trade services, above all transport, given the clear signals from the last two months goods trade data that the trade war with China is starting to have an impact on export volumes, above all in Food, Feed & Beverages.

from Marc Ostwald
 
on the verge ...below red activates a downside count
spanner in the dow...maybe
7566 trend rez
supp below 7580 area
 
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