Over the weekend China released it’s Industrial Profits numbers which showed the fifth consecutive monthly slowdown in September as sales of raw materials and manufactured goods further ebbed, pointing to cooling domestic demand. China growth concerns will persist while the US/China trade war shows no signs of letting up in the short-term at least. Be sure to check USDCNH tomorrow.
German Chancellor Angela Merkel’s ruling coalition faces its second test in as many weeks later today when voters go to the polls in the western state of Hesse for a regional election that could torpedo the national government.
Themes for the Week:
- Global Stocks: has the drop ended? US stocks posted a very weak recovery into Friday’s close and further losses cannot be ruled out just yet. The Nasdaq has been the leading US index as it peaked in August ahead of S&P and Dow. Nasdaq is also the index where retail folk are closest at flipping short (which would suggest a rally) and it posted the strongest rejection on Friday. However, expect volatility to remain elevated until we clear the US elections. Over 130 US companies making up the S&P 500 report this week with Apple and Facebook the main events. Fears on Wall Street that earnings of the high-flying companies within the FAANG space have peaked has been one of the main factors behind the recent turmoil on Wall Street.
- Budget & Bank of England: on Monday “spreadsheet Phil” will give his best approximation of a budget and Thursday there will be the vote on it. However, the civil war raging in May and Hammond’s ruling Conservative Party also means any talk of raising taxes to plug the UK’s financing holes will be avoided for now at least. Quite a tightrope for Carney also, as the BOE’s forecasts do not incorporate a no-deal Brexit (which is ever more likely).
- Bank of Japan should come & go without notice.
- Non Farm Payrolls will be the highlight of course, with traders focused on wages moreso than anything else.
Data in the week ahead:
- AU CPI & Retail Sales
- BOJ decision
- Cad GDP & Employment
- BoE decision
On the Radar:
Obviously the main focus this week will be the Nasdaq along with other indices. Dax has held up better than US indices so perhaps we’ll see something interesting there as well. In FX, I like the recent AUD strength which is resilient despite risk-off and China issues. GbpAud, EurAud shorts look compelling.
About the Author
Justin is a Forex trader and Coach. He is co-owner of www.fxrenew.com, a provider of Forex signals from ex-bank and hedge fund traders (get a free trial), or get FREE access to the Advanced Forex Course for Smart Traders. If you like his writing you can subscribe to the newsletter for free.
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