CALENDAR HIGHLIGHTS THIS WEEK

Monday: JN Tankan Manufacturing/Non-Manufacturing Index, Manufacturing PMI, CN holiday, GE Retail Sales, SP/IT/FR/GE/EU Manufacturing PMI (F), UK Manufacturing PMI, M4 Money Supply, Mortgage Approvals, EU Unemployment Rate, Eurogroup Meeting, US Manufacturing PMI (F), ISM Manufacturing Prices, Construction Spending, Total Vehicle Sales, Fed’s Bostic speaks

Tuesday: AU RBA Interest Rate Decision, JN Consumer Confidence, 10-yr bond auction, CN Holiday, SP Unemployment Change, UK Construction PMI, Nationwide HPI, EU ECOFIN Meeting, US Weekly API Inventory, Fed Chair Powell & Quarles speak

Wednesday: CN/GE Holiday, SP/IT/FR/GE/EU Services PMI (F), Retail Sales, UK Services PMI, Conservative Party Conference PM May keynote speech, US ADP Employment Change, Service PMI (F), ISM Non-Manufacturing PMI, Weekly DoE Inventories, Fed Chair Powell, Brainard, Mester speak

Thursday: CN Holiday, AU Trade Balance, UK/SP/FR 10-yr bond auction, US Challenger Job Cuts, Weekly Jobless Claims, Factory Orders, CA Ivey PMI, Fed’s Quarles speaks]

Friday: CN Holiday, AU Retail Sales, JN Leading Indicators, GE Factory Orders, PPI, FR Trade Balance, Budget Balance, UK Halifax HPI, US Non-Farm Payrolls, Average Earnings, Unemployment Rate, Trade Balance, Consumer Credit, CA Trade Balance, Employment Change, Unemployment Rate

Sunday: Presidential and Parliamentary Elections in Brazil

Cheque Mayte…

Brexit related headlines are set to peak mid-week as Prime Minister Theresa May is scheduled to close the Conservative Party conference on Wednesday with her key note speech. The weekend was not without its fireworks and once again it was former foreign secretary Boris Johnson who was highly critical of the PM’s existing Chequers plan branding it ‘deranged’ and ‘highly preposterous as he set forward his own vision of Brexit.

The annual Tory conference has historically been a decisive event for the pound as shown in both 2016 (hard Brexit) and 2017, with the latter quickly leading to calls for May’s resignation following the now infamous, loss of voice, speech.

2016 cable drop

2017 cable drop

However, this week I am expecting a very different tone from the Prime Minister and am anticipating an assertive speech as she moves to sure up her position as leader of the Party.

What this will mean for Cable is debatable as two weeks ago her stern line in stating that Britain is prepared for a ‘no deal’ saw the bears take control so a reiteration of this stance may not be as impactful as markets have become somewhat accustomed to this new threat.

Cable

In the long-run I still hold firm that this change in tact from the PM is purely a political play in order to get over the line this week and come mid-month, and then the November deadline, necessary concessions will be made on both sides so that the Chequers deal can progress.

5 Stars for EU…

Italy will remain a major consideration for any EUR strategies this week with concerns over the country’s economic viability following the failed attempted by finance minister Giovanni Tria to control the Italian budget deficit which has been agreed by the Five Star and the League at 2.4% of output for 2019 rather than the 1.6% Tria has reportedly been seeking, according to Bloomberg news. As such, I would be mindful of tracking Italian yields and local bank stocks as an indicator of market sentiment on the issue.

EUR

Moving on up…

The belief of higher oil prices to come continues to grow with hedge funds’ net-long positions increasing 6.1% for the week ended Sept 25th, the highest since late May 2018. This comes as participants fear a potential squeeze on supply as Iranian production is impacted by sanctions in the context of generally improving demand via on-going improvements in global growth, chiefly led by the US. Not only this, nations such as Nigeria, Libya and Venezuela are not in a economic or political state to respond on the supply slide and US oil rigs dropped for a second week in a row on Friday (-3 to 863).

Oil chart

Given these factors the calls for $100 oil have been growing which if achieved would mark a 4-year high, and with crude extending its gains after the longest rally in a decade it’s becoming increasingly hard to go against the trend in the months ahead.

100 oil

ATH in sight…

The latest US non-farm payrolls reading is due on Friday, so as per usual we have all the related employment data due throughout the week. In addition to this, Fed Chair Jerome Powell is also due to speak on Tuesday and Wednesday which may be more telling given the slight confusion in markets on how to interpret the most recent communication from the Fed meeting last week.

Another consideration for the coming sessions is that mainland China is closed for Golden Week which may put the war of words over trade with the US on ice for the time being.

S&P500

Rebranded NAFTA deal…

A quick word on Canada, as after several months of stalemate US and Canadian negotiators have managed to secure an agreement on a revised NAFTA deal. According to Bloomberg, the new accord involves improved access to Canada’s dairy market for US farmers, stronger intellectual property provisions, and tighter rules of origin for auto production. The announcement of course comes well timed ahead of the looming US mid-terms which are now over 5-weeks away.

CAD

Have a good week ahead and remember you can catch our market briefings each morning via the Amplify YouTube page HERE.

(Photo by Bruce Mars from Pexels)

 

Anthony Cheung
Anthony is a leading market commentator with over a decade of experience accumulated as Head of Market Analysis at a leading news and analysis organisation, and now a Director of Amplify Trading.