Right about now Jerome Powell is wishing he’d never come up with the brilliant idea of holding a press conference after each FOMC meeting from today’s meeting in the US Wednesday. Of course he initially set this up to aid Fed communication and market understanding – it was all part of the plain English Fed he wanted to run.
The trouble was that rather than being a volatility dampener Powell’s plain English approach has caused markets – prone to over reaction, headline chasing algos, misinterpretation, and overreaction in the press – to overreact. He’s language that included comments to the effect that the Fed was a long way from neutral, that the balance sheet was on auto pilot (yes Yellen said that too) have become volatilty amplifiers
So Powell has to be careful what he says and how he frames it tonight – I very much doubt either hey or the Fed wants to ignite another stock market rally if the economy genuinely can’t support one. But neither does he want to startle the horses while the Fed pauses and awaits clarification that the economy is in the fine fettle most of the Fed still thinks it might be in.
This is the most uncomfortable Weekly scan I have done for many months. That uncertainty of feeling doesn’t shine through in the scan I don’t think, but it is certainly something I felt.
With the US government reopening, the data flowing, a Fed meeting, more Brexit messiness, and with the PBOC seemingly instituting QE to try to get the banks lending again we are at an important juncture.
So here are all 76 pages and more than 100 charts of your weekly Platinum Scan
Chinese data today was magnificently managed to largely satisfy the market that Chinese growth hadn’t deteriorated as badly as some feared. I’ll leave the judgement of whether the retail sales really did grow 8.2% yoy in December or Q4 GDP printed the exact 6.4% the NBS said it did. They did throw in a little variation in the investment and production numbers that were secondary to growth – so we can’t say categorically that the books are cooked.
That data from China, served as a circuit breaker to the weak open in US futures, Sunday night.
So nothing has changed from the weekend scan at this point. But let’s dive in.
Last week’s question of extension or exhaustion was answered emphatically with a further risk rally as hopes a US-China trade deal had a multiplicitory impact on the fed’s decision to pause it’s rate hike and maybe even quantitative hiking cycle.
Interestingly the USD found its mojo again as the US stands out as the place to deploy capital.
You’ll notice that the new and improved scan has easier to read charts, bookmarks so you can tab around, and is overall a much better and accessible product. All 70 odd pages and more than 100 charts.
The Wall Street Journal article that kicked stocks in the US higher Thursday and saw risk assets like the Aussie dollar and copper catch a bid resonated through Asian trade Friday even though both the treasury and the White House repudiated the story.
It’s the old, “where there’s smoke there’s fire trick” – as Maxwell Smart might say.
And that’s a key point, in a day, or three, in a week, or four, the candlestick, or OHLC bar is simply going to reflect the price action. Which is important, because even though there is still plenty of angst about the outlook the sell signals are absent.
US futures are a little lower in Asia trade today with the S&P down around 18-20 points from the highs during the days session Thursday. That’s doesn’t mean the rally is over, but it does suggest my notion to go flat on stocks for a time in this morning’s Newsletter might be the right one for the moment.
Indeed the ASX and SPI are flat (9.05pm New York, 2.05am London, 10.05am Beijing, and 1.05 pm Sydney) are flat and Asia’s stocks markets are marginally red at present.
USDJPY is a little lower as well at 108.90 and the Aussie and Kiwi remain offered.
The risk rally continues with US stocks still pushing higher though Asia is in a less excitable mood than yesterday. We need more Chinese stimulus news perhaps because as I write at 1.17pm Beijing, 12.17am New York and 4.17pm Sydney Chinese and Japanese stocks are lower though the rest of the region is mixed with rallies in the Kospi, Straits Times and of course the ever ebullient ASX 200.
The USD is a little stronger too – but only marginally so. And of course players are still trying to determine what Theresa May’s defeat of her brexit deal really means.
Personally I’d bet this is a pre-determined strategy she’s pursuing, one that lessens the chance of no deal Brexit, and one that will put a bit of a bid under the Pound, against the USD and on the crosses.
Commodities like gold, silver, and copper remain in their bands though Shanghai commodities aren’t doing too badly
China is trying to goose markets again after the awful trade figures yesterday fairly screamed SLOWDOWN.
They are cutting reserve requirements again, they are saying they’ll keep monetary policy accommodative and “strengthen counter cyclical adjustments”, they’ll cut taxes, and so on. They also fixed the Yuan a tiny but stronger against the USD when they could easily have been forgiven for letting it weakne a bit.