The Weekly Wrap – Geopolitics, Monetary Policy and Stats Influence

The Stats

It was a busy week on the economic calendar in the week ending 1^st November.

A total of 64 stats were monitored throughout the week, following 34 stats from the week prior.

Of the 64 stats, 23 came in ahead forecasts, with 27 economic indicators coming up short of forecast. 14 stats were in line with forecasts in the week.

Looking at the numbers, 25 of the stats reflected an upward trend from previous figures. Of the remaining 39, 25 stats reflected a deterioration from previous.

In spite of resilient hiring in the U.S in October, the Dollar was on the back foot throughout the week. 5 consecutive days in the red left the U.S Dollar Index (“DXY”) down 0.61% to $97.239.

Out of the U.S

It was a particularly busy week on the economic data front.

Through the start of the week, a narrowing in the U.S trade deficit from $73.06bn to $70.39bn had a muted impact on Monday.

A 1.4% rise in pending home sales also failed to provide support on Tuesday, with a fall in consumer confidence weighing. In October, the CB Consumer Confidence Index eased from 126.3 to 125.9.

Through Wednesday, better than expected 3^rd quarter GDP numbers also failed to prop up the Dollar. The economy grew by 1.9%, coming in ahead of a forecast of 1.6%. This was slower than a GDP of 2% in the 2^nd quarter.

The main event of the week was the FED rate cut on Wednesday, however, where the FED delivered on its 25 basis point rate cut.

A 3^rd consecutive rate cut ultimately did the damage and pinned back the Dollar.

Through the later part of the week, September’s core PCE Price Index came in flat, following a 0.1% rise in August. The annual rate of inflation eased from 1.8% to 1.7% adding pressure on the Dollar. While personal spending held steady at 0.2% in September, October’s Chicago PMI slid from 47.1 to 43.2…

A particularly busy Friday saw nonfarm payrolls top estimates, with payrolls rising by 129k, following a 180k rise in September. Economists had forecast a rise of just 89k.

A slower pace of contraction in the manufacturing sector failed to provide any support, with the U.S unemployment rate rising from 3.5% to 3.6% in October.

Outside of the stats, China’s doubts about the possibility of a long-term trade agreement with the U.S were also negative for the greenback.

In the equity markets, the Dow rose by 1.44%, with the S&P500 and NASDAQ gaining 1.47% and by 1.74% respectively. Gains for the week came off the back of corporate earnings, economic data, and the FED rate cut.

Out of the UK

It was a quiet week on the economic calendar.

Economic data was limited to October’s Manufacturing PMI that rose from 48.3 to 49.6.

While the PMI was positive for the Pound, 4 days in the green out of 5 came off the back of Brexit and UK politics.

Following the EU’s approval of the Brexit extension to 31^st January 2020, Boris Johnson got his way mid-week. Britain returns to the polls on 12^th December, with the bookies giving Johnson an evens chance of victory.

Victory would mean an orderly departure from the EU, which is the market’s favored outcome for now.

The Pound ended the week up by 0.93% to $1.2946.

For the FTSE100, a stronger Pound pressured the index in the week. The FTSE100 slipped by 0.3%.

Positive PMI numbers out of China and the UK on Friday limited the damage, however, with the index up by 0.75% on Friday.

Out of the Eurozone

It was a busy week on the economic data front.

On Wednesday, key stats included French 3^rd quarter GDP and September consumer spending figures and German unemployment numbers.

Better than expected GDP numbers were offset by an unexpected fall in consumer spending, with German unemployment rising by more than anticipated.

On Thursday, German retail sales figures also disappointed, rising by just 0.1% in September.

Also negative for the EUR was slower economic growth in the Eurozone. The GDP grew by 1.1% in the 3^rd quarter, year-on-year, down from 1.2% in the 2^nd quarter.

A pick up inflationary pressure, better than expected quarter-on-quarter GDP numbers and a steady unemployment rate provided support on Thursday, however.

For the week, the EUR rose by 0.78% to 1.1166, reversing a 0.78% decline from the previous week.

For the European major indexes, the CAC40 led the way, rising by 0.69%. The EuroStoxx600 and DAX30 weren’t far behind, with gains of 0.36% and 0.52% respectively.

Elsewhere

It was back in the green for the Aussie Dollar and Kiwi Dollar.

The Aussie Dollar rose by 1.19 to $0.6904, with the Kiwi Dollar up by 1.23% to $0.6427.

For the Aussie Dollar

It was a relatively busy week for the Aussie Dollar.

Inflation figures and manufacturing numbers out of China provided direction on the data front.

On Wednesday, the annual rate of inflation picked up from 1.6% to 1.7% in the 3^rd quarter giving the Aussie Dollar a boost.

While consumer prices rose by 0.5%, quarter-on-quarter, following a 0.6% rise in the 2^nd, the trimmed-mean CPI rose by 0.4%, also providing support.

On Friday, China’s Caixin Manufacturing PMI also provided support, with the PMI rising by 51.4 to 51.7.

Disappointing Australian building approvals, private sector credit, and manufacturing data in the week had a muted impact.

For the Kiwi Dollar

The stats were on the lighter side once more.

A 7.2% jump in building consents in September and better than expected October business confidence figures provided support on Thursday.

The ANZ Business Confidence Index rose from -53.5 to -42.4, coming in well ahead of a forecasted fall to -54.1.

While the stats were positive, the upside through the week came off the back of a sliding Greenback. Whether the Kiwi can hold onto the gains remains to be seen, however. A dovish RBNZ could send the Kiwi back towards sub-$0.63 levels.

For the Loonie

It was a relatively quiet week for the Loonie.

Key stats were limited to August GDP and September RMPI numbers released on Thursday.

The economy grew by 0.1% in August, month-on-month, slowing from 0.2% in July. Economists had forecast a 0.2% rise.

For the RMPI, while avoiding another slide in September, coming in flat fell well short of a forecasted 2.5% rise.

On the monetary policy front, while the BoC held rates unchanged on Wednesday, a more cautious view on the economy tested the Loonie on Wednesday.

Falling crude oil prices through the week and negative news on the U.S – China trade war front also pressured the Loonie.

A 3.5% jump in Brent crude and 3.7% rise in WTI on Friday provided some support at the end of the week

The Loonie ended the week down by 0.64% to C$1.3142 against the Greenback.

For the Japanese Yen

It was a busy week on the data front. Stats included October inflation numbers on Tuesday and retail sales figures on Wednesday.

Tokyo’s core annual rate of inflation held steady at 0.5%, falling short of a forecasted 0.7%.

On Wednesday, retail sales figures impressed, with sales jumping by 9.1%, which was well above a forecasted 6.9% rise.

On Thursday, industrial production rose by 1.4% in September, reversing a 1.2% fall in August.

With the stats skewed to the positive, the BoJ’s decision to hold rates unchanged on Thursday also propped up the Yen.

The BoJ did make further suggestions of an imminent rate cut, however. Some breathing space off the back of a weaker Yen and easing trade tensions between the U.S and China allowed the BoJ to stand pat.

The Japanese Yen rose by 0.44% to ¥108.19, against the U.S Dollar.

Out of China

It was a relatively quiet week on the economic data front.

The markets had to wait until Thursday for the first set of private sector PMI numbers.

In October, the NBS Manufacturing PMI slipped from 49.8 to 49.3, falling short of a forecast of 49.9. Service sector activity also disappointed, with the PMI down from 53.7 to 52.8. Economists had forecast a PMI of 53.7.

On Friday, however, the more influential Caixin Manufacturing PMI gave riskier assets a boost. The PMI rose from 51.4 to 51.7 in October, coming in ahead of a forecasted 51.0.

The CSI300 gained 1.43% in the week, with the upside coming off the back of a 1.69% rally on Friday.

The Yuan continued its upward trajectory, rising by 0.44% to end the week at CNY7.0342 against the Greenback.

Corporate Earnings

Throughout the week, corporate earnings also provided support to riskier assets. Better than expected earnings results eased near-term concerns about growth. The bar had been lowered, however…