Weekly Game Plan 13 May 19

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Here is this week's Game Plan:

With no influential developments over the weekens, markets will likely pick up where they left off last week. Markets remain nervous, though a true risk-off move has arguably failed to materialize so far. US/China headlines will be the main focus this week, despite the busy data calendar.

Themes for the Week:

US/China Trade Debate: Markets will be on guard for details to China’s pledge to retaliate and the risk of a spiralling effect. Analysts are also watching the 10yr/3mo spread again as it approaches an inversion.

Italy: a plethora of negative developments has impacted Europe’s largest bond market. Within the ruling coalition there has been a corruption scandal that cost a junior minister his job; BlackRock ditched a proposed rescue of Carige bank; European Commission has warned that Italian finances may deteriorate further. How talks on deficit targets may pan out could become clearer at the May 16 Eurogroup meeting of finance ministers. Watch BTPs and FTSEMIB.

Data in the week ahead:

• UK Employment
• GER ZEW & GDP
• CNY Industrial Production & Retail Sales
• EUR GDP
• CAD CPI
• US Retail Sales
• AU Employment & Elections

On the Radar:

I continue my short bias on Dow and FTSEMIB on trade jitters and potential Italian escalation. In FX, I still favour JPY and CHF longs vs. NZD and GBP.