Daily Market Outlook by Solid Trust Markets

[SolidTrustMarket]

Daily Market Outlook 14 June

Asian stocks slipped on Tuesday ahead of the U.S. Federal Reserve's two-day meeting that begins later in the day, amid growing worries this month's referendum in Britain could see it exit the European Union. The pound and euro have suffered in recent sessions as economists fear a so-called Brexit would tip Europe back into recession. Voters appear divided ahead of the June 23 referendum, with the "Out" campaign widening its lead over the "In" camp, according to two opinion polls published by ICM on Monday. Uncertainty over this week's Federal Reserve policy meeting has weighed on markets, though the U.S. central bank is widely expected to leave rates unchanged after the much weaker-than-expected May nonfarm payrolls report. The Bank of England, Swiss National Bank and the Bank of Japan will also meet this week, and are similarly expected to stand pat on policy with the Brexit vote looming.

The British pound remained fragile near a two-month low against the dollar on Tuesday and the yen hovered near six-week highs against the U.S. currency on worries Britain may leave the European Union in a referendum less than 10 days away. Two recent opinion polls show a lead for the "Leave" campaign. While many market players are sceptical about the polling, recent poll results do seem to suggest a momentum for "Leave" campaign, market players said. Sterling has come under pressure in recent sessions amid fears that a U.K. exit or Brexit from the EU in the June 23 referendum could trigger a period of uncertainty in financial markets and hit growth in the region. An opinion poll on Friday conducted by ORB International put support for a Brexit at 53%, against 47% for remaining. A YouGov poll this week showed that the "Leave," campaign overtook the "Stay" campaign in the latest survey, reversing a narrow lead from a poll last week. While the Bank of Japan's policy meeting on June 15-16 is a near-term focal point for the yen, the prevailing market expectation is for the BOJ to hold off from any additional monetary easing, said a trader for a Japanese bank in Singapore. The BOJ will probably stand pat, especially since the impact of any additional monetary easing at this point could be limited while the market is preoccupied by the Brexit risk, the trader said. The euro is also vulnerable to threats of Brexit, which would hurt the euro zone economy and deal a serious blow to European integration. At the same time, however, the currency could be helped by safe-haven flows as the euro is often used as a funding currency for bets in riskier assets. Surprisingly soft U.S. employment data published earlier this month quashed expectations of a near-term rate hike by the U.S. Federal Reserve, underpinning the euro and other currencies against the dollar. The Federal Reserve is set to meet on Tuesday and Wednesday, with market players waiting for clues about when the Fed might next look to move on rates.

Crude oil futures fell in Asian trade on Tuesday, as investors ignored signs of market tightness to focus on concerns over global growth and overnight declines in stocks on the impending vote on Britain's possible European Union exit.. Concerns about Chinese growth are also weighing on sentiment, enough to set aside bullish signs such as a U.S. government forecast on Monday that shale oil output is expected to fall in July for the seventh consecutive month. OPEC also forecast on Monday that the world oil market would be more balanced in the second half of 2016 as outages in Nigeria and Canada help to speed up the erosion of a supply glut. Overnight, crude futures fell slightly on Monday, extending losses from late last week, as OPEC left its world oil demand growth forecasts unchanged amid further evidence of declines in Chinese crude imports. On Monday, OPEC left its 2016 global oil demand growth forecast unchanged at 1.20 million barrels per day to 94.18 million, amid increases in India. It came as China refinery output fell to 10.46 million bpd, its lowest daily average since last September. At the same time, oil imports in China declined to four-month lows, amid signals that demand could level off over the next several months. Meanwhile, OPEC supply growth estimates also remained steady at a contraction of 0.74 million bpd, totaling 56.40 million bpd for the year. OPEC expects downward revisions in Canada, Brazil and Colombia to offset gains in the U.S., U.K., Russia and Azerbaijan. In terms of OPEC demand, the 13-nation group left it unchanged at 31.5 million bpd, up 1.8 million bpd from the same month last year. Also, money managers raised their bullish bets on futures and options in the middle of May to record-high levels, before unloading their net long positions in the final week of the month as futures prices approached $50 a barrels, OPEC said in its Monthly Oil Market Report. In total, OPEC production fell by 100,000 bpd to 32.361 million bpd, as a series of attacks on oil facilities in Nigeria by 231,000 bpd. Slight increases from Kuwait, Iran and Saudi Arabia were offset by declines in Venezuela and Iraq. For the month, Saudi output rose by 84,000 bpd to 10.241 million bpd.

 

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Daily Market Outlook 15 June

Wall Street dropped for a fourth straight session on Tuesday as central bank policymakers weighed the health of the U.S. economy and investors worried about an upcoming vote in Britain on whether to leave the European Union. Investors launched a late-day rally but the major indices still ended with losses. The Federal Reserve will conclude its two-day June monetary policy meeting, with a closely-watched interest rate decision on Wednesday afternoon. While the Federal Open Market Committee (FOMC) is not expected to raise short-term interest rates at the meeting, Fed chair Janet Yellen could provide clues on whether the U.S. central bank could lift rates before the end of the fall. The FOMC has left the target range of its benchmark Federal Funds Rate steady at a level between 0.25 and 0.50% at each of its first three meetings this year. Adding to angst on Wall Street, recent opinion polls indicated growing support for Britain's exit from the European Union, creating a rush by investors to safe-haven assets like gold and the yen. Traders see virtually no chance of a rate hike on Wednesday, according to CME Group's FedWatch tool. They are pricing in a 21 percent chance of a rate hike in July, a 40 percent chance in September and a 59 percent chance in December.

The yen ticked higher in early Asia on Wednesday on continued safe-haven demand while the pound trended weaker with attention focused on the tone of the latest Federal Reserve statement on policy today and opinion polls ahead of a vote on U.K. membership in the European Union. Investors also continued to closely monitor poll results in the U.K., which increasingly show a British public shifting their support to the "Leave," campaign, ahead of next week's controversial Brexit referendum. Foreign exchange traders continued to keep a close eye on poll results in the U.K., which increasingly show a British public shifting their support to the "Leave," campaign, ahead of next week's controversial Brexit referendum. An online poll from TNS said a Leave vote widened its lead over a vote to "Stay" by a 47-40 margin, as Rupert Murdoch's Sun newspaper backed a campaign to depart from the European Union. Another survey, a YouGov poll for The Times, found that the "Leave" vote held a 46-39% lead, while 11% remained undecided. It came days after a popular columnist from The Telegraph broke ranks with the British establishment and supported a vote to leave. Last week, the Remain campaign held a slight one point lead in the same YouGov poll. In recent weeks, a number of top political leaders and economists including U.K. Prime Minister David Cameron, Germany chancellor Angela Merkel and International Monetary Fund managing director Christine Lagarde have issued stark warnings in recent weeks on the ramifications a British departure from the EU could have on the global economy at large. On the other end, House of Commons Leader Chris Grayling, Culture Secretary John Whittingdale and former London mayor Boris Johnson have shown support for the Leave movement.

The dollar held onto gains against the other major currencies on Tuesday, as the release of upbeat U.S. retail sales data boosted optimism over the strength of the economy and as investors eyed the Federal Reserve’s monthly policy meeting due to begin later in the day. The U.S. Commerce Department said that retail sales increased by 0.5% last month, compared to the forecast for a rise of 0.3%. Retail sales for April rose 1.3%. Core retail sales, which exclude automobile sales, increased by 0.4% in May, in line with forecasts. Core sales in April gained 0.8%. In a separate report, the Labor Department said import prices increased 1.4 percent last month, the largest rise since March 2012, after advancing 0.7 percent in April. In the 12 months through May, import prices fell 5.0 percent, the smallest decline since November 2014.

Oil prices fell for a fourth straight day on Tuesday, dropping 1 percent as nervousness over Britain's vote next week on whether to leave the European Union overshadowed signs of a return to health for crude after a two-year glut. The referendum-related concerns eclipsed an upbeat forecast for oil demand growth from the International Energy Agency (IEA), which said the oil market is essentially balanced after two years of surpluses. [IEA/M] On Monday, OPEC forecast that the oil market would be more balanced in the second half of 2016 as outages in Nigeria and Canada help to speed erosion of a supply glut. The market was awaiting direction from the American Petroleum Institute (API) data later in the day that was forecast to show U.S. crude inventories fell for a fourth straight week.

 

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Daily Market Outlook 16 June

The U.S. Federal Reserve kept interest rates unchanged on Wednesday and signaled it still planned to raise rates twice in 2016, though it said slower economic growth would crimp the pace of monetary policy tightening in future years. The central bank's decision to stick with its 2016 rate path, however, appeared shakier, with six of its 17 policymakers projecting just one increase this year. Only one Fed policymaker had done so when economic forecasts were last issued in March. A sharp slowdown in U.S. hiring in May had fueled doubts about the strength of the labor market going into the Fed's two-day policy meeting. Fed Chair Janet Yellen acknowledged the need to see clear signs of economic strength before lifting rates. "We do need to make sure that there's sufficient momentum," Yellen told a news conference. Yellen was not clear on whether a rate increase could come at the next policy meeting in late July or whether the central bank would wait for a slew of firmer data as it headed into its September meeting. The Fed also said the economy would grow only 2 percent this year and in 2017, 0.1 percentage point lower than previously forecast for each year. It also cut its longer-term view of the appropriate federal funds rate, its benchmark lending rate, by a quarter point to 3 percent and indicated it would be less aggressive in raising rates after the end of this year. Yellen said the U.S. economy appeared to have gained momentum since April, but that the labor market had lost some steam. Financial markets all but priced out a rate increase this year after the Fed statement, and U.S. short-term interest rate futures contracts rose. U.S. stocks closed lower.

BoJ kept monetary policy steady on Thursday even as sluggish global growth and anemic inflation put policymakers under pressure to do more to reflate the economy out of stagnation, bolstering the yen and battering Tokyo stocks. While the central bank maintained its optimistic view of the economy, it cut its view on consumer inflation to say prices were likely to fall slightly year-on-year or hover around flat for the time being. The BOJ maintained its massive asset buying program at the two-day rate review that ended on Thursday, pledging to increase base money at an annual pace of 80 trillion yen ($753 billion). It also left unchanged a 0.1 percent negative interest rate applied to some of the excess reserves financial institutions park with the central bank. The decision to maintain the base money target was made by a 8-1 vote, while maintaining the 0.1 percent negative rate was agreed in a 7-2 vote. The dollar briefly fell to 104.50 yen, its lowest level since September 2014, as the BOJ's inaction added to mounting downward pressure on the dollar on receding expectations of a near-term U.S. interest rate hike. A possible vote by Britain to leave the European Union was the biggest near-term concern for BOJ officials, and all the more reason to hold fire until after the June 23 referendum. A Reuters poll showed economists have seen a much higher chance of the BOJ easing at its meeting on July 28-29, when it issues fresh quarterly growth and inflation forecasts, assuming that global markets remain stable.

Oil prices fell in early Asian trade on Thursday, heading for a sixth day of declines, following a lower than expected draw on U.S. stockpiles and amid worries Britain might leave the European Union. U.S. crude stocks fell last week, the government said on Wednesday, but the decline was much smaller than anticipated, while gasoline stocks decreased sharply. Crude inventories USOILC=ECI fell by 933,000 barrels in the last week, the U.S. Energy Information Administration reported, less than half the 2.3 million barrel decrease expected by analysts. The U.S. Federal Reserve signaled on Wednesday that it still plans two U.S. rate hikes this year despite slower growth expectations, also hitting the oil market. With a week to go before Britain votes on leaving the European Union, oil and other markets also remain in thrall to opinion polls, which are increasingly showing those supporting an exit are in the majority.

Britain's exit from the 28-member EU would add more uncertainty for Yellen's Fed as it seeks to re-establish its rate-setting credibility in the face of skeptical markets which have now all but priced out a rate rise by the U.S. central bank this year. Economists fear a "leave" vote could unleash turmoil on global financial markets. Traders in London are readying for all-nighters after polls close late on June 23. The European Central Bank is prepared to pledge to backstop financial markets alongside the Bank of England. There are conflicting signals on how Britons will vote, with betting odds suggesting they will opt to stay in the EU, and some polls showing a "leave" decision will win out. On Wednesday, however, even the reliably hawkish president of the Kansas City Fed, Esther George, agreed with her colleagues that rates should not rise. She did not say why, although some economists conclude she was swayed by Brexit uncertainty. Analysts also worry a U.K. decision to leave the EU could spur other defections, unraveling one of the world's biggest economic blocs and hurting long term prospects for regional and world growth.

 

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Daily Market Outlook 17 June

Asian shares rose on Friday, but were set for weekly losses as investors favored safe haven assets due to fears that Britain will vote to quit the European Union, though the killing of a pro-EU lawmaker was seen swaying sentiment toward the "Remain" camp. Campaigning for Thursday's referendum, which overshadowed this week's U.S. and Japanese central bank meetings, was temporarily halted after a British member of parliament, Jo Cox, was shot and fatally wounded on Thursday. Japanese Finance Minister Taro Aso said on Friday that he was deeply concerned about "one-sided, rapid and speculative moves" seen in the currency market and would respond if necessary to ensure stability in currencies. The Federal Reserve also stood pat on policy on Wednesday, though it signaled it still planned to raise rates twice in 2016. But it also downgraded its economic view, and said slower growth would stem the pace of future monetary policy tightening.

U.S. consumer prices moderated in May, but sustained increases in housing and healthcare costs kept underlying inflation supported, which could still allow a cautious Federal Reserve to raise interest rates this year. While another report on Thursday showed an increase in the number of Americans applying for unemployment benefits last week, the trend remained consistent with a healthy labor market. The data came a day after the Fed lowered its assessment of the jobs market and suggested a slower path to interest rate hikes. The Labor Department said its Consumer Price Index increased 0.2 percent last month, slowing from April's 0.4 percent gain, as gasoline prices rose modestly and the cost of food fell. In the 12 months through May, the CPI increased 1.0 percent after advancing 1.1 percent in April. Stripping out the volatile food and energy components, the so-called core CPI increased 0.2 percent after a similar gain in April. That took the year-on-year core CPI rise to 2.2 percent from 2.1 percent in April. The Fed has a 2 percent inflation target and tracks an inflation measure which is currently at 1.6 percent. The U.S. central bank on Wednesday kept interest rates unchanged and said it expected inflation to remain below its target through 2017. Although the Fed signaled it still planned two rate hikes this year, there was less conviction. Six officials expect only a single increase, up from one in March. The Fed raised its benchmark overnight interest rate in December for the first time in nearly a decade. In a second report, the Labor Department said initial claims for state unemployment benefits increased 13,000 to a seasonally adjusted 277,000 for the week ended June 11. The four-week moving average of claims, considered a better measure of labor market trends as it irons out week-to-week volatility, slipped 250 to 269,250 last week. Jobless claims have now been below 300,000, a threshold associated with a strong job market, for 67 straight weeks, the longest streak since 1973. Separately, the Philadelphia Fed said its business conditions index rose nearly seven points to 4.7, returning to positive territory after two consecutive negative readings. But details of the survey were weak, with a measure of new orders declining further and shipments falling. This suggests that the manufacturing downturn is yet to run its course.

Japan's government kept its assessment of the economy unchanged this month but warned that consumer prices are rising at a slower pace, casting more doubt on policymakers' three-year effort to shake off deflation. "Japan's consumer prices are rising at a slower pace," the Cabinet Office said in its monthly economic report on Friday, while maintaining that the economy remains in a "moderate" recovery. The assessment comes a day after the Bank of Japan cut its view on consumer inflation and refrained from offering additional monetary stimulus despite a weak global economy and anemic inflation. The government's new assessment is more pessimistic than last month's, when it said consumer prices were rising gradually. While the government said the change in assessment was not a downgrade, it could fan more concerns that the BOJ will have difficulty reaching its 2 percent price target by March 2018.

Crude oil prices rose in early Asian trade on Friday for the first time in seven days as markets took a breather from concerns about the impact of Britain's possible exit from the European Union. The British pound rose from a two-month low after campaigning for next week's so-called Brexit vote next week was suspended following the murder on Thursday of UK member of parliament Jo Cox, who was a vocal advocate for Britain to stay in the European Union.

 

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Daily Market Outlook 20 June

Sterling rallied early on Monday as momentum swung in favor for Britain to remain in the European Union just days ahead of a referendum, helping underpin risk sentiment which in turn weighed on the safe-haven yen. Investors took heart after three of six opinion polls published over the weekend showed a shift towards keeping Britain in the EU, but the June 23 vote still looked too close to call. As a result, the yen dipped across the board - a move that may help ease worries about the strength in the currency. On Friday, Finance Minister Taro Aso said he was deeply concerned about "one-sided, rapid and speculative" currency moves and would respond urgently if needed - a hint at possible yen-selling market intervention.

The yen traded weaker ahead of trade data on Monday with investors squarely focused on this week's Brexit vote. In Japan, the adjusted trade balance is due with a surplus of ¥130 billion expected for May and exports down 10.4% year-on-year and imports down 13.8% year-on-year. At the weekend, China reported that average property prices growth slowed on a monthly basis for the first time in seven months, according to data from the National Bureau of Statistics. NBS said 60 of the 70 cities it monitors saw prices in May rising from a month earlier compared with 65 cities in April. And 36 of the 70 saw price growth on a monthly basis narrowing, compared with 21 in April. Last week, the pound rose around 1% against the dollar and the yen on Friday as fears over the upcoming U.K. referendum on European Union membership subsided as campaigning was suspended following the killing of Jo Cox, a Labour Party member and supporter of EU membership. Two opinion polls published on Saturday showed that support for the 'Remain' campaign had regained its lead over a vote to leave, while a third showed momentum shifting in favor of a vote to remain in the 28 member bloc for the June 23 vote. The pound had tumbled earlier in the week amid fears that a vote to leave the EU would cause turmoil in global financial markets. The pair rose to the day’s highs earlier Friday after Japanese Finance Minister Taro Aso warned that Tokyo Is ready to take action against “one-sided, sharp and speculation-driven” gains in the yen. The remarks came one day after the Bank of Japan left monetary policy on hold, sending the yen surging to two-year highs against the dollar. Investors will also be looking at testimony on monetary policy by Federal Reserve Chair Janet Yellen after the U.S. central bank left interest rates on hold this week and lowered forecast for how much they expect to hike interest rates in the next few years.

Oil prices extended gains on Monday as a weaker dollar and easing worries over Britain's possible exit from the European Union helped buy back the commodity after six straight days of declines. Campaigning for Britain's vote on EU membership resumed on Sunday after a three-day hiatus prompted by the killing of a pro-EU lawmaker. Three opinion polls ahead of Thursday's vote showed the 'Remain' camp recovering some momentum, although the overall picture remained one of an evenly split electorate. Oil prices continued to recover despite data showing U.S. energy firms adding oil rigs for a third week in a row, suggesting higher production to come. Oil services firm Baker Hughes reported nine rig additions in the week to June 17. Sizzling home price rises in China's biggest cities showed signs of easing in May but sharp gains appeared to be spreading to smaller cities, making policymakers' job harder as they look to support the faltering economy without inflating bubbles. France's hardline CGT union ended a strike on Friday that had paralyzed traffic for 26 days at the Fos Lavera oil terminals on the Mediterranean, the country's biggest oil hub, a management official at port operator Fluxel said.

 

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Daily Market Outlook 27 June

Asian stocks fell and the British pound tumbled more than 2 percent on Monday as markets struggled to shake off deep uncertainty sparked by Britain's decision to leave the European Union. Sentiment remained weak and trading was volatile, even if the worst of the turmoil seen on Friday, when global stock markets suffered their biggest decline in nearly five years, had eased. Among many questions the British exit, or Brexit, has triggered are just how much UK and European economies will slow, how they will negotiate their new relationship and how European leaders will try to boost the crumbling European Union. The British pound fell 2.4 percent to $1.3388 GBP, still some distance from the 31-year low of $1.3228 touched during Friday's wild trade. The euro also came under further pressure, falling almost 1 percent against the dollar, as investors fret Brexit could stoke the anti-establishment mood in Europe and even talk of disintegration of the union. "This sell-off will be more profound and long-lasting and will be not just against the dollar and yen but also against the pound. It will also raise fears of significant loss of values for holders of Euro-zone government bonds." But in a sign Briton's shock decision to leave the European Union may be encouraging Europeans to seek the safety of the status quo, support for Spain's conservative People's Party (PP) surged in Sunday's general election.

U.S. stock index futures eased slightly in early trading on Sunday after Britain's vote to leave the European Union sparked a sharp sell-off in global markets on Friday, wiping out over $2 trillion from world equities. Investors were blindsided by Thursday's vote, having bid up equity markets in the days leading up to it. U.S. stock indexes had been in striking distance of all-time highs, with some expecting a sharp rally to new highs in the coming days. Barron's cited Goldman Sachs Group (GS.N) as a possible target for bargain-hunters in an edition on Sunday dedicated to "How to play the markets" after the "Brexit" vote. Goldman Sachs shares could rise as much as 30 percent over the next year if the U.S. bank buys back stock and cuts costs, according to the report. It claimed the company's shares have fallen too far, especially after losing 7 percent on Friday after the referendum. The $2.08 trillion dollar loss across global equity markets was the biggest one-day fall ever, according Standard & Poor's Dow Jones Indices, trumping the Lehman Brothers bankruptcy during the 2008 financial crisis and the Black Monday stock market crash of 1987.

Britain is likely to enter a recession within the year as a result of last week's vote to leave the European Union, a decision that will stunt global economic growth as well, Goldman Sachs' top economists said on Sunday. "We now expect the (British) economy to enter a mild recession by early 2017," Goldman economist Jan Hatzius and Sven Jari Stehn wrote in a note for clients. They expect the victorious "leave" outcome in the June 23 referendum to chop a cumulative 2.75 percent off UK gross domestic product in the next 18 months. They also expect knock-on effects in the U.S. and European economies. Goldman now expects eurozone GDP over the next two years to average 1.25 percent versus 1.5 percent before the Brexit vote. For the U.S. economy, the bank now expects GDP growth in the second half of 2016 to come in at 2 percent versus a forecast of 2.25 percent previously. Goldman sees three principle risks for as a result of the vote: terms of trade are likely to deteriorate; companies are likely to scale back investment due to the uncertainty created by the outcome; and financial conditions will tighten due to exchange rate fluctuations and weakness in risk assets like stocks and junk bonds.

Oil prices dropped on Monday, extending sharp declines after Britain's vote to leave the European Union sparked a sharp selloff in global markets on Friday. Oil prices were under pressure as the British pound fell anew on Monday, with investors still at a loss as to what happens next now that the country has voted to leave the European Union. While roiling equity and currency markets, analysts said that Britain's vote to leave the EU would not have a big effect on fundamental oil demand. Chinese refiners have responded to the Asian oil products glut by exporting record amounts of gasoline and diesel fuel into regional markets, eroding refinery profit margins and swelling storage. As a result, analysts say there is a possibility that refiners dial back production and curb orders for their main feedstock crude oil, potentially weighing on prices. Despite this, the bank added that "the medium term trend towards oil market rebalancing appears in place, barring a recession," implying that oil prices would likely remain stable or rise as a supply overhang that pulled down prices by as much as 70 percent between 2014 and early 2016 is gradually brought down, bringing production back in line with consumption. In shipping, Panama opened the long-delayed $5.2 billion expansion of its shipping canal connecting the Atlantic and the Pacific oceans on Sunday, but the facilities are still too small to handle oil super-tankers like Very Large Crude Carriers (VLCC).

 

[SolidTrustMarket]

Daily Market Outlook 29 June

Asian share markets joined a global rebound on Wednesday as the immediate drag from the Brexit vote began to ebb and investors wagered central banks would ultimately ride to the rescue with more stimulus measures. Any bounce was welcome, given global equity markets shed $3 trillion in value in the two days following Britain's shock vote, according to S&P Dow Jones Indices. Investors also pointed to solid U.S. economic data as helping to steady the ship. Yet Britain's course out of the EU remains unknown, leaving the future of the entire bloc and its currency an open question. For now, investors are counting on central banks to step in with fresh stimulus to support markets over time. Japanese Prime Minister Shinzo Abe urged the Bank of Japan to provide ample funds to ensure market liquidity. In the first of Federal Reserve policymakers to comment since the vote, Governor Jerome Powell said it had shifted global risks "to the downside." That only reinforced market expectations the Fed will no longer be able to hike U.S. rates this year, and could even be forced to cut if the domestic economy falters. Aiding sentiment were data showing the U.S. economy grew at a 1.1 percent annualized rate in the first quarter, rather than the 0.8 percent pace reported last month. Yet concerns about the impact of Brexit on global growth and all the talk that central banks might have to ease anew to offset it, kept sovereign bonds well supported. Indeed, all Japanese bonds out to 40 years now offer less than 0.1 percent, a nightmare for pension funds and insurers desperate for a "decent" return.

Britain's vote to leave the European Union could pose a new drag on the U.S. economy at a time when momentum in the U.S. job market may already by slowing, Federal Reserve governor Jerome Powell said on Tuesday. In the first of Fed policymakers to comment since the shock vote in Britain last week, Powell said the Brexit referendum had shifted global risks "to the downside," potentially posing a new threat to the Fed's outlook. A Brexit-induced rise in the dollar would add to what Powell said has been a steady tightening of U.S. financial conditions since 2014, equivalent to several Fed rate hikes. Policymakers had set aside a possible rate hike in June awaiting the outcome of the British vote and the possible disruption of global markets. With the unexpected victory of the "Leave" camp, many analysts now expect the Fed to keep rates on hold until late this year, if not longer, as the terms of British exit are negotiated, and the impact on global trade, investment and currency values is analyzed.

Japanese Prime Minister Shinzo Abe on Wednesday pledged to use all available policy tools to keep the wheels of the economy turning as financial markets were gripped by uncertainty in the wake of Britain's shock vote to exit the European Union. The yen's spike following the referendum has kept Japanese policymakers on edge as they fret of the pain a strong currency inflicts on an export-reliant economy, already reeling from weak consumption. Retail sales fell more than expected in May in a third straight month of annual declines, keeping policymakers under pressure to top up stimulus. "Consumer spending has been stagnant and the trend is likely to continue for a while due to sluggish growth in wages," said Hidenobu Tokuda, senior economist at Mizuho Research Institute. In a meeting to discuss post-Brexit market developments, Abe urged Bank of Japan (BOJ) Governor Haruhiko Kuroda to ensure the central bank provides ample funds to the market to prevent any credit squeeze. Oil rose on Wednesday as financial traders poured money back into commodities following the initial shock of Britain's vote to leave the European Union, and as a potential strike in Norway and crisis in Venezuela threatened to cut supply. Standard Chartered said that it expected oil prices to regain $50 per barrel rapidly after the Brexit-related fall as the referendum's impact on demand was limited. On the supply side, a looming strike by Norwegian oil workers threatened to cut output from the biggest North Sea producer. In crisis-struck Venezuela, oil producers and refiners were struggling to keep output up due to power outages and equipment shortages also supported prices, traders said. Additionally, the American Petroleum Institute (API) indicated in a report on Tuesday that U.S. crude inventories fell nearly 4 million barrels for the week to June 24, some two-thirds more than the 2.4 million barrels expected by analysts. The U.S. Energy Information Administration will issue official stockpile data on Wednesday. Despite the tightening supply-side, there are concerns that a looming refined products glut especially in Asia, which has halved benchmark Singapore production margins since January, might spill back into the crude market as refiners cut output and orders of their main feedstock, crude.

 

[SolidTrustMarket]

Daily Market Outlook 30 June

Asia stocks rose on Thursday, tracking an overnight rally on Wall Street, while the safe-haven Japanese yen was held in check as global markets regained a semblance of calm after the Brexit shock. U.S. President Barack Obama said on Wednesday he expects the world economy will be steady in the short run after Britain's decision but expressed concern about longer-term global growth. Still, expectations that major central banks will ease monetary policy in the wake of Brexit have buoyed risk assets globally. Analysts also saw the recent plunge in sovereign debt yields as a factor driving investors to equities. German and Japanese benchmark 10-year government debt yields have both fallen to historic lows below zero over the past week. Irish, French and Dutch 10-year yields hit record lows on Wednesday, all approaching zero. Precious metals rose in part due to a weaker dollar, although the gains also highlighted underlying investor appetite for safe assets amid longer-term financial uncertainty after Brexit.

Gold prices were higher in North American trade on Wednesday, holding on to solid overnight gains after data showed that core PCE prices rose in line with market expectations in May. In a report, the Commerce Department said that the core PCE price index inched up 0.2% last month, matching expectations. On an annualized basis, core PCE prices rose 1.6%, in line with forecasts. The Federal Reserve uses core PCE as a tool to help determine whether to raise or lower interest rates, with the aim of keeping inflation at a rate of 2% or below. Prices of the yellow metal surged to a 27-month peak of $1,362.60 last Friday, after a shock U.K. vote to exit the European Union sent investors flooding into bullion and other safe haven assets. The news raised concerns that other countries might leave the union and that global growth would come under significant pressure, while the actual timeframe of the U.K. departure from the EU remained unclear. Outgoing U.K. Prime Minister David Cameron met with the European Council Tuesday but refrained from invoking Article 50, the treaty measure that would jump start the two year deadline for the U.K. to leave the European Union. The heads of the EU's 27 other member states will continue their meeting on Wednesday without the U.K. present.

Nearly all of the largest U.S. banks are on steady enough footing to increase payouts to shareholders, the U.S. Federal Reserve said on Wednesday, with just two subsidiaries of foreign banks failing its annual stress test. The results show that big U.S. banks have not only built up significant capital since the 2007-2009 financial crisis but that management teams have largely proven the merit of their internal disaster planning to the Fed. The regulatory thumbs up prompted a slew of announcements from banks who plan to buy back more stock or increase dividends - good news for investors who saw their banks shares hammered by Britain's vote last week to leave the European Union. While the Fed's stress tests are only hypothetical scenarios and the evaluations are subjective, the process is forcing banks to be better prepared for real life events. Although the Fed said the problems deserve attention, they were not substantial enough to undermine Morgan Stanley's quantitative stress test success. The bank would still produce a ratio of high quality capital to assets of at least 7.7 percent in severely adverse scenario, well above the regulatory minimum.

Oil prices fell in early trade on Thursday, with Brent futures struggling to defend $50 per barrel as fears over strike outages in Norway faded and as Nigeria's production improved. Initial fears of sharp production cuts from a looming strike by Norway's oil and gas workers seemed to ease as output from the North Sea's biggest producer would only fall by about 7 percent even in case of a walk-out, according to data from Norway's Petroleum Directorate. In Nigeria, violent attacks on the oil infrastructure knocked out some 600,000 barrels of daily oil production to around 1.25 million barrels per day (bpd) between January and mid-June. But a tentative ceasefire means output has recovered by 200,000-300,000 bpd since then. Prior to the disruptions, Nigerian production stood around 2 million bpd. Goldman Sachs also said that production outages from Canadian wildfires since May, which peaked around 1.5 million bpd, would recover over the coming months and virtually end by September. In other regions, however, there were signs of a tightening market. The U.S. Energy Information Administration reported on Wednesday that crude stockpiles fell 4.1 million barrels in the week to June 24, the sixth consecutive week of drawdowns, to 526.6 million barrels. U.S. crude oil production was at 8.62 million bpd, down from a peak of over 9.6 million bpd in June 2015. In the Middle East, OPEC's second biggest producer Iraq is set to see output fall for a second straight month in June. Iraq's seaborne exports in the first 29 days of June have averaged 3.14 million bpd, according to loading data tracked by Reuters and an industry source. That would be down 60,000 bpd from May.

 

[SolidTrustMarket]

Daily Market Outlook 4 July

British finance minister George Osborne is planning to cut Britain's corporation tax to less than 15 percent in an attempt to offset the shock to investors of the country's decision to leave the European Union, the Financial Times reported on Sunday. Osborne was also quoted saying he would put more effort into Britain's relationship with China and lead another trade visit later this year, after the shock referendum decision. He told the newspaper he wanted to build a "super competitive economy" with low business taxes and a global focus. In his most recent budget statement, announced in March, Osborne said he planned to cut the corporation tax to 17 percent by 2020, down from 20 percent now. Other elements of his plan to steer the economy through the upheaval caused by the Brexit vote included ensuring support for bank lending, intensifying efforts to direct investment to northern England and maintaining Britain's fiscal credibility, the FT quoted him as saying. The Brexit vote threatens to redefine Britain's growing financial services relationship with China, which has agreed to a number of joint projects as part of the China-UK Economic and Financial Dialogue program to deepen economic ties between the two counties, based largely on the UK's membership of the EU. Britons stunned the world with a vote to leave the EU in a referendum on June 23. Prime Minister David Cameron resigned after the vote, asking his Conservative Party to choose another leader by the autumn.

The U.S. dollar eased against its major counterparts on Friday, amid fading expectations of a Federal Reserve rate hike in the next couple of months and as markets continued to evaluate the consequences of the Brexit vote. Market players all but ruled out further rate hikes by the Fed this year in the aftermath of Britain’s vote to leave the European Union. In fact, futures markets are now reflecting a chance that the Fed could actually cut interest rates before the end of the year. According to the CME Fed Watch tool, there’s currently a 0% probability of a Fed rate hike in July and a 3% probability of a rate cut. The dollar slumped 0.7% against the yen as weak economic data from China and the fallout from the U.K.’s vote to leave the EU boosted safe-haven demand. The Caixin China manufacturing purchasing managers’ index fell to 48.6 in June, below expectations for 49.1, while the official manufacturing PMI came in at 50.0 last month, in line with expectations. London mayor Boris Johnson abruptly pulled out of the race to become Britain's next prime minister on Thursday, while Britain’s Justice Secretary Michael Gove, one of the main campaigners to take Britain out of the EU, said he would run to become prime minister. Interior Minister Theresa May, who campaigned to remain in the EU, also announced her candidacy to lead the party. Bank of England Governor, Mark Carney indicated on Thursday that more stimulus may be needed over the summer, sparking expectations for an upcoming rate cut. Elsewhere, the euro rose after a Reuters report said the European Central Bank was not considering buying government debt out of proportion to euro zone countries' shareholding in the bank. The single currency had fallen sharply on Thursday on a Bloomberg report that the ECB had been considering giving up the capital key due to a shortage of German paper. In the week ahead, market players will be shifting their attention slightly away from Brexit-related headlines and more towards economic fundamentals and U.S. monetary policy, with the June nonfarm payrolls report and FOMC meeting minutes in the spotlight. There is also ISM services data on Wednesday. U.S. financial markets will be closed on Monday for the Independence Day holiday. Elsewhere, in the U.K., market players will be eyeing the release of the Bank of England’s financial stability report for fresh clarity on the health of the U.K. banking sector in wake of Britain’s shock decision to leave the European Union.

Oil futures ended higher on Friday, as a weaker U.S. dollar lent support to the commodity and amid subsiding fears about the Brexit referendum’s impact on crude demand. Gains were limited as data showed that the U.S. oil rig count rose for the fourth time over the past five weeks. Despite the upbeat performance, gains were limited amid signs of a potential recovery in U.S. drilling activity. Oilfield services provider Baker Hughes said late Friday that the number of rigs drilling for oil in the U.S. increased by 11 last weeks to 341, marking the fourth increase in five weeks. The renewed gain in U.S. drilling activity fueled speculation that domestic production could be on the verge of rebounding in the weeks ahead, underlining worries over a supply glut. In the week ahead, oil traders will be focusing on U.S. stockpile data on Wednesday and Thursday for fresh supply-and-demand signals. The reports come out one day later than usual due to the Independence Day holiday in the U.S. on Monday. Market players will also continue to monitor supply disruptions across the world for further indications on the rebalancing of the market. The energy minister of Saudi Arabia, the world's largest oil exporter, and the secretary general of OPEC agree that the global oil market is heading toward a balance and that prices are starting to settle, according to comments carried by Saudi state news agency SPA. Falih said Saudi Arabia was seeking, through OPEC, to continue playing its role in meeting the growing global demand for oil and ensuring the reliability of the continued flow of oil supplies.

 

[SolidTrustMarket]

Daily Market Outlook 5 July

Asian shares snapped a five-day winning streak on Tuesday as investors took stock of a rally driven by hopes that central banks will provide more stimulus to offset a likely downturn triggered by Brexit. Chinese shares rose, with the CSI 300 .CSI300 up 0.3 percent, while the Shanghai Composite .SSEC added 0.6 percent, buoyed in part by a private business survey which showed growth in the services sector jumped to an 11-month high. But Hong Kong's Hang Seng .HSI retreated 0.8 percent. But trade was thin, with financial and commodities markets in the United States closed on Monday for Independence Day. Britain's vote to leave the European Union has ramped up the urgency for some Asian central banks to ease monetary policy, as a prolonged period of uncertainty threatens a wider downshift in trade and investment. Many investors expect the European Central Bank and the Bank of Japan to expand their monetary easing. Base metal prices were also bolstered by talk of stimulus in China. The Bank of England has indicated it could provide stimulus measures to support the economy in coming months. That kept the pound close to its 31-year trough hit in the wake of the Brexit decision.

Britain's vote to leave the European Union has ramped up the urgency for some Asian central banks to ease monetary policy, as a prolonged period of uncertainty threatens a wider downshift in trade and investment. Economists warn delayed investment decisions and a hit to jobs and consumption from Brexit will hurt exports from Asia's trade-reliant economies, which are already reeling from weak external demand, particularly from China. A round of Asian central bank policy meetings in the region this month could reveal an increased bias to ease policy, if not deliver outright interest rate cuts. HSBC sees increased prospects of easing in Australia, New Zealand, South Korea, Japan, China and Thailand although the risks of inflation from currency weakness could constrain policy options in emerging markets like India, Indonesia and Malaysia.

Activity in China's services sector rose to an 11-month high in June, a private survey showed on Tuesday, diverging from struggling manufacturing in a trend that if sustainable would indicate Beijing is making progress in rebalancing the economy. However, a composite measure of activity fell to a four- month low, highlighting that a growing services sector may not be able to make up for a prolonged decline in the industrial economy that has pushed China's growth to 25-year lows. The Caixin/Markit services purchasing managers' index (PMI) for June rose to 52.7 from 51.2 in May on a seasonally adjusted basis. New business expanded at the fastest rate since July 2015, prompting services firms to hire more workers for the third month in a row, though the rate of job creation was moderate. Beijing has been counting on a strong services sector to pick up the slack as it shifts the economy towards stronger consumption and away from a dependence on heavy industry and manufacturing exports. Activity in Japan's services sector contracted in June as new business shrank the fastest in almost five years, adding to worries that the economy is losing momentum due to weak consumer spending, a private business survey showed on Tuesday. The Markit/Nikkei Japan Services Purchasing Managers Index (PMI) fell to 49.4 in June from 50.4 in May on a seasonally adjusted basis. The index for new business fell to 47.3 from 50.4 in the previous month to reach the lowest since September 2011. The composite index for output in both manufacturing and services fell to 49.0 in June from 49.2 in May on a seasonally adjusted basis, showing the fourth consecutive month of contraction.

Crude prices dipped in early trading on Tuesday, with Brent falling back below $50 per barrel as economic concerns took center stage with many analysts saying oil demand will stall later this year. Analysts said that concerns over the global economy were weighing on the outlook for oil demand and on prices. "The deterioration in the global economic outlook, financial market uncertainty and ripple effects on key areas of oil demand growth are likely to exacerbate already-lacklustre industrial demand growth trends," British bank Barclays said in a note to clients. JPMorgan also said in its latest oil market outlook that "macro-economic risks may weigh on oil prices", although the U.S. bank added that oil prices would still likely rise between this year and the next as stocks are drawn down, and political risk and maturing oil fields tighten the market. JPMorgan said it expected Brent and WTI to average $47.30 and $46.66 per barrel respectively this year and $56.75 a barrel for both in 2017. That's an increase of $2 each for 2016 and $1.75 a barrel for both benchmarks for 2017, compared with the bank's previous forecast. In the latest sign of a glut in refined products, which traders say will reduce orders for crude oil, which is the most important refining feedstock, several tankers carrying gasoline-making components have dropped anchor off New York harbor, unable to discharge as onshore tanks are full.

 

[SolidTrustMarket]

Daily Market Outlook 11 July

Asian share markets enjoyed a relief rally on Monday as upbeat U.S. jobs data lessened immediate concerns about the health of the world's largest economy, while the long-run fallout from Brexit kept sovereign yields near record lows. Prime Minister Shinzo Abe's ruling coalition won a landslide victory giving it the power to potentially revise the nation's post-war pacifist constitution for the first time. The Asian rebound came after news the U.S. economy added 287,000 jobs last month, well above median forecasts and recovering from a very weak May report. In the end, investors concluded the data was not strong enough to revive the prospect of a rate hike from the Federal Reserve for the next few months, benefiting bonds and stocks. Fed officials are scheduled to speak several times this week, offering plenty of opportunities for the market to glean clues about policy. One major event this week will be a Bank of England meeting on Thursday when it might well cut its 0.5 percent rate to offset the economic drag from the vote to leave the European Union. Governor Mark Carney has already opened the door to easing, including the expansion of its 375 billion-pound bond-buying program. Various reports out Monday argued for urgent action, with consumer spending falling last month, the business outlook darkening by the most in four years and economic activity in London slowing sharply. "The outcome of the UK referendum has dealt a significant shock to the outlook for the global economy," warned Christian Keller, an economist at Barclays. "It introduced a higher uncertainty about Europe's future, and raised questions about globalization more generally," he added. "Confidence and financial channels could potentially propagate the effects to the U.S., China and beyond." That was one factor behind the relentless demand for sovereign debt that has driven down yields, which move inversely to prices, and kept the pound at its weakest since 1985.

The dollar steadied against the safe-haven yen on Monday thanks to an improvement in investors' appetite for riskier assets, but traders said the greenback will be capped longer term by views the Federal Reserve will remain cautious on interest rates. Job creation in June was much stronger than expected, increasing by 287,000 and easing fears that the U.S. labour market may be faltering. But the report did not change the view that the Fed may not hike rates this year, particularly after May payroll growth was revised down to 11,000 from 38,000. Japanese Prime Minister Shinzo Abe's ruling coalition won a landslide victory on Sunday in an election for parliament's Upper House. While the win is seen clearing the way for the Japanese government to compile fresh stimulus measures, there are concerns that revising the constitution could now be given priority with economic steps taking a back seat. "The government's agenda could pivot away from Abenomics and renew yen buying by foreign players. There was little reason to sell the yen to begin with, as Japan has a large current account surplus, the Fed is unlikely to actively hike rates and fundamental risks smoulder in Britain, the EU and China," said Junichi Ishikawa, forex analyst at IG Securities in Tokyo. While the yen could ultimately gain against the dollar, the greenback would still appreciate against other currencies due to such fundamental risks facing the global economy, Ishikawa added. Elsewhere, the pound steadied a little following the post-Brexit turbulence which has buffeted the currency through much of this month. Still, the pound was seen vulnerable in the longer term with the UK still in the beginning stages of working out its future relationship with the European Union.

Oil fell on Monday over signs that U.S. shale drillers have adapted to lower prices and on renewed indications of economic weakness in Asia. Prices also dipped in physical markets. Iran has set the official selling price (OSP) of Iranian Light grade for its Asian buyers at $0.45 above the Oman/Dubai average for August, down 40 cents from the previous month, an industry source with direct knowledge of the matter said on Monday. Goldman Sachs said that it expected "WTI oil to remain in a range of $45-50 per barrel over the next 12 months". Meanwhile, there is mounting evidence that U.S. oil producers can live with crude prices of $45 or higher, as oil drillers added rigs for the fifth week in six, U.S. oil bankruptcies became sparse in June, and bullish U.S. oil bets dropped to near four-month lows. Saudi Arabia's energy minister Khalid al-Falih said on Sunday the oil market was becoming more balanced in terms of supply and demand and, as a result, prices were stabilizing. But there were more signs of economic slowdown in Asia. In Japan, core machinery orders unexpectedly fell 1.4 percent in May from the previous month, down for a second straight month, government data showed on Monday. In China, consumer inflation last month held below the official target of around 3 percent for this year, data released on Sunday showed, indicating weak demand.

 

[SolidTrustMarket]

Daily Market Outlook 12 July

Asian stocks rose to a 2-1/2-month peak on Tuesday, a day after Wall Street shares hit a record high thanks to a combination of upbeat U.S. data and expectations of more stimulus from global policymakers. Globally low interest rates from central bank stimulus in both Japan and Europe are supporting risk assets. Bond yields in the U.S., Japan, Germany, France and the U.K all hit record lows last week as investors bet on more stimulus following the Brexit shock. The rally was in part driven by investors buying high-dividend and defensive shares, seeking refuge from low or negative interest rates in Europe and Japan. Fanning the latest rally in share prices, Japanese Prime Minister Shinzo Abe called for a fresh round of fiscal stimulus after a victory for his ruling coalition. While Abe did not give details on the size of the package, it is widely expected to reach 10 trillion yen ($97.5 billion). A visit by former Federal Reserve Chairman Ben Bernanke to the Bank of Japan on Monday fueled talk BOJ Governor Haruhiko Kuroda might decide to provide "helicopter money" - a term coined by economist Milton Friedman and cited by Bernanke, before he became Fed chairman, as a way to finance government budgets and fight deflation. Bernanke plans to meet Abe on Tuesday. Japanese wholesale prices fell 4.2 percent in the year to June, Bank of Japan data showed on Tuesday. The fall in the corporate goods price index (CGPI), which measures the price companies charge each other for their goods and services, compares with the median market forecast for a 4.2 percent annual decrease and follows a 4.3 percent annual decrease in May. Overall final goods prices the prices of finished products charged to businesses fell 3.7 percent from a year earlier. Domestic final goods prices, which loosely track the consumer price index, fell 1.2% from a year earlier.

The British pound gained 0.6 percent to $1.3070 as weeks of political turmoil appeared to ease on news Interior Minister Theresa May have cleared the path to become Britain's prime minister on Wednesday. Still, market players say huge uncertainty remains, including May's approach to negotiating Britain's exit from the European Union and on whether she will call a general election to cement her authority. Some traders also expect the Bank of England to cut rates this week to fend off pressure on the UK economy following the Brexit vote. A rate cut could undermine the sterling's dwindling yield attraction among major currencies and push it further, possibly below its 31-year low just under $1.28 hit on July 6. Later on Tuesday, EU finance ministers will decide on the European Commission's recommendation for sanctions on Spain and Portugal for their excessive deficits -- an issue that could re-ignite controversies over the fair application of EU fiscal rules. Low rates in the developed world as well as concerns about the fallout from Brexit in Europe are encouraging investment in emerging markets.

Oil futures rose on Tuesday as an interruption in Iraqi crude loadings at Basra threatened to tighten supplies, but prices held close to two-month lows hit in the previous session as investors continued to slash their bullish bets. Traders said the rise in prices was largely a result of a suspension of tanker loading of Basra Light crude at two export terminals in Iraq's south after a pipeline leak. Although loadings reportedly resumed overnight, Iraq plans to cut crude oil exports from its southern ports to 2.79 million barrels per day (bpd) in August from 2.99 million bpd planned for July, a preliminary loading program showed. Oil price gains have, however, been limited with financial players betting on price falls, or shorting the crude market, moving away from long positions that benefit from price rises. Hedge funds and other money managers cut their bullish bets on crude by 22 million barrels over the seven days ending on July 5. These players have cut their net long positions in crude futures and options by almost a quarter, from 633 million barrels to 485 million, over the last four weeks. Physical markets were also weak, with Asian oil refiners processing less crude as they grapple with margins that plunged to five-year lows after the region was flooded with supply of refined products and as slowing economic growth hits demand for fuels this month. Still, the pound was seen vulnerable in the longer term with the UK still in the beginning stages of working out its future relationship with the European Union. Saudi Arabia hopes that slower global growth will not trigger a fall in the current healthy demand for oil, Energy Minister Khalid al-Falih told a German newspaper in an interview published on Tuesday, adding oil prices of around $50 per barrel were too low. "Ultimately, market fundamentals, or supply and demand, are the primary determinant of the oil price, and at the moment we see healthy demand for oil," he told German business daily Handelsblatt. "That said, there are economic headwinds in some important markets and we hope this does not trigger a slowdown in global demand," he added. He said oil prices need to be somewhere between $50 and $100 per barrel for the industry to sustain investment.

 

[SolidTrustMarket]

Daily Market Outlook 14 July

Asian shares remained near an eight-month high on Thursday as investors bet the Bank of England will cut rates to ward off recession following Britain's vote to leave the European Union. U.S. stocks ticked up on Wednesday, just enough for the S&P 500 and Dow industrials to set record highs, with investors expecting upbeat earnings to keep the rally going. Wall Street shares have quickly recovered the losses triggered by Britain's vote on June 23 to leave the European Union, driven by solid U.S. economic data. In addition, concerns that Brexit could disrupt European economies effectively took a Federal Reserve rate hike off the agenda in the near future, and boosted expectations of more monetary stimulus from central banks in Europe and Japan. Financial markets expect the Bank of England to announce a rate cut later on Thursday. Governor Mark Carney has hinted he may ease policy to cushion the economy from the Brexit shock. While the European Central Bank is expected to keep policy on hold at its meeting next week, the euro's overnight index swaps were pricing in further rate cuts over coming months.

The British pound GBP=D4 advanced 0.3 percent to $1.3194 on Thursday. Sterling climbed to this week's high of $1.3340 on Wednesday as political uncertainty eased following the appointment of Theresa May as prime minister. But it ended the day down 1.4 percent from that peak after May named leading Brexit supporters to key positions in her new government, including former London mayor Boris Johnson as foreign secretary, and attention shifted toward a possible rate cut by the Bank of England.

The U.S. federal government posted a budget surplus of $6 billion in June, compared with a surplus of $50 billion in the same month a year earlier, the Treasury Department said on Wednesday. The current fiscal year-to-date deficit stood at $401 billion, according to the Treasury's monthly budget statement. Receipts last month totaled $330 billion, while outlays were at $323 billion. Accounting for calendar adjustments, June would have shown a surplus of $10 billion compared to an adjusted surplus of $50 billion for June 2015. The U.S. economy continued to expand from mid-May through the end of June but there was little indication that inflation would surge any time soon, the Federal Reserve said on Wednesday. Wage pressures were "modest to moderate" in most of the central bank's districts and price pressures remained slight, the Fed said in its Beige Book report of anecdotal information collected from business contacts across the country. Fed policymakers have been spooked by a lack of sustained progress in moving inflation up to the central bank's 2 percent target as well as by a global growth slowdown. U.S. business investment also has been weak for two straight quarters. The Fed raised interest rates in December for the first time in nearly a decade but has held off further increases this year. Despite a strong rebound in U.S. job growth in June, traders see the Fed keeping rates on hold until at least mid-2017. Pressure to raise wages at the end of the second quarter was centered on skilled workers and difficult-to-fill positions, while "price pressures remain slight, with contacts generally reporting no movement in selling prices," the Fed said in its report. Only three districts - Cleveland, Chicago and San Francisco - reported increased wages for entry-level staff. With the U.S. labor market near what is considered to be full employment, economists generally have been expecting wages to rise, which in turn would help spark higher inflation. Employment continued to grow modestly, the Fed report said.

Crude prices rose on Thursday to recoup some of their big losses from the previous session, but gains are likely to be limited by mounting concerns the global glut in oil is not going away soon after two major agencies issued bearish reports. A bearish assessment on the oil market from the International Energy Agency (IEA) on Wednesday sent both benchmarks down more than 4 percent by the close of trading. The glut in the global oil market is persistent and is putting a lid on crude prices despite strong demand growth and steep declines in non-OPEC production, the IEA said. Surging crude stocks have pushed floating storage to seven-year highs, the IEA said. Crude stockpiles in the United States were down less than expected last week, while distillate inventories rose the most since January and gasoline stocks unexpectedly increased, the Energy Information Administration (EIA) said on Wednesday. The data portrayed a traditionally busy summer driving season beset with unusually weak demand, when many had expected record driving trips amid lower oil prices. The EIA said crude inventories fell 2.5 million barrels last week, less than the 3 million-barrel drop forecast in a Reuters poll.

 

[SolidTrustMarket]

Daily Market Outlook 18 July

The U.S. dollar gained on the yen in Asia on Monday as investors unwound safe-haven trades in the wake of the failed coup in Turkey, while a giant takeover bid in the tech sector and the promise of central bank stimulus lent support to equities. Ankara said it was in control of the country and economy and widened a crackdown on suspected supporters of the failed military coup, taking the number of people rounded up from the armed forces and judiciary to 6,000. The initial reaction of investors to the coup had been to bid up safe havens such as the Japanese yen, but that was quickly unwinding. The dollar was at 105.60 yen JPY= having briefly been as low as 104.63 late Friday, with trade further thinned by a holiday in Japan.

European Central Bank President Mario Draghi is likely to plead for governments to do more to boost the euro zone's economy in the coming week as the fallout of Britain's vote to leave the EU and weaker global growth threaten the bloc's fragile recovery. Governments in China, Japan and Britain have already started easing their fiscal stance or hinted at plans to do so as sub-par global growth and inflation show that central banks' ultra-easy monetary policy has run up against its limit. The ECB is not expected to change its monetary stance on Thursday, its last meeting before an eight-week summer break. But a reiteration of Draghi's long-standing call on governments to spend more where possible and speed up growth-boosting reforms is once again likely to fall on deaf ears. The only country with significant fiscal firepower, Germany, is reluctant to give up its budget surplus and has resisted any attempt to pool more money at the European level in the absence of greater power-sharing. Calls for greater fiscal spending have been intensifying, with OECD head José Ángel Gurría and doyen investor George Soros throwing their weight behind the argument in recent weeks. The need for more stimulus was particularly visible in the euro zone, where unemployment is high in many peripheral countries and resentment toward the euro project is growing. The recent slide in many governments' borrowing costs on the bond market has been seen by some economists as providing more room for public investment. In fact, European Union finance ministers agreed this week to sanction Spain and Portugal, two countries battling to emerge from a deep financial and economic crisis, for not doing enough to correct their excessive budget deficits last year. Thursday's ECB meeting is likely to bring tricky questions for Draghi about the effectiveness and sustainability of the ECB's monetary policy and the state of Italian banks, struggling under the burden of bad debt. The ECB is unlikely to take further action before seeing updated inflation forecasts at its Sept. 8 meeting, taking comfort from a stabilization in financial markets after an initial 'Brexit' shock.

Home prices in China's 70 major cities rose 7.3 percent in June from a year earlier, an official survey showed on Monday, accelerating from a 6.9 percent rise in May. Gains on a monthly basis continued to slow, however, as some cities tightened policies amid fears of a housing price bubble. The monthly rise slowed slightly to 0.8 percent in June, compared with 0.9 percent in May, according to a Reuters calculation based on data issued by the National Bureau of Statistics (NBS). On a year-on-year basis, Shenzhen and Xiamen were the two top performers, with home prices rising 46.7 percent and 33.6 percent, respectively. Beijing prices rose 20.3 percent, slightly faster than in May, while Shanghai prices rose 27.7 percent, the same as in May.

Oil prices rose in Asian trade on Monday, following gains last week, as traders shrugged off the impact of Friday's attempted coup in Turkey, while a weaker dollar and upbeat economic data from the United States lent price support. Both benchmarks rebounded after declining early in Monday's session as investors digested the impact from the coup bid. Istanbul's Bosphorus Strait, a key chokepoint for oil which handles about 3 percent of global shipments, mainly from Black Sea ports and the Caspian region, was reopened on Saturday after being shut for several hours after Friday's attempted military coup. The dollar index slipped against a basket of currencies in early trade on Monday. A weaker greenback makes dollar-priced commodities cheaper for holders of other currencies, boosting demand for crude. Buoyant economic data from the U.S. and China on Friday, the world's two biggest economies, lent support to oil prices. U.S. retail sales rose more than expected in June as Americans splurged on motor vehicles and other goods, while U.S. industrial production recorded its biggest increase in 11 months in June, official data on Friday showed. But Morgan Stanley raised concerns about the longer term outlook for oil consumption as demand for petrochemicals rather than fuels such as diesel and gasoline is clouding the outlook for crude demand, according to a report on Monday.

 

[SolidTrustMarket]

Daily Market Outlook 20 July

Profit taking weighed on Asian stocks on Wednesday after a record run on Wall Street showed signs of petering out, while the dollar hovered near a four-month high against a basket of currencies following upbeat U.S. data. Investors' risk appetite, which has recovered rapidly from the Brexit shock late in June, received a sobering reminder after the International Monetary Fund cut its global growth forecasts for the next two years on Tuesday, citing uncertainty over Britain's looming exit from the European Union. The Australian dollar was nearly flat at $0.7503 AUD=D4 after falling 1.1 percent on Tuesday, when it was dragged down by a New Zealand dollar weakened by growing speculation that the country's central bank it will cut rates in August. Fed funds futures rates show investors see almost a 50/50 chance that the U.S. central bank will raise interest rates by its December meeting, according to CME Group's FedWatch tool, compared with less than 20 percent a few weeks ago. Geopolitical risks also loomed as a factor for markets. The Turkish lira came under renewed pressure and fell to its lowest level since last September amid reports of a widening purge in Turkey after an abortive coup last week. According to a BofA Merrill Lynch fund managers' survey, investors saw geopolitical risk as the biggest risk to financial market stability, followed by risks of protectionism.

The dollar hit a four-month high against a basket of currencies and rose against the yen on Wednesday, bolstered by strong U.S. data and growing expectations that the Federal Reserve may raise rates before the end of the year. Commerce Department data showed that U.S. housing starts surged 4.8 percent to a seasonally adjusted annual pace of 1.19 million units, underpinning a theme of strength in the U.S. economy. Fed funds futures rates show investors see around a 40% chance the Fed will raise rates by its December meeting, according to CME Group's FedWatch tool, compared with less than 20 percent a few weeks ago. Speculators have also been unwinding their safe-haven bids in the yen as the initial shocks from the Brexit vote dissipated, and expectations rose of additional easing from the Bank of Japan at its July 28-29 meeting. A majority of economists polled by Reuters expect further BOJ easing, which is likely to consist of a combination of measures. Japanese policymakers are unlikely to go as far as funding government spending through direct debt monetization, or "helicopter money" but might pursue a mix of aggressive fiscal and monetary expansion to battle deflation, according to sources. The ECB will hold a regular policy meeting on Thursday, its last before an eight-week summer break.

Gold prices held steady in Asia on Tuesday in cautious trade with investors looking ahead to the European Central Bank meeting later in the week for the state-of-play on possible further stimulus efforts. Overnight, gold prices edged lower in North American trade on Monday, as investors unwound safe-haven trades in the wake of a failed military coup in Turkey. The Turkish government said on Sunday it was in full control of the country and economy after thwarting an apparent military coup to topple President Tayyip Erdogan late on Friday. Authorities widened a crackdown on suspected supporters of the failed coup over the weekend, taking the number of people rounded up in the armed forces and judiciary to 6,000. The bullish data could allow the Federal Reserve to raise interest rates later this year, but much will depend on policymakers' assessment of the impact on the U.S. economy of Britain's June 23 vote to leave the European Union. Interest rate futures are currently pricing in a 43% chance of a rate hike by December. Oil futures were mixed on Wednesday with Brent posting limited gains and U.S. crude trading sideways in advance of the release of official weekly inventory figures later in the day. Crude is "looking rather trepidative ahead of another weekly inventory report, while dollar strength is also helping to put the kibosh on a rally," Matt Smith, an analyst at oil cargo tracker and energy data provider Clipper Data, said in a blog post. U.S. crude rose earlier after industry group the API reported crude stockpiles fell by 2.3 million barrels last week. That was just above a 2.1 million-barrels draw forecast in a Reuters poll. For distillate inventories including diesel, API reported a surprise draw of 484,000 barrels. But it also showed there was an unexpected gasoline build of 805,000 barrels. The U.S. government's EIA will issue stockpile data later on Wednesday. If the EIA confirms a drawdown, it will be the ninth straight week that U.S. crude stockpiles have fallen. Adding to the sense of oversupply for oil products, China's June gasoline output rose 8.7 percent from a year ago to 11 mn tonnes, or about 3.1 million barrels per day, the Statistics Bureau said on Wednesday. Diesel output last month fell 4.5 percent from a year ago, while kerosene supply shot up 10.5 percent, the bureau said. Liquefied petroleum gas, used mainly in cooking and sometimes for petrochemical feedstocks, rose 18.9 percent and naphtha production, mainly used for petrochemicals, climbed 15.7 percent from a year ago.

 

[SolidTrustMarket]

Daily Market Outlook 29 July

Asian shares slipped after touching a near one-year peak on Friday, while Japanese stocks tumbled and the yen strengthened as the Bank of Japan's fresh stimulus measures disappointed markets. The BOJ modestly increased purchases of exchange-traded funds, but maintained its base money target at 80 trillion yen ($775 billion) and the pace of purchases of other assets, including Japanese government bonds. The central bank also held at 0.1 percent the interest it charges to a portion of excess reserves financial institutions leave with the central bank. Japanese Prime Minister Shinzo Abe's promised economic stimulus package will include 13.5 trillion yen ($130 billion) in "fiscal measures," both direct government spending and loans, according to a draft of the package seen by Reuters on Friday. The package, to be approved by Abe's cabinet on Tuesday, includes 7.5 trillion yen in spending by the national and regional governments and 6 trillion yen from the Fiscal Investment and Loan Programme, which is not included in the government's general budget, the draft shows. The headline figure for the package, which includes public-private partnerships and other amounts that are not direct government outlays, comes to 28.1 trillion yen.

The dollar weakened 1.9 percent to 103.27 yen, its biggest one-day decline since June 24, after the UK's decision to leave the European Union. Before the BOJ's decision, many investors warned of a big chance of disappointment because markets have long expected more stimulus, making it difficult for BOJ Governor Haruhiko Kuroda to spring a surprise. Investors will await the U.S. government's initial reading on second quarter gross domestic product later on Friday. The economy was expected to expand at an annualized 1.8 percent, the Atlanta Federal Reserve's GDP Now forecast model showed on Thursday. The Bank of Japan expanded stimulus on Friday by doubling purchases of exchange-traded funds (ETF), yielding to pressure from the government and financial markets for bolder action, but disappointing investors who had set their hearts on more audacious measures. At the two-day rate review that ended on Friday, the BOJ decided to increase ETF purchases so its total holdings increase at an annual pace of 6 trillion yen ($58 billion), up from the current 3.3 trillion yen. The decision was made by a 7-2 vote. Worried about their dwindling policy options, some BOJ policymakers have expressed doubts over the feasibility of expanding an already massive stimulus program that has failed to boost inflation. Such concerns may be addressed when the BOJ conducts an assessment of the effect of its current policies at its next rate review on Sept. 20-21. Some analysts say the review may lead to more radical steps being proposed.

The U.S. economy likely regained speed in the second quarter as robust consumer spending offset a sharp moderation in inventory investment and weak exports, pointing to underlying growth momentum that could be maintained for the rest of the year. Gross domestic product probably increased at a 2.6 percent annual rate, which would be the fastest in a year, according to a Reuters survey of economists. The economy grew at a 1.1 percent pace in the first quarter. The Commerce Department will publish its advance second-quarter GDP growth estimate on Friday at 08:30 a.m. (1230 GMT). With the Federal Reserve watching the labor market and persistently low inflation, a pick-up in growth in the second quarter, which officials at the central bank are also anticipating, is not expected to have an impact on the outlook for interest rates in the short term.

Oil prices fell to fresh April lows on Friday as slowing economic growth threatened to worsen ongoing oversupply of crude and refined products. Because refiners produced too much fuel from cheap crude, margins in the Americas, Europe and Asia have fallen sharply this year, eroding revenues for oil producers and refiners like Royal Dutch Shell (RDSa.L), which this week reported poor results. On the supply side, Iranian exports to Asia's main buyers - China, India, Japan and South Korea - jumped 47.1 percent in June from a year ago to 1.72 million barrels per day, the highest levels in over four years. The sales jump is the latest sign that Tehran's aggressive moves to recoup market share, lost under international sanctions, are paying off. Because of ongoing oversupply, U.S. bank Goldman Sachs (GS.N) said this week that it did not expect a big recovery in prices any time soon. Despite this, some analysts said recent price falls in oil had been overdone, especially as demand remains strong despite concerns over future economic growth.

 

[SolidTrustMarket]

Daily Market Outlook 1 August

Asian shares hit a one-year high on Monday after disappointing U.S. economic growth data reduced expectations that the U.S. Federal Reserve will raise interest rates in the next few months. U.S. gross domestic product increased at a 1.2 percent annual rate in the April-June period, less than a half of a 2.6 percent growth rate economists had expected. Asian markets showed limited reaction to a better-than-expected private survey on China's factory sector. The Caixin/Markit Manufacturing Purchasing Managers' index (PMI) rose to a 1 1/2-year high of 50.6, beating market expectations of 48.7 and up from 48.6 in June. Analysts reckoned the weak U.S. economic growth in the second quarter left the Fed was nowhere close to tightening policy, even after it had appeared last week to have opened the door to raising interest rates later this year by saying near-term risks to the economy had diminished. Fed funds rate futures are pricing in only around 30 percent chance of a rate hike by December, compared to about 50 percent early last week. Investors will be watching how European financial markets will react to the results of the European Union bank stress test, which showed some banks are still vulnerable. Moments before that announcement, Italy's Monte dei Paschi bank, which fared the worst in the stress test, unveiled a privately funded rescue plan consisting of 9.2 billion euro sales of bad debt and 5 billion euro recapitalization. The poor health of the world's oldest bank has been seen as a grave weakness in the euro zone economy, posing a threat to the wider Italian banking system and also to the increasingly shaky political standing of Italian Prime Minister Matteo Renzi.

The Federal Reserve should be cautious in considering an interest rate increase due to lingering risks to the U.S. economy, one of the central bank's most influential policymakers said on Monday, appearing to signal the chance of a hike by the end of the year was fading. While New York Fed President William Dudley said it was "premature" to rule out a policy tightening in 2016, he added that negative shocks were more likely than positive ones due to the unknown fallout from Britain's vote to leave the European Union, a strong dollar, and because it was safer to delay a move with rates so low. "All three of these reasons - evidence that U.S. monetary policy is currently only moderately accommodative, the fact that U.S. financial conditions have been influenced by economic and financial market developments abroad, and risk management considerations - argue, at the moment, for caution in raising U.S. short-term interest rates," said Dudley, a close ally of Fed Chair Janet Yellen and a permanent voter on U.S. policy. Dudley called the recent U.S. GDP reading of 1.2 percent annualized growth for the second quarter as "sluggish" but stuck to his expectation that the economy would rebound to about 2 percent growth over the next 18 months, and said he was confident inflation would rise to the Fed's 2 percent goal in the medium term.

Japanese manufacturing activity shrank in July at a slower pace than the previous month but new export orders contracted the fastest in more than 3-1/2 years, a private survey showed on Monday, in an indication that recent yen gains are hurting exporters. The IHS Markit/Nikkei Japan Final Manufacturing PMI rose to 49.3 in July, versus a preliminary 49.0 and a final reading of 48.1 in June. But the headline index remained below the 50 threshold that separates contraction from expansion for the fifth month. The sub-index for new export orders was 44.5. That compares with a preliminary reading of 44.0, but showed overseas demand fell at the fastest pace since December 2012.

Oil prices started August trading with fresh falls on Monday after several bearish reports, including rising output from OPEC, a rise in U.S. drilling and weak economic data from Asia. Oil output from the OPEC is likely in July to have reached its highest in recent history, at 33.41 million bpd in July from a revised 33.31 million bpd in June, a Reuters survey found on Friday. In OPEC-member Libya, the state oil company said on Sunday it welcomed the reopening of blockaded oil ports following a deal between the U.N.-backed government and an armed force, saying it would begin work to restart disrupted exports soon. In the United States, drillers last week added oil rigs for a fifth consecutive week as part of the biggest monthly rig count increase in over two years, Baker Hughes Inc said on Friday, adding three oil rigs to a total of 374, compared with 664 a year ago. Just as oil supplies were rise, new economic concerns arose. China's manufacturing activity unexpectedly shrank in July, with the official PMI standing at 49.9 compared with 50 in June, putting it just below the 50-point mark that separates growth from contraction. In South Korea, July exports fell at the fastest pace in three months, data showed on Monday, far worse than expectations. Exports fell 10.2 percent on-year to $41.05 billion in July, their biggest fall since April this year.