Forex research

UK Opening Call from Alpari UK on 20 September 2013

Calm after the storm despite strong US data

Today’s UK opening call provides an update on:

• Markets hesitant despite strong US data
• EU amends regulations, reducing requirements for beleaguered economies
• Congress worries add anxiety to affairs as standoff awaits

Yesterday saw a raft of positive data releases out of the US, just a day after the FOMC perceived the economy as insufficiently mature in its recovery to be able to restrict the level of monthly asset purchases. The ‘precautionary’ measure taken by the Fed in averting the decision to taper initially provided markets with a significant boost, safe in the knowledge that the hawkish maneuver will not occur for at least another month. However, there has since been a degree of hesitancy. Given there were so many within the markets with strong conviction of a Fed taper, perhaps the renewed stance and strategy is yet to take hold.

The three notable tier one economic releases saw the existing home sales figure rise to the highest level in over three years, the Philly Fed manufacturing index spike to a 30 year high, and most importantly, the unemployment claims figure rose moderately to a level consistent with early 2008. It is this ability of the US economy to exhibit strong economic performance, alongside the continuation of the current $85 billion monthly asset purchases which allows markets to believe that not only can markets continue to rise, but they should.

An EU regulatory change has been approved by European finance officials which allows for lowered austerity requirements amongst the hardest hit countries in the eurozone. The decision to allow an amendment to a calculation by the European Commission to alleviate the requirements in relation to the size of budget deficits being run within each country is certainly controversial and has been met with significant criticism. There are worries as to whether such a measure would allow nations to resume normal business and cast aside austerity measures with significantly improved data.

However, despite questioning over the logical driver of this policy, it is clear that many see this as a necessary towards loosening the framework for the more troubled nations to grow their way out of this mess. As is often the case, few will recall this amendment in a years time, by which point the figures could be particularly rosy and that increased confidence does allow for more progressive and optimistic investment and consumption decision.

The US returns back to the fold over the coming weeks, as the recently fraught market conditions provided by potential tapering is now replaced by an increasingly staunch and bipartisan round of discussions aimed at the confirmation of a spending bill for the new fiscal year on 1 October. This precedes the requirement to extend the current $16.7 trillion debt ceiling. The inability to accomplish either of these would bring government spending of areas such as defence and healthcare to a standstill, whilst the debt limit alone has the potential to push the US treasury into default considering the ongoing fiscal obligations.

Initial signs are worrying, where the Republicans see any bill or amendment as a favour upon which to utilise in their favour. On this occasion, the target of choice is the soon to be implemented Obamacare; due to begin functioning on 1 October. The Republican stance looks set to be that all other spending will be ratified and approved, albeit for a temporary period (until January 2014), with the exception of the healthcare element. Obama seems equally unwilling to budge over this issue, and for that very reason, Obamacare appears to be the divisive factor within a round of negotiations which could leave the country at a standstill.

European markets are expected to open mixed, with the FTSE100 -11, CAC +2 and DAX +7.
 
US Opening Call from Alpari UK on 20 September 2013

Markets mixed as German elections and congress dominate

Today’s US opening call provides an update on:

* Market indecision following buoyant mood post-FOMC
* Can the German elections spring a surprise on Sunday?
* US congress negotiations likely to increasingly worry markets

European markets and US futures are trading marginally higher this morning, buoyed to some extent by the decision from the Fed to delay tapering on Wednesday. However, this positivity is wavering somewhat in the realisation that potentially not all is rosy in the garden ahead of a testing period. The existence of a potential deadlock in congress accompanied by a German election over the weekend have muted the celebrations somewhat and bring a more uncertain tone going forward.

On Sunday, Angela Merkel seeks to be appointed as the German chancellor for a third term, originally taking office in 2005. The chances of the her competitors within the Social Democratic Party to win the election outright seem limited at best, with opinion polls having seen a rise in popularity of the German chancellor over the preceding months, coinciding with a notable rise in strength within the Eurozone. Merkel has become increasingly unwilling to accommodate discussions regarding potential future bail-outs or debt concessions for the likes of Greece, with her harder line stance seemingly taken shape by the rise of ill feeling towards the cost borne out of southern eurozone nations by the German public. Despite the likeliness that Merkel will soften her stance following re-election, the German public increasingly believe that the ability to keep the eurozone together will be hugely beneficial going forward, and is thanks in no small part to the efforts of their current leader.

The one prominent threat to the ruling party comes in the form of Germany’s answer to UKIP, the eurosceptic ‘Alternative für Deutschland’ (AfD) party. Should the AfD manage to gain 5% of the vote on Sunday, this would force the ruling CDU party into a position whereby a Grand Coalition would be sought. Unlike in the UK, whereby a coalition is somewhat more of an unknown entity, the Germans have an element of the Free Democratic Party (FDP) within most governments since 1949. However, the ability of the FDP to form a coalition would be reliant upon obtaining sufficient votes in their own right, and for that reason there is also a possibility of the coalition instead occurring with the SPD. Either way, the incumbent chancellor will likely take the position once more, with the only likely thorn in her side coming in the form of a potential grand coalition.

Market perception of this election is clear in terms of result, yet less clear in terms of what it means for the markets. The recent strength within the eurozone is certainly notable in its timing, yet there is a clear possibility that trouble could be brewing within the region. Portuguese and Spanish weaknesses remain within the banking system, as do Greek worries, which some see as facing an almost impossible task in attempting to clear the debt and fix the tax system amid one of their greatest crises in history. The levels of debt to GDP persist in their rise higher, with many above the levels seen prior to the imposition of austerity measures. For these very reasons, markets are anxious as to what the future could hold post-German election, with a chancellor more willing to address and concede some of the issues inherent within the world’s largest common currency area.

This month also represents an ongoing countdown to the beginning of the new fiscal year in the US. Ordinarily something which would only cause many to note for tax reasons, this year we are expecting to see significant brinkmanship, the likes last seen at the turn of the year with the fiscal cliff and sequester discussions. This time around we have further discussions over the spending and in particular a raft of ‘appropriations’ which need to be agreed upon and signed off the allow spending within areas such as healthcare and defence to continue. It is the healthcare element which appears to be the sticking point, where the republicans are willing to provide a 2 ½ month extension of current spending for all bills apart from healthcare. The infatuation with throwing out the Obamacare policy seems to have become the crossroads at which the Republican and Democrat members within congress will fight over.

Unfortunately for the rest of us, this is all to frequent within the US. An economy which has the power to bring the world markets to a standstill, the ability to provide stable and transparent leadership seems to have become lost on those within congress. The proposition of a 2 ½ month resolution simply provides further opportunities for additional brinkmanship over concessions. Until any long term solutions are put into place, it seems that the US system is at risk of becoming a laughing stock, with a Fed that continues to print money as a precautionary measure against the risks of deadlock in congress causing a fiscal breakdown. One thing remains clear, the inability of the Democrats to take majority control of both the senate and house is increasingly the thorn in the side of Obama as he seeks to manage domestic deadlock just as global politics have provided one of the most testing times for the President.

US markets are expected to open higher, with the S&P500 +1.5 and DJIA +7 points.
 
Daily Market Update - 20 September 2013 - Alpari UK

0:10 Markets fail to retain pace as non-taper cheer fades
0:44 Worries turn to impending sequester negotiations
1:54 German elections point to another term for Angela Merkel

 
UK Opening Call from Alpari UK on 23 September 2013

Debt ceiling negotiations weigh on European futures

Today’s UK opening call provides an update on:

• DAX boosted by Merkel election victory;
• Chinese HSBC manufacturing PMI improves again in September;
• US debt ceiling negotiations to weigh on sentiment this week;
• Speeches from Fed members key following decision not to taper;
• Eurozone PMIs in focus this morning.

Most European indices are expected to open lower on Monday, except Germany’s DAX, which is expected to open slightly higher following Angela Merkel’s election victory over the weekend.

The German index would probably be even higher this morning, had it not been for the better than expected showing from anti-euro party, Alternative for Germany. These crucial votes forced the junior coalition partner of Merkel’s CDU party, the Free Democratic Party, out of the Bundestag, leaving a grand coalition looking the likely option.

The better showing from the AfD party is a slight concern though. It shows that despite unemployment being low, the economy performing much better than most and Merkel being one of the most popular Chancellors ever, there’s still a growing number of German’s who are no longer willing to foot the bill for the peripheral countries and instead wish to exit the eurozone. This shouldn’t be a problem for now, but will be something that Merkel will be very aware of.

The preliminary reading of the HSBC manufacturing PMI may also be limiting losses ahead of the European open this morning. The figure rose to 51.2 in September, following its surprising return to growth territory last month, which suggests the governments targeted stimulus efforts are having the desired impact. This is especially encouraging as this survey mostly covers small and medium sized private firms, which tend to benefit less from government stimulus that the larger state owned firms. This will help convince the markets that the recovery is sustainable and that minimum growth of 7% is probable, although something closer to 7.5% now looks likely.

While both of these are positive results, investors are clearly more focused on the US still, with debt ceiling negotiations now weighing on sentiment. The Fed’s decision to delay tapering last week did provide a temporary boost to indices, however with no decision now expected until December, the debt ceiling is the next big threat to the stock market rally.

The deadline for a budget to be passed is just over a week away and neither party has so far blinked. The House passed a budget last week that saw huge reductions in spending on Obama care, but this will be quickly rejected by Obama and the Senate. Obama on the other hand is refusing to negotiate at all, claiming the House should agree to raise the debt ceiling for nothing in return.

This is clearly not going to happen and a deal will surely be made, but this inability to work together again suggests it’s once again going to go right down to the wire. Even in this scenario, the can is likely to be kicked down the road and we could even be back where we are now as early as December. This uncertainty is not good for investors and it doesn’t help the Fed’s situation either. How can the Fed be confident that the economic recovery is sustainable if a divided government keeps threatening to derail it. It also doesn’t fill businesses with much confidence as they never know what the future holds for themselves or the economy as a whole. Unfortunately, Congress is more concerned with playing the game than aiding the recovery.

The week ahead is looking relatively quiet in terms of economic releases, so focus will be entirely on Congress and the Fed. No deal is likely on the debt ceiling until next week though, so the big moves in the markets are likely to come from the many speeches from Fed members, scheduled for this week. Today we’ll hear from FOMC voting member, William Dudley, and Dennis Lockhart, who is not a voting member but does tend to share the views of the majority within the Fed. Not only will we be looking for further information about why the Fed chose not to taper from both of these, we’ll also be looking for clues about when tapering could begin, with December now looking the most likely, although it could easily now be next year.

We also have some preliminary PMI readings from the eurozone this morning. Services and manufacturing PMIs from Germany, France and the eurozone will be released, all of which are expected to improve further in September. The recent improvement in the eurozone has provided a major boost to the markets, although this is very fragile. Any early signs from these PMIs that the recovery is not sustainable would quickly change people’s views and weigh further on sentiment.

Ahead of the open we expect to see the FTSE down 12 points, the CAC down 16 points and the DAX up 7 points.
 
Weekly market preview – 23 September 2013

The week ahead looks to regain clarity with respect to market sentiment as the reaction post-FOMC points to a mixed outlook for the forthcoming period. The inability of the markets to rally off the back of strong US data later in the week points to an indecisive market as to whether good news is really good news going forward. The main event of the week comes in the form of the unemployment claims figure, given the impact jobs data has upon the perception of tapering recently. Meanwhile in the UK, a quiet week is likely to largely concentrate on the final GDP figure, due on Thursday. In the eurozone, the German election taking place on Sunday will no doubt take the headlines given the potential impact it could have upon the markets.

In Asia, the only event of note comes from China, with the release of their HSBC flash manufacturing PMI figure on Monday. Finally, the Australian economy comes into focus on Wednesday with the release of the RBA financial stability review.


US

The markets were taken by surprise at the announcement from the FOMC that tapering was set to be delayed until later in the year. The remaining two prospective meetings for the policy to be introduced are in October and December, and for this reason markets will likely continue to perceive many economic releases in terms of their impact to tapering prospects.This week sees the release of a number of economic statistics, many of which will have relatively little impact to the markets. The major releases to note are a CB consumer confidence figure, two home sales releases, and the weekly unemployment claims number.

The CB consumer confidence figure, due out on Tuesday is included in the list owing to its propensity to either under or overshoot the market expectations by a significant amount. The importance of consumer confidence is difficult to overstate, given the impact that confidence has upon everything from retail sales to home sales along with employment data. This survey focuses upon labour, business and economic conditions, which given the concentration on the FOMCs perception of economic strength, is highly relevant. Market expectations point towards a fall in the figure from 81.5 to 80.7, however given that four of the last five releases came in better than expectations, I would be a little more positive about this one.

Later in the week, the release of the new home sales and pending home sales figures provide an insight into the current health of the housing market. The existing home sales figure brought about a significantly better than expected number, yet little response from the markets and thus these releases will be notable to gauge how much emphasis is currently being places upon the housing market. Both figures are expected to come in better than last time and on recent form there is a chance that we could see an out-performance of estimates on release. New home sales are expected to rise from 394k to 427k on Wednesday, while the pending home sales figure is expected to rise from -1.3% to -0.9% on Thursday.

Finally, on Thursday the release of the weekly unemployment claims figure is expected to rise somewhat, amid a notably strong run of form this month. The jobs market has been the primary target for those trying to understand the perception of the Fed in relation to tapering and thus the weekly unemployment claims figure has been a major weekly event. Expectation is for a rise to 319k from 309k last week, which despite representing a step backwards, would still be a respectable figure. The past three figures have come in better than expectations and thus I retain a positive outlook for this release.

UK

A quiet week for the UK economy, where the only real event of note comes on Thursday when the final GDP figure for Q2 is released. Given that it is the final release, this is the second revision to the original 0.6% announced in late July, where the second release brought the figure up to 0.7% There is no expectation for it rise again and one would expect the third release to be the most accurate. Thus 0.7% is highly likely given the circumstances.

Eurozone

A busy week in the eurozone, where the German election over the weekend begins a notably busy start to the week. The release of PMI figures on Monday, along with a German business climate figure on Tuesday contribute to a week where the eurozone will be at the forefront of global affairs.

The German elections on Sunday have been evident in a number of ways for the eurozone, some clear, others not so much. The reelection of current chancellor Angela Merkel is crucial to the continued path dictated by the ECB and eurozone leaders. Thus for that reason there has been a notable hardening in the stance taken towards potential further bail outs or debt haircuts from the likes of Greece. Merkel has become increasingly popular under this stance given German frustration at the costs borne out of this crisis for the industrial powerhouse and now that the signs are pointing towards a strengthening region, Merkel appears best equipped to look after the nations interests.

All signs point towards a clear victory for the CDU regaining power, with the only question mark appearing in relation to whether they will be able to obtain a sufficient proportion of the vote to solely rule the country. Should the likes of the eurosceptic ADP party gain above 5%, then it would push the CDU into forming a grand coalition. However, this is fairly typical of German politics and the necessity of a coalition would generally not cause too much of an inconvenience going forward for Merkel.

On Monday, the release of a raft of PMI figures will dominate market attention. Of the six releases, the most important is typically the French and German manufacturing figures, along with both the eurozone figures. The German manufacturing PMI takes precedence for obvious reasons, being the core industrial driver behind the eurozone. Expectations point towards a rise to 52.3 from 51.8 last time, which would represent the highest level since mid-2011.

The French manufacturing PMI figure tells a similar story, where its importance to the single currency as a major manufacturer points to the requirement of a strong sector to drive the region out of this crisis. The market forecasts point towards a push above the crucial 50 mark which separates a sector in contraction and expansion, which if it occurs, would potentially be the most significant event of the day. Unfortunately last time despite predictions to do so, the figure fell short and thus we await to see if this can finally cross that threshold.

The manufacturing and services PMI figures for the eurozone both have a more direct link to the wider economic group and thus the ability to be in expansion is key here. Both currently lay above the 50.0 mark (services 50.7 & manufacturing 51.4) and we will be watching closely to see if both of these manage to push further into the safe territory.

Finally, the German IFO business climate is expected to further drive home the positive picture for the eurozone on Tuesday. The survey is highly regarded owing to its sample size and focus upon the industrial powerhouse. Expectations are for a rise from 107.5 to 108.4, which would notable given that it would be the highest rate in 17 months. Given the recent uptick in economic indicators out of the eurozone, it is likely that the sentiment within German businesses will continue to rise markedly.

Asia & Oceania

A very quiet week in terms of Asian economic events, where the only one of note comes in the form of the HSBC flash manufacturing PMI figure, due out on Monday. Owing to the obvious importance of the Chinese economy in terms of international trade, the existence of a thriving manufacturing sector in China is a necessary for the rest of the global economy. Thus this figure will be closely watched, with market expectations pointing to a rise from 50.1 to 50.9. Given that the last reading is so close to the crucial 50.0 mark, it is worth noting that the possibility remains for a fall back into contraction. Should this occur, it is likely to bring significant waves within the markets.

In Australia, a largely quiet week expected to see the market focus upon the release of the RBA financial stability review on Wednesday. Given the innate weaknesses exhibited and expressed by the RBA throughout 2013, it is likely that this will be a very dovish affair. Much attention is likely to be focused upon how the economy will fare going forward. Whether this will be in association with a continued devaluation of the Australian dollar or a realignment of the economy, the release will certainly be a good read to understand what the prospects of the economy are looking like according to the RBA.
 
US Opening Call from Alpari UK on 23 September 2013

All eyes on Fed officials for taper hints

Today’s US opening call provides an update on:

* Markets lacking direction as Congress continues debt ceiling negotiations;
* Fed speeches in focus this week after last week’s decision not to taper;
* Positive PMIs overshadowed by debt ceiling talks;
* Grand coalition likely in Germany after Merkel falls marginally short of majority.

Equity markets are struggling for direction this morning, as the prospect of more drawn out debt ceiling negotiations overshadowed some encouraging data from China and the eurozone.

While most people in the markets would agree that the odds of a government shutdown are extremely slim, they are clearly not willing to put their money where their mouth is. The risk aversion seen in the markets this morning is therefore likely to continue throughout the week, with any agreement between the Democrats and Republicans unlikely before next week’s deadline.

The problem we have is that most people expected an eventual deal on the sequester in the weeks leading up to the deadline, given that neither party agreed with the cuts. Unfortunately, both put politics ahead of what’s best for the economy, so people aren’t overly confident that they won’t do the same again.

The Fed is also going to be on people’s minds this week, following last week’s decision to leave monthly asset purchases unchanged at $85 billion. The markets had clearly priced in a reduction in the lead up to the meeting and now we’re back to square one on the argument of when the Fed will start tapering.

There are a number of Fed members scheduled to speak this week, which should bring about some big swings in the markets. As it stands, December is being viewed as the most likely starting point, but with the debt ceiling now looking like being pushed back to the same month, I think it’s more likely to be early next year. Any hints we get from officials that this is the case will surely prompt further gains in equities. Today we’ll hear from two Fed officials, William Dudley, a member of the FOMC, and Dennis Lockhart, who’s views tend to be in line with the consensus.

Encouraging PMIs from China and the eurozone only had a marginal impact on the markets this morning. China’s HSBC manufacturing PMI rose to 51.2 in September, up from 50.1 the month before. This is generally seen as a more accurate reflection of the manufacturing sector in China, as it covers mainly small and medium sized private firms. The fact that the pace of growth has picked up again is a very positive sign. It suggests the country should have no problem achieving growth above 7% now, with the original target of 7.5% even looking likely.

Manufacturing and services PMIs for Germany, France and the eurozone were also positive, with only the French manufacturing PMI failing to rise above 50, the level that separates growth from contraction. We did get some reaction to these figures, but it was only minimal under the circumstances. We’d have seen a much bigger reaction had the numbers been negative, given people’s view that the recovery is extremely fragile.

Germany’s DAX was boosted this morning, following the election over the weekend that saw the CDU-CSU alliance, led by Angela Merkel, fall marginally short of a majority in the Bundestag. A grand coalition now looks likely, which isn’t necessarily a bad thing given that both parties are pro-euro and if anything, the SDP believes Germany should be less harsh on the peripheral countries requesting aid.

Ahead of the open we expect to see the S&P up 2 points, the Dow up 19 points and the NASDAQ up 7 points.
 
Alpari UK's 3 FX Highlights of the week

0:11 - 1. The Fed's stance on tapering
0:49 - 2. The US Debt Ceiling
1:54 - 3. UK & US GDP figures

 
UK Opening Call from Alpari UK on 24 September 2013

Debt ceiling continues to weigh on markets

Today’s UK opening call provides an update on:

• Debt ceiling continues to weigh on markets;
• Vote not an accurate reflection of Fed stance according to Fisher;
• Investors less focused on economic data;
• More Fed officials due to speak today.

European indices are expected to open slightly higher on Tuesday, although a lack of progress in debt ceiling negotiations and confusion over Fed monetary policy is continuing to weigh on the markets.

Slow progress in Congress when it comes to negotiating on whether to raise the debt ceiling is nothing new. In fact, previous negotiations have gone exactly the same way, with both sides using the media to pile the pressure on the other party in the weeks running up to the deadline, rather than trying come to an agreement. Only in the final couple of days do we tend to see any actual negotiating, before a deal is struck with hours to go before the deadline.

Despite being fully aware of this and the majority not believing for a second that Congress will allow a shutdown of government, traders continue to act with caution which truly highlights the lack of confidence in the people who run the world’s largest economy. Let’s not forget, both parties did nothing to stop the sequester, despite agreeing that the spending cuts would damage the economy. How can we be sure they won’t put politics first again?

Also in focus this week is the Federal Reserve, following last week’s decision to leave asset purchases unchanged at $85 billion. Already we’ve had a number of Fed officials give their views on the matter, with William Dudley and Dennis Lockhart agreeing that the economy is not yet strong enough to justify a reduction in stimulus.

Richard Fisher, President of the Dallas Federal Reserve, on the other hand suggested that the vote at last week’s meeting did not accurately reflect the discussions that occurred. His comments suggested that the first taper may not actually be that far away, despite Ben Bernanke’s comments indicating otherwise during the post-meeting press conference. This helped weigh on risk appetite during the US and Asian sessions over night.

All in all, there’s just very little to drive the markets higher at the moment. While many of yesterday’s economic releases were positive, people are more concerned about the debt ceiling and what the Fed is doing as both of these have the potential to derail the recovery going forward. The week is now looking pretty light on the economic data side, so both of these are likely to continue to dominate.

The only notable economic release this morning is the German Ifo business climate figure, which is expected to rise again in September to 108.2. The US consumer confidence figure will be released this afternoon and is expected to show a small decline to 79.8, reflecting the ongoing squeeze on the income of the US consumer, due to rising mortgage rates and fuel prices, and the negative impact of the payroll tax which came into force earlier this year.

Once again, a number of Fed officials are due to speak on Tuesday, which will be worth paying attention to. These comments always have the potential to move the markets, especially at a time when there’s so much confusion around the Fed’s decision making. The majority in the markets were convinced that the Fed would taper in September and were baffled by its decision to delay it.

Ahead of the open we expect to see the FTSE up 9 points, the CAC up 6 points and the DAX up 19 points.
 
US Opening Call from Alpari UK on 24 September 2013

US consumer confidence key this afternoon

Today’s US opening call provides an update on:

* Debt ceiling negotiations continue to weigh on indices;
* US consumer confidence key this afternoon;
* More Fed speeches scheduled for today;
* Investors respond positively to Ifo figure despite miss in headline figure.

Debt ceiling negotiations and the Fed are continuing to weigh on indices. The uncertainty surrounding both these events has left investors feeling rather risk averse. The initial reaction to the Fed decision last week was a positive one, due to the fact that it meant that, for a few more months at least, the full $85 billion would continue to be pumped into the financial system.

Since then though they’ve just been grinding lower, mainly due to the painful negotiations in Congress over the debt ceiling. At this stage, despite no progress being made, it still seems very unlikely that a deal won’t be struck. That said, one thing we learned from the sequester earlier this year is that just because neither party wants it to happen, it doesn’t mean they won’t put political gains ahead of the best interests of the economy. This is what’s causing concerns in the markets.

Focus this afternoon will be on the consumer confidence figure for September and the speeches from members of the Fed. Consumers have been hit hard recently by a combination of rising mortgage rates and fuel prices, both of which come on top of the payroll tax increase earlier this year. This should be reflected in the confidence figure today, with it expected to drop to 79.8 from 81.5 last month. If we do see a drop here, it will only support the Fed’s decision to hold off on tapering last week, given that consumer spending is hugely important to the US economy.

Just like yesterday, a number of Fed officials are scheduled to speak on Tuesday, which will be worth paying attention to. There’s a lot of confusion in the markets at the moment about why the Fed opted against tapering last week, given that it was almost entirely priced in. Once again, people are going to be looking for hints about when the first reduction in the asset purchase facility will take place and how much by, which always has the potential to create big swings in the markets.

Investors reacted favourably to the German Ifo release this morning, despite the headline figure falling short of expectations at 107.7. The miss was due to businesses assessment of current conditions, which fell slightly from a month earlier, despite expectations of a small rise. However, going forward businesses were much more optimistic, which is much more important from an investor perspective.

It’s normal for businesses to be cautiously optimistic in the early stages of a recovery. The important thing is that they actually believe conditions are improving as they will then be encouraged to invest more and hire more. As always, these surveys are very volatile and will change dramatically should things take a turn for the worse in the eurozone. However, these early signs are very encouraging.

Ahead of the open we expect to see the S&P down 2 points, the Dow down 7 points and the NASDAQ up 1 point.
 
Daily Market Update - 24 September 2013 - Alpari UK

James Hughes discusses this morning's German IFO reading and looks ahead to yet more uncertainty over the Fed tapering plan.

 
UK Opening Call from Alpari UK on 25 September 2013

Markets lack direction as US budget talks continue

Today’s UK opening call provides an update on:

• Lack of progress on budget and debt ceiling continues to weigh on sentiment;
• No Fed officials scheduled to speak on Wednesday;
• US new home sale and durable goods orders released this afternoon.

A lack of progress in Congress on the budget for the next fiscal year is continuing to weigh on global equity markets, with futures pointing to a slightly lower open in Europe following slow sessions in the US and Asia.

With the 1 October deadline fast approaching, fears over a partial government shutdown and a failure to raise the debt ceiling, which would result in the US defaulting on its debt, are continuing to act as a drag on equity markets. There’s clearly little incentive at the moment to buy into a market that will be hammered in the, albeit unlikely, event that Congress fails to pass a budget and raise the debt ceiling. Even last week’s decision from the Fed to leave its asset purchase program at $85 billion per month hasn’t provided enough of an incentive to push markets higher.

With little progress being made in these negotiations, investors are likely to remain somewhat risk averse again on Wednesday. Especially given that there’s very little else to distract them, with the economic calendar looking very thin and no members of the Fed scheduled to speak today.

As highlighted over the last couple of days, the decision by the Fed to leave its asset purchases unchanged frustrated the markets and left investors confused as to what the Fed wants to see before it starts scaling back its asset purchases. The majority in the markets were convinced that the Fed would announce a reduction in the program last week and as a result, it was largely priced in. Investors will therefore pay a lot of attention to what Fed officials have to say this week, with a large number of them scheduled to speak.

As for today, there are a couple of pieces of economic data being released which may draw some attention from the markets. First up we have the German Gfk consumer confidence survey, which is expected to rise to 7 in October, up from 6.9 in December.

Later on during the US session, we’ll get the durable goods orders for August, which are expected to rise 0.2%, following last month’s shock 7.3% decline. It is worth noting that these numbers are very volatile and the actual figure is actually rarely in line with forecasts. Following such a significant swing lower in July, it wouldn’t surprise me to see a significant beat now in August.

Finally, we have the release of the new home sales figures for August. This is expected to rise to 420,000, following July’s surprising slump. There’s going to be a lot of focus on the housing market in the months ahead, as the Fed considers tapering its asset purchases. We’ve seen a significant rise in Treasury yields in recent months, since Bernanke suggested that tapering would begin later this year, which has forced a corresponding rise in mortgage rates.

Despite seeing very little evidence of it yet, many believe this will have a negative impact on the housing market, which has underpinned the recovery seen in the US this year. If this turns out to be true, it may encourage the Fed to continue with its purchases for longer, with a number of things already threatening to derail the recovery in its infancy.

Ahead of the open we expect to see the FTSE down 5 points, the CAC down 4 points and the DAX flat.
 
Daily Market Update - 25 September 2013 - Alpari UK

0:10 Market subdued owing to ongoing budget talks
2:28 Overnight, New Zealand posted worst trade deficit since 2006.
3:49 Looking ahead to US data

 
UK Opening Call from Alpari UK on 26 September 2013

UK and US GDP in focus on Thursday

Today’s UK opening call provides an update on:

• Focus on economic data on Thursday;
• Longest losing streak in S&P 500 since US almost went over the fiscal cliff;
• Another upward revision to UK GDP expected this morning;
• Investors may be in for a surprise when US GDP is released.
• Three Fed members scheduled to speak this afternoon.

European index futures are trading relatively flat across the board on Thursday, after both US and Asian indices posted small losses again over night.

There will be a little more focus on economic data on Thursday, with investors in desperate need of a boost following another long drawn out battle over the debt ceiling in Washington. It seems as though optimism is being drained out of investors on a daily basis at the moment, prompting risk assets such as equities to continually grind lower.

The S&P recorded its fifth day of losses on Wednesday, its longest losing streak since December, when funnily enough Congress was bickering over how to avoid the fiscal cliff. Clearly investors hate the uncertainty surrounding these talks. Investors are currently concerned about the possibility of a partial government shutdown if no budget for the next year is passed by next week, followed by a default on US debt in the middle of the month, should the debt ceiling not be raised. Of course neither of these scenarios are likely to happen, although both the Democrats and the Republicans have irresponsibly put politics in front of the national interest before (the sequester) so they cannot be ruled out.

This morning will focus around the UK, starting with the release of the current account balance for the second quarter. We haven’t seen a current account surplus in the UK since the final quarter of 2009, and even this was a one-off figure, so another deficit figure here today will not be a surprise to anyone. On a positive note though, the deficit is expected to shrink to £12 billion, down from £14.512 billion in the first quarter.

Next up is another revision to the second quarter GDP figure. This will be the second revision to the figure, with the first having increased the initial figure from 0.6% to 0.7%. We’re expecting something similar again today, with the figure being revised higher to 0.8% as a result of continually improving data out of the UK.

Next it’s over to the US, where we have a number of key economic figures being released, starting with its final revision of the second quarter GDP figure. At the moment, a small upward revision from 2.5% (annualised) to 2.7% is expected, taking the entire revision since the initial release to 1%. That said, a recent slump to certain US data releases along with a more downbeat assessment on the economy from the Federal Reserve, which prompted them to delay tapering, suggests to me that expectations are too high in respect to this release. I would not be surprised to see a downward revision here, rather than an upward one which would certainly prompt further selling at a time when the mood is already downbeat.

Also being released today are the weekly jobless claims, which fell significantly in the last two weeks, largely due to IT issues in California that is delaying the processing of some claims. What that means this week is that if the issue has been dealt with, we could see either a huge surge in new claims in California for last week, or significant revisions to previous figures. As it stands, a move back to 325,00 is expected.

We’ll also hear from a number of Fed officials today, with Jeremy Stein, Narayana Kocherlakota and Sandra Pianalto all scheduled to speak. With many now confused about when the Fed will now taper, these speeches will be followed closely for hints and as always, have the potential to cause big swings in the markets.

Ahead of the open we expect to see the FTSE down 3 points, the CAC up 3 points and the DAX up 7 points.
 
Daily Market Update - 26 September 2013 - Alpari UK

0:52 UK GDP and business investment
2:09 US GDP and jobless claims
4:25 Fed officials due to speak

 
UK Opening Call from Alpari UK on 27 September 2013

Risk aversion expected as the budget deadline approaches

Today’s UK opening call provides an update on:

• Risk aversion expected as the budget deadline approaches;
• Consumer confidence nears six year highs;
• Japanese inflation raises doubts over Abenomics;
• Eurozone confidence and US inflation figures released today;
• More Fed officials scheduled to speak this afternoon.

We’re likely to see more risk aversion in the markets on Friday, as we head into the final weekend before Monday’s deadline, when Congress must pass a budget for the next year or face partial government shutdown.

Overnight, US indices broke a five day losing streak to record small gains, after new jobless claims were once again well below market expectations. It is still unclear how much the IT issues in California have contributed to these unusually low numbers over the last few weeks. However, with the backlog of claims still being processed, we’re likely to see some spikes in the figures in the coming weeks, or at the very least, revisions to previous ones.

In the early hours of this morning, we also had the release of the GfK consumer confidence figure for the UK. This showed a risk to -10 in September, the highest reading we’ve seen in this figure since November 2007. This is very encouraging, as it suggests that the message of an improving economy is getting through to the consumers. With consumer spending making a big contribution to output, this can only boost growth further going forward.

The release of the Japanese CPI figure over night didn’t do much for Japanese stocks. Despite the headline core inflation figure rising to 0.8%, investors were concerned about inflation in Tokyo, which rose at only 0.2%. It has prompted investors to question whether “Abenomics” is actually working as well as officials have been claiming. If we continue to see these low inflation levels in Tokyo, it could prompt further calls for more monetary easing from the Bank of Japan, on top of their already huge asset purchase program.

As for today, the economic calendar is looking pretty thin when it comes to high impact figures. This isn’t exactly unusual given that we have the US jobs report next week, along with a large number of other high impact releases. That said, there’s still a few releases which are worth keeping an eye on.

First we have the release of a number of consumer and business confidence surveys out of the eurozone. All of these have seen a significant improvement in recent months, and the same is expected again today, when the September figures are released.

Next it’s over to the US, where the Fed’s preferred measure of inflation, the personal consumption expenditure index, will be released. Again, this is expected to remain very low, at 1.2%, meaning the prospect of monetary tightening from the Fed in the near future is extremely unlikely.

Finally we have more speeches from a number of Fed officials. Today’s we’ll hear from Eric Rosengren, Charles Evans and William Dudley. While these speeches haven’t necessarily had too major an impact so far this week, it doesn’t mean they won’t today, so they’re worth following. Again, investors will be looking for hints about when the Fed is likely to taper, given that the central bank opted against it at its September meeting even though the markets had almost entirely priced it in.

Ahead of the open we expect to see the FTSE up 2 points, the CAC up 7 points and the DAX up 12 points.
 
US Opening Call from Alpari UK on 27 September 2013

US futures lower as budget deadline looms

Today’s US opening call provides an update on:

* Uncertainty weighs on stock markets;
* If deal is agreed, next week should be a positive one for stocks;
* Eurozone confidence surveys largely positive again in September;
* Three more FOMC members scheduled to speak today.

US index futures are all in the red on Friday, ahead of what is going to be a busy weekend of negotiations in Congress over the budget, with the deadline midnight on Monday.

Uncertainty is never welcome in the markets, so it’s no surprise to see so much negativity, not just in the US, but also Europe this morning. It’s generally assumed that a deal will be struck between the Democrats and the Republicans that will kick the can down the road a few more months, and involves raising the debt ceiling and some spending cuts.

If this can be agreed over the weekend, I expect to see a very positive start to next week, as this will allow traders to focus solely on the Fed’s ultra-loose monetary policy, which as we’ve seen in the past is good for stock markets. For now though, with no deal likely before the end of today, I expect indices to remain in the red.

There’s very little economic data being released that could change this. So far in the European session, we’ve had some good confidence figures out and these had very little impact on investors. This afternoon, we have the Fed’s preferred measure of inflation being released, the core personal consumption expenditure index, and again this is unlikely to have much impact.

That said, this is also due to the fact that it is currently well below the level that would force the Fed to taper and consider tightening monetary policy. It is expected to remain at 1.2% in August, significantly below the Fed’s 2% inflation target.

One thing that could move the markets this afternoon is the Fed. Three voting members of the FOMC are scheduled to speak this afternoon and are likely to be quizzed about their views on the Fed’s decision not to taper last week. Charles Evans and William Dudley are both doves while Esther George is a hawk, so any comments in line with these views are likely to be ignored. Any change of stance from these, or any suggestion that tapering could begin as early as October could prompt a reaction in the markets.

Ahead of the open we expect to see the S&P down 6 points, the Dow down 41 points and the NASDAQ down 11 points.
 
Daily Market Update - 27 September 2013 - Alpari UK

0:09 US budget and debt ceiling negotiations
1:30 Eurozone confidence surveys
1:57 US data this afternoon

 
UK Opening Call from Alpari UK on 30 September 2013

Political issues in US and Italy weighs on investor sentiment

Today’s UK opening call provides an update on:

• US government faces shutdown with Congress no closer to agreeing a budget;
• Shutdown could knock 1.4% off of GDP according to Moody’s;
• Italian Prime Minister, Enrico Letta, seeks confidence vote as Silvio Berlusconi causes havoc for Italian politics once again;
• Chinese HSBC manufacturing PMI falls short of expectations, weighing further on sentiment.

It’s looking like a very negative start to the week for financial markets, with the US government facing a shutdown, Italy facing new elections and China’s manufacturing sector growing at a slower pace than expected.

We shouldn’t be too surprised really that Congress failed to agree on a new budget over the weekend. As we’ve seen in the past, the months leading up to the deadline are simply seen as an opportunity for both sides to gain political points, while making a villain out of the opposition. It’s only in the final 24 hours that any actual progress tends to be made. We can only hope that this is what we’re seeing again

Attempts by the Republican-led House over the weekend to pass a budget that including a one year delay to the implementation of Obamacare was absolutely pointless, given that the Democrats had already confirmed that the budget would not pass through the Senate. This is just one example of the games still being played in Congress, as we approach the deadline, and both parties are as guilty as each other for creating so much uncertainty for the financial markets.

The negativity is likely to continue throughout the day, until a resolution is found, which I still see as extremely likely. No bipartisan agreement would see all non-essential government employees furloughed, which is something neither party wants to be blamed for. Now it’s just a case of whether they will act in the best interest of the nation, or attempt to score political points by shifting the blame onto the opposition party. Moody’s have claimed that a shutdown would knock 1.4% off of GDP, although the bigger problem could be more long term, with voters losing total confidence in their government to act in their interest. A shutdown would also result in the Labour department not issuing the jobs report on Friday.

It’s been a relatively quiet six months for the eurozone, with confidence returning to many countries, including France which climbed out of recession in the second quarter and Spain which is expected to do the same in the third. That could all be about to change and unsurprisingly, former Italian Prime Minister, Silvio Berlusconi, is at the centre of it.

Five members of Berlusconi’s PDL party resigned over the weekend, in protest against a new sales tax which will soon be implemented in Italy. The resignations will force Letta to seek support on Wednesday to ensure the government still holds a majority. If not, we could see another round of elections in Italy before changes to the electoral law can be implemented, something both parties were pushing for earlier this year. A lack of change here would likely lead to another stalemate after people head to the polls.

Many believe Berlusconi is at the centre of this and could use it to avoid being kicked out of parliament after recently being found guilty of tax fraud. Another round of political instability could be devastating for Italy, although some would say it’s been inevitable from the start. Already we’re seeing borrowing costs push higher, but more importantly, is would have a negative impact on business and consumer confidence, both of which have been on the mend recently.

Not helping sentiment in the markets this morning was the Chinese HSBC manufacturing PMI, which was released over night. The figure fell to 50.2 for September, down from a previous reading of 51.2, and up only marginally from Augusts’ 50.1 figure. This still marks an improvement for the sector, which is important, and most important, has remained in growth territory for a second consecutive month.

The rest of the day is going to be quiet, in terms of economic releases. The Chicago PMI in the US is the only notable release, however it’s unlikely to have much of an impact in the markets. Investors are going to remain focused on the budget talks in Washington and this is therefore what’s likely to continue to drive the markets on Monday.

Ahead of the open we expect to see the FTSE down 60 points, the CAC down 29 points and the DAX down 58 points.
 
Daily Market Update - 30 September 2013 - Alpari UK

0:10 US government 'shutdown' possible should no resolution be reached
1:27 Italy back in political crisis as 5 ministers resign
2:41 HSBC manufacturing PMI shows moderate growth

 
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