Forex research

UK Opening Call from Alpari UK on 6 December 2013

Caution expected ahead of massive US jobs report

Today’s UK opening call provides an update on:

* Focus on the US on Friday;
* UK consumer inflation expectations released this morning;
* US jobs report key ahead of the December FOMC meeting;
* Fed’s Charles Evans wraps things up this week.

It’s going to be all about the US on Friday, with a number of economic releases scheduled that could highly influence the FOMCs decision on asset purchases at the meeting in two weeks.

We’re likely to see a quiet start to the European session, with the lack of economic data in Europe and investor caution ahead of these key US releases pushing investors to the sidelines. The US releases in the afternoon could prove to be the difference between the Fed reducing its asset purchases in a couple of weeks and not. It will therefore be no surprise to see investors approach them with plenty of caution.

The only notable releases this morning will be UK consumer inflation expectations figure and German factory orders. Both of these are seen as medium impact releases but given the day that lies ahead, I expect the impact to be minimal. Consumer inflation expectations have been falling in recent quarter, as inflation itself drops, which may suggest that consumers will be less demanding when it comes to asking for a raise. That said, with so many people feeling the pinch right now, I’m not convinced lower inflation expectations will make much of a difference.

The markets are sure to go mental at 1.30, UK time, an hour before the opening bell in the US, with the release of the jobs report in the US. It’s not just the non-farm payrolls that are released at this time, there is also a number of other very important parts of the jobs report, such as the unemployment rate and person income and spending. All of these will influence whether the Fed tapers, although clearly, the NFP figure is the most important.

It’s not just the NFP figure that investors will be looking for as well, previous revisions to the figure will be just as important, if not more so, depending what they are. Assuming no revisions at this stage, a figure around 180,000, which is expected, could well be enough to encourage the Fed to taper, which I’m sure would prompt investors to price it in more. This would be very bearish for Gold, stocks and US Treasury prices.

Anything significantly lower than this, or a significant downward revision to the previous figures, may suggest to traders that the Fed is unlikely to taper as there clearly isn’t evidence that the economic recovery is sustainable.

The unemployment rate will also be watched closely, although the headline figure will be less important than the participation rate. We’ve seen constant declines in the figure over the last 12 months, which has been, at least in part, due to the falling participation rate, which is not what the Fed wanted when it set its threshold for asset purchases and interest rates. Another fall in the participation rate could even convince the Fed that ongoing stimulus is needed before a reduction is made.

Other important aspects of the job report include personal income and spending, which is hugely important for a country reliant on consumer spending. The core personal consumption expenditure index is believed to be the Fed’s preferred measure of inflation, so is always worth keeping an eye on. The figure is expected to remain well below the central banks 2% target, but that could be an argument for a continuation of the asset purchase program in its current form. Deflation is as big a threat as high inflation, which could be a concern of certain FOMC members.

Finally, on the data front, we have the preliminary reading of the UoM consumer sentiment index, which is expected to rise slightly to 76.2, from 75.1 in November. Consumer sentiment is very important for the US economy, so the improving figures here following the substantial drop in September and October will also be noted by the FOMC.

Wrapping things up this week we’ll hear from FOMC voting member Charles Evans, who is due to speak in Chicago. This will provide the first Fed reaction to the figures and could provide key insight into whether they are likely to taper at the December meeting.

Ahead of the open we expect to see the FTSE up 10 points, the CAC up 3 points and the DAX up 8 points.
 
US Opening Call from Alpari UK on 6 December 2013

Traders look to US jobs report for December taper clues

Today’s US opening call provides an update on:

* Traders cautious ahead of US jobs report;
* Another strong NFP figure may prompt the Fed to taper;
* Previous NFP revisions also important;A
* Other aspects of jobs report important, such as unemployment, personal income and spending.

It’s been a very quiet start to the European session on Friday, which is hardly surprising considering that one of the biggest US jobs reports this year will be released shortly before the opening bell in the US.

Up to about a month ago, most investors had written off the possibility that the Fed could taper its asset purchases at the December meeting, following an apparent change of heart from them in September, a government shutdown that lasted almost three weeks and a near-default from the US on its debt.

It was difficult to know what kind of impact this would have on the economic data and many thought it would be at least a few months until we saw it cleansed of the temporary distortion that it would bring. That was not the case though and the data we’ve seen so far for October and November has suggested that the economy preformed very well throughout, and after, the shutdown. In fact, it improved on the months leading up to it.

The most important figures of these though, as far as the Fed is concerned, are the ones contained in the US jobs report. The October report was far better than all expectations, as 204,000 jobs were created and unemployment rose only marginally to 7.3%, which will be entirely due to the furloughed government workers that have since returned to work.

If we see a similar performance in the November jobs report today, I believe the Fed will seriously consider a small reduction in asset purchases at the next meeting in two weeks time. And I’m sure I’m not alone in that thinking. All you have to do it look at the activity in Gold, US Treasuries and indices this week when we’ve seen positive US data to see that traders are hedging more against a possible taper, and this will become even more priced in today if we see another strong jobs report.

It’s not just November’s figures that we need to pay attention to though. The revisions to past non-farm payrolls figures is also extremely important, as it’s only because these were revised higher last month that we’re even talking about the possibility of a taper this month. If we see a strong figure for November, but previous figures are revised lower, the Fed’s decision will be made much harder and it may suggest to them that the evidence isn’t there to suggest that the recovery is sustainable.

A number of other parts of the jobs report will also play into the Fed’s decision next month, for example the unemployment rate. The rate itself can be deceiving, however the participation rate that has impacted it a lot in the last year, could tell us a lot about people’s view on the recovery in the US. If people are continuing to drop out of the labour market it means they have no faith in the recovery. This is not what the Fed wanted when it set its unemployment thresholds last year.

Personal spending and income is also important as it gives an indication about whether the recovery is being driven by Americans spending more because of improved earnings, which is sustainable, or by running up more debt, which isn’t. Also we have the core personal consumption expenditure index, the Fed’s preferred measure of inflation, which is expected to show inflation falling slightly to 1.1%, well below its 2% target.

Ahead of the open we expect to see the S&P up 7 points, Dow up 65 points and the NASDAQ up 15 points.
 
Daily Market Update - 6 December 2013 - Alpari UK

Chief Market Analyst James Hughes looks at the prospects for the Fed tapering in December ahead of today's nonfarm payroll data.

 
US Opening Call from Alpari UK on 9 December 2013

Fed speeches key on Monday ahead of week long embargo

Today’s US opening call provides an update on:

  • Indices mixed followed strong US jobs report on Friday;
  • Good news is bad news scenario appears to be fading;
  • FOMC speeches key on Monday, with no major economic releases due.

European indices and US futures are relatively mixed on Monday, following Friday’s strong US jobs report that sent stock markets flying higher.

The response on Friday was quite unusual compared to recent reactions to strong data. Quite often we’ve seen good data prompt a negative reaction in the stock markets, with investors taking the better figures to indicate a higher probability of a Fed taper in December.

Friday’s reaction suggests that markets are either confident that the taper won’t come until next year, which would be surprising given the recent figures we’ve seen from the US, or that a taper is mostly priced in an investors are comfortable with it. If the latter is true, it could mean we’ve seen the end, for now at least, of the good news is bad news scenario.

That is unlikely to be tested much this week though, given how quiet it is expected to be. There’s very little high impact economic releases scheduled for this week and with the FOMC meeting now only a little over a week away, no official comments are due from any Fed members starting Tuesday. This is normal the week before an FOMC meeting but means the markets will be lacking any real direction this week.

The final official comments this week will come today, with three Fed members due to speak. The only FOMC voter among these is James Bullard, who’s scheduled to speak in St.Louis. Bullard is a fairly neutral member of the FOMC, so his views on the economy and tapering could be very helpful in determining what the FOMC will do next.

We’ll also hear from Jeffrey Lacker and Richard Fisher today, although neither of these are voting FOMC members, don’t directly influence the outcome of the vote. That said, they may still be able to provide important insight into which way the Fed is leaning at this stage.

The rest of the day is likely to be very quiet, just as we’ve seen so far this morning. There has been a few pieces of data released today, but it’s had very little impact. The focus is clearly on next week’s FOMC meeting now and anything else is likely to be largely ignored.

Ahead of the open we expect to see the S&P up 2 points, Dow down 5 point and the NASDAQ up 6 points.
 
UK Opening Call from Alpari UK on 10 December 2013

Investors shrug off taper warning from Fed’s Bullard

Today’s UK opening call provides an update on:

• December taper on the cards, markets not bothered;
• Bullard comments prepare markets for taper next week;
• Focus on UK this morning, with manufacturing and GDP estimates expected.

It would appear that despite US indices remaining at, or very close to, record highs, investors have almost fully priced in a small taper by the Fed, when it meets next week.

There were signs that this was the case on Friday, when a strong US jobs report prompted a positive reaction in the stock markets, which goes against the good news is bad news scenario that we’ve seen so much of recently. This was all but confirmed yesterday when we heard from three members of the Fed yesterday, all of whom strongly hinted at a reduction in asset purchases next week, which had no negative impact on the markets. In fact, the S&P 500 ended the session at record highs.

Comments from two of these, Richard Fisher and Jeffrey Lacker, would not have ordinarily had much of an impact on the markets as these are known hawks and therefore regularly call for reductions, while warning against the risks and costs of the program. However, it was the comments from James Bullard, a known dove and FOMC voting member, that gave the clearest message yet that a taper next week is well and truly on the cards.

Bullard claimed that a small taper to QE3 would acknowledge the improvements in the labour market while allowing them to monitor inflation next year. This is as clear a message we’ve had in recent months about the timing and size of the first taper, which should now come next week and be around $10 billion, bringing the asset purchase program down slightly to $75 billion. The only question now will be whether the Fed starts by tapering purchases of Treasuries, mortgage backed securities, or both.

The lack of a response in the markets clearly shows that investors have finally accepted that the Fed’s asset purchase program is on borrowed time and have already started to move on. That said, a bigger first taper than expected would still likely have quite a negative impact on the markets. Investors have only priced in a small taper at this stage, anything larger would still prompt that shock response we’ve seen so many times this year.

European futures also appear to have shrugged off Bullard’s comments from last night, with indices seen opening only marginally lower. The day ahead in Europe is looking a little quiet again, with only a couple of pieces of noteworthy data being released. The first of these is the UK manufacturing and industrial production figures for October, both of which are expected to show a 0.4% increase, which is a little lower than September’s gain.

This will be followed by the UK NIESR GDP estimate for the three months to November, which should give us the clearest indication yet about the kind of growth we’ll see in the fourth quarter. The last few figures have been very strong, compared to what we’ve become accustomed to in recent years, although they do seem to be falling gradually, which suggests the recovery is losing momentum.

Ahead of the open we expect to see the FTSE down 13 points, the CAC down 7 points and the DAX down 12 points.
 
Weekly market preview – 10 December 2013

A somewhat mixed bag this week, as the major economies calm down somewhat after last week’s plethora of tier 1 economic releases. The major US event is likely to be the retail sales figure, due on Thursday. In the UK, the NIESR GDP estimate is one of very few big releases this week. Meanwhile in the eurozone, the industrial production figure is likely to attract attention amid a very quiet week.

In Asia, the only event of note to catch the eye is the Chinese industrial production release on Tuesday. Meanwhile in Australia, Thursday’s jobs report is going to be key going forward.


US

The markets are reeling somewhat following a particularly strong week of releases from the US. The significant out-performance of the jobs data in particular means there appears to be more of a decision to be made from the FOMC when they reconvene at next weeks meeting. However, last week was also notable for the strength of figures such as the manufacturing PMI and GDP figure which indicated a more rounded recovery for the Fed to ponder. This week, we will be focusing largely upon the retail sales data out on Thursday, along with Friday’s PPI inflation figure.

On Thursday, the retail sales figure is due to provide an update on how the sector is faring. This is crucial coming into the festive period whereby the likes of the Thanksgiving and Christmas sales provide a boost to the sector. The retail sales data is notable for the fact that it reflects how consumers perceive inflation expectations, along with current and future earnings conditions. On this occasion, market expectations point towards an improvement in this figure, from 0.4% in October to 0.6% in November. Should we see 0.6% achieved, this would be the highest level in six months and thus would be highly positive. However, there has been an overall propensity for this measure to disappoint recently so I am wary for that reason. That being said, this November data should include a significant degree of of the black Friday sales, which took place on the 29th. It was widely publicised that the black Friday sales disappointed, being trumped by the so called ‘cyber Monday’. Thus this figure will be key to understanding the overall effects that the Thanksgiving sales had upon the US retail sector.

On Friday the US PPI inflation figure is released, with a clear linkage between US monetary policy and inflation likely to dominate. The PPI figure is key because it is the earliest indication of the current level of price inflation available for the US economy and is highly correlated with the CPI measure. One of the factors which could be seen as a deterrent to the FOMC tapering this month is the fact that despite monetary policy being loose, the inflation rate remains at very low level, thus indicating a possibility of defaltion should we see the end of monetary expansion. On this occasion, this argument seems to be valid, given that the monthly PPI figure is expected to come in at 0% from -0.2% last month. Should we see this figure fall below 0%, it could be seen as negative for taper prospects.

Finally, on Thursday, the weekly unemployment claims figure provides us with another measure of the jobs market ahead of next week’s Fed meeting. Given that this is only a weekly reading, it is less significant than the likes of the non-farm or unemployment rate. However, it is another indicator that is likely to be considered by Bernanke and co, thus giving it more importance this week. Market expectations point towards an increase in claims from 298k last week to 321k. However, given the strong all-round jobs figures seen last week, I expect the positive trend to continue with a better figure on Thursday.

UK

A quiet week in the UK, where the only major events of note comes in the form of the manufacturing production and NIESR GDP estimate releases. The manufacturing production figure comes off the back of a particularly strong manufacturing PMI figure last week, pointing to a pickup in the region during November. This is called back into question on Tuesday, when the rate of production is expected to fall from 1.2% in October to 0.4% in November. Given we saw such a strong PMI last week, I think we could get a pleasant surprise on Tuesday.

The NIESR GDP estimate represents their calculations of the how much the value of all goods and services produced by the UK economy has grown in the last three months. Generally, this reading is a fairly accurate barometer of the UK growth and thus markets will be keeping an eye out for this release. The last two months have seen a slowdown in the rate of growth from 0.9% in September to 0.7% last month. Thus this is key to seeing if we can expand growth this month or continue on the recent downward trajectory.

Eurozone

A very quiet week in the eurozone, where the only event of note is the release of the industrial production figure on Thursday. This event is even unlikely to move markets given that previous months have seen very little volatility around this figure. Markets expect to see it push back into positive growth following a poor figure of -0.5% in September. However, despite the expected 0.2% move to growth for October, it is the fact that this figure is lagging by a month which makes it somewhat less influential in the markets.

Also keep an eye out for two speeches from ECB president Mario Draghi, which have the potential to bring volatility to the markets.

Asia & Oceania

A similarly quiet week in Asia, where the main event of note is the industrial production figure out of China. The industrial production figure is key given the impact a strong manufacturing sector has upon both domestic and global growth. Thus a reduction in this could be an indicator of another slowdown in the region going forward. Market expectations point towards a marginal drop in the rate of growth from 10.3% to 10.2%, which would not be much of a problem. However, be aware that this figure is a good proxy of how the manufacturing sector is faring and thus any poor figure could shock markets.

In Australia, the jobs report due out on Thursday means that we could get some significant volatility in the latter part of the week for assets associated with the region. The headline unemployment rate provides the starkest indicator of exactly where the Australian jobs market currently stands and market expectations point towards a second rise in as many months. Should we see this figure rise to 5.8% from 5.7% last month, this would provide yet another indicator for the RBA to justify a possible rate cut next month. Following disappointing GDP and export data last week, there is clearly a form of slowdown in place despite a pickup in the Chinese region. Thus watch closely for whether these jobs releases show a deterioration in the employment conditions as it could also provide a clue as to the RBA’s next move.

The employment change figure is expected to show a similar picture of employment on a more micro level. On this occasion, the markets are expecting to see the employment change fall from 1,100 jobs created in October to 1,000 in November. This may be marginal, but would show consistency of the trend should this occur.
 
US Opening Call from Alpari UK on 10 December 2013

US futures higher despite threat of taper next week

Today’s US opening call provides an update on:

* US futures higher following record close for the S&P 500;
* Investors clearly comfortable with moderate taper next week;
* Gold rally unlikely to continue if Fed tapers next week;
* Quiet day expected with little data due and no Fed members speaking.


European indices are trading slightly higher on Tuesday and their US counterparts are seen doing the same after the opening bell, despite comments last night from a number of Fed members that suggested tapering could begin next week.

The trend recently has been for any hint of tapering in December to be negative for the markets but that appears to have changed, starting on Friday with the US jobs report. The response to the report showed that attitudes in the market has changed and tapering is no longer going to fill investors with fear. Well, as long as it’s only moderate tapering. Anything larger and we’ll be back to square one.

Comments last night from a few members of the Fed, including one from a dovish voting FOMC member, only increased the odds of a taper next week. Clearly investors are now comfortable with the taper and are choosing to focus on the improving economy to drive markets higher, rather than the threat of less stimulus, as seen by the record closing high in the S&P 500 on Monday.

Gold prices have been a key focus over the last couple of trading sessions, given its correlation with Fed monetary policy. Despite the increasing likelihood of tapering, Gold has been creeping higher in the last couple of sessions, but I don’t expect this to continue. It still remains in a very clear downtrend and is likely to continue this way in the coming months. Especially if people believe that tapering could have disinflationary consequences for the US, something James Bullard claimed the Fed would keep a close eye on, with inflation already very low.

Today’s session is expected to be very quiet again, with no high impact data due out of the US and Fed members under a week long embargo ahead of the FOMC meeting on 17/18 December. We will hear from ECB President Mario Draghi before the opening bell in the US, but nothing is expected from this. The ECB only recently cut interest rates and is unlikely to do so again anytime soon.

The UK NIESR GDP estimate for the three months to the end of November will be released shortly after the US open and should provide some insight into whether the UK recovery is losing momentum. The last couple of figures have shown a small downturn in growth, which may raise fears about the sustainability of the recovery going into 2014.

Ahead of the open we expect to see the S&P up 2 points, Dow up 15 point and the NASDAQ up 6 points.
 
UK Opening Call from Alpari UK on 11 December 2013

Another taper obstacle falls as US budget deal is agreed

Today’s UK opening call provides an update on:

• Quiet day expected, with no major economic releases or Fed speeches scheduled;
• ECBs Nowotny and Constancio due to speak this morning;
• House and Senate negotiators agree two-year budget in a bid to avoid another humiliating shutdown;
• Will the deal, if passed on Congress, impact the Fed’s decision on tapering next week?

European indices are expected to open slightly lower on Wednesday, ahead of what is expected to be another very quiet day in the financial markets.

The economic calendar is looking very thin on Wednesday, with no high impact data scheduled to be released during either the European or US trading sessions. Some low level data is due out of Europe this morning but this is unlikely to have any impact on the financial markets, while the only noteworthy release this afternoon is the EIA crude oil stocks change, which is expected to show a drop in stocks of around 2.2 million barrels.

There’s going to be a lot of focus on the Federal Reserve this week, ahead of next week’s decision on its QE3 program. However, with Fed members now under an embargo, we’re unlikely to get any official comments that could potentially create any major swings in the markets.

We are due to hear from a couple of ECB members this morning, with Ewald Nowotny speaking in Austria and Vitor Constancio speaking in Frankfurt. Very little is expected from either of these speeches though, in relation to ECB policies, as the central bank only cut interest rates last month and are therefore unlikely to do so again for a few more months. There has been talk about potential negative deposit rates going forward but officials have so far been unwilling to discuss this in any real detail.

House and Senate negotiators have come to an early agreement on spending for the next two years, in a bid to avoid a repeat of the politically damaging government shutdown in October that lasted almost three weeks. The shutdown was hugely unpopular in the US as it forced almost 800,000 people out of work, without pay, and threatened to derail the fragile economic recovery that was only just starting to gain momentum.

As it turned out, the data for October and November has suggested that the shutdown had no impact whatsoever on the economy. Businesses continued to hire at a faster pace than in the months before, while consumers continued to spend despite surveys suggesting otherwise. Fortunately, government hasn’t viewed this as evidence that they can run riot again in January and have instead come to a agreement before the holidays, which should bring some comfort to the markets.

That said, the budget still needs to be passed in both the Senate and the House and does not involve raising the debt ceiling, which will be hit again in February, unless another agreement is made that involves raising it, making significant reductions in spending, or a combination of the two.

So what does this mean for financial markets? Well, the immediate impact at least appears to be minimal, for two reasons. Firstly, the budget still needs to pass through Congress, which as we’ve seen in the past is certainly no guarantee. Secondly, with the data showing the government shutdown had no impact on the data, investors weren’t as bothered by the potential for a repeat in January, from a markets perspective. If it had no impact previously, the same will probably be true again.

The only question now is, will this deal have any impact on the Fed’s decision to taper when it meets next week? While the data suggests it shouldn’t, I imagine it must be something the Fed officials will consider when making their decision next week. With another obstacle almost out of the way, this surely gives the Fed even more reason to opt for a small taper and see if the economy can begin to stand on its own two feet again.

Ahead of the open we expect to see the FTSE down 18 points, the CAC down 3 points and the DAX down 11 points.
 
US Opening Call from Alpari UK on 11 December 2013

Budget deal provides temporary lift to investors

Today’s US opening call provides an update on:

* Budget deal buoys European markets;
* Budget still needs to pass through Congress;
* Deal gives Fed one more reason to taper next week.

European indices are trading higher on Wednesday, buoyed by a deal on the US budget that should avert another government shutdown in January.

The deal, struck between negotiators from the House and the Senate, doesn’t appear to particularly favour either side and is going to draw criticism from members of both parties. However, it is an important first step in ensuring that we don’t go through another shutdown, similar to October, that saw the popularity of both major parties drop significantly and almost 800,000 workers sent home without pay.

The budget still needs to pass through Congress, which may hit a few speed bumps along the way, but it’s a nice change to see US politicians being proactive in a bid to avoid the mistakes of the past rather than leaving everything until the last minute in a bid to gain political points. That said, the deal does not include a deal on the debt ceiling so we still have that to come in February.

One thing the deal does do is remove one more element of uncertainty that could have otherwise weighed on the recovery. There was no evidence in the October and November data that the previous shutdown had any negative impact on the economy, but that doesn’t mean it won’t in the future. We also don’t know if the economy would have performed even better in the absence of an unnecessary shutdown.

This can only play into the hawks hands come the FOMC meeting next week. It is becoming increasingly difficult for dovish Fed members to argue against a small tapering of asset purchases this month. The data has improved significantly, there’s no evidence of any negative impact from the shutdown and future obstacles to a sustainable recovery are now being removed.

Aside from the budget deal, there’s been very little else moving the financial markets on Wednesday. The economic calendar is looking very thin, with no high impact data scheduled for release. With Fed members now under an embargo before next week’s meeting, we should get no further clues on what decision the Fed will make next week.

Ahead of the open we expect to see the S&P flat, Dow down 4 points and the NASDAQ down 2 points.
 
UK Opening Call from Alpari UK on 12 December 2013

European futures lower as taper fears grow

Today’s UK opening call provides an update on:

• Sell-off in US and Asian equities overnight driven by tapering fears;
• Economic data releases pick up a little today;
• Mario Draghi scheduled to speak in Strasbourg;
• Mixed data for Australia sends the aussie tumbling.

European indices are expected to open lower on Thursday, following a similarly poor performance in the US and Asia over night.

The sell-off over night, and again in European futures this morning, continues to be driven by fears that the Fed will reduce its asset purchase program at its December meeting next week. The budget deal on Tuesday, although not yet passed through Congress, was the latest contributor to the sell-off as it removed another hurdle for the US, that could have otherwise led to another government shutdown in January, and gives the Fed less reason again to delay the taper next week.

Between now and the meeting next week, the moves in the markets are going to continue to be largely driven by investors interpretation of what the Fed will do next week. This isn’t ideal, but it’s not helped by the lack of economic data being released this week, the lack of earnings reports or even the lack of comments coming from the Fed, with officials now being under a week long embargo ahead of the meeting.

Things are actually a little better today, in terms of economic releases. This week has been very quiet so far on the data front, as is always the case in the week following the non-farm payrolls. Today though is a little better, with industrial production figures for the eurozone scheduled for release this morning, while this afternoon, we’ll get the retail sales figure, for November, from the US. This is the final piece of the jigsaw ahead of the Fed meeting and could make the difference when it comes to the decision on tapering. Also being released will be the weekly jobless claims figure which fell below 300,000 last week and is expected to rise slightly this week to 320,000.

Also this morning, we’ll hear from ECB President Mario Draghi, who is scheduled to speak in Strasbourg. Not too much is expected from this speech by Draghi, or any questions that may follow. People use these speeches to try and get insight on current and future ECB policy. However, with the central bank having cut rates to record lows last month, I can’t imagine there’s too much for Draghi to give away on this occasion.

The ECB is believed to have considered the use of negative deposit rates as a means of monetary stimulus in recent months, but this is not likely to be a knee-jerk reaction from the ECB, or a topic that Draghi will be keen to discuss.

The ECB monthly report will also be released this morning, but this again is likely to be largely ignored. The report is only likely to echo what Draghi said in the press conference following the meeting last week, and will therefore not contain any clues on the potential for further rate cuts in the coming months, whether that be to the main refi rate or the deposit rate

Overnight we had some mixed data released from Australia, where the number of those employed rose by 21,000, more than double the expected figure, while the previous figure was revised lower. At the same time, the unemployment rate rose to 5.8%, in line with expectations, but once again heading in the wrong direction. The initial reaction to the negative was negative, with the Australian dollar falling against the greenback, but we’re already seeing it recover a little. After the last couple of releases, the reaction to the data has been similarly negative, but the currency has gone on to recover most, if not all, of its losses during the European session. It will be interesting to see whether we get a similar reaction today.

Ahead of the open we expect to see the FTSE down 35 points, the CAC down 11 points and the DAX down 38 points.
 
UK Opening Call from Alpari UK on 13 December 2013

Taper expectations rise as US budget gets House vote

Today’s UK opening call provides an update on:

* Europe higher ahead of quiet end to the week;
* Taper expectations rise on strong US retail sales;
* Two-year US budget awaiting Senate vote;
* Five BoE and ECB officials scheduled to speak today.

European indices are expected to open slightly higher on Friday, ahead of what is expected to be a very quiet end to the week in the financial markets.

The entire week has been pretty quiet really, which isn’t necessarily unusual in the second week of the month, when far fewer pieces of high impact economic data are generally released. This also hasn’t been helped this week by the FOMC meeting next week which has meant all Fed members are under an embargo and are therefore not allowed to release any official statements.

Given how important these statements have been to the financial markets recently, with the Fed’s asset purchase program being the main driver in the markets at the moment, the markets have somewhat lacked direction. The lack of risk appetite ahead of the FOMC meeting next week has actually weighed on equities a little this week, with small losses being seen as investors position themselves ahead of a possible taper.

Fears of a Fed taper have only increased this week, with the retail sales figure potentially being the final nail in the coffin, coming in above expectations at 0.7%, while the previous figure was revised higher. Also not helping this was the deal reached earlier this week between negotiators from the Democrats and the Republicans, which passed comfortably through the House last night.

Assuming the Senate passes the two-year budget as well, which I expect they will as it doesn’t appear to favour either side particularly, this will remove another hurdle for the US economy next year, allowing the recovery to gather some momentum without the US government repeatedly shooting itself in the foot. That said, we still have the debt ceiling debate to come in February so there’s still plenty of time for that.

There’s very little to focus on in Europe on Friday, with no major pieces of data being released and no noteworthy companies reporting earnings. We will hear from a number of central bankers from the Bank of England and the European Central Bank, although their comments are unlikely to have much, if any, impact on the markets, given that neither are expected to loosen or tighten monetary policy in the coming months.

This is especially true of the BoE, who has been very transparent recently, laying out a very clear plan for the next 18 months or so. The ECB has been less clear, however we did get a rate cut only last month, which was followed by a small rebound in inflation, followed the unexpected drop to 0.7%.

Ahead of the open we expect to see the FTSE up 4 points, the CAC up 2 points and the DAX up 11 points.
 
US Opening Call from Alpari UK on 13 December 2013

US futures point to indices ending the week on a high

Today’s US opening call provides an update on:

* US futures pointing to a higher open on Friday;
* Budget deal removes another hurdle for the Fed;
*Strong US data supports taper;
* Quiet day expected with no data or Fed comments.

US indices look likely to end the week on a positive note, following a few negative sessions as investors finally face up to the reality that quantitative easing may start being phased out next week.

Everything we see and hear at the moment seems to support a reduction in asset purchases next week, from jobs figures to consumer behaviour and even fiscal issues. The latter has been the most recent development, with negotiators from the Democrats and Republicans striking a deal on a two-year budget that will avoid a repeat of the October government shutdown in January.

This was previously seen as a potential obstacle for the economic recovery that the Fed may want to move past before withdrawing its support, despite evidence suggesting that the shutdown in October had no negative impact. With the budget being passed easily in the House yesterday, I expect the vote in the Senate to run just as smoothly, which may give the Fed confidence that the economy can take a small taper.

The next hurdle will be the debt ceiling, which the US is due to hit in February. However, I don’t think this is seen by many as a serious threat. This is not because it wouldn’t have a devastating impact on the economy and the financial markets, because it would, it’s because the government has shown in the past that they will absolutely not allow it to be hit. Even if a deal is struck at the last minute, it will definitely be struck.

The data we’ve seen for October and November has been surprisingly strong under the circumstances, which again suggests the economy can take a taper next week. Yesterday’s figures could potentially have been the final nail in the coffin for QE3 in its current form.

We still have a few more pieces of data being released early next week, before the FOMC announces its decision on Wednesday. These figures will of course play into the Fed’s decision, but the most important figures have already been released and they have all been very good.

It could be argued that another month of data is necessary for the recovery to be viewed as sustainable, but the FOMC may decide that its credibility is more important than one more month of data. Chairman Ben Bernanke claimed earlier this year that tapering would probably begin later this year and ending in the middle of next.

Since this time, the Fed’s communication and transparency have been heavily questioned and this would go some way to justifying their position. As previously promised, they waited for the data to improve and tapered at the end of the year.

Unfortunately today is not one of those days that has any economic releases that will impact the decision on next week. In fact, the economic calendar is looking very bare and with Fed members under a week long embargo ahead of the meeting, trading volumes may be relatively low.

Ahead of the open we expect to see the S&P up 4 points, Dow up 24 points and the NASDAQ up 9 points.
 
Daily Market Update - 13 December 2013 - Alpari UK


It’s been a quiet day so far in the financial markets but things should pick up significantly next week, with a number of high impact figures being released and, most important of all, the FOMC decision on Wednesday. Market Analyst takes a look at how events in the last 24 hours impact the FOMC meeting next week and what he expects the outcome to be.
 
UK Opening Call from Alpari UK on 16 December 2013

Investors risk averse ahead of Wednesday’s Fed decision

Today’s UK opening call provides an update on:

* Investors risk averse ahead of Wednesday’s FOMC decision;
* Chinese and Japanese data fails to inspire;
* Eurozone PMIs in focus this morning.

Risk aversion ahead of Wednesday’s FOMC announcement and weak data from Asia is weighing on European futures ahead of the open on Monday.

This week’s Fed meeting is likely to seriously weigh on risk appetite in the early stages of the week, as investors become increasingly concerned about a reduction in asset purchases, that could bring to an abrupt end the daily record highs being recorded in US indices. The data over the last couple of months has certainly justified a small taper, it’s just a case now of whether Chairman Ben Bernanke will want to risk rocking the boat at his final meeting in charge or wait to see another month of positive economic readings and leave the decision to his successor Janet Yellen.

We’ve had a mixed response to the data out of Asia over night, which has contributed to the losses being seen at the start of the week. The figures themselves don’t actually look that bad, in fact the Japanese Tankan survey figures look very encouraging. The large manufacturing outlook and the non-manufacturing outlook fell short of expectations, but even these, along with the other readings, showed significant improvement again in the fourth quarter. The headline large manufacturing index rose to 16 in the first quarter, the highest level in six years, after being in negative territory only earlier this year.

Even the Chinese HSBC manufacturing PMI isn’t as bad as is being made out. The index is still comfortably in growth territory, at 50.5, and has only fallen slightly from the reading in November. I think what we’re seeing here is a typical case of risk aversion from investors ahead of Wednesday’s Fed decision, with any negativity in the data being viewed as a reason to sell. Ordinarily, the figures themselves wouldn’t be viewed in such a negative way.

It will be interesting to see what kind of response we get to the data being released today, with a large number of manufacturing surveys being released this morning. This is the first reading of these PMIs so could give an early indication about any slowing of the recovery, which has barely taken off as it is.

Already we’ve seen signs that the French economy is struggling to gather any momentum. In fact, France, along with Spain could fall back into recession this quarter, having recorded small negative growth figures in the third quarter. Small improvements are expected from most of the manufacturing and services PMIs for France, Germany and the eurozone. The only figure that isn’t expected to improve is the German services PMI, which is expected to fall slightly to 55.5, still comfortably in growth territory.

This is going to be a data heavy week for the markets, after seeing the complete opposite last week. Unlike last week, there will be plenty of things driving financial markets, although with all eyes on the FOMC meeting on Wednesday, the only question is how much attention will investors give all these economic releases. It wouldn’t be unusual for investors to pretty much ignore the data and instead focus solely on the Fed decision.

Ahead of the open we expect to see the FTSE down 26 points, the CAC down 13 points and the DAX down 22 points.
 
Last edited:
US Opening Call from Alpari UK on 16 December 2013

Stocks turn higher after negative start to the day

Today’s US opening call provides an update on:

* Indices higher after negative start to the day;
* Eurozone PMI gains driven by German exports;
* US manufacturing figures key today;
* FOMC decision likely to weigh on risk appetite.

European indices have turned higher this morning following a difficult start to the session.

There had been a lot of risk aversion in the markets early in the European session, but that seems to have changed following the release of the eurozone PMIs. On the face of it, the manufacturing and services PMIs weren’t actually that great.

Both French figures were actually significantly below expectations and deep into contraction territory. However, investors appear to have reacted very positively to the jump in the eurozone composite and manufacturing PMIs which beat expectations and rose significantly from November. The improvement was largely driven by the jump in German export-focused manufacturers, which investors clearly see as a positive thing.

Investors did not view the Chinese or Japanese data with the same positivity, despite these arguably being the stronger releases. The headline Japanese Tankan manufacturing index rose to 16, the highest in six years. This has clearly been helped significantly by the weaker yen, following a huge monetary stimulus program that has been undertaken by the Bank of Japan this year.

The Chinese HSBC manufacturing PMI also wasn’t as bad as the reaction in the markets overnight would suggest. The figure did fall slightly to 50.5, which may suggest the recovery is losing momentum, but this is still comfortably in growth territory which is what counts.

We have more data being released this afternoon, with the US manufacturing PMI and the Empire State manufacturing index being of particular interest. Both are expected to have improved in December which may provide more of a boost ahead of the opening bell.

That said, investors are going to be distracted in the coming days ahead of the FOMC decision. We already saw risk aversion from investors earlier in the session and this is likely to increase over the next couple of days. The majority of the data recently, particularly the NFP, Q3 GDP and unemployment figures, has supported a small taper from the Fed and investors are going to be very concerned about this.

Ahead of the open we expect to see the S&P up 7 points, Dow up 68 points and the NASDAQ up 17 points.
 
You must log in or register to reply here.

Similar threads

B
best place to research.
Replies
0
Views
2K
boyes51
B
J
DailyFX.com Releases Top Forex Trading Ideas for 2011
Replies
0
Views
3K
jsales
J
M
research participants?
Replies
7
Views
2K
mikaelsegerberg
M
R
Re: RvdMarkets best trading terms for currency trading
Replies
9
Views
3K
rep.rvd
R
M
Forex Prop Trading Firms and Operational Research
Replies
9
Views
7K
shahkhan
S
Top