Forex research

UK Opening Call from Alpari UK on 17 December 2013

European data in focus as Fed kicks off December meeting

Today’s UK opening call provides an update on:

* UK inflation nears BoE target four years after last hitting it;
* Eurozone inflation expected unchanged from preliminary reading;
* Economic sentiment to pick up again in the eurozone;
* US inflation data to be released ahead of tomorrow’s Fed decision.

It’s going to be another busy day in the financial markets on Tuesday, with plenty of data being released and investors keeping one eye on the FOMC meeting which starts today.

The UK gets things underway on Tuesday, with the release of a range of inflation data for November. The Bank of England’s preferred measure of inflation is the consumer price index, so this tends to be the one that investors focus on. This is expected to remain at 2.2%, very close to the BoEs 2% target which hasn’t been hit in exactly four years.

However, it is heading in the right direction which will provide some relief to investors, for a couple of reasons. Firstly, it provides further comfort to businesses and households that inflation won’t spike higher and invalidate the BoEs forward guidance on interest rates, forcing them to raise them. Also, from a consumer perspective, it closes gap between wage inflation and the cost of living, which has been rising at a much faster rate for a long time now leaving people worse off in real terms.

The other inflation readings being released are the retail price index, which is expected to show inflation creeping up to 2.7%, and the producer price index, which is expected to show prices for manufacturers falling by 0.5%. While investors don’t pay too much attention to this figure, it can be a good indication of future price inflation, with price changes at the manufacturing level eventually being passed on to consumers.

Following this we have the inflation reading for the eurozone, where the increasing fear of disinflation turning into deflation forced the ECB to cut interest rates in November to record lows of 0.25%. The preliminary reading for the CPI figure showed inflation rising to 0.9%, from 0.7% in October. This is expected to remain unchanged today which will help ease deflation concerns for now, although with countries in the eurozone continuing with their austerity efforts, the threat of deflation will not go away. That said, as ECB President Mario Draghi has stated previously, deflation in certain countries has been intentional in order to regain competitiveness so this is not a huge concern right now.

Next up we have the German and eurozone ZEW economic sentiment figures being released. Both of these are expected to improve for December, which is encouraging as it means investors and analysts are becoming more optimistic about the recovery in the eurozone. That said, a large part of this is driven by improvements in Germany, while the likes of France and Spain are once again on the brink of recession. This isn’t ideal but it could be far worse.

We have more inflation data being released in the US this afternoon, although this is not the Fed’s preferred measure of inflation so it can, to an extent, be taken with a pinch of salt. Low inflation is the only reason why some investors believe the Fed won’t taper tomorrow, with the rest of the data over the last couple of months clearly showing that the economy is improving.

People may look to today’s core CPI figure for signs that inflation is on the rise, which may suggest similar results will be seen in the preferred measure, the core personal consumption expenditure index, going forward. The only problem with this is that there hasn’t been much change for a long time in the PCE figure, so I don’t know what investors expect to change here in the next couple of months. If this was a real concern, the Fed should increase its asset purchases in an attempt to hit its 2% inflation target, not do nothing and hope for the best.

Ahead of the open we expect to see the FTSE down 3 points, the CAC down 3 points and the DAX up 7 points.
 
US Opening Call from Alpari UK on 17 December 2013

Investors cautious ahead of tomorrow’s FOMC decision

Today’s US opening call provides an update on:

• Investors cautious ahead of tomorrow’s FOMC decision;
• European indices lower despite very encouraging economic surveys;
• US core CPI figure expected to remain unchanged.

US indices are expected to open marginally lower on Tuesday, as investors err on the side of caution ahead of the FOMC announcement tomorrow.

Yesterday’s rally led many to believe that tapering had either been fully priced in or that investors did not believe the Fed would act at this month’s meeting. The response seen in US futures and European indices during the morning session would suggest otherwise.

This suggests that yesterday was nothing more than investors buying the dips after the S&P ended the week with four consecutive negative days. And while the buying looked aggressive at the time, the S&P only pared around half of those losses before pulling back later in the session.

Today we’re seeing more risk aversion from investors, which isn’t overly surprising given that the FOMC will announce tomorrow whether it will scale back its asset purchases or not. Investors appear split on this at the moment, with some pointing to the significant improvement in the data and others warning about the low levels of inflation.

What this means for the markets is that there’s plenty of scope for significant moves whatever the FOMC decides to do. This uncertainty among investors is what’s likely to contribute to the caution among investors over the next couple of days.

We’ve already seen this caution this morning. The data out of the eurozone has been very good, with the ZEW economic sentiment figures both rising significantly and easily beating expectations. The German figure rose to 62 from 54.6, against expectations of a rise to 55, while the eurozone figure reached 68.3, its highest ever level, from 60.9 last month.

Despite these very encouraging figures, European indices are trading lower across the board at the moment, which again highlights the risk averse nature of investors this morning.

The US session could be a little quieter on Tuesday, with very little economic data being released and no comments expected from the Fed in relation to tomorrow’s decision. The only notable economic release is the CPI inflation figure for November, which is expected to rise to 1.3%. The core CPI figure, which is seen as a more reliable inflation measure, is expected to remain at 1.7%.

That said, neither of these are the Fed’s preferred measure of inflation, with the central bank instead favouring the core personal consumption expenditure index. With this in mind, investors tend to take the CPI reading with a pinch of salt, paying more attention to significant moves rather than specific levels. A significant rise in the figure today, for example, may suggest that the core PCE will rise going forward which could ease disinflation concerns among the Fed.

Ahead of the open we expect to see the S&P down 2 points, Dow down 6 points and the NASDAQ down 2 points.
 
UK Opening Call from Alpari UK on 18 December 2013

UK unemployment and BoE minutes in focus this morning

Today’s UK opening call provides an update on:

* UK unemployment and BoE minutes in focus this morning;
* Yesterday’s beat in German ZEW suggests IFO beat could be on the cards;
* Investors to finally get tapering answers this evening.

We have a busy day ahead of us in the financial markets on Wednesday, with UK unemployment data kicking things off this morning and the FOMC decision wrapping things up later on tonight.

The UK unemployment figure, along with a few other related data releases such as average earnings and jobless claims, will be released alongside the minutes from this month’s Bank of England MPC meeting. The meeting itself was an unsurprisingly dull affair, with no changes to interest rates or asset purchases being announced, as expected, and no statement or press conference following it. I’m sure at least one of these will change in 2014 now that Mark Carney has settled into his position as Governor.

With that in mind, I don’t expect the minutes themselves to tell us anything we don’t already know. The BoE has been very transparent in recent press conferences and testimony’s, leaving very little for financial markets to predict on their own, unlike its US counterpart. The Fed tried the open and transparent approach earlier this year but it only came back to bite them. Investors assumed, based on their comments that tapering would begin in September, which has a significant impact on the markets. When tapering never came, investors were left very frustrated with the Fed and since then the communication from them has been very unclear.

The BoE on the other hand has had no such problems. The only problem it’s had has been around forward guidance, with investors, correctly as it turned out, not buying into the assumption that unemployment would take three years to fall to 7%. Carney finally acknowledged recently that this forecast had been incorrect and now accepts that this threshold could be hit in 18 months. Although he has refused to amend the guidance.

This makes the unemployment rate a very important piece of economic data to follow. While Carney has made it perfectly clear in the past that the 7% threshold isn’t a trigger for a rate hike, without any further information, markets are likely to price in a hike in the six months following this threshold being met. And this could come even sooner than the BoE has now acknowledged, which means any reduction in the unemployment rate today could prompt a significant reaction in the markets.

Also this morning we have the German IFO business climate figure being released, which is expected to rise slightly to 109.5 from 109.3. Given yesterday’s surprisingly strong ZEW figure, which showed institutional investors and analysts being far more optimistic about the next six months than in November, I wouldn’t be surprised if the IFO figure reflected a similar boost in sentiment among businesses. We could therefore see a significant beat here, as we had yesterday.

The main event today comes from the US, with the FOMC completed its two-day meeting and announcing whether it will scale back its asset purchase program or leave it on hold for another month. More and more analysts appear to be moving into the Q1 2014 camp now, with surveys showing, at best, only a third of people predicting a reduction today.

This seems very odd considering the number of investors and analysts that predicted a taper in September, when the economic data wasn’t a good as it has been in recent months and with budget and debt ceiling negotiations to come in October. We still have debt ceiling talks to come in February, but with another government shutdown in January now pretty much off the table, there’s much fewer obstacles for the recovery than there were before.

Those who point to inflation as the reason for the Fed not tapering today due to stubbornly low inflation seem to forget that, according to the Fed’s preferred measure – the core personal consumption expenditure index – inflation has been between 1.1% and 1.3% for the whole of 2013. What’s going to change with this in the next couple of months that hasn’t already? And if this is a real concern, then surely an increase in asset purchases is the suitable response from the Fed, rather than more of the same.

Ahead of the open we expect to see the FTSE up 17 points, the CAC up 5 points and the DAX up 22 points.
 
UK Opening Call from Alpari UK on 18 December 2013

UK unemployment and BoE minutes in focus this morning

Today’s UK opening call provides an update on:

* UK unemployment and BoE minutes in focus this morning;
* Yesterday’s beat in German ZEW suggests IFO beat could be on the cards;
* Investors to finally get tapering answers this evening.

We have a busy day ahead of us in the financial markets on Wednesday, with UK unemployment data kicking things off this morning and the FOMC decision wrapping things up later on tonight.

The UK unemployment figure, along with a few other related data releases such as average earnings and jobless claims, will be released alongside the minutes from this month’s Bank of England MPC meeting. The meeting itself was an unsurprisingly dull affair, with no changes to interest rates or asset purchases being announced, as expected, and no statement or press conference following it. I’m sure at least one of these will change in 2014 now that Mark Carney has settled into his position as Governor.

With that in mind, I don’t expect the minutes themselves to tell us anything we don’t already know. The BoE has been very transparent in recent press conferences and testimony’s, leaving very little for financial markets to predict on their own, unlike its US counterpart. The Fed tried the open and transparent approach earlier this year but it only came back to bite them. Investors assumed, based on their comments that tapering would begin in September, which has a significant impact on the markets. When tapering never came, investors were left very frustrated with the Fed and since then the communication from them has been very unclear.

The BoE on the other hand has had no such problems. The only problem it’s had has been around forward guidance, with investors, correctly as it turned out, not buying into the assumption that unemployment would take three years to fall to 7%. Carney finally acknowledged recently that this forecast had been incorrect and now accepts that this threshold could be hit in 18 months. Although he has refused to amend the guidance.

This makes the unemployment rate a very important piece of economic data to follow. While Carney has made it perfectly clear in the past that the 7% threshold isn’t a trigger for a rate hike, without any further information, markets are likely to price in a hike in the six months following this threshold being met. And this could come even sooner than the BoE has now acknowledged, which means any reduction in the unemployment rate today could prompt a significant reaction in the markets.

Also this morning we have the German IFO business climate figure being released, which is expected to rise slightly to 109.5 from 109.3. Given yesterday’s surprisingly strong ZEW figure, which showed institutional investors and analysts being far more optimistic about the next six months than in November, I wouldn’t be surprised if the IFO figure reflected a similar boost in sentiment among businesses. We could therefore see a significant beat here, as we had yesterday.

The main event today comes from the US, with the FOMC completed its two-day meeting and announcing whether it will scale back its asset purchase program or leave it on hold for another month. More and more analysts appear to be moving into the Q1 2014 camp now, with surveys showing, at best, only a third of people predicting a reduction today.

This seems very odd considering the number of investors and analysts that predicted a taper in September, when the economic data wasn’t a good as it has been in recent months and with budget and debt ceiling negotiations to come in October. We still have debt ceiling talks to come in February, but with another government shutdown in January now pretty much off the table, there’s much fewer obstacles for the recovery than there were before.

Those who point to inflation as the reason for the Fed not tapering today due to stubbornly low inflation seem to forget that, according to the Fed’s preferred measure – the core personal consumption expenditure index – inflation has been between 1.1% and 1.3% for the whole of 2013. What’s going to change with this in the next couple of months that hasn’t already? And if this is a real concern, then surely an increase in asset purchases is the suitable response from the Fed, rather than more of the same.

Ahead of the open we expect to see the FTSE up 17 points, the CAC up 5 points and the DAX up 22 points.
 
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Reaction to the FOMC decision to taper

It looks as though investors will never learn when it comes to the Federal Reserve. Once again, the majority in the markets got the big decision wrong, expecting the FOMC to leave asset purchases unchanged in December, despite the economic data clearly supporting a small taper and future hurdles being removed, namely another government shutdown in January, before the meeting got underway.

The response in the markets following the decision was exactly what would be expected, huge amounts of volatility followed shortly after by dollar strength, before eventually settling pretty much where they started. Now this would suggest that a $10 billion taper had been priced in, but surveys and trading in the lead up to the announcement show otherwise.

This battle, which we haven’t seen much of so far, is one between those who are optimistic on the economy and those who fear the impact on the markets of a reduction in monetary stimulus. In the coming days, I expect the latter group to take control but in the longer term common sense will prevail and markets will once again begin to reflect an improving economy. Not one addicted to huge injections from the Fed.

Alternatively, it may suggest that markets aren’t actually that fazed by small reductions in Fed support as long as it’s due to the economic picture improving. This bodes well going forward with the Fed clearly concerned about the impact on the markets when it tapers, or even raises interest rates, following the debacle in September.
 
UK Opening Call from Alpari UK on 19 December 2013

Markets rally as US begin tapering with $10 billion reduction

Today’s UK opening call provides an update on:

* Markets rally following yesterday’s announcement;
* Tapering begins with $10 billion reduction
* Forward guidance surprises markets as 6.5% threshold is loosened
* FOMC members provide strong economic projections.

European indices are expected to open higher this morning as global markets rallied following last nights announcement that the US would finally begin to trim back on it’s asset purchase programme. Despite this move seeming somewhat counter-intuitive given the like between stimulus and growth, it was clearly a mix of the taper being ‘priced in’ to some extent along with a more dovish taper than expected.
History was made yesterday evening, when Fed Governor Ben Bernanke announced the first cut to the QE3 asset purchase scheme, reducing the rate of monthly purchases by $10 billion. Market consensus regarding whether such a move seemed likely or not was notably polarised, where the largely dovish standpoint of most was called into question with the release of significantly better than expected data over the last two months. Bernanke decided to split that $10 billion equally between the MBS and treasuries components, explaining it ‘would be the simplest’.

What this measure does is provide a framework for the markets and wider economic participants to fully understand that the pathway towards weaning the US from the artificial drug of QE is being established. As such, whilst the focus will largely be fixed upon whether or not the rate of asset purchases will be reduced each month, the hope is that the growing familiarity with the occurrence will lessen the impact going forward.

Perhaps the most notable event following the news that tapering was set to begin was Ben Bernanke’s disclosure that going forward, the interest rates will remain near zero until ‘well past’ 6.5%. This comes despite his previous view that this would be the threshold to initiate rate hikes. Market chatter points to a possible 6.0% threshold being speculated, thus pushing low interest rates back into the distant future. Thus whilst the act of tapering represents a form of monetary tightening, the extension of minimal interest rate expectations is tantamount to monetary loosening of sorts. This has been cited as the main reason behind the reactive jump in the US indices which saw both the S&P500 and DJIA hit record highs following the announcement.

The conclusion of the two day Fed meeting also brought about a raft of economic projections from the FOMC members, painting a picture of the coming years from the standpoint of those in the know. Overall the projections portray a positive economy where growth is expected to pick up, unemployment move lower, faster, and crucially where inflation is expected to push closer towards the target level of 2% in 2015/16. The importance of the inflation rate should not be understated, as this is the primary mandate of the Fed, much like the BoE. Thus without expectations that this will pick up despite a reduction in asset purchases, no taper would have happened. Going forward, the importance of the Fed will hopefully diminish, with luck returning the markets to a scenario where positive economic data is seen as good news for the market rather than the inverse relationship borne out of the Fed’s decision-making process. That being said, the equity markets in particular are clearly at such lofty heights in part due to the creation of liquidity under Bernanke’s stewardship. This calls into question whether such levels would be warranted should we simply view the markets in a direct relationship with the strength of the economy and businesses.

In European markets, the impact of the US decision is likely to remain the chief topic as traders continue to decipher what this means for the future. However, there is some movement in the form of the retail sales figure out of the UK due in the morning. The market consensus points towards a move back into positive growth for the measure, with 0.7% expected following a figure of -0.3% in October.

The European indices are expected to open higher, with the FTSE100 +62, DAX +82 and the CAC +43 points.
 
US Opening Call from Alpari UK on 19 December 2013

US data in focus following first Fed taper

Today’s US opening call provides an update on:

* European markets higher despite $10 billion taper;
* Commitment to low interest rates eases concerns over taper;
* Thin volumes expected heading into yearend;
* Economic data in focus this afternoon.

Those who thought tapering would be bad for equity markets may be baffled this morning, with European indices flying higher following a record close for both the S&P and the Dow.

So far I’ve seen many explanations for this response in the markets, including a taper being priced in despite most surveys suggesting otherwise and investors being numb to the taper after months of speculation. I’m not convinced that either of these really explains it.

In September we saw some heavy selling in equities, driven largely by fears that the first taper would signal an earlier than expected rise in interest rates further down the line. Fed Chairman Ben Bernanke clearly stated yesterday that while the unemployment threshold for an interest rate hike would remain at 6.5%, the first increase would come well after this threshold had been hit.

These reassurances around interest rates effectively offset the negative implications on the markets of less asset purchases, leaving plenty of reason to continue to buy in this cheap money environment. As long as the Fed continues to stand by this promise, we may avoid a sharp pull back in the markets.

As we approach the holiday season, things are likely to get much quieter. We could see more reaction between now and the end of the week to yesterday’s decision, but trading volumes are likely to get very thin, especially next week.

There is some more economic data being released which may create a bit of a stir in the markets. With the first taper out of the way, it will be interesting to see how traders view the news now, will good news be good news once again? Or are we destined to be stuck in the good news is bad news scenario for another six months?

Of note today, we have initial jobless claims being released before the opening bell. These are expected to be much lower than last weeks unexpected jump to 368,000, at around 334,000. Also being released today is the existing home sales for November and the Philly Fed manufacturing index.

Ahead of the open we expect to see the S&P down 2 points, Dow down 12 points and the NASDAQ down 2 points.
 
UK Opening Call from Alpari UK on 20 December 2013

European data in focus as chaotic week draws to a close

Today’s UK opening call provides an update on:

* German consumer confidence seen remaining at six year highs;
* UK third quarter growth expected to be confirmed at 0.8%;
* US annualised third quarter growth expected to remain unchanged at 3.6%;
* Beware of triple witching today.

With the big “will they or won’t they” FOMC meeting now behind us, markets are expected to be much quieter in the lead up to Christmas, with trading volumes significantly reduced and the economic calendar looking very thin.

There’s still a few economic announcements today worth keeping an eye on, although a couple of them are final revisions to previous releases which tends to reduce the impact they have on the markets. First up is the German Gfk consumer confidence survey, which is expected to remain at six year highs of 7.4.

Big efforts are currently being made in Germany to increase consumer spending, in the hope that it will lead to the country importing more goods from other eurozone countries and aid in their recoveries. One example of this will be the increase in the minimum wage, which will both help other countries become more competitive with Germany while also giving Germans more cash to spend, hopefully on imported goods from Greece or Spain etc.

This rising consumer confidence that we’re seeing is hopefully a sign that these efforts are working and the rebalancing of the eurozone is finally underway. Going forward we will hopefully see this reflected more in trade balance figures, with Germany’s trade surplus, which is currently at record highs, falling which will hopefully then bring down the trade deficits of other eurozone members.

The final revision for UK GDP is expected to confirm that the country grew by 0.8% in the third quarter, leaving it on course to record the strongest growth of any of the major Western economies this year. This is quite unbelievable when you consider that it was only this year that the country was in crisis and at risk of falling into a triple dip recession.

Not only did that never materialise, but the double dip has now been revised away and people are more focused on when the Bank of England will raise interest rates, rather than what it will do to stop another downturn. If this momentum can be carried into 2014, it could be a very good year for the UK.

Next up we have the final revision of the US third quarter GDP figure. On an annualised basis, this is expected to remain at 3.6% following the upward revision a couple of weeks ago, that undoubtedly contributed to the FOMC’s decision on Wednesday to reduce its asset buying program by $10 billion. In fact, Fed Chairman Ben Bernanke highlighted this, alongside improvements in the labour market as one of the reasons for the taper.

Finally, we have the preliminary reading of the eurozone consumer confidence figure for December. This is expected to remain deep in contraction territory at -15.4, highlighting the huge pessimism among consumers in the eurozone still. That said, we are still seeing gradual improvements here in the long term which is still a positive development. The eurozone crisis is still got a long way to go and the recovery is going to be very gradual, so this data is actually very consistent with expectations.

One more thing worth noting is that today is one of the four occasions in the year when we have a triple witching. What this means is that contracts for stock index futures, stock index options and stock options all expire today. This can create a surge in volatility, particularly towards the end of the day.

Ahead of the open we expect to see the FTSE up 22 points, the CAC up 21 points and the DAX up 34 points.
 
US Opening Call from Alpari UK on 20 December 2013

US GDP in focus as stocks look to end on a high

* Today’s US opening call provides an update on:
* Stocks look to continue strong week;
* Trading volumes likely to fall significantly next week;
*US GDP and eurozone consumer confidence figures released today.

It’s been a surprisingly good week for stocks, under the circumstances, and it looks set to continue today with futures pointing to a higher open on Wall Street.

Wednesday’s decision by the FOMC to reduce its monthly asset purchases came as a shock to many, with surveys beforehand showing up to 90% of people anticipating no taper. Considering previous reactions to the possibility of tapering, many would have expected the response to be negative.

However, the commitment from the Fed to maintain low interest rates until unemployment falls well below 6.5% completely offset the disappointment from the taper, and was clearly seen by investors as preferential to it. While the threshold wasn’t technically moved, it clearly has been in the minds of the FOMC which has provided comfort to investors.

These gains may continue in the coming weeks, although with the holiday season now upon us, trading volumes will be significantly reduced. The economic calendar will also provide less direction for the markets, making any significant moves unlikely.

The only noteworthy economic release on Friday will be the final revision to the third quarter US GDP figure, which is expected to remain unchanged at 3.6%, on an annualised basis. Any upward revision to this will just be further evidence that the US is recovering well and the FOMC was correct to scale back its asset purchases.

Also being released today will be the eurozone consumer confidence figure, which is expected to remain at -15. While this is still deep in negative territory, highlighting how pessimistic consumers still are, it’s still far better than it was earlier this year. Clearly there is still a long way to go with the eurozone recovery, but it is headed in the right direction, and that is the important thing.

Ahead of the open we expect to see the S&P up 2 points, Dow up 19 points and the NASDAQ up 5 points.
 
Opening Call from Alpari UK on 24 November 2013

Markets set for quiet session on Christmas Eve

With it being Christmas Eve, we will obviously get the usual lack of volume, with trading floors emptying out at midday with people looking to brave the horrendous weather conditions to get home to their families. However with US markets still trading, and some economic data coming out there is as always still something for traders to focus on.


Forex markets will be looking to carry on with the movements from yesterday as the Yen yet again comes into focus. All eyes are going to focus on US data though as durable goods and housing data is released. USDJPY will be looking for something to boost it to test yesterdays highs at 104.40. something with a little more gusto could well see highs from last Friday (a measly 20 pips) given a test.

With a range today of 20 pips its not looking too much more exciting for EURUSD. A positive target today for the pair is that of yesterday’s highs at 1.3715, while we are currently sitting on support of the last few days at 1.3670.

GBPUSD has seen a little more movement this morning with the bulls coming back in and pushing cable back above today’s major support at 1.6360, with the a move now open up and US numbers expected later today thenw e could be looking at targets at support of 1.6375 and more likely 1.6390. However we have to be careful with anything to do with US data at the moment and that is only cause it has been so positive. Low volume can sometimes breed volatility and we could well see that is today’s US data continues its recent positive path of very strong readings.

European stock markets headed for a fifth straight day of gains in thin holiday trade on Tuesday, as investors waited for durable-goods orders data from the U.S. The Stoxx Europe 600 index climbed 0.2% to 323.90, after closing at the highest level since early December on Monday. Several country-specific indexes were closed for the Christmas holidays, including Germany’s DAX 30 index , while most others were scheduled to close after lunch. The U.K.’s FTSE 100 index rose 0.3% to 6,699.38 and France’s CAC 40 index added 0.2% to 4,222.93. Shares of Segro PLC rose 0.3% in London after the property investment firm said it completed the disposal of the Neckermann site for 46 million euros ($63 million). Oil firms were also higher, with shares of BP PLC up 0.7% and BG Group PLC 0.8% higher.

ASIA: MARKETS - Japanese shares hit a six-year high Tuesday, helped by a weaker yen and propelled steadily upward as investors looked to developed Asia for returns, indicating growing faith in Japan’s reform agenda. The Nikkei Average was 0.7% higher following a national holiday Monday, bringing its year-to-date gains to 53.8% and making it by far Asia’s top performer. The gains followed another strong performance in U.S. stocks, which advanced for the fourth-straight session, with the Dow Jones Industrial Average closing at a record high for the 48th time this year. Chinese stocks traded higher for a second consecutive day, cementing a recovery from over two weeks of losses despite a stubborn cash crunch that has led interbank lending rates to hit a six-month high, starving the system of liquidity. The stresses began to ease Tuesday, with the benchmark seven-day repurchase agreement rate down to 5.5% from 8.94% Monday, releasing cheaper cash into the financial system and buoying markets. The mainland’s Shanghai Composite Index managed to achieve gains of 0.7% by the middle of the day. Hong Kong’s Hang Seng Index gained 1.1%. Shares in Australia gained for a fourth-straight session, with the S&P/ASX 200. After a slow start, Korea’s Kospi rose 0.4%. New Zealand’s benchmark index was a strong performer for a second day running, rising 1% to a three-week high. Markets in Australia, New Zealand, Singapore and Hong Kong were all due to close early Tuesday, to break for the Christmas holiday.
 
Daily Market Update - 27 December 2013 - Alpari UK

http://www.youtube.com/watch?v=l0hZngZ8860


00:14 - Markets continue Santa rally
00:30 - Japanese inflation shows positive movement towards 2% target
02:57 - Obama signs off budget deal which reduces the chances of a January shutdown
03:58 - US 10y bond yields hit 3% for first time since 2011.
For further news and analysis, check out the Alpari newsroom at
http://www.alpari.co.uk/newsroom/
 
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UK Opening Call from Alpari UK on 30 December 2013

Santa rally in full swing as we approach the end of the year

Today’s UK opening call provides an update on:

* Santa rally in full swing as we approach the end of the year;
* Another quiet week expected in the markets;
* Rise in UK house prices showing no signs of slowing;
* US session also expected to be relatively quiet.

The rally once again saw the Dow, S&P and DAX posting record highs while the FTSE continued to edge ever closer to a record high of its own. We should be a little careful though as these gains have come at a time when trading volumes have dropped significantly, owing to the festive period, which can sometimes be followed by sharp reversals as volumes pick up again.

That said, January has historically been a good month for equity markets, particularly in recent years, so this aggressive rally may just be in anticipation of this trend continuing. In fact, many believe that the Santa rally is just this, investors being proactive in anticipation of the “January effect”, as opposed to it being down to Christmas bonuses being invested into the markets, or a more positive feeling generally among investors, as others would suggest.

As for today, European indices are seen opening relatively pretty much in line with Friday’s closing levels. Trading volumes are expected to remain low for most of this week, if not all of it, with another bank holiday coming on Wednesday. Volumes on Monday and Tuesday should be particularly low, as traders extend their holiday’s from last week through to the end of the year.

Not helping these lower trading volumes is the fact that the economic calendar is looking so thin. We have a few low impact releases this morning, starting with UK Nationwide house prices for December. This is expected to show house prices up 0.7% compared with November and 7.1% compared with the same month last year. This is fairly consistent with recent data which suggests the recovery in the housing market is showing no signs of slowing.

It’s still a little early to say whether this is something we should be concerned about. Some suggest we’re simply creating another housing bubble in order to get the economy moving again and distract away from the longer term issues that still face the country. On the other hand, a short term boost in the housing market, as long as that is all it is, could be what the economy needs in order to give consumers the confidence to spend again which will hopefully lead to more hiring and investment from businesses.

Also being released this morning we have the Spanish retail sales for November and the Italian business confidence figure, which is expected to rise to 99 from 98.1 in November. After this it’s over to the US, where we’re expecting a similarly quiet session. The economic calendar here is also looking very light, with the only notable release being the November pending home sales figure, which is expected to show a monthly increase of 1%.

Ahead of the open we expect to see the FTSE down 7 points, the CAC down 2 points and the DAX flat.
 
US Opening Call from Alpari UK on 30 December 2013

US economic data in focus on Monday

Today’s US opening call provides an update on:

* Lower trading volumes continue this week;
* US pending home sales the highlight of today;
* Manufacturing data also eyed;
* No reason to doubt that the January effect will continue to guide markets higher.

It’s been a very quiet start to the week so far, which is hardly surprising given the time of year.

As we tend to see around this time, trading volumes have been very low and this is likely to continue into year end, with many traders extending their holidays a couple of extra days. This isn’t helped by the lack of catalysts in the markets around this time of year, with the economic calendar looking very light and corporate earnings season not starting for a couple more weeks.

There is a couple of pieces of data being released in the US on Monday, although both are unlikely to have much of an impact on the markets. The first is the pending home sales figure for November, which is expected to show a 1% month on month increase.

This would be very positive for the US as it would bring an end to the five consecutive months of falling sales, which came following the rise in mortgage rates in the middle of this year. That said, this may only be a slight blip in the data with rates expected to rise further next year as the Fed brings an and to its quantitative easing program. It will be interesting to see how home buyers respond to these changes in rates, with some potentially being deterred, while others may try and get in early before they rise further.

The other notable release will be the Dallas Fed manufacturing business index, which has fallen quite significantly in the last months. The manufacturing sector is expected to be one of the better performing in 2014, as consumer spending picks up with the improving economy and the global recovery gathers momentum. This could begin to be reflected as early as the December figure, which is released shortly after the opening bell.

Aside from this things will be very quiet. That said, this didn’t stop indices hitting record highs on numerous occasions last week, with the S&P and Down doing this on numerous occasions. I see no reason why this won’t continue today as the Santa rally continues into the final couple of trading sessions of the year.

January has historically been a good year for the markets, particularly in the last couple of years, which is what many see as the main reason for the Santa rally. It will be interesting to see if we’ll see the same in 2014 in the face of Fed tapering. I imagine this will bring added importance to corporate earnings which have been somewhat overlooked thanks to the Fed’s loose monetary policy. The last week in the markets has left little reason to doubt that the January effect will arrive in the markets in full force.

Ahead of the open we expect to see the S&P up 2 points, Dow up 16 points and the NASDAQ flat.
 
UK Opening Call from Alpari UK on 31 December 2013

Quiet session expected ahead of New Year bank holiday

Today’s UK opening call provides an update on:

* Very quiet day expected on Tuesday;
* Record highs still being hit in indices despite low trading volumes;
* No economic data being released in Europe.

It’s going to be another very quiet day in the financial markets on Tuesday, with many European markets only opening for a half day while Germany’s DAX is closed all day, due to a bank holiday in the country.

Trading volumes have already been extremely low over the last week or so, which is not unusual around this time of year. However, with many exchanges closing early and others not opening at all, they should be even lower today. That said, lower trading volumes do not mean we don’t get any significant moves in the market, as seen in equity markets across Europe and the US, where the DAX, Dow and S&P have repeatedly hit record highs, while the FTSE in the UK is not far off its own.

Clearly, the FOMC’s decision to begin scaling back its quantitative easing program a couple of weeks ago is still providing investors with the confidence to buy into the rally. There were concerns that even a small reduction in purchases would bring an end to the bull run in equities, but it would appear that investors are more concerned with interest rates than purchases, which the Fed claimed would remain at record lows until well after the 6.5% unemployment threshold is reached.

With this concern now out the way, for now at least, investors can begin to focus on the fundamentals again, rather than what the Fed is doing. That said, this is a lot easier when we have economic data being released or companies reporting earnings, something that is severely lacking again today.

In Europe, we have no significant pieces of data being released, while the US offers only slightly more, with the release of the Chicago PMI, which is expected to fall slightly to 61, and the December consumer confidence figure, which is expected to rise to 76 from 70.4.

Things should pick up a lot on Thursday, and much more again next week, as traders return from their festive breaks and immerse themselves in the markets again ahead of what is likely to be a very interesting year. Thursday also brings with it a raft of economic releases, starting with manufacturing surveys from all across Europe.

Ahead of the open we expect to see the FTSE down 3 points and the CAC flat.
 
US Opening Call from Alpari UK on 31 December 2013

Chicago PMI and consumer confidence key today

Today’s US opening call provides an update on:

* Another quiet session expected;
* Investors have little to focus on with monetary and fiscal issues apparently in order;
* Many European markets closing before the opening bell in the US;
* Chicago PMI and consumer confidence key today.

It’s going to be another very quiet day in the financial markets on Tuesday, with trading volumes remaining at very low levels and traders looking forward to things picking up later this week and next.

It’s not unusual for trading volumes to take a hit at this time of year, as traders spend time with their families instead of in front of their desk. There’s also a severe lack of catalysts for the markets, with the economic calendar offering us very little and the start of corporate earnings season just under a couple of weeks away.

Last year investors still had the fiscal cliff to worry about, which was really driving market sentiment at the time, but that is not the case this year. This time around the US appears to have got its fiscal house in order with plenty of time to spare, to the relief of the markets and the ratings agencies. Maybe those in Congress are finally learning from the mistakes of the past.

The Fed has also played its part in all of this, removing a huge amount of uncertainty from the markets last week when it announced its first reduction in asset purchases, from $85 billion to $75 billion. At the same time it laid out its plans for bringing the quantitative easing program to an end altogether later on in 2014, providing the transparency and certainty that investors have long sought after. Although I’m sure confusion will arise again throughout next year as mixed messages are sent and investors misinterpret those that are clear, as we saw repeatedly this year.

With all this in mind, there’s very little left to drive the markets today. What’s more, the German DAX is closed all day today, London stock markets close before the US open and many of the other European markets are only open for part of the day. This is hardly going to help those trading volumes.

For those still involved, there are a couple of economic figures being released that could be of interest. The Chicago PMI, a measure of business conditions, will be released shortly after the opening bell on Wall Street. This is expected to fall slightly from 63 to 61.

Following this is the release of the December consumer confidence figure, which is expected to rise to 76 from 70.4 in November. Given how important the consumer is to the US economy, this figure will probably be followed closely for signs of improvement as we head into what is going to be a huge year for the US.

Ahead of the open we expect to see the S&P flat, Dow down 3 points and the NASDAQ up 2 points.
 
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