Alpari UK
Experienced member
- Messages
- 1,502
- Likes
- 5
UK Opening Call from Alpari UK on 10 July 2014
Good Morning Folks!
Asian stocks finally managed to post some gains overnight as markets look set for a more positive session after a week that has seen equity markets retreat from their all-time highs. The positive performance seen was helped by strong import and export numbers out of China and solid unemployment readings out of Australia. Stocks gained in Asia apart from Japan where the Nikkei suffered a moderate fall. Today’s session is still likely to be dominated by the talk of earnings season in the US, however with the busiest day of the week on the economic calendar in front of us there will be no lack of news flow for traders to get their teeth stuck into.
The UK will be a major focus today as we get the BOE interest rate decision. Of course expectations are for no change at today’s meeting, but recent rumours of a rate hike in the second half of 2014 have been gathering pace of late. If we are to get no change in policy today, which is as expected then the vote counts at the meeting minutes will take on added importance. Talks of a rate hike in the next couple of months may have been gathering pace, but currently the voting remains stuck at a solid 0-0-9 in favour of leaving fiscal policy unchanged. For the potential rate hike to be taken seriously we will have to start seeing a change in this voting pattern with at least a couple of MPC members voting for a change. As mentioned already a number of times this week, the equity market gains we have seen are based of very weak foundations, being built during a time of low volatility and even lower volume. So it could well be the case that we don’t need a rate hike to spook the markets and that a couple of committee members changing their vote will be enough to see the markets plummet.
Last night saw the release of the Fed meeting minutes and it was announced that Janet Yellen and the Fed have been contemplating a full exit from the asset purchasing plan that has been in place. The minutes showed that the Fed plan to end the asset purchasing plan in October and have also come up with a plan to manage the increase of interest rates. Interestingly the minutes mentioned that the members were concerned that the recent low volatility in financial markets showed that investors were not factoring in a more hawkish approach from central banks. This clearly shows that the Fed are also worried about the weak foundations the equity market rally is based on and that the gains could unravel at lightning speed if something was to catch them of guard. It seems there is an overall complacency from traders and investors at the moment and that no one will take heed of the warnings until markets finally do show this is a serious matter by posting huge declines.
Overall today the BoE will take centre stage but with a whole host of CPI readings out of the Eurozone both today and tomorrow and earnings from the US it will be a perfect day for an increase in volume and volatility as traders head towards the weekend. Ahead of the open we expect to see the FTSE 100 open higher by 7 points and the German Dax higher by 11 points.
Good Morning Folks!
Asian stocks finally managed to post some gains overnight as markets look set for a more positive session after a week that has seen equity markets retreat from their all-time highs. The positive performance seen was helped by strong import and export numbers out of China and solid unemployment readings out of Australia. Stocks gained in Asia apart from Japan where the Nikkei suffered a moderate fall. Today’s session is still likely to be dominated by the talk of earnings season in the US, however with the busiest day of the week on the economic calendar in front of us there will be no lack of news flow for traders to get their teeth stuck into.
The UK will be a major focus today as we get the BOE interest rate decision. Of course expectations are for no change at today’s meeting, but recent rumours of a rate hike in the second half of 2014 have been gathering pace of late. If we are to get no change in policy today, which is as expected then the vote counts at the meeting minutes will take on added importance. Talks of a rate hike in the next couple of months may have been gathering pace, but currently the voting remains stuck at a solid 0-0-9 in favour of leaving fiscal policy unchanged. For the potential rate hike to be taken seriously we will have to start seeing a change in this voting pattern with at least a couple of MPC members voting for a change. As mentioned already a number of times this week, the equity market gains we have seen are based of very weak foundations, being built during a time of low volatility and even lower volume. So it could well be the case that we don’t need a rate hike to spook the markets and that a couple of committee members changing their vote will be enough to see the markets plummet.
Last night saw the release of the Fed meeting minutes and it was announced that Janet Yellen and the Fed have been contemplating a full exit from the asset purchasing plan that has been in place. The minutes showed that the Fed plan to end the asset purchasing plan in October and have also come up with a plan to manage the increase of interest rates. Interestingly the minutes mentioned that the members were concerned that the recent low volatility in financial markets showed that investors were not factoring in a more hawkish approach from central banks. This clearly shows that the Fed are also worried about the weak foundations the equity market rally is based on and that the gains could unravel at lightning speed if something was to catch them of guard. It seems there is an overall complacency from traders and investors at the moment and that no one will take heed of the warnings until markets finally do show this is a serious matter by posting huge declines.
Overall today the BoE will take centre stage but with a whole host of CPI readings out of the Eurozone both today and tomorrow and earnings from the US it will be a perfect day for an increase in volume and volatility as traders head towards the weekend. Ahead of the open we expect to see the FTSE 100 open higher by 7 points and the German Dax higher by 11 points.
Alpari UK
Experienced member
- Messages
- 1,502
- Likes
- 5
US Opening Call from Alpari UK on 10 July 2014
US futures slide ahead of jobless claims data
• US futures tumble following similarly weak European session;
• Dovish Fed ensures stocks will remain high in the coming months;
• Chinese trade balance figures disappoint.
• Weekly jobless claims in focus.
Another negative European session is also weighing on risk appetite in the US ahead of the opening bell on Wednesday, with the S&P seen opening 17 points lower, the Dow 142 points lower and the Nasdaq 36 points lower.
This comes following a fairly positive US session on Wednesday, where investors were boosted by the dovish tone of the Fed minutes. Despite US economic data dramatically improving in the second quarter and the outlook being equally as positive, the Fed maintained its dovish stance claiming rates will remain near zero for a considerable time after the end of its quantitative easing program.
This is exactly what investors wanted to hear and what they had been banking on during the entire period of strong numbers. When investors begin to price in tighter policy, we can see a more negative response in equity and bond markets to strong data but last Thursday’s incredible jobs report prompted none of that. Investors instead cheered the results and stocks soared to record highs. With the Fed maintaining this dovish stance on rates, this may continue in the coming months.
That doesn’t appear to have provided much comfort today though, with investors currently adopting a more risk averse stance. The inability for the Dow to hold above 17,000 on Wednesday or the S&P to break through 2,000 may be seen as a red flag among investors that we’re not yet ready for that next leg higher and as a result, we’re going to see profit taking near these levels for now.
One of the things weighing on sentiment this morning has been the Chinese trade balance figures overnight, which fell short of expectations due to lower exports. The slowdown in the eurozone recovery could be responsible for a portion of this, with figures this morning acting as a further reminder that while things may be better than they have been in the past, there is still a long hard road ahead. Industrial production figures for Italy and France showed a significant decline in May despite expectations for a small rise.
As we near the end of a fairly quiet week on the economic calendar, there is a couple of important economic readings scheduled for release today. In particular, weekly jobless claims which have been a consistent strong point for the US this year. Again, we’re expecting another good reading, 316,000, which further supports the view that the US is well on its way to a strong recovery this year.
US futures slide ahead of jobless claims data
• US futures tumble following similarly weak European session;
• Dovish Fed ensures stocks will remain high in the coming months;
• Chinese trade balance figures disappoint.
• Weekly jobless claims in focus.
Another negative European session is also weighing on risk appetite in the US ahead of the opening bell on Wednesday, with the S&P seen opening 17 points lower, the Dow 142 points lower and the Nasdaq 36 points lower.
This comes following a fairly positive US session on Wednesday, where investors were boosted by the dovish tone of the Fed minutes. Despite US economic data dramatically improving in the second quarter and the outlook being equally as positive, the Fed maintained its dovish stance claiming rates will remain near zero for a considerable time after the end of its quantitative easing program.
This is exactly what investors wanted to hear and what they had been banking on during the entire period of strong numbers. When investors begin to price in tighter policy, we can see a more negative response in equity and bond markets to strong data but last Thursday’s incredible jobs report prompted none of that. Investors instead cheered the results and stocks soared to record highs. With the Fed maintaining this dovish stance on rates, this may continue in the coming months.
That doesn’t appear to have provided much comfort today though, with investors currently adopting a more risk averse stance. The inability for the Dow to hold above 17,000 on Wednesday or the S&P to break through 2,000 may be seen as a red flag among investors that we’re not yet ready for that next leg higher and as a result, we’re going to see profit taking near these levels for now.
One of the things weighing on sentiment this morning has been the Chinese trade balance figures overnight, which fell short of expectations due to lower exports. The slowdown in the eurozone recovery could be responsible for a portion of this, with figures this morning acting as a further reminder that while things may be better than they have been in the past, there is still a long hard road ahead. Industrial production figures for Italy and France showed a significant decline in May despite expectations for a small rise.
As we near the end of a fairly quiet week on the economic calendar, there is a couple of important economic readings scheduled for release today. In particular, weekly jobless claims which have been a consistent strong point for the US this year. Again, we’re expecting another good reading, 316,000, which further supports the view that the US is well on its way to a strong recovery this year.
Alpari UK
Experienced member
- Messages
- 1,502
- Likes
- 5
Weekly market preview from Alpari UK – 14 July 2014
A busy week ahead in the markets following a particularly quiet one just gone. The return of substantial economic events out of the US is particularly encouraging for volatility, where Janet Yellen’s testimony at Tuesday’s monetary policy report is likely to take centre stage. In the UK, the announcement of employment data on Wednesday is likely to contribute to a volatile start to the week. Meanwhile, the eurozone inflation rate will no doubt be absolutely key following the introduction of various easing measures by Mario Draghi.
In Asia, the release of Chinese GDP on Wednesday will provide a substantial degree of interest as the impact of the 2014 slowdown looks set to lower growth expectations for Q2. Meanwhile, the Japanese focus will be dominated by monetary policy statement on Tuesday where expectations of further easing are driven by a slowdown in the economy following the sales tax hike in April.
US
An interesting week ahead for the US economy, where the release of retail sales and consumer sentiment data is joined by two major testimonies from Fed chair Janet Yellen. It is those two speeches from Yellen which I believe could significantly move markets, as she addresses the Senate Banking Committee for the Fed’s semi-annual monetary policy report. The focus within markets has well and truly shifted away from asset purchases and towards interest rates in recent months and this is likely to be key this week. The end of asset purchases in October is now all but certain, yet there remains significant uncertainty surrounding the timeline for interest rate hikes. Yellen has been keen to stress that rates will rise gradually and there will likely be some time between the end of asset purchases and the start of the rate hikes. However, with economic indicators pointing to a booming US economy, there is the potential for this timeline to be pushed forward somewhat and this is what the markets are looking for to drive volatility. Personally I believe that rates will rise in Q1 2015 which is likely to remain as a timeline despite strong macro figures. The Fed has been very careful not to shock the markets in the past and Yellen will not want to spark a major sell-off should she not prepare the markets properly.
On Tuesday, the retail sales figure will be hugely important at a time when the economic picture is really looking positive for H2. The retail sales data is crucial because it is a quantitative representation of consumer behaviour in an economy largely driven by domestic consumption. As such, strong retail sales give a great gauge of where GDP growth is moving in that quarter. This release also has a qualitative element which reflects the fact that people spend money when they are both confident in their own situation and the future conditions of the economy. Thus should we see a strong retail sales release, it leads me to believe that consumers see economic growth continuing for some time and employment conditions also being supportive to major expenditure. This month’s release is expected to move higher towards 0.6% following the 0.3% seen for April. That would reflect a fifth consecutive positive figure which goes some way to explaining the strength we’ve seen in indicators such as GDP recently.
Finally, the consumer sentiment survey released on Friday gives a more qualitative focused release of consumer attitudes. This is the July reading, compared to the retail sales figure which is for May. Subsequently while it is not something which reflects the spending behaviour, the timing of it means that we can gauge how July retail sales data is going to look when it is released in two months. Given that a survey will typically not affect an economy in the way sales data would, I do not expect as much volatility. However, it is key in understanding how the likes of retail sales could move in the coming months. This month the markets are expecting a figure close to 83.2 following a figure of 82.5 last time round.
UK
An interesting week ahead in the UK, where the release the jobs report is preceded by a speech from the BoE governor Mark Carney. On Tuesday, Carney will face yet another treasury select committee hearing with the focus set to be upon financial stability. With that, we are more than likely to revisit the threats of the housing market and whether the steps introduced by the BoE at last months meeting will be adequate to stem the much discussed risks. Ultimately, the question may come down to whether the main tool that should be used is interest rates, thus pushing for a hike sooner rather than later. Given the changing perception of when rates are set to be hiked, we are still in a stage of price discovery as people seek to buy or sell according to any change in expectations of when rates are to rise. For this reason, any hints at sooner or later than expected rate hikes will likely drive market volatility.
On Wednesday, the release of the unemployment rate and claimant count data is going to be crucial in determining if this period of positivity is set to continue for the UK economy. The tumbling rate of unemployment last month really took the headlines as we reached 6.6% for the first time since March 2009. Given this major fall last month I do not expect to see any further drop this month, but it is just important that the figure does not rise yet again. Thus the focus could yet be the claimant count change, which is more of a detailed release. The markets expect to see very little change from last month’s 27.4k and in which case, the scene is set for a possible miss which could bring volatility. Thus I expect to see the unemployment rate remain at 6.6% with the focus possibly centred upon the claimant count figure.
Eurozone
A similar story to the other regions, where the existence of multiple major events means that there is a possibility of volatility within the markets. The first of these is the speech by Mario Draghi at the committee on economic and monetary affairs of the European Parliament. This testimony is predominantly focused upon monetary policy at the ECB which of course is one of the most likely drivers of volatility in the markets. With Draghi having recently implemented a whole raft of measures aimed at minimising the risk of deflation, it will be interesting to get some more details regarding those steps and what impact he expects them to make. However, the market focus will likely centre around the chance of a fully blown asset purchase scheme which ECB members have hinted as being a possibility down the line. Thus be sure to keep a look out for any discussion around this topic for potential volatility in the markets.
Later in the week, the eurozone CPI reading will shed more light on where the ECB’s core economic indicator stands. Of course, the implementation of several measures at the ECB means that even if we did get a further fall in inflation this time around, a kneejerk move from the ECB is highly unlikely. However, any shock fall could spark heightened expectations in the markets that asset purchases could be on their way or at least discussed and this means the markets will be following it very closely. That being said, the markets are looking for another figure of 0.5% to match last months release.
Asia & Oceania
Another week of note in Asia, where Japanese monetary policy and Chinese growth come to the fore. It is the release of Chinese GDP which will certainly grab the attention of the markets overnight on Wednesday. The slowdown throughout H1 within China has been discussed in depth with many worrying that the mix of debt and overcapacity meant we were going to see the powers that be leave the economy to cool off somewhat. However, the signs are pointing towards a recovery and move back to the strong growth we have become accustomed to. The most important indicator for the Chinese has always been GDP growth which is a sense of pride in an international realm, along with a signal to their domestic population that the ruling party is doing what is best for the country. For this reason, Wednesday’s reading is going to be crucial in determining exactly how much the recent slowdown has hurt their country and whether markets are satisfied that this will be temporary. Market expectations are for a flat figure of 7.4%, which is significantly down from the 7.7% seen at the back end of last year. However, should we see any movement either way it will be an opportune moment for the markets to gauge in what direction the economy is moving.
On Tuesday, the BoJ monetary policy stance looks set to come back into focus with their latest monetary policy decision. Recently, market calls for further QE have been largely ignored despite a weakening in many of the fundamentals off the back of April’s sales tax hike. It is worth bearing in mind that the Japanese sales tax of 8% still pales in comparison to some of the other major economies, with the UK VAT currently at 20%. For this reason, I do not see this move as being particularly restrictive for the economy and whilst the negative effect is not ideal, it is likely to be short term. However, it is more likely that the BoJ will be thinking about their currency and inflation levels as a reason to raise asset purchases further. With much of the geo-political conflict we have seen around the world, the Japanese yen has been a safe haven asset despite the ongoing printing of the yen from the BoJ. Thus the deterioration in the price has cooled somewhat despite the call from many within the markets for a rate of 120, compared to the current level of 101. That being said, I do not I do not expect any change from the BoJ at this meeting as they seek further data regarding where the economy is heading off the back of the sales tax hike. As things stands, the 2% inflation target does not seem attainable should the monetary policy remain the same given an end to the yen’s decline along with weakened consumer spending. However, it is most likely that the BoJ will look to move on this sentiment later rather than sooner in my opinion.
A busy week ahead in the markets following a particularly quiet one just gone. The return of substantial economic events out of the US is particularly encouraging for volatility, where Janet Yellen’s testimony at Tuesday’s monetary policy report is likely to take centre stage. In the UK, the announcement of employment data on Wednesday is likely to contribute to a volatile start to the week. Meanwhile, the eurozone inflation rate will no doubt be absolutely key following the introduction of various easing measures by Mario Draghi.
In Asia, the release of Chinese GDP on Wednesday will provide a substantial degree of interest as the impact of the 2014 slowdown looks set to lower growth expectations for Q2. Meanwhile, the Japanese focus will be dominated by monetary policy statement on Tuesday where expectations of further easing are driven by a slowdown in the economy following the sales tax hike in April.
US
An interesting week ahead for the US economy, where the release of retail sales and consumer sentiment data is joined by two major testimonies from Fed chair Janet Yellen. It is those two speeches from Yellen which I believe could significantly move markets, as she addresses the Senate Banking Committee for the Fed’s semi-annual monetary policy report. The focus within markets has well and truly shifted away from asset purchases and towards interest rates in recent months and this is likely to be key this week. The end of asset purchases in October is now all but certain, yet there remains significant uncertainty surrounding the timeline for interest rate hikes. Yellen has been keen to stress that rates will rise gradually and there will likely be some time between the end of asset purchases and the start of the rate hikes. However, with economic indicators pointing to a booming US economy, there is the potential for this timeline to be pushed forward somewhat and this is what the markets are looking for to drive volatility. Personally I believe that rates will rise in Q1 2015 which is likely to remain as a timeline despite strong macro figures. The Fed has been very careful not to shock the markets in the past and Yellen will not want to spark a major sell-off should she not prepare the markets properly.
On Tuesday, the retail sales figure will be hugely important at a time when the economic picture is really looking positive for H2. The retail sales data is crucial because it is a quantitative representation of consumer behaviour in an economy largely driven by domestic consumption. As such, strong retail sales give a great gauge of where GDP growth is moving in that quarter. This release also has a qualitative element which reflects the fact that people spend money when they are both confident in their own situation and the future conditions of the economy. Thus should we see a strong retail sales release, it leads me to believe that consumers see economic growth continuing for some time and employment conditions also being supportive to major expenditure. This month’s release is expected to move higher towards 0.6% following the 0.3% seen for April. That would reflect a fifth consecutive positive figure which goes some way to explaining the strength we’ve seen in indicators such as GDP recently.
Finally, the consumer sentiment survey released on Friday gives a more qualitative focused release of consumer attitudes. This is the July reading, compared to the retail sales figure which is for May. Subsequently while it is not something which reflects the spending behaviour, the timing of it means that we can gauge how July retail sales data is going to look when it is released in two months. Given that a survey will typically not affect an economy in the way sales data would, I do not expect as much volatility. However, it is key in understanding how the likes of retail sales could move in the coming months. This month the markets are expecting a figure close to 83.2 following a figure of 82.5 last time round.
UK
An interesting week ahead in the UK, where the release the jobs report is preceded by a speech from the BoE governor Mark Carney. On Tuesday, Carney will face yet another treasury select committee hearing with the focus set to be upon financial stability. With that, we are more than likely to revisit the threats of the housing market and whether the steps introduced by the BoE at last months meeting will be adequate to stem the much discussed risks. Ultimately, the question may come down to whether the main tool that should be used is interest rates, thus pushing for a hike sooner rather than later. Given the changing perception of when rates are set to be hiked, we are still in a stage of price discovery as people seek to buy or sell according to any change in expectations of when rates are to rise. For this reason, any hints at sooner or later than expected rate hikes will likely drive market volatility.
On Wednesday, the release of the unemployment rate and claimant count data is going to be crucial in determining if this period of positivity is set to continue for the UK economy. The tumbling rate of unemployment last month really took the headlines as we reached 6.6% for the first time since March 2009. Given this major fall last month I do not expect to see any further drop this month, but it is just important that the figure does not rise yet again. Thus the focus could yet be the claimant count change, which is more of a detailed release. The markets expect to see very little change from last month’s 27.4k and in which case, the scene is set for a possible miss which could bring volatility. Thus I expect to see the unemployment rate remain at 6.6% with the focus possibly centred upon the claimant count figure.
Eurozone
A similar story to the other regions, where the existence of multiple major events means that there is a possibility of volatility within the markets. The first of these is the speech by Mario Draghi at the committee on economic and monetary affairs of the European Parliament. This testimony is predominantly focused upon monetary policy at the ECB which of course is one of the most likely drivers of volatility in the markets. With Draghi having recently implemented a whole raft of measures aimed at minimising the risk of deflation, it will be interesting to get some more details regarding those steps and what impact he expects them to make. However, the market focus will likely centre around the chance of a fully blown asset purchase scheme which ECB members have hinted as being a possibility down the line. Thus be sure to keep a look out for any discussion around this topic for potential volatility in the markets.
Later in the week, the eurozone CPI reading will shed more light on where the ECB’s core economic indicator stands. Of course, the implementation of several measures at the ECB means that even if we did get a further fall in inflation this time around, a kneejerk move from the ECB is highly unlikely. However, any shock fall could spark heightened expectations in the markets that asset purchases could be on their way or at least discussed and this means the markets will be following it very closely. That being said, the markets are looking for another figure of 0.5% to match last months release.
Asia & Oceania
Another week of note in Asia, where Japanese monetary policy and Chinese growth come to the fore. It is the release of Chinese GDP which will certainly grab the attention of the markets overnight on Wednesday. The slowdown throughout H1 within China has been discussed in depth with many worrying that the mix of debt and overcapacity meant we were going to see the powers that be leave the economy to cool off somewhat. However, the signs are pointing towards a recovery and move back to the strong growth we have become accustomed to. The most important indicator for the Chinese has always been GDP growth which is a sense of pride in an international realm, along with a signal to their domestic population that the ruling party is doing what is best for the country. For this reason, Wednesday’s reading is going to be crucial in determining exactly how much the recent slowdown has hurt their country and whether markets are satisfied that this will be temporary. Market expectations are for a flat figure of 7.4%, which is significantly down from the 7.7% seen at the back end of last year. However, should we see any movement either way it will be an opportune moment for the markets to gauge in what direction the economy is moving.
On Tuesday, the BoJ monetary policy stance looks set to come back into focus with their latest monetary policy decision. Recently, market calls for further QE have been largely ignored despite a weakening in many of the fundamentals off the back of April’s sales tax hike. It is worth bearing in mind that the Japanese sales tax of 8% still pales in comparison to some of the other major economies, with the UK VAT currently at 20%. For this reason, I do not see this move as being particularly restrictive for the economy and whilst the negative effect is not ideal, it is likely to be short term. However, it is more likely that the BoJ will be thinking about their currency and inflation levels as a reason to raise asset purchases further. With much of the geo-political conflict we have seen around the world, the Japanese yen has been a safe haven asset despite the ongoing printing of the yen from the BoJ. Thus the deterioration in the price has cooled somewhat despite the call from many within the markets for a rate of 120, compared to the current level of 101. That being said, I do not I do not expect any change from the BoJ at this meeting as they seek further data regarding where the economy is heading off the back of the sales tax hike. As things stands, the 2% inflation target does not seem attainable should the monetary policy remain the same given an end to the yen’s decline along with weakened consumer spending. However, it is most likely that the BoJ will look to move on this sentiment later rather than sooner in my opinion.
Alpari UK
Experienced member
- Messages
- 1,502
- Likes
- 5
UK Opening Call from Alpari UK on 14 July 2014
Positive start as European markets seek to make up the losses
• Are we due a wider market correction?
• Mario Draghi faces the European Parliament
• A look ahead
A bullish start to the week is ahead for global markets if the overnight Asian session is anything to go by, with the MSCI Asia Pacific Index rising for the first time in 5 trading days. Last week’s Eurozone fears sparked via the Portuguese banking system appear to have subsided and the we are now faced with a busy week of economic releases that seek to bring about a renewed focus upon economic strength and monetary policy. European futures are pointing towards a positive open, with the FTSE100 +20, CAC +20 and DAX +46 points.
Today represents the lull before the storm, whereby trading is likely to be determined by the underlying sentiment within the markets accompanied by a mix of expectations for the week ahead. The major market correction everyone has been talking about seems to have subsided, for now. Instead giving way to a more calm and steady platform for the week. This by no means that there is no further weakness ahead for some of the major indices, given that each of the corrections seen since late 2013 having lost almost all of the previous gains, each time setting a new higher low yet crucially going on to reach a new higher high. This being the case, as long as price doesn’t fall below 6450 in the FTSE100, then I am not worried about a more drawn out bearish market.
However, the more interesting question is whether we should see more of a drawn out correction. The year 2014 has been characterised by further record and multiyear highs for all the major European and US markets. However, with the economic landscape only just reaching a place where we can truly feel a degree of confidence within the UK and US, this has always felt like a somewhat uneasy occurance. The price of the FTSE100 broke above the pre-crisis highs back in early May 2013, a time when US and UK unemployment stood at 7.5% and 7.8% respectively. Meanwhile UK GDP had just moved out of negative territory and output was expanding at a measly 0.3%. Thus it seems somewhat ironic that at the time when we should probably feel the most confident economically, the questions being asked regarding whether we are finally going to see that major correction which has alluded this bull market thus far. The fact is that we should have corrected a long time ago, yet with record low interest rates and easy money thanks to the likes of the Fed and BoE, the markets have essentially been running on empty for a year in the form of low volumes and volatility. The markets have weathered the start of tapering, a fully blown Eurozone crisis and potential US military involvement in Syria, Ukraine and now Iraq. I cannot see why a scare in the Portuguese banking system is going to be the catalyst to finally bring that major correction we have been calling for since last May. However, with markets behaving in such unconventional ways, who it to say that any final correction is going to make any sense.
Today’s only event of note is going to come later in the day, where ECB governor Mario Draghi faces the European Parliament as they seek to better understand the monetary policy stance he currently holds and exactly what the ECB expects the future to hold for economic prospects. Given that the meeting centres around monetary policy, it is likely that we will see significant questioning around both the measures Draghi recently implemented, along with the one he didn’t. Unfortunately the markets seem somewhat transfixed with the idea of full scale asset purchases within the Eurozone and the Portuguese banking fears seen last week are only going to add to this. The ECB has recently warmed to the idea, yet Mario Draghi has a penchant for talk and it is highly likely that he sees an openly accommodative stance on the matter to reap half the benefits as actually doing it. Thus should he discuss the possibility of a QE programme, I would see him doing so with a view to devaluing the euro and boosting markets. It just does not seem likely in a collection of countries such as the Eurozone where so many differing economies are represented.
The week ahead looks jam packed full of major events to hopefully bring about that volatility everyone craves. One of the main themes will likely be upon Chinese growth, with the GDP release due on Wednesday. The recent uptick in economic indicators points towards the end of the slowdown seen in recent months, yet a Q2 GDP release will give us a much clearer idea of how much their economy has been affected. Meanwhile, Janet Yellen has a busy week ahead as she testifies on the semi-annual monetary policy report in Washington. The markets have been second guessing as to when interest rates are set to rise and we remain within a period of price discovery whereby any perceived change in Yellen’s outlook can dramatically impact the markets. When we finally do see that interest rate hike announced, it is likely to be very small, yet much like the start of tapering, it must be well handled or else it has the potential to bring the markets dramatically lower.
Positive start as European markets seek to make up the losses
• Are we due a wider market correction?
• Mario Draghi faces the European Parliament
• A look ahead
A bullish start to the week is ahead for global markets if the overnight Asian session is anything to go by, with the MSCI Asia Pacific Index rising for the first time in 5 trading days. Last week’s Eurozone fears sparked via the Portuguese banking system appear to have subsided and the we are now faced with a busy week of economic releases that seek to bring about a renewed focus upon economic strength and monetary policy. European futures are pointing towards a positive open, with the FTSE100 +20, CAC +20 and DAX +46 points.
Today represents the lull before the storm, whereby trading is likely to be determined by the underlying sentiment within the markets accompanied by a mix of expectations for the week ahead. The major market correction everyone has been talking about seems to have subsided, for now. Instead giving way to a more calm and steady platform for the week. This by no means that there is no further weakness ahead for some of the major indices, given that each of the corrections seen since late 2013 having lost almost all of the previous gains, each time setting a new higher low yet crucially going on to reach a new higher high. This being the case, as long as price doesn’t fall below 6450 in the FTSE100, then I am not worried about a more drawn out bearish market.
However, the more interesting question is whether we should see more of a drawn out correction. The year 2014 has been characterised by further record and multiyear highs for all the major European and US markets. However, with the economic landscape only just reaching a place where we can truly feel a degree of confidence within the UK and US, this has always felt like a somewhat uneasy occurance. The price of the FTSE100 broke above the pre-crisis highs back in early May 2013, a time when US and UK unemployment stood at 7.5% and 7.8% respectively. Meanwhile UK GDP had just moved out of negative territory and output was expanding at a measly 0.3%. Thus it seems somewhat ironic that at the time when we should probably feel the most confident economically, the questions being asked regarding whether we are finally going to see that major correction which has alluded this bull market thus far. The fact is that we should have corrected a long time ago, yet with record low interest rates and easy money thanks to the likes of the Fed and BoE, the markets have essentially been running on empty for a year in the form of low volumes and volatility. The markets have weathered the start of tapering, a fully blown Eurozone crisis and potential US military involvement in Syria, Ukraine and now Iraq. I cannot see why a scare in the Portuguese banking system is going to be the catalyst to finally bring that major correction we have been calling for since last May. However, with markets behaving in such unconventional ways, who it to say that any final correction is going to make any sense.
Today’s only event of note is going to come later in the day, where ECB governor Mario Draghi faces the European Parliament as they seek to better understand the monetary policy stance he currently holds and exactly what the ECB expects the future to hold for economic prospects. Given that the meeting centres around monetary policy, it is likely that we will see significant questioning around both the measures Draghi recently implemented, along with the one he didn’t. Unfortunately the markets seem somewhat transfixed with the idea of full scale asset purchases within the Eurozone and the Portuguese banking fears seen last week are only going to add to this. The ECB has recently warmed to the idea, yet Mario Draghi has a penchant for talk and it is highly likely that he sees an openly accommodative stance on the matter to reap half the benefits as actually doing it. Thus should he discuss the possibility of a QE programme, I would see him doing so with a view to devaluing the euro and boosting markets. It just does not seem likely in a collection of countries such as the Eurozone where so many differing economies are represented.
The week ahead looks jam packed full of major events to hopefully bring about that volatility everyone craves. One of the main themes will likely be upon Chinese growth, with the GDP release due on Wednesday. The recent uptick in economic indicators points towards the end of the slowdown seen in recent months, yet a Q2 GDP release will give us a much clearer idea of how much their economy has been affected. Meanwhile, Janet Yellen has a busy week ahead as she testifies on the semi-annual monetary policy report in Washington. The markets have been second guessing as to when interest rates are set to rise and we remain within a period of price discovery whereby any perceived change in Yellen’s outlook can dramatically impact the markets. When we finally do see that interest rate hike announced, it is likely to be very small, yet much like the start of tapering, it must be well handled or else it has the potential to bring the markets dramatically lower.
Alpari UK
Experienced member
- Messages
- 1,502
- Likes
- 5
US Opening Call from Alpari UK on 14 July 2014
Draghi speech headlines quiet start to the week
• Slow start to the week seen but things will pick up tomorrow;
• Draghi speech the only notable event today;
• US retail sales and Yellen speech to come tomorrow.
This week offers plenty in terms of tier one economic data and some significant events, unfortunately though today is not one of those days. Despite this, the day has got off to a good start, with European indices posting strong gains and US futures pointing to a similarly positive open.
The last week was pretty grim for the markets as investors opted for a more risk averse approach. This meant European stocks continuing their recent slide and those in the US faltering at some big psychological levels. Today’s strong start ahead of a busy week may be a sign that the recent weakness is short-lived and more record highs are in store for the US.
As mentioned earlier, today is looking fairly quiet, with the only notable event to come being ECB President Mario Draghi’s speech on monetary policy in front of the Committee on Economic and Monetary Affairs of the European Parliament. Given that the ECB has only recently announced a large scale monetary stimulus program, this speech is unlikely to offer much in terms of the proximity of future stimulus efforts and what form they’re likely to come in.
Draghi may be questioned heavily on the selection of stimulus measures that the ECB opted for, given that they have come in for quite a lot of criticism by market participants. The consensus view has been that the ECB took the easy way out and many of the measures announced are going to have very little positive impact. I can’t imagine this therefore having much of a market impact, but as always with comments from a major central bank, you cannot write it off.
The first big day for the US comes tomorrow, with retail sales figures being released alongside manufacturing data. More important though is likely to be Fed Chairwoman Janet Yellen’s testimony on the semiannual monetary policy report before the Senate Banking Committee. Until now the Fed has refused to adopt a more hawkish tone despite the significant improvement in economic performance in the second quarter but that can only go on for so long. Eventually I expect Yellen to hint at a first rate hike in the first quarter of next year and when she does, investors may well freak out. That could well bring the end of these daily records being made and be the start of the next correction.
Ahead of the opening bell, the S&P is expected to open 7 points higher, the Dow 68 points higher and the Nasdaq 18 points higher.
Draghi speech headlines quiet start to the week
• Slow start to the week seen but things will pick up tomorrow;
• Draghi speech the only notable event today;
• US retail sales and Yellen speech to come tomorrow.
This week offers plenty in terms of tier one economic data and some significant events, unfortunately though today is not one of those days. Despite this, the day has got off to a good start, with European indices posting strong gains and US futures pointing to a similarly positive open.
The last week was pretty grim for the markets as investors opted for a more risk averse approach. This meant European stocks continuing their recent slide and those in the US faltering at some big psychological levels. Today’s strong start ahead of a busy week may be a sign that the recent weakness is short-lived and more record highs are in store for the US.
As mentioned earlier, today is looking fairly quiet, with the only notable event to come being ECB President Mario Draghi’s speech on monetary policy in front of the Committee on Economic and Monetary Affairs of the European Parliament. Given that the ECB has only recently announced a large scale monetary stimulus program, this speech is unlikely to offer much in terms of the proximity of future stimulus efforts and what form they’re likely to come in.
Draghi may be questioned heavily on the selection of stimulus measures that the ECB opted for, given that they have come in for quite a lot of criticism by market participants. The consensus view has been that the ECB took the easy way out and many of the measures announced are going to have very little positive impact. I can’t imagine this therefore having much of a market impact, but as always with comments from a major central bank, you cannot write it off.
The first big day for the US comes tomorrow, with retail sales figures being released alongside manufacturing data. More important though is likely to be Fed Chairwoman Janet Yellen’s testimony on the semiannual monetary policy report before the Senate Banking Committee. Until now the Fed has refused to adopt a more hawkish tone despite the significant improvement in economic performance in the second quarter but that can only go on for so long. Eventually I expect Yellen to hint at a first rate hike in the first quarter of next year and when she does, investors may well freak out. That could well bring the end of these daily records being made and be the start of the next correction.
Ahead of the opening bell, the S&P is expected to open 7 points higher, the Dow 68 points higher and the Nasdaq 18 points higher.
Alpari UK
Experienced member
- Messages
- 1,502
- Likes
- 5
UK Opening Call from Alpari UK on 15 July 2014
Further weakness ahead in Germany as ZEW dominates
• RBA minutes give few surprises
• BoJ also remains steady
• UK CPI unlikely to affect markets in a major way
• ZEW figures expected to highlight ongoing German weakening
• Yellen due to testify in US session
European markets are looking a little undecided ahead of the open as futures point towards a negative open despite another strong session overnight in the Asian markets. The release of a whole plethora of economic and monetary policy announcements today means that price will largely be driven by fundamental releases and thus as we go through the day a lot can change. As we stand, the FTSE100 is expected to open -8, CAC -5 and DAX -10 points.
A somewhat of a non-event overnight saw the Australian monetary policy minutes highlight the period of relative stability that the RBA is seeking for the economy. Given the transition away from a solely export led economy, towards one which is more dependent upon domestic consumption, it makes sense that interest rates remain low to stay accommodative towards investment at home. I expect to see this stance remain for some time now, with economic figures likely to pick up gradually in H2 given the expected resurgent strength of Chinese growth.
A similarly stable outlook from the BoJ too overnight saw their monetary policy remain steady at the current 60-70 trillion yen annual expansion of its monetary base. This comes despite the slowdown we have seen off the back of the sales tax hike back in April and begins to beg the question of whether we are going to see a rise in asset purchases at all. Today’s announcement also saw a moderate downgrade to growth forecasts with Japan GDP for 2014/15 now standing at 1% rather than the 1.1% projected back in April. However, one of the most notable events was the vote to throw out the proposition of making the 2% target a ‘medium-to-long term’ goal. Much has been made of whether Shinzo Abe will be able to reach this target in the near future as set out in his manifesto and the suggestion to push back on the timelines highlights the fact that it is becoming less and less likely to be hit in time. Unfortunately, it could take something like an increase in the rate of asset purchases to push CPI towards target and thus with the BoJ now throwing out the idea of moving the goalposts, it begs the question of how they will hit the target in time.
UK CPI comes back into focus today, with many viewing it as somewhat of a non-event given the current levels. It wasn’t so long ago that CPI stood around 3% and acted as a noose around the neck of Mark Carney when he first came to office. However, with current price inflation at 1.6%, it has hit somewhat of a sweet spot. Given the deflationary fears within the Eurozone, Carney will not want to see this fall too much further, especially at a time when he is considering a tighter monetary policy stance. Thus with forecasts pointing towards a fall to 1.5%, let’s hope it doesn’t fall yet further to begin causing a headache for the BoE.
Also later today, the ZEW economic sentiment surveys are expected to tell a story of shifting fortunes in the Eurozone, where German weakness is highlighted yet again. The German survey has been falling consistently for six months now, pulling back from the December high of 62 to todays expected reading of 28.0. Meanwhile, the Eurozone figure makes for a lot more easy reading, with expectations pointing towards a rise from 58.4 to 62.3. Unfortunately, despite the world cup win, German fortunes remain weak in the economic sphere, with poor factory orders, retail sales and unemployment claims pointing towards a slowdown in the region. Much of this has been expected given the extraordinarily strong Q1 that they seemed to have. However, if there is one thing that the Eurozone does not want it is a weak German economy pulling down growth. As sanctions are increased against Russia, the export figures from Germany are expected to wane further and thus there is no sign that we are out of the woods quite yet. Let’s just hope that the world cup beer sales make up for those unsold cars.
It is also worth noting that today represents the beginning of Janet Yellen’s semi-annual monetary policy testimony in Washington DC. To many this represents a major chance to gauge exactly where the Fed stand in relation to rates and thus we are expecting to see some market moves off the back of this. Given the strong jobs report seen earlier this month, there is a possibility of a more hawkish tone from Yellen. However, she is likely to wish to keep he cards close to her chest and thus it remains to be seen whether we will get anything too juicy out of this session.
Further weakness ahead in Germany as ZEW dominates
• RBA minutes give few surprises
• BoJ also remains steady
• UK CPI unlikely to affect markets in a major way
• ZEW figures expected to highlight ongoing German weakening
• Yellen due to testify in US session
European markets are looking a little undecided ahead of the open as futures point towards a negative open despite another strong session overnight in the Asian markets. The release of a whole plethora of economic and monetary policy announcements today means that price will largely be driven by fundamental releases and thus as we go through the day a lot can change. As we stand, the FTSE100 is expected to open -8, CAC -5 and DAX -10 points.
A somewhat of a non-event overnight saw the Australian monetary policy minutes highlight the period of relative stability that the RBA is seeking for the economy. Given the transition away from a solely export led economy, towards one which is more dependent upon domestic consumption, it makes sense that interest rates remain low to stay accommodative towards investment at home. I expect to see this stance remain for some time now, with economic figures likely to pick up gradually in H2 given the expected resurgent strength of Chinese growth.
A similarly stable outlook from the BoJ too overnight saw their monetary policy remain steady at the current 60-70 trillion yen annual expansion of its monetary base. This comes despite the slowdown we have seen off the back of the sales tax hike back in April and begins to beg the question of whether we are going to see a rise in asset purchases at all. Today’s announcement also saw a moderate downgrade to growth forecasts with Japan GDP for 2014/15 now standing at 1% rather than the 1.1% projected back in April. However, one of the most notable events was the vote to throw out the proposition of making the 2% target a ‘medium-to-long term’ goal. Much has been made of whether Shinzo Abe will be able to reach this target in the near future as set out in his manifesto and the suggestion to push back on the timelines highlights the fact that it is becoming less and less likely to be hit in time. Unfortunately, it could take something like an increase in the rate of asset purchases to push CPI towards target and thus with the BoJ now throwing out the idea of moving the goalposts, it begs the question of how they will hit the target in time.
UK CPI comes back into focus today, with many viewing it as somewhat of a non-event given the current levels. It wasn’t so long ago that CPI stood around 3% and acted as a noose around the neck of Mark Carney when he first came to office. However, with current price inflation at 1.6%, it has hit somewhat of a sweet spot. Given the deflationary fears within the Eurozone, Carney will not want to see this fall too much further, especially at a time when he is considering a tighter monetary policy stance. Thus with forecasts pointing towards a fall to 1.5%, let’s hope it doesn’t fall yet further to begin causing a headache for the BoE.
Also later today, the ZEW economic sentiment surveys are expected to tell a story of shifting fortunes in the Eurozone, where German weakness is highlighted yet again. The German survey has been falling consistently for six months now, pulling back from the December high of 62 to todays expected reading of 28.0. Meanwhile, the Eurozone figure makes for a lot more easy reading, with expectations pointing towards a rise from 58.4 to 62.3. Unfortunately, despite the world cup win, German fortunes remain weak in the economic sphere, with poor factory orders, retail sales and unemployment claims pointing towards a slowdown in the region. Much of this has been expected given the extraordinarily strong Q1 that they seemed to have. However, if there is one thing that the Eurozone does not want it is a weak German economy pulling down growth. As sanctions are increased against Russia, the export figures from Germany are expected to wane further and thus there is no sign that we are out of the woods quite yet. Let’s just hope that the world cup beer sales make up for those unsold cars.
It is also worth noting that today represents the beginning of Janet Yellen’s semi-annual monetary policy testimony in Washington DC. To many this represents a major chance to gauge exactly where the Fed stand in relation to rates and thus we are expecting to see some market moves off the back of this. Given the strong jobs report seen earlier this month, there is a possibility of a more hawkish tone from Yellen. However, she is likely to wish to keep he cards close to her chest and thus it remains to be seen whether we will get anything too juicy out of this session.
Alpari UK
Experienced member
- Messages
- 1,502
- Likes
- 5
UK Opening Call from Alpari UK on 16 July 2014
Strong Chinese GDP fails to impress the markets
• Mixed messages from Janet Yellen in day one of her testimony;
• Strong Chinese data leaves Asian markets somewhat underwhelmed;
• UK jobs report absolutely key after yesterdays CPI reading.
A surprising degree of indecision seems to be creeping into the markets today despite better than expected figures out of China and an ongoing accommodative stance from Janet Yellen yesterday. Asian stocks saw a choppy session which ended without any clear direction and this appears to be creeping into the European mindset where we are expecting a mixed open. The FTSE100 is expected to open flat, CAC +5 and DAX -6 points.
Yesterday saw Janet Yellen take to the stand in what was the first in two days of testimony at the semi annual monetary policy report. Perhaps it was her way or trying to bring the much needed volatility back into the markets, but Yellen seemed to be both dovish and hawkish at different points within her testimony. She warned that should the labour market continue to improve faster than expected, then the rate hike would happen sooner and more rapidly than currently envisioned. However, she also later noted that the labour market remained weak and that an accommodative stance still remains necessary. So no more clarity there then.
In fact, the markets had managed to see some significant volatility yesterday well ahead of Janet Yellen even taking the stand. The release of a shocking spike in UK CPI (the highest jump in 20 months) followed by yet another very poor ZEW figure out of Germany meant that the likes of GBPUSD and EURUSD saw some major moves and subsequent retracements (certainly in the case of the EURUSD).
This volatility was expected to continue overnight, with the release of some absolutely key figures out of China, yet it seems markets do not know exactly how to take them given the mixed response. The release of Chinese growth, industrial production and fixed asset investment all gave us a pleasant surprise, showing that the slowdown within China was largely overstated and gives me greater confidence that within H2, the Asian powerhouse will be able to really kick on. However, we did not see the major market moves that would be expected and this is likely to be down to the fact that growth still remains relatively weak despite the rise from 7.4% to 7.5%. Yes this is the first rise in three quarters for China, but this is also only 0.1% higher than the slowest rate of growth since Q2 2009. It is not necessarily something to make a song and dance about. That being said, industrial production rose significantly more than expected and fixed asset investment also came in to the upside, so things should begin to pick up from here. It just seems that in Asia, they are not quite yet ready to become too enamoured by a single GDP print that is 0.1% higher than a multiyear low.
The UK comes back into focus this morning, when the release of employment figures will bring both the strength of the economic recovery and the timing of monetary policy from the BoE back into focus. Yesterday’s CPI reading of 1.9% provided us with a heightened awareness of exactly why today’s jobs report is so important. On one hand, the rapidly rising inflation rate is something which Mark Carney and co cannot tolerate for very long, and thus where we see a strengthening jobs market, it is safe to say that rates will be rising sooner rather than later. However, with Mark Carney also utilising the ‘spare capacity’ mindset, elements such as real wage growth become more important to such decision. Therefore, unless we start to see average earnings rise rapidly, there is going to be an issue at hand because the BoE will have to decide whether they are comfortable raising rates at a time when real wages are tumbling. Expectations for average earnings point towards a fall from 0.7% to 0.5%, standing in stark contrast to yesterdays spike in CPI. However, both claimant the count and unemployment rate figures are expected to come in steady following a very strong release last month and thus this current predicament is going to pose a problem for those at the MPC unless one of these measures begins to reverse their trend.
Strong Chinese GDP fails to impress the markets
• Mixed messages from Janet Yellen in day one of her testimony;
• Strong Chinese data leaves Asian markets somewhat underwhelmed;
• UK jobs report absolutely key after yesterdays CPI reading.
A surprising degree of indecision seems to be creeping into the markets today despite better than expected figures out of China and an ongoing accommodative stance from Janet Yellen yesterday. Asian stocks saw a choppy session which ended without any clear direction and this appears to be creeping into the European mindset where we are expecting a mixed open. The FTSE100 is expected to open flat, CAC +5 and DAX -6 points.
Yesterday saw Janet Yellen take to the stand in what was the first in two days of testimony at the semi annual monetary policy report. Perhaps it was her way or trying to bring the much needed volatility back into the markets, but Yellen seemed to be both dovish and hawkish at different points within her testimony. She warned that should the labour market continue to improve faster than expected, then the rate hike would happen sooner and more rapidly than currently envisioned. However, she also later noted that the labour market remained weak and that an accommodative stance still remains necessary. So no more clarity there then.
In fact, the markets had managed to see some significant volatility yesterday well ahead of Janet Yellen even taking the stand. The release of a shocking spike in UK CPI (the highest jump in 20 months) followed by yet another very poor ZEW figure out of Germany meant that the likes of GBPUSD and EURUSD saw some major moves and subsequent retracements (certainly in the case of the EURUSD).
This volatility was expected to continue overnight, with the release of some absolutely key figures out of China, yet it seems markets do not know exactly how to take them given the mixed response. The release of Chinese growth, industrial production and fixed asset investment all gave us a pleasant surprise, showing that the slowdown within China was largely overstated and gives me greater confidence that within H2, the Asian powerhouse will be able to really kick on. However, we did not see the major market moves that would be expected and this is likely to be down to the fact that growth still remains relatively weak despite the rise from 7.4% to 7.5%. Yes this is the first rise in three quarters for China, but this is also only 0.1% higher than the slowest rate of growth since Q2 2009. It is not necessarily something to make a song and dance about. That being said, industrial production rose significantly more than expected and fixed asset investment also came in to the upside, so things should begin to pick up from here. It just seems that in Asia, they are not quite yet ready to become too enamoured by a single GDP print that is 0.1% higher than a multiyear low.
The UK comes back into focus this morning, when the release of employment figures will bring both the strength of the economic recovery and the timing of monetary policy from the BoE back into focus. Yesterday’s CPI reading of 1.9% provided us with a heightened awareness of exactly why today’s jobs report is so important. On one hand, the rapidly rising inflation rate is something which Mark Carney and co cannot tolerate for very long, and thus where we see a strengthening jobs market, it is safe to say that rates will be rising sooner rather than later. However, with Mark Carney also utilising the ‘spare capacity’ mindset, elements such as real wage growth become more important to such decision. Therefore, unless we start to see average earnings rise rapidly, there is going to be an issue at hand because the BoE will have to decide whether they are comfortable raising rates at a time when real wages are tumbling. Expectations for average earnings point towards a fall from 0.7% to 0.5%, standing in stark contrast to yesterdays spike in CPI. However, both claimant the count and unemployment rate figures are expected to come in steady following a very strong release last month and thus this current predicament is going to pose a problem for those at the MPC unless one of these measures begins to reverse their trend.
Alpari UK
Experienced member
- Messages
- 1,502
- Likes
- 5
US Opening Call from Alpari UK on 16 July 2014
Markets bounce back ahead of second Yellen testimony
• Markets bounce back after yesterday’s losses;
• Yellen’s softened tone doesn’t change anything, yet;
• Chinese data boosts investor sentiment;
• UK unemployment falls but wage growth remains a problem;
• Yellen testimony key again today.
Janet Yellen may have spooked investors a little yesterday, with her warning that rates could rise earlier and quicker if economic data improves, but that’s not holding them back on Wednesday following the release of a strong second quarter GDP figure from China.
In reality, Yellen’s comments don’t actually change anything. The Fed’s monetary policy stance has always been data dependent and always will be. However, until now Yellen has refused to even speculate about higher rates, claiming it won’t happen until well after the end of tapering. Yesterday’s acknowledgement that they could rise has been seen as a slight softening in stance by Yellen and a sign that the Fed sees potential for the data to continue to improve to the point that a rate hike will need to be considered.
While this may have spooked investors, it was only ever going to be temporary because it doesn’t change current rate expectations. Today’s Chinese data has been a real boost for investors who have been looking for any reason to buy the dips recently. Given the concerns about Chinese growth earlier this year, it is a big relief to see the country growing at 7.5% in the second quarter, even if this is largely due to the targeted stimulus efforts of the government and central bank. As long as this continues, investors will be happy.
There was mixed news for the UK this morning, who saw its unemployment rate fall to 6.5% in the three months to May, a near five and a half year low, and jobless claims fall 36,300. As has been the trend for a while now, this positive employment report came alongside data showing weakness in wage growth which is likely to delay any decision by the Bank of England to hike interest rates. They will be very reluctant to raise rates at a time when inflation is easily outstripping wage growth, especially given how reliant the economy is on consumer spending.
There’s plenty of data due out of the US today, although the majority of it is lower impact reports, such as PPI inflation and industrial production numbers. The key event will again be Janet Yellens testimony, this time in front of the House Financial Services Committee. This tends to go much the same way as yesterday’s testimony but it’s still worth watching as some of the questions will be different and there may be attempts made to expand on some of yesterday’s hawkish comments.
Ahead of the opening bell, the S&P is expected to open up 5 points, the Dow up 42 points and the Nasdaq up 21 points.
Markets bounce back ahead of second Yellen testimony
• Markets bounce back after yesterday’s losses;
• Yellen’s softened tone doesn’t change anything, yet;
• Chinese data boosts investor sentiment;
• UK unemployment falls but wage growth remains a problem;
• Yellen testimony key again today.
Janet Yellen may have spooked investors a little yesterday, with her warning that rates could rise earlier and quicker if economic data improves, but that’s not holding them back on Wednesday following the release of a strong second quarter GDP figure from China.
In reality, Yellen’s comments don’t actually change anything. The Fed’s monetary policy stance has always been data dependent and always will be. However, until now Yellen has refused to even speculate about higher rates, claiming it won’t happen until well after the end of tapering. Yesterday’s acknowledgement that they could rise has been seen as a slight softening in stance by Yellen and a sign that the Fed sees potential for the data to continue to improve to the point that a rate hike will need to be considered.
While this may have spooked investors, it was only ever going to be temporary because it doesn’t change current rate expectations. Today’s Chinese data has been a real boost for investors who have been looking for any reason to buy the dips recently. Given the concerns about Chinese growth earlier this year, it is a big relief to see the country growing at 7.5% in the second quarter, even if this is largely due to the targeted stimulus efforts of the government and central bank. As long as this continues, investors will be happy.
There was mixed news for the UK this morning, who saw its unemployment rate fall to 6.5% in the three months to May, a near five and a half year low, and jobless claims fall 36,300. As has been the trend for a while now, this positive employment report came alongside data showing weakness in wage growth which is likely to delay any decision by the Bank of England to hike interest rates. They will be very reluctant to raise rates at a time when inflation is easily outstripping wage growth, especially given how reliant the economy is on consumer spending.
There’s plenty of data due out of the US today, although the majority of it is lower impact reports, such as PPI inflation and industrial production numbers. The key event will again be Janet Yellens testimony, this time in front of the House Financial Services Committee. This tends to go much the same way as yesterday’s testimony but it’s still worth watching as some of the questions will be different and there may be attempts made to expand on some of yesterday’s hawkish comments.
Ahead of the opening bell, the S&P is expected to open up 5 points, the Dow up 42 points and the Nasdaq up 21 points.
Alpari UK
Experienced member
- Messages
- 1,502
- Likes
- 5
UK Opening Call from Alpari UK on 17 July 2014
Eurozone CPI looks to dominate an otherwise quiet session
• Yellen pulls back from micro commentary
• Time Warner bid shows M&A market continues to boom
• Potential second corporate default brings risk off view to China
• Eurozone CPI expected to dominate European session.
European markets are looking a little downbeat despite a fourth day of growth in Asian stocks. That being said, with yesterday representing one of the strongest days of upside in over four months for the FTSE100, perhaps a move to pare some of those gains was always likely. A light overnight session is looking to give way to a somewhat one-dimensional European outlook with Eurozone CPI providing the single major release ahead of the US open. European markets are expected to open lower, with the FTSE100 -16, CAC -10 and DAX -12 points.
Janet Yellen’s two day testimony in Washington drew to a close yesterday, as she fielded questions from the House financial services committee. This was largely a non-event, with an identical initial statement matched by fairly similar question to that pitched by the Senate. However, it was notable that Yellen took a step back from her initial comments regarding the fact that she sees concern over biotech and social-media company valuations. On this occasion, Yellen stated that the Fed doesn’t necessarily target equity valuations, with valuations seeming to be at historical norms.
However, I am sure Yellen will pay close attention to the ongoing M&A boom which continued apace with the $80 billion takeover bid from 21st Century Fox for Time Warner. The ongoing environment of major M&A activity is a sign of booming balance sheets and economic confidence within the markets. Thus whilst we continue to see major takeover bids such as this, it points to yet further strength within the markets as firms make the most of record low interest rates and growing revenue streams.
In China, signs are pointing towards a possible second corporate default in what is the worlds largest corporate debtload. The default of Chaori back in March rang alarm bells for many in the markets, given Chinese unwillingness to let such a thing happen in the past. However, at that point we asked whether this was going to be the first of many. Thus the announcement that Huatong Road & Bridge Group Co. may be the second to go down the default path is highly notable and brings a more risk off scenario for investors.
The major event of the day comes from the Eurozone, where the latest CPI figure looks set to provide yet another test of Mario Draghi’s monetary policy framework. Weak inflation has been the single most persistant problem for Draghi in 2014, as a threat of deflation has turned even the most ardent hawk into a dove. Markets have been baying for a gutsy response from Draghi and in turn he decided to throw everything but the kitchen sink at the problem, expecting that the likes of negative deposit rates and TLTRO’s will reverse the downward trend in prices. However, this is likely to take some time to significantly affect CPI and as such markets are looking out for a steady figure of 0.5%. By all means, a steady figure is better than another drop in price growth, yet with CPI standing at the lowest level in 4 ½ years, we are beginning to approach a now or never moment where any further decrease could call for drastic measures. Those measures would surely have to come in the form of asset purchases, which remains the one golden card Draghi has yet to play. It does not come without difficulties and as such he would most likely prefer not to resort to such drastic measures. However, as months pass and the expectations grow in response to Draghi’s recent actions, we have to see a shift in CPI or else markets will begin pricing in a high likeliness of asset purchases.
Eurozone CPI looks to dominate an otherwise quiet session
• Yellen pulls back from micro commentary
• Time Warner bid shows M&A market continues to boom
• Potential second corporate default brings risk off view to China
• Eurozone CPI expected to dominate European session.
European markets are looking a little downbeat despite a fourth day of growth in Asian stocks. That being said, with yesterday representing one of the strongest days of upside in over four months for the FTSE100, perhaps a move to pare some of those gains was always likely. A light overnight session is looking to give way to a somewhat one-dimensional European outlook with Eurozone CPI providing the single major release ahead of the US open. European markets are expected to open lower, with the FTSE100 -16, CAC -10 and DAX -12 points.
Janet Yellen’s two day testimony in Washington drew to a close yesterday, as she fielded questions from the House financial services committee. This was largely a non-event, with an identical initial statement matched by fairly similar question to that pitched by the Senate. However, it was notable that Yellen took a step back from her initial comments regarding the fact that she sees concern over biotech and social-media company valuations. On this occasion, Yellen stated that the Fed doesn’t necessarily target equity valuations, with valuations seeming to be at historical norms.
However, I am sure Yellen will pay close attention to the ongoing M&A boom which continued apace with the $80 billion takeover bid from 21st Century Fox for Time Warner. The ongoing environment of major M&A activity is a sign of booming balance sheets and economic confidence within the markets. Thus whilst we continue to see major takeover bids such as this, it points to yet further strength within the markets as firms make the most of record low interest rates and growing revenue streams.
In China, signs are pointing towards a possible second corporate default in what is the worlds largest corporate debtload. The default of Chaori back in March rang alarm bells for many in the markets, given Chinese unwillingness to let such a thing happen in the past. However, at that point we asked whether this was going to be the first of many. Thus the announcement that Huatong Road & Bridge Group Co. may be the second to go down the default path is highly notable and brings a more risk off scenario for investors.
The major event of the day comes from the Eurozone, where the latest CPI figure looks set to provide yet another test of Mario Draghi’s monetary policy framework. Weak inflation has been the single most persistant problem for Draghi in 2014, as a threat of deflation has turned even the most ardent hawk into a dove. Markets have been baying for a gutsy response from Draghi and in turn he decided to throw everything but the kitchen sink at the problem, expecting that the likes of negative deposit rates and TLTRO’s will reverse the downward trend in prices. However, this is likely to take some time to significantly affect CPI and as such markets are looking out for a steady figure of 0.5%. By all means, a steady figure is better than another drop in price growth, yet with CPI standing at the lowest level in 4 ½ years, we are beginning to approach a now or never moment where any further decrease could call for drastic measures. Those measures would surely have to come in the form of asset purchases, which remains the one golden card Draghi has yet to play. It does not come without difficulties and as such he would most likely prefer not to resort to such drastic measures. However, as months pass and the expectations grow in response to Draghi’s recent actions, we have to see a shift in CPI or else markets will begin pricing in a high likeliness of asset purchases.
Alpari UK
Experienced member
- Messages
- 1,502
- Likes
- 5
US Opening Call from Alpari UK on 17 July 2014
Russian sanctions weigh on risk appetite ahead of US data
• Risk appetite takes a hit on new Russia sanctions;
• Negative impacts likely to be temporary, could reverse today;
• Housing, jobs and manufacturing in focus for the US.
Risk aversion has returned to the markets on Thursday after the US and Europe announced a fresh round of sanctions against Russia in response to its part in the Ukrainian conflict. European indices are trading lower across the board and we’re expecting to see a similar response after the opening bell on Wall Street, with the S&P seen 7 points lower, the Dow 38 points lower and the Nasdaq 14 points lower.
The Ukrainian crisis hasn’t been a big focus for the markets recently, with it having fallen out of the headlines and the risk associated to it having been priced in. However, additional sanctions such as those imposed by the US and those expected by Europe at the end of July, have the potential to escalate the crisis further, not to mention damage the economies of those involved in the sanctions. Germany is the prime example of this given the amount of trade it conducts with Russia.
The pull back in the markets is only likely to be temporary though, given the size of the sell-off that we’ve seen in response to the sanctions. This is hardly a major development, it’s simply a case of a tad more risk being priced in. In fact, we could see these losses reversed as early as today, with plenty of data being released from the US this afternoon.
While Yellen’s testimony over the last couple of days was viewed as slightly hawkish, I don’t believe there was enough in it to prompt the kind of sell on good news scenario that we’ve seen at times in recent years. Yellen highlighted housing as one area that has not really performed well this year so at this stage, a boost in building permit and housing starts would be welcomed, not feared.
The jobless claims numbers have been persistently strong and the same is expected today, with 310,000 new claims expected for last week. Continuing claims are also expected to drop slightly, to 2.575 million, close to the near 6 year lows that it hit recently. We also have the Philly Fed manufacturing index being released today so there’s plenty of data for traders to get their teeth stuck into that could provide that boost to move indices back into positive territory.
We also shouldn’t overlook corporate earnings season in all of this. Earnings season doesn’t just impact the stocks and sectors involved, it has an impact on sentiment as a whole so the performance during the season should be monitored to determine risk appetite.
Russian sanctions weigh on risk appetite ahead of US data
• Risk appetite takes a hit on new Russia sanctions;
• Negative impacts likely to be temporary, could reverse today;
• Housing, jobs and manufacturing in focus for the US.
Risk aversion has returned to the markets on Thursday after the US and Europe announced a fresh round of sanctions against Russia in response to its part in the Ukrainian conflict. European indices are trading lower across the board and we’re expecting to see a similar response after the opening bell on Wall Street, with the S&P seen 7 points lower, the Dow 38 points lower and the Nasdaq 14 points lower.
The Ukrainian crisis hasn’t been a big focus for the markets recently, with it having fallen out of the headlines and the risk associated to it having been priced in. However, additional sanctions such as those imposed by the US and those expected by Europe at the end of July, have the potential to escalate the crisis further, not to mention damage the economies of those involved in the sanctions. Germany is the prime example of this given the amount of trade it conducts with Russia.
The pull back in the markets is only likely to be temporary though, given the size of the sell-off that we’ve seen in response to the sanctions. This is hardly a major development, it’s simply a case of a tad more risk being priced in. In fact, we could see these losses reversed as early as today, with plenty of data being released from the US this afternoon.
While Yellen’s testimony over the last couple of days was viewed as slightly hawkish, I don’t believe there was enough in it to prompt the kind of sell on good news scenario that we’ve seen at times in recent years. Yellen highlighted housing as one area that has not really performed well this year so at this stage, a boost in building permit and housing starts would be welcomed, not feared.
The jobless claims numbers have been persistently strong and the same is expected today, with 310,000 new claims expected for last week. Continuing claims are also expected to drop slightly, to 2.575 million, close to the near 6 year lows that it hit recently. We also have the Philly Fed manufacturing index being released today so there’s plenty of data for traders to get their teeth stuck into that could provide that boost to move indices back into positive territory.
We also shouldn’t overlook corporate earnings season in all of this. Earnings season doesn’t just impact the stocks and sectors involved, it has an impact on sentiment as a whole so the performance during the season should be monitored to determine risk appetite.
Alpari UK
Experienced member
- Messages
- 1,502
- Likes
- 5
UK Opening Call from Alpari UK on 18 July 2014
Geopolitical fears ignite as traders run for a safe haven
• Malaysian airlines crash sparks geopolitical fears
• Israeli ground offensive in Gaza heightens sell-off
• BoJ governor Kuroda indicates an increasingly hawkish stance
• Jens Weidmann speech to dominate as Eurozone and Germany fears persist
What was supposed to be a day where financial markets unwound following a week of high volatility economic announcements has in fact seen markets become embroiled in multiple geopolitical stories. The downing of Malaysian Airlines flight MH17 has been accompanied by a ground assault operation throughout Gaza by the Israeli armed forces, sending investors running for the nearest safe haven. Within European markets, the brunt of this was felt yesterday, yet we continue to see a risk off sentiment dominating markets in the futures markets. European indices are expected to open lower, with the FTSE100 -28, CAC -30 and DAX -60 points.
Yesterday’s crash involving a Malaysian airlines plane over Ukrainian airspace saw all 295 people on board killed in what seems to be a further escalation of the separatist conflict within the country. The blame appears to lay at the door of the pro-Russian rebels whom having recently been equipped with high-tech Russian weaponry, have been shooting planes out the sky for fun. This time they got it wrong, downing a commercial airline, causing not only a humanitarian catastrophe, but also a geopolitical nightmare. As is generally the case with any major geopolitical threat, the markets headed for the nearest perceived safe haven, seeing gold, oil and the VIX all spike higher. Conversely, any perceived riskier assets saw a sharp retreat, with the S&P 500 and Dow seeing their biggest one-day fall since April 10 and May 15 respectively. Ultimately, this issue is a clear firelight to what is already a tinderbox in Ukraine, with the Ukrainian leader now justified to go into those rebel held regions with much more vigour despite Putin’s accusation that the military push from the government was at fault for this crash. Backed by the western world, I fully expect to see further pressure on pro-Russian rebels as Ukraine seeks to take back it’s sovereign land once more. Given the likely ongoing emergence of negative pressure surrounding the Russian’s decision to arm these rebels with such weaponry, it will be interesting to see if Putin steps back from his involvement somewhat, thus leaving the rebels more isolated to fight their cause. Otherwise, with the likes of Holland, Malaysia and Australia suffering the most in this conflict, there is sure to be further sanctions and actions taken against the Russians at a time when their popularity hits a new low. From a market standpoint, we are likely to see people come back out of their bunkers and start buying back into the markets in the near future. Throughout the last year everyone has been buying into the dips and yesterday’s crash just provides yet another one in what is more a humanitarian disaster than a financial one.
Geopolitical fears ramped up yet further yesterday, with the announcement that Israel had begun a ground offensive within Gaza following 10 days of aerial bombardment. The ongoing narrative behind this conflict has been one of Israel seeking to destroy Hamas owned weaponry as they seek to put an end to the constant missiles being sent from Gaza to Israel. However, with civilian casualties being the only outcome that has been seen globally, it is clear that Israel are doing themselves no favours from a PR standpoint. Thus yesterday’s move can be seen in two lights, with many deploring such an attack on another sovereign land as a tragedy which would be breaking global conventions. Yet it is also an opportunity for the Israeli forces to take out key military targets without the same risk to civilian lives and for that I believe this move could be something that may spare lives rather than take them. The big question is for how long is this offensive going to last and to what extent they are successful in finding and destroying Hamas weaponry. Hamas has shown itself to be unwilling to negotiate as shown by their disregard for any ceasefire, and thus it is more than likely that we will simply see more rockets fire upon completion of the Israeli air offensive. Ultimately, there is likely to be conflict within the region for some time yet and whilst the financial market’s response will likely be short-lived, the humanitarian and sectarian impact will last a lot longer.
Moving on to more standard affairs, the release of Japanese monetary policy minutes overnight provided markets with an opportunity to gauge yet again whether the BoJ will move to heighten the rate of asset purchases in response to a weakening in the region following the sales tax in April. What the minutes did provide us with was a vague timeline for asset purchases, given the commitment to keep QE in place until the 2% inflation target was reached. However, this was always likely to be the case and thus markets turned their attention to a speech from BoJ governor Kuroda in Tokyo. In his speech, Kuroda seemed significantly more hawkish than usual, seeing current conditions as being satisfactory. Kuroda’s regarded the current value of the yen as no longer excessively strong, whilst also seeming confident that the economy was well on its way to reaching the 2% inflation target. Given the likeliness that either the further depreciation of the yen or a boost to inflation was going to be the catalyst for another rise in the rate of asset purchases, this has come as a shock to the markets, with the Nikkei tumbling throughout the Asian session. As such, it now seems likely that Japan could remain steady with its monetary policy for some time, which is likely to unravel some of those yen shorts backed by those expecting further easing from the BoJ.
Finally, the European session also sees Bundesbank President Jens Weidmann speak, at a time when the Eurozone is facing a critical deflationary threat and the German economy is showing signs of weakening across the board. The imposition of TLTRO’s, negative deposit rates and alike by Mario Draghi took the headlines upon announcement, yet markets remain unconvinced with many seeing the imposition of asset purchases as a necessary to bring the area back into strong price and GDP growth. However, Weidmann has been somewhat mixed on the matter and as such any leaning towards the creation of a QE programme would likely spark markets into a more bullish mind-set given the German influence upon the ECB. It will also be key to note how Weidmann sees the German economy developing following disappointing ZEW, factory orders, retail sales and unemployment claims figures. For the Eurozone to thrive, a strong Germany is a necessity and thus whilst many within Germany had expected a weaker Q2, this trend cannot last for long and markets will be looking for signs of hope from today’s speech.
Geopolitical fears ignite as traders run for a safe haven
• Malaysian airlines crash sparks geopolitical fears
• Israeli ground offensive in Gaza heightens sell-off
• BoJ governor Kuroda indicates an increasingly hawkish stance
• Jens Weidmann speech to dominate as Eurozone and Germany fears persist
What was supposed to be a day where financial markets unwound following a week of high volatility economic announcements has in fact seen markets become embroiled in multiple geopolitical stories. The downing of Malaysian Airlines flight MH17 has been accompanied by a ground assault operation throughout Gaza by the Israeli armed forces, sending investors running for the nearest safe haven. Within European markets, the brunt of this was felt yesterday, yet we continue to see a risk off sentiment dominating markets in the futures markets. European indices are expected to open lower, with the FTSE100 -28, CAC -30 and DAX -60 points.
Yesterday’s crash involving a Malaysian airlines plane over Ukrainian airspace saw all 295 people on board killed in what seems to be a further escalation of the separatist conflict within the country. The blame appears to lay at the door of the pro-Russian rebels whom having recently been equipped with high-tech Russian weaponry, have been shooting planes out the sky for fun. This time they got it wrong, downing a commercial airline, causing not only a humanitarian catastrophe, but also a geopolitical nightmare. As is generally the case with any major geopolitical threat, the markets headed for the nearest perceived safe haven, seeing gold, oil and the VIX all spike higher. Conversely, any perceived riskier assets saw a sharp retreat, with the S&P 500 and Dow seeing their biggest one-day fall since April 10 and May 15 respectively. Ultimately, this issue is a clear firelight to what is already a tinderbox in Ukraine, with the Ukrainian leader now justified to go into those rebel held regions with much more vigour despite Putin’s accusation that the military push from the government was at fault for this crash. Backed by the western world, I fully expect to see further pressure on pro-Russian rebels as Ukraine seeks to take back it’s sovereign land once more. Given the likely ongoing emergence of negative pressure surrounding the Russian’s decision to arm these rebels with such weaponry, it will be interesting to see if Putin steps back from his involvement somewhat, thus leaving the rebels more isolated to fight their cause. Otherwise, with the likes of Holland, Malaysia and Australia suffering the most in this conflict, there is sure to be further sanctions and actions taken against the Russians at a time when their popularity hits a new low. From a market standpoint, we are likely to see people come back out of their bunkers and start buying back into the markets in the near future. Throughout the last year everyone has been buying into the dips and yesterday’s crash just provides yet another one in what is more a humanitarian disaster than a financial one.
Geopolitical fears ramped up yet further yesterday, with the announcement that Israel had begun a ground offensive within Gaza following 10 days of aerial bombardment. The ongoing narrative behind this conflict has been one of Israel seeking to destroy Hamas owned weaponry as they seek to put an end to the constant missiles being sent from Gaza to Israel. However, with civilian casualties being the only outcome that has been seen globally, it is clear that Israel are doing themselves no favours from a PR standpoint. Thus yesterday’s move can be seen in two lights, with many deploring such an attack on another sovereign land as a tragedy which would be breaking global conventions. Yet it is also an opportunity for the Israeli forces to take out key military targets without the same risk to civilian lives and for that I believe this move could be something that may spare lives rather than take them. The big question is for how long is this offensive going to last and to what extent they are successful in finding and destroying Hamas weaponry. Hamas has shown itself to be unwilling to negotiate as shown by their disregard for any ceasefire, and thus it is more than likely that we will simply see more rockets fire upon completion of the Israeli air offensive. Ultimately, there is likely to be conflict within the region for some time yet and whilst the financial market’s response will likely be short-lived, the humanitarian and sectarian impact will last a lot longer.
Moving on to more standard affairs, the release of Japanese monetary policy minutes overnight provided markets with an opportunity to gauge yet again whether the BoJ will move to heighten the rate of asset purchases in response to a weakening in the region following the sales tax in April. What the minutes did provide us with was a vague timeline for asset purchases, given the commitment to keep QE in place until the 2% inflation target was reached. However, this was always likely to be the case and thus markets turned their attention to a speech from BoJ governor Kuroda in Tokyo. In his speech, Kuroda seemed significantly more hawkish than usual, seeing current conditions as being satisfactory. Kuroda’s regarded the current value of the yen as no longer excessively strong, whilst also seeming confident that the economy was well on its way to reaching the 2% inflation target. Given the likeliness that either the further depreciation of the yen or a boost to inflation was going to be the catalyst for another rise in the rate of asset purchases, this has come as a shock to the markets, with the Nikkei tumbling throughout the Asian session. As such, it now seems likely that Japan could remain steady with its monetary policy for some time, which is likely to unravel some of those yen shorts backed by those expecting further easing from the BoJ.
Finally, the European session also sees Bundesbank President Jens Weidmann speak, at a time when the Eurozone is facing a critical deflationary threat and the German economy is showing signs of weakening across the board. The imposition of TLTRO’s, negative deposit rates and alike by Mario Draghi took the headlines upon announcement, yet markets remain unconvinced with many seeing the imposition of asset purchases as a necessary to bring the area back into strong price and GDP growth. However, Weidmann has been somewhat mixed on the matter and as such any leaning towards the creation of a QE programme would likely spark markets into a more bullish mind-set given the German influence upon the ECB. It will also be key to note how Weidmann sees the German economy developing following disappointing ZEW, factory orders, retail sales and unemployment claims figures. For the Eurozone to thrive, a strong Germany is a necessity and thus whilst many within Germany had expected a weaker Q2, this trend cannot last for long and markets will be looking for signs of hope from today’s speech.
Alpari UK
Experienced member
- Messages
- 1,502
- Likes
- 5
US Opening Call from Alpari UK on 18 July 2014
US recoup some losses ahead of data
• US futures edge higher as geopolitical risk is priced in;
• Investor complacency raised again after yesterday’s events;
• UoM consumer sentiment and CB leading indicator in focus.
Yesterday’s events in eastern Ukraine and the Gaza strip are weighing on European indices this morning, as investors price in the additional geopolitical risk that comes with both events. US futures are not experiencing the same declines and are actually pointing to a slightly positive open, which just goes to show how short term these shocks to the market are at the moment. There’s always investors out there looking to buy the dips.
You could say that both events were fully priced into US indices on Thursday, given that the markets closed after the Israeli ground offensive was announced. However, the Dow didn’t even shed 1% following both events, which begs the question, how much additional geopolitical risk has actually been factored in? Are investors being too complacent when it comes to these events?
This is difficult to determine and the potential complacency of investors has been raised on a number of occasions this year. What I think is preventing any significant sell-off is the uncertainty around what comes next. It is unlikely that nothing will be done in response to the passenger plane being shot down by, what appears to be, the pro-Russian rebels occupying areas of eastern Ukraine.
One outcome could be an escalation of the crisis, which is not desirable for investors and could result in a greater sell-off. Another outcome could be that something positive comes from this tragedy in that it acts as a wakeup call to all involved and encourages them to come up with a diplomatic solution to the crisis. This would be positive for all involved and for the markets. While this would be the ideal outcome, the fact that we’re hearing all sides blaming each other this morning suggests it’s the least likely of the two outcomes.
In terms of what this means for the markets today, based on what we’ve seen so far, it would appear that all of the uncertainty isn’t weighing too heavily but it is impacting the volatility. This isn’t unusual in times of uncertainty as traders find it much more difficult to predict market direction. Given that it’s the end of the week, I expect this to continue for the rest of the day, unless of course, we see further escalation of either event.
The scarcity of economic data won’t help this, although there are two significant economic releases from the US later, the preliminary UoM consumer sentiment and CB leading indicator readings. We may see some volatility in the markets following these releases, but to an extent, they are likely to be overshadowed by the events in the Ukraine and the Gaza strip.
Ahead of the opening bell, the S&P is expected to open 2 points higher, the Dow 18 points higher and the Nasdaq 8 points higher.
US recoup some losses ahead of data
• US futures edge higher as geopolitical risk is priced in;
• Investor complacency raised again after yesterday’s events;
• UoM consumer sentiment and CB leading indicator in focus.
Yesterday’s events in eastern Ukraine and the Gaza strip are weighing on European indices this morning, as investors price in the additional geopolitical risk that comes with both events. US futures are not experiencing the same declines and are actually pointing to a slightly positive open, which just goes to show how short term these shocks to the market are at the moment. There’s always investors out there looking to buy the dips.
You could say that both events were fully priced into US indices on Thursday, given that the markets closed after the Israeli ground offensive was announced. However, the Dow didn’t even shed 1% following both events, which begs the question, how much additional geopolitical risk has actually been factored in? Are investors being too complacent when it comes to these events?
This is difficult to determine and the potential complacency of investors has been raised on a number of occasions this year. What I think is preventing any significant sell-off is the uncertainty around what comes next. It is unlikely that nothing will be done in response to the passenger plane being shot down by, what appears to be, the pro-Russian rebels occupying areas of eastern Ukraine.
One outcome could be an escalation of the crisis, which is not desirable for investors and could result in a greater sell-off. Another outcome could be that something positive comes from this tragedy in that it acts as a wakeup call to all involved and encourages them to come up with a diplomatic solution to the crisis. This would be positive for all involved and for the markets. While this would be the ideal outcome, the fact that we’re hearing all sides blaming each other this morning suggests it’s the least likely of the two outcomes.
In terms of what this means for the markets today, based on what we’ve seen so far, it would appear that all of the uncertainty isn’t weighing too heavily but it is impacting the volatility. This isn’t unusual in times of uncertainty as traders find it much more difficult to predict market direction. Given that it’s the end of the week, I expect this to continue for the rest of the day, unless of course, we see further escalation of either event.
The scarcity of economic data won’t help this, although there are two significant economic releases from the US later, the preliminary UoM consumer sentiment and CB leading indicator readings. We may see some volatility in the markets following these releases, but to an extent, they are likely to be overshadowed by the events in the Ukraine and the Gaza strip.
Ahead of the opening bell, the S&P is expected to open 2 points higher, the Dow 18 points higher and the Nasdaq 8 points higher.