Alpari UK
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UK Opening Call from Alpari UK on 30 July 2014
Data and Fed eyed as Russian sanctions hit risk appetite
• European indices edge lower as Russia is hit with more sanctions;
• European confidence readings unlikely to have much market impact;
• US GDP and employment readings key ahead of the US open;
• Another $10 billion taper expected from FOMC, statement eyed for rate hike clues.
European indices are expected to open marginally lower on Wednesday following choppy sessions in both the US and Asia, while a new round of sanctions announced by the US and Europe also weighed on risk appetite.
So far, the sanctions announced by the West have arguably not had the desired impact given that the Kremlin has continued to support the rebels in eastern Ukraine, even following the shooting down of flight MH17 a couple of weeks ago. That said, the Russian economy is clearly feeling the pain of the sanctions and the latest round could be enough to send the country into recession and cause unrest among some of Putin’s closest allies.
The sanctions are also likely to hit the economies of those dishing them out, particularly in Europe, but Germany has made it clear in recent days that this is a price worth paying in order to pressure Russia into helping bring this conflict to an end. Germany and Russia are large trading partners and exports from Germany have fallen since the first sanctions were announced leading to a slowdown in the economy and a drop in confidence among businesses. The only question now is which side will blink first, with both currently giving the impression that it has no intention of backing down on the issue. Russia has got away with a lot in the past but the shooting down of flight MH17 is seen by many as a game changer.
A certain amount of the weakness seen ahead of the open can also be attributed to traders sitting on the side lines ahead of some major economic releases and an the FOMC decision. It’s been a very slow start to the week and any data we have seen has had little to no impact on the markets but I am convinced that will not be the case today.
The data released during the first half of the European session may not do much to the markets, despite it containing some valuable information regarding confidence in different areas of the Eurozone economy. Aside from coming just before some major economic releases, these numbers are generally seen as lagging because they are released after other, more widely followed confidence readings, so in theory should already be priced in. That’s not to say they should be ignored because they provide important insight into sentiment in different areas of the economy and in general, if we see a big swing one way or another, they could get a reaction. That may be a little less likely today though given what’s to come.
The GDP and employment readings for the US will surely shake things up ahead of the FOMC decision this evening. The decision itself shouldn’t offer any surprises with asset purchases falling by another $10 billion to $25 billion, but the statement may provide insight into the outlook for interest rates with many expecting the Fed to adopt a slightly more hawkish tone in the coming months. With no press conference scheduled today, Chairwoman Janet Yellen may wait for the Jackson Hole symposium next month to provide more details on the path for interest rates and what exactly it will take to bring forward the first hike.
Ahead of the European open, the FTSE is seen 5 points lower, the CAC 8 points lower and the DAX 16 points lower.
Data and Fed eyed as Russian sanctions hit risk appetite
• European indices edge lower as Russia is hit with more sanctions;
• European confidence readings unlikely to have much market impact;
• US GDP and employment readings key ahead of the US open;
• Another $10 billion taper expected from FOMC, statement eyed for rate hike clues.
European indices are expected to open marginally lower on Wednesday following choppy sessions in both the US and Asia, while a new round of sanctions announced by the US and Europe also weighed on risk appetite.
So far, the sanctions announced by the West have arguably not had the desired impact given that the Kremlin has continued to support the rebels in eastern Ukraine, even following the shooting down of flight MH17 a couple of weeks ago. That said, the Russian economy is clearly feeling the pain of the sanctions and the latest round could be enough to send the country into recession and cause unrest among some of Putin’s closest allies.
The sanctions are also likely to hit the economies of those dishing them out, particularly in Europe, but Germany has made it clear in recent days that this is a price worth paying in order to pressure Russia into helping bring this conflict to an end. Germany and Russia are large trading partners and exports from Germany have fallen since the first sanctions were announced leading to a slowdown in the economy and a drop in confidence among businesses. The only question now is which side will blink first, with both currently giving the impression that it has no intention of backing down on the issue. Russia has got away with a lot in the past but the shooting down of flight MH17 is seen by many as a game changer.
A certain amount of the weakness seen ahead of the open can also be attributed to traders sitting on the side lines ahead of some major economic releases and an the FOMC decision. It’s been a very slow start to the week and any data we have seen has had little to no impact on the markets but I am convinced that will not be the case today.
The data released during the first half of the European session may not do much to the markets, despite it containing some valuable information regarding confidence in different areas of the Eurozone economy. Aside from coming just before some major economic releases, these numbers are generally seen as lagging because they are released after other, more widely followed confidence readings, so in theory should already be priced in. That’s not to say they should be ignored because they provide important insight into sentiment in different areas of the economy and in general, if we see a big swing one way or another, they could get a reaction. That may be a little less likely today though given what’s to come.
The GDP and employment readings for the US will surely shake things up ahead of the FOMC decision this evening. The decision itself shouldn’t offer any surprises with asset purchases falling by another $10 billion to $25 billion, but the statement may provide insight into the outlook for interest rates with many expecting the Fed to adopt a slightly more hawkish tone in the coming months. With no press conference scheduled today, Chairwoman Janet Yellen may wait for the Jackson Hole symposium next month to provide more details on the path for interest rates and what exactly it will take to bring forward the first hike.
Ahead of the European open, the FTSE is seen 5 points lower, the CAC 8 points lower and the DAX 16 points lower.
Alpari UK
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US Opening Call from Alpari UK on 30 July 2014
US GDP, ADP and Fed statement in focus on Wednesday
• Volatility hit from all sides ahead of key data and Fed announcements;
• ADP and GDP readings massive ahead of the opening bell;
• Fed statement eyed for rate hike clues.
It’s been a fairly slow start to the week so far, with volumes and volatility being hit from all sides. The biggest cause of this has been a lack of significant economic data to provide any kind of catalyst for the markets, along with the fact that when we see such a large amount of major data releases and central bank decisions later in the week, traders tend to remain on the side lines more so than usual. Add this to summer slowdown that is often witnessed in the markets and you’re left with the kind of situation we’ve seen so far this week.
Fortunately, we’re now entering the latter half of the week so volatility and trading volumes should improve significantly. The first half of the European session has been pretty quiet but that’s to be expected considering the data and Fed decision to come and, as with the rest of the week, the lack of big data being released.
This should all change ahead of the opening bell on Wall Street with the release of the ADP employment change and second quarter GDP figures. The ADP release is intended to be an estimate of the non-farm payrolls figure, which will be released on Friday and measures the number of jobs created in July. In reality, the first reading tends to be a pretty unreliable estimate of the official NFP figure and is only useful in predicting a much higher or lower number than analyst forecasts. The best example of this was last month when the ADP figure was close to 300,000 than 200,000 which was expected and the NFP release followed suit.
The GDP reading could really shake things up today and may well play a big part in the Fed’s decision on interest rates. The 2.9% contraction in the first quarter was extremely disappointing for the US, given that heading into the year hopes were for a strong recovery in 2014. However, it was also expected following some dreadful weather in the first quarter which forced analysts to significantly lower their forecasts. This left us with a situation in which the country needs to record 2.9% growth in the second quarter, which is what is expected, if the country is going to head into the second half of the year having no contracted in the first half.
If the US falls short of expectations here, it may suggest that the impact of the first quarter slowdown has stretched beyond the quarter itself and had an impact on the overall recovery. This would not be ideal by any stretch of the imagination, the only silver lining for the markets is that it may be enough to delay the first rate hike which could come as early as the first quarter of next year, at this rate.
Finally today we have the FOMC monetary policy decision, which is almost guaranteed to include another $10 billion taper, bringing the asset purchase program to $25 billion, and no rise in interest rates. While there is no press conference scheduled for after the announcement, a statement will be released alongside and this will be picked apart for any hawkish tones or hints at earlier rate hikes. Should we get either of these, I expect to see quite a significant market reaction, with investors then pricing in an announcement of some kind at the Jackson Hole symposium next month. This event has been used on numerous occasions in the past to drop big hints at changes in monetary policy so I see no reason why it won’t be used again.
The S&P is currently seen opening 2 points higher at 1,971, the Dow 22 points higher at 16,934 and the Nasdaq 9 points higher at 3,968.
US GDP, ADP and Fed statement in focus on Wednesday
• Volatility hit from all sides ahead of key data and Fed announcements;
• ADP and GDP readings massive ahead of the opening bell;
• Fed statement eyed for rate hike clues.
It’s been a fairly slow start to the week so far, with volumes and volatility being hit from all sides. The biggest cause of this has been a lack of significant economic data to provide any kind of catalyst for the markets, along with the fact that when we see such a large amount of major data releases and central bank decisions later in the week, traders tend to remain on the side lines more so than usual. Add this to summer slowdown that is often witnessed in the markets and you’re left with the kind of situation we’ve seen so far this week.
Fortunately, we’re now entering the latter half of the week so volatility and trading volumes should improve significantly. The first half of the European session has been pretty quiet but that’s to be expected considering the data and Fed decision to come and, as with the rest of the week, the lack of big data being released.
This should all change ahead of the opening bell on Wall Street with the release of the ADP employment change and second quarter GDP figures. The ADP release is intended to be an estimate of the non-farm payrolls figure, which will be released on Friday and measures the number of jobs created in July. In reality, the first reading tends to be a pretty unreliable estimate of the official NFP figure and is only useful in predicting a much higher or lower number than analyst forecasts. The best example of this was last month when the ADP figure was close to 300,000 than 200,000 which was expected and the NFP release followed suit.
The GDP reading could really shake things up today and may well play a big part in the Fed’s decision on interest rates. The 2.9% contraction in the first quarter was extremely disappointing for the US, given that heading into the year hopes were for a strong recovery in 2014. However, it was also expected following some dreadful weather in the first quarter which forced analysts to significantly lower their forecasts. This left us with a situation in which the country needs to record 2.9% growth in the second quarter, which is what is expected, if the country is going to head into the second half of the year having no contracted in the first half.
If the US falls short of expectations here, it may suggest that the impact of the first quarter slowdown has stretched beyond the quarter itself and had an impact on the overall recovery. This would not be ideal by any stretch of the imagination, the only silver lining for the markets is that it may be enough to delay the first rate hike which could come as early as the first quarter of next year, at this rate.
Finally today we have the FOMC monetary policy decision, which is almost guaranteed to include another $10 billion taper, bringing the asset purchase program to $25 billion, and no rise in interest rates. While there is no press conference scheduled for after the announcement, a statement will be released alongside and this will be picked apart for any hawkish tones or hints at earlier rate hikes. Should we get either of these, I expect to see quite a significant market reaction, with investors then pricing in an announcement of some kind at the Jackson Hole symposium next month. This event has been used on numerous occasions in the past to drop big hints at changes in monetary policy so I see no reason why it won’t be used again.
The S&P is currently seen opening 2 points higher at 1,971, the Dow 22 points higher at 16,934 and the Nasdaq 9 points higher at 3,968.
Alpari UK
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UK Opening Call from Alpari UK on 31 July 2014
Europe mixed ahead of unemployment and inflation data
• FOMC very dovish despite ongoing improvement in the economy;
• Yellen may wait until Jackson Hole next month to discuss rate hikes;
• German unemployment and retail sales figures being released this morning;
• Eurozone inflation data less important, unemployment rate also being released.
European futures are looking a little mixed ahead of the open, following similarly mixed sessions in the US and Asia overnight. US stocks were initially off a fair bit but the Fed’s very dovish stance managed to drive some late gains to leave the S&P marginally higher on the day, while the Dow ended with a small loss.
The Fed announced another $10 billion taper and left interest rates unchanged at below 0.25%, which is exactly what the market was expecting. It was the statement that investors were really interested in as the economic data has improved dramatically in the second quarter, capped off with the first GDP reading yesterday showing the economy grew at a 4% annualised rate, ahead of expectations. Given that the first quarter figure was also revised higher to -2.1%, from -2.9%, I imagine many people’s outlooks for growth will paint a much more rosey picture now.
The only people that don’t seem to be getting carried away with the recovery is the Federal Reserve, or most members anyway. While it was always suggested that Chairwoman Janet Yellen is even more dovish than her predecessor Ben Bernanke, I don’t think everyone quite realised just how much more dovish a leader she would actually be. Yesterday’s statement was extremely dovish given the strides made in most areas of the economy, to the point that Charles Plosser, a known hawk, dissented.
I understand that there is still a significant amount of slack in the economy, as there is in the UK, but I get the feeling that the Fed, in effectively refusing to even discuss rate hikes, is putting itself in the position that when it finally does, the markets are going to go mental, something it has tried to prevent recently. Talk of rate rises could even come as early as next month, when Yellen will speak at the Jackson Hole symposium, an event that has been used many times in the past by the Fed Chair to drop a big hint of a coming change in monetary policy. I guess I just find it difficult to believe that the Fed is actually as dovish as it’s trying to appear which brings into question how transparent it is actually being.
Regardless, the markets are loving this while it lasts, so it may well be onwards and upwards from here, for the next month at least. With the Fed decision out of the way, traders will now turn to tomorrow’s jobs report and inflation data for further signs of improvement in the economy, including the amount of slack that still exists. That said, there is plenty of economic data being released today that shouldn’t be overlooked, despite it not necessarily being as important as yesterday’s or Friday’s numbers.
Of note this morning, we have the German unemployment data, which is expected to show a small decline in the number of unemployed with the rate remaining unchanged at 6.7%. It is worth noting that we’ve had similar expectations the last couple of months and each time unemployment has risen. We also have retail sales data for Germany this morning, which is expected to show a 1% increase in June.
The Eurozone inflation data is another one worth keeping an eye on, although following the ECBs decision a couple of months ago to announce a big monetary stimulus package, the numbers have lost some importance. Unless we see a significant decline in the inflation figures, the ECB is very unlikely to announce any further stimulus and instead insist that the current package needs time to feed into the economy. Eurozone unemployment will also be released this morning and is expected to remain unchanged at 11.6%.
Ahead of the European open, the FTSE is expected to open 4 points higher at 6,777, the CAC 11 points higher at 4,323 and the DAX 5 points lower at 9,588.
Europe mixed ahead of unemployment and inflation data
• FOMC very dovish despite ongoing improvement in the economy;
• Yellen may wait until Jackson Hole next month to discuss rate hikes;
• German unemployment and retail sales figures being released this morning;
• Eurozone inflation data less important, unemployment rate also being released.
European futures are looking a little mixed ahead of the open, following similarly mixed sessions in the US and Asia overnight. US stocks were initially off a fair bit but the Fed’s very dovish stance managed to drive some late gains to leave the S&P marginally higher on the day, while the Dow ended with a small loss.
The Fed announced another $10 billion taper and left interest rates unchanged at below 0.25%, which is exactly what the market was expecting. It was the statement that investors were really interested in as the economic data has improved dramatically in the second quarter, capped off with the first GDP reading yesterday showing the economy grew at a 4% annualised rate, ahead of expectations. Given that the first quarter figure was also revised higher to -2.1%, from -2.9%, I imagine many people’s outlooks for growth will paint a much more rosey picture now.
The only people that don’t seem to be getting carried away with the recovery is the Federal Reserve, or most members anyway. While it was always suggested that Chairwoman Janet Yellen is even more dovish than her predecessor Ben Bernanke, I don’t think everyone quite realised just how much more dovish a leader she would actually be. Yesterday’s statement was extremely dovish given the strides made in most areas of the economy, to the point that Charles Plosser, a known hawk, dissented.
I understand that there is still a significant amount of slack in the economy, as there is in the UK, but I get the feeling that the Fed, in effectively refusing to even discuss rate hikes, is putting itself in the position that when it finally does, the markets are going to go mental, something it has tried to prevent recently. Talk of rate rises could even come as early as next month, when Yellen will speak at the Jackson Hole symposium, an event that has been used many times in the past by the Fed Chair to drop a big hint of a coming change in monetary policy. I guess I just find it difficult to believe that the Fed is actually as dovish as it’s trying to appear which brings into question how transparent it is actually being.
Regardless, the markets are loving this while it lasts, so it may well be onwards and upwards from here, for the next month at least. With the Fed decision out of the way, traders will now turn to tomorrow’s jobs report and inflation data for further signs of improvement in the economy, including the amount of slack that still exists. That said, there is plenty of economic data being released today that shouldn’t be overlooked, despite it not necessarily being as important as yesterday’s or Friday’s numbers.
Of note this morning, we have the German unemployment data, which is expected to show a small decline in the number of unemployed with the rate remaining unchanged at 6.7%. It is worth noting that we’ve had similar expectations the last couple of months and each time unemployment has risen. We also have retail sales data for Germany this morning, which is expected to show a 1% increase in June.
The Eurozone inflation data is another one worth keeping an eye on, although following the ECBs decision a couple of months ago to announce a big monetary stimulus package, the numbers have lost some importance. Unless we see a significant decline in the inflation figures, the ECB is very unlikely to announce any further stimulus and instead insist that the current package needs time to feed into the economy. Eurozone unemployment will also be released this morning and is expected to remain unchanged at 11.6%.
Ahead of the European open, the FTSE is expected to open 4 points higher at 6,777, the CAC 11 points higher at 4,323 and the DAX 5 points lower at 9,588.
Alpari UK
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US Opening Call from Alpari UK on 31 July 2014
Europe lower on Adidas profit warning due to Ukraine crisis
• Europe lower on Adidas profit warning due to Ukraine crisis;
• Argentine default weighs further on sentiment;
• Eurozone inflation falls again but ECB unlikely to react;
• US jobless claims to come but focus on tomorrow’s jobs report.
We may have seen a positive response to the Fed’s dovish statement on Wednesday evening but that boost has proven to be temporary, with a few stories this morning weighing on investor sentiment and pushing US futures lower.
The biggest of these appears to be the profit warning from Adidas, which sank almost 15% early in European trade. The company lowered its forecasts for the year quite significantly and warned about the impact of the crisis in eastern Ukraine on exports to Russia, which not only confirmed what people had already feared but highlighted the fact that the pain felt in Europe could be much larger than anticipated.
German stocks were the worst hit this morning, which is hardly surprising given the amount of trade the country conducts with Russia. When you see profit warnings like these from such a large company, it really makes you realise exactly what these countries are losing every time a fresh batch of sanctions are imposed on Russia.
With the countries in the eurozone already experiencing very low levels of growth, this is really not going to do them any favours. And as we’ve seen a lot in recent years, when one region is falling further and further behind the rest in the recovery cycle, it tends to weigh on growth everywhere.
The Argentine default isn’t helping matters this morning, although had this not come alongside the Adidas profit warning, I doubt it would have weighed too heavily on sentiment today.
One other thing potentially hitting sentiment this morning is the disappointing inflation reading for July. Up until a couple of months ago, this reading would have been met with rising expectations of monetary stimulus from the ECB but with the central bank having recently announced a large stimulus package, it’s very unlikely that we’ll see any more stimulus this year. With that in mind, further moves towards deflation in the eurozone will not be well received at the moment.
The US session is looking a little quiet today, with the only notable release being the weekly jobless claims number. This is seen rising to 301,000 following the surprise dip to 284,000 last month. I don’t expect this to have too big an impact today though, with the US jobs report and inflation data tomorrow seen as the far more important releases.
The S&P is currently seen opening 13 points lower at 1,957, the Dow 93 points lower at 16,787 and the Nasdaq 27 points lower at 3,949.
Europe lower on Adidas profit warning due to Ukraine crisis
• Europe lower on Adidas profit warning due to Ukraine crisis;
• Argentine default weighs further on sentiment;
• Eurozone inflation falls again but ECB unlikely to react;
• US jobless claims to come but focus on tomorrow’s jobs report.
We may have seen a positive response to the Fed’s dovish statement on Wednesday evening but that boost has proven to be temporary, with a few stories this morning weighing on investor sentiment and pushing US futures lower.
The biggest of these appears to be the profit warning from Adidas, which sank almost 15% early in European trade. The company lowered its forecasts for the year quite significantly and warned about the impact of the crisis in eastern Ukraine on exports to Russia, which not only confirmed what people had already feared but highlighted the fact that the pain felt in Europe could be much larger than anticipated.
German stocks were the worst hit this morning, which is hardly surprising given the amount of trade the country conducts with Russia. When you see profit warnings like these from such a large company, it really makes you realise exactly what these countries are losing every time a fresh batch of sanctions are imposed on Russia.
With the countries in the eurozone already experiencing very low levels of growth, this is really not going to do them any favours. And as we’ve seen a lot in recent years, when one region is falling further and further behind the rest in the recovery cycle, it tends to weigh on growth everywhere.
The Argentine default isn’t helping matters this morning, although had this not come alongside the Adidas profit warning, I doubt it would have weighed too heavily on sentiment today.
One other thing potentially hitting sentiment this morning is the disappointing inflation reading for July. Up until a couple of months ago, this reading would have been met with rising expectations of monetary stimulus from the ECB but with the central bank having recently announced a large stimulus package, it’s very unlikely that we’ll see any more stimulus this year. With that in mind, further moves towards deflation in the eurozone will not be well received at the moment.
The US session is looking a little quiet today, with the only notable release being the weekly jobless claims number. This is seen rising to 301,000 following the surprise dip to 284,000 last month. I don’t expect this to have too big an impact today though, with the US jobs report and inflation data tomorrow seen as the far more important releases.
The S&P is currently seen opening 13 points lower at 1,957, the Dow 93 points lower at 16,787 and the Nasdaq 27 points lower at 3,949.
Alpari UK
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UK Opening Call from Alpari UK on 1 August 2014
Investors turn to mass data releases for end of week boost
• European indices seen slightly lower following big sell-off in the US on Thursday;
• US sell-off this week may not be something to be too concerned about;
• VIX action may provide insight into whether we’re about to see larger correction;
• Chinese PMI readings help boost sentiment overnight;
• European PMIs and US jobs report in focus on Friday.
European indices are expected to open slightly in the red on Friday following a major sell-off in US equities on Thursday and a fairly negative session in Asia overnight.
The Dow plunged more than 300 points yesterday to record its largest days losses in six months which has given many people the difficult job of trying to explain exactly why we’ve seen such a U-turn from investors. There were plenty of small things that could have weighed on sentiment yesterday such as the Adidas profit warning which was driven by the crisis in the Ukraine, the Argentine default or even disappointing earnings. Some people, in a desperate attempt to explain the sell-off, even highlighted the employment cost index rise to 0.7%, suggesting that higher wages could prompt a more hawkish response from the Fed.
The simple fact of the matter is that it was probably a combination of a number of factors, along with the fact that the markets can act a little irrationally at month end. The important question now is whether this was just a one-day sell-off or the start of a more significant correction. Well, as it stands European futures are only pointing to a slightly weaker open while US indices are seen opening a quarter of a percentage point higher so I’m not overly concerned yet.
On top of that, with indices currently deep in negative territory this week, it’s worth looking at the last few times we’ve seen a week like this. Of course, with the jobs report being released today, this could all change. But, assuming it doesn’t, it is worth knowing that each time we’ve seen a week like this in the Dow this year, it’s turned out to be quite a bullish signal. In January, we saw a little more selling before the upturn but on the last two occasions in March and April, we saw an immediate reversal.
One thing worth watching in the coming weeks will be the VIX as this spiked significantly higher this week to a three and a half month high. The VIX is known as the fear index and the way it responds in the coming weeks could provide insight into whether we’re seeing a brief sell-off or a more significant correction. In the past, these spikes in volatility have tended to be followed, not always immediately, by a gradual decline back towards the previous lows. Should we not see this, or if it creates a new higher low, this could be a warning sign of worrying times to come.
An improvement in the official Chinese manufacturing PMI helped lift sentiment in Asia overnight, although it wasn’t quite enough to push indices there back into positive territory. The 51.7 reading though was the highest recorded since April 2012 which is an encouraging sign given that at time this year, people have genuinely been concerned about whether growth could fall to 5% this year, while some have predicted even worse outcomes.
There’s plenty more data being released today, so we could be in for another day of volatile markets. The Eurozone manufacturing PMI readings will be released throughout the early part of the session, followed by the UK reading at 9.30. Once again, people will be looking for further evidence of a slowdown in the euro area, as well as signs that the German economy is genuinely suffering as a result of the Ukrainian crisis and the sanctions against Russia. This has already been confirmed by Adidas’ profit warning yesterday but these PMI readings could provide further insight into how much confidence is deteriorating in the eurozone’s largest economy.
Finally today we’ll have the jobs report from the US, which will be followed extremely closely. There are so many pieces of data being released at 1.30 and all of them make up some piece of the jigsaw that is the Fed’s outlook for monetary policy. In the past we’ve been able to focus on a couple of pieces such as the unemployment rate or the non-farm payrolls number but it isn’t that simple any more. Now data such as wage inflation and hours worked are very important as they provide insight into the amount of slack still in the economy. Also, we have the Fed’s preferred measure of inflation, the personal consumption expenditure price index, being released at the same time, so I expect to see a lot of volatility in the markets as traders attempt to make sense of all these releases.
Ahead of the European open, the FTSE is expected to open 17 points lower, the CAC 13 points lower and the DAX 26 points lower.
Investors turn to mass data releases for end of week boost
• European indices seen slightly lower following big sell-off in the US on Thursday;
• US sell-off this week may not be something to be too concerned about;
• VIX action may provide insight into whether we’re about to see larger correction;
• Chinese PMI readings help boost sentiment overnight;
• European PMIs and US jobs report in focus on Friday.
European indices are expected to open slightly in the red on Friday following a major sell-off in US equities on Thursday and a fairly negative session in Asia overnight.
The Dow plunged more than 300 points yesterday to record its largest days losses in six months which has given many people the difficult job of trying to explain exactly why we’ve seen such a U-turn from investors. There were plenty of small things that could have weighed on sentiment yesterday such as the Adidas profit warning which was driven by the crisis in the Ukraine, the Argentine default or even disappointing earnings. Some people, in a desperate attempt to explain the sell-off, even highlighted the employment cost index rise to 0.7%, suggesting that higher wages could prompt a more hawkish response from the Fed.
The simple fact of the matter is that it was probably a combination of a number of factors, along with the fact that the markets can act a little irrationally at month end. The important question now is whether this was just a one-day sell-off or the start of a more significant correction. Well, as it stands European futures are only pointing to a slightly weaker open while US indices are seen opening a quarter of a percentage point higher so I’m not overly concerned yet.
On top of that, with indices currently deep in negative territory this week, it’s worth looking at the last few times we’ve seen a week like this. Of course, with the jobs report being released today, this could all change. But, assuming it doesn’t, it is worth knowing that each time we’ve seen a week like this in the Dow this year, it’s turned out to be quite a bullish signal. In January, we saw a little more selling before the upturn but on the last two occasions in March and April, we saw an immediate reversal.
One thing worth watching in the coming weeks will be the VIX as this spiked significantly higher this week to a three and a half month high. The VIX is known as the fear index and the way it responds in the coming weeks could provide insight into whether we’re seeing a brief sell-off or a more significant correction. In the past, these spikes in volatility have tended to be followed, not always immediately, by a gradual decline back towards the previous lows. Should we not see this, or if it creates a new higher low, this could be a warning sign of worrying times to come.
An improvement in the official Chinese manufacturing PMI helped lift sentiment in Asia overnight, although it wasn’t quite enough to push indices there back into positive territory. The 51.7 reading though was the highest recorded since April 2012 which is an encouraging sign given that at time this year, people have genuinely been concerned about whether growth could fall to 5% this year, while some have predicted even worse outcomes.
There’s plenty more data being released today, so we could be in for another day of volatile markets. The Eurozone manufacturing PMI readings will be released throughout the early part of the session, followed by the UK reading at 9.30. Once again, people will be looking for further evidence of a slowdown in the euro area, as well as signs that the German economy is genuinely suffering as a result of the Ukrainian crisis and the sanctions against Russia. This has already been confirmed by Adidas’ profit warning yesterday but these PMI readings could provide further insight into how much confidence is deteriorating in the eurozone’s largest economy.
Finally today we’ll have the jobs report from the US, which will be followed extremely closely. There are so many pieces of data being released at 1.30 and all of them make up some piece of the jigsaw that is the Fed’s outlook for monetary policy. In the past we’ve been able to focus on a couple of pieces such as the unemployment rate or the non-farm payrolls number but it isn’t that simple any more. Now data such as wage inflation and hours worked are very important as they provide insight into the amount of slack still in the economy. Also, we have the Fed’s preferred measure of inflation, the personal consumption expenditure price index, being released at the same time, so I expect to see a lot of volatility in the markets as traders attempt to make sense of all these releases.
Ahead of the European open, the FTSE is expected to open 17 points lower, the CAC 13 points lower and the DAX 26 points lower.
Alpari UK
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US Opening Call from Alpari UK on 1 August 2014
US futures tumble again ahead of jobs report
• Across the board sell-off seen at the end of the week;
• Traders seen pricing in earlier Fed rate hike;
• US seen adding more than 200,000 jobs for sixth month;
• US inflation, manufacturing and consumer sentiment data also eyed.
It’s certainly been an interesting few days in the markets, with losses being witnessed across the board as the Dow wiped out the last of its yearly gains, bond yields rose as an earlier rate hike from the Federal Reserve started to be priced in and even Gold fell to a six week low. With such losses being seen it’s hardly surprising that we’ve finally seen a spike in volatility, with the VIX rising to a three and a half month high.
The only question now is whether what we’re seeing is the early stages of a broader correction or simply a brief sell-off prompted by a number of small factors feeding into people’s fear that a big correction must be round the corner. While US indices are on course for big losses, it’s worth noting that we’ve seen similar weeks on three occasions this year and each time, it’s actually been a fairly bullish signal as traders have found reason to buy the dips.
While traders may finally be pricing in a slightly earlier rate hike from the Federal Reserve, as seen by the rising yields across the board in recent days, I don’t expect there to be too big a revision to forecasts while the Fed continues to push out such dovish statements.
One thing that could prompt a change in sentiment is today’s jobs report. The jobs report is widely viewed as the most important economic release of the month and so we tend to see a little more caution from traders as we approach it anyway.
Today’s report could provide big insight into what the markets are expecting when it comes to rate hikes in the US. If investors do in fact believe that the Fed could be persuaded to raise rates earlier than planned, then a strong report today should prompt more of a negative reaction in the markets. If, on the other hand, we see a positive response to the jobs report, it would suggest that investors are not as concerned as some are suggesting.
In recent years, people have been obsessed by two or three pieces of the jobs report in particular, the unemployment rate, the participation rate and the non-farm payrolls figure. While these remain extremely important, with the latter seen above 200,000 for the sixth consecutive month, other aspects of the report are also being tracked very closely.
The Fed has been very clear in stating that it is looking at many different measurements of economic health and that it is concerned about the amount of slack in the economy. With that in mind, data such as hourly earnings, number of hours worked and personal income are increasingly important measures in determining Fed policy and should therefore not be overlooked.
The data doesn’t end with the jobs report today, we also have the Fed’s preferred measure of inflation, the core personal consumption expenditure price index, two pieces of manufacturing data and the UoM consumer sentiment reading. This should make for some volatile markets in what has already been a very volatile end to the week.
Ahead of the opening bell on Wall Street, the S&P is expected to open 13 points lower, the Dow 109 points lower and the Nasdaq 30 points lower.
US futures tumble again ahead of jobs report
• Across the board sell-off seen at the end of the week;
• Traders seen pricing in earlier Fed rate hike;
• US seen adding more than 200,000 jobs for sixth month;
• US inflation, manufacturing and consumer sentiment data also eyed.
It’s certainly been an interesting few days in the markets, with losses being witnessed across the board as the Dow wiped out the last of its yearly gains, bond yields rose as an earlier rate hike from the Federal Reserve started to be priced in and even Gold fell to a six week low. With such losses being seen it’s hardly surprising that we’ve finally seen a spike in volatility, with the VIX rising to a three and a half month high.
The only question now is whether what we’re seeing is the early stages of a broader correction or simply a brief sell-off prompted by a number of small factors feeding into people’s fear that a big correction must be round the corner. While US indices are on course for big losses, it’s worth noting that we’ve seen similar weeks on three occasions this year and each time, it’s actually been a fairly bullish signal as traders have found reason to buy the dips.
While traders may finally be pricing in a slightly earlier rate hike from the Federal Reserve, as seen by the rising yields across the board in recent days, I don’t expect there to be too big a revision to forecasts while the Fed continues to push out such dovish statements.
One thing that could prompt a change in sentiment is today’s jobs report. The jobs report is widely viewed as the most important economic release of the month and so we tend to see a little more caution from traders as we approach it anyway.
Today’s report could provide big insight into what the markets are expecting when it comes to rate hikes in the US. If investors do in fact believe that the Fed could be persuaded to raise rates earlier than planned, then a strong report today should prompt more of a negative reaction in the markets. If, on the other hand, we see a positive response to the jobs report, it would suggest that investors are not as concerned as some are suggesting.
In recent years, people have been obsessed by two or three pieces of the jobs report in particular, the unemployment rate, the participation rate and the non-farm payrolls figure. While these remain extremely important, with the latter seen above 200,000 for the sixth consecutive month, other aspects of the report are also being tracked very closely.
The Fed has been very clear in stating that it is looking at many different measurements of economic health and that it is concerned about the amount of slack in the economy. With that in mind, data such as hourly earnings, number of hours worked and personal income are increasingly important measures in determining Fed policy and should therefore not be overlooked.
The data doesn’t end with the jobs report today, we also have the Fed’s preferred measure of inflation, the core personal consumption expenditure price index, two pieces of manufacturing data and the UoM consumer sentiment reading. This should make for some volatile markets in what has already been a very volatile end to the week.
Ahead of the opening bell on Wall Street, the S&P is expected to open 13 points lower, the Dow 109 points lower and the Nasdaq 30 points lower.
Alpari UK
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Reaction to US jobs report and inflation data
The US jobs report and inflation numbers for July had the perfect balance of being good enough to support a strong economic recovery in the US, while lacking in the areas that the Fed is most concerned with right now, including wage growth. From a markets standpoint, we couldn’t ask for more. No one wants the economy to suffer in order for the stock markets to keep pushing higher but the Fed, in remaining extremely dovish regardless of the improvement being seen in many areas, has created a situation whereby the data can be great in most areas but we don’t have to worry about rate hikes, which means stocks can continue to push higher.
The numbers themselves were a little mixed but there were a lot of good points to the data that shouldn’t be overlooked. For example, the unemployment rate rose but so did the participation rate for the first time since March. While the rise was only marginal, it’s still potentially a sign that people are returning to the work force as they see the jobs market improving. In terms of job creation, only 209,000 jobs were created in July, which is lower than expected, but last month’s figure was revised up by 10,000 and this month’s was far from poor. It’s also the sixth consecutive month that more than 200,000 jobs have been created which is not something to be sniffed at.
The US jobs report and inflation numbers for July had the perfect balance of being good enough to support a strong economic recovery in the US, while lacking in the areas that the Fed is most concerned with right now, including wage growth. From a markets standpoint, we couldn’t ask for more. No one wants the economy to suffer in order for the stock markets to keep pushing higher but the Fed, in remaining extremely dovish regardless of the improvement being seen in many areas, has created a situation whereby the data can be great in most areas but we don’t have to worry about rate hikes, which means stocks can continue to push higher.
The numbers themselves were a little mixed but there were a lot of good points to the data that shouldn’t be overlooked. For example, the unemployment rate rose but so did the participation rate for the first time since March. While the rise was only marginal, it’s still potentially a sign that people are returning to the work force as they see the jobs market improving. In terms of job creation, only 209,000 jobs were created in July, which is lower than expected, but last month’s figure was revised up by 10,000 and this month’s was far from poor. It’s also the sixth consecutive month that more than 200,000 jobs have been created which is not something to be sniffed at.
Alpari UK
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Weekly market preview from Alpari UK – 4 August 2014
A fairly busy week ahead in the markets, where a particularly interesting week for the US gives way to a more UK and global focus. As such, the US will only have the likes of the trade balance figure to look forward to. Conversely, the UK markets will be having a wide range of economic announcements in sight, where the services PMI could make up the most interesting of these. European focus will likely look towards the ECB press conference on Thursday where Mario Draghi could bring yet more volatility to the markets.
In Asia, Friday marks the day to be watching out for, where Chinese trade data is joined by the latest monetary policy from the Bank of Japan. Finally, a massive week for Australia sees the jobs report take centre stage amid multiple notable releases.
US
A somewhat less interesting week ahead in terms of economic releases in the US, where the impact of the recent FOMC announcement and jobs report data is just as likely to continue impacting the market as the upcoming new data is. The two major releases I will be looking out for are Wednesday’s trade balance data and the release of labour market data on Friday.
The trade data has become more and more important to gauge exactly how much the US export market is growing in response to the boom in shale oil and gas. This made a profound effect upon the value to outward trade in 2013 where the trade balance peaked at -$34.54 billion, coming off sub -$60 billion levels back in 2009. However, this has come back somewhat and there is an expectations that the figure will fall moderately to -$44.70 from -$44.39. Be aware of any major miss on this headline figure and also be aware of the full breakdown of imports and exports to gauge how domestic businesses are faring.
Later in the week, the release of preliminary non-farm productivity and unit labour costs provide a belated look at some of the alternate measures of labour market slack. The Fed and BoE alike are very keen on alternate measures such as part time work, the participation rate and alike. Given their new form of forward guidance, alternate measures of labour slack are almost as keenly followed as the headline payrolls and unemployment figures. Subsequently, they are certainly worth watching out for. In general, the link is that strong labour costs and strong productivity growth would be deemed conducive to an earlier move on rates, whereas poor figures would likely confirm a longer and more accommodative stance at the Fed. Markets are expecting them to both post a positive figure, yet with poor numbers arising at Fridays jobs report, I believe any surprises could be to the downside.
UK
The UK looks alot more busy this week, where last week’s manufacturing PMI figure on Friday means that we have the remaining construction and services releases in the early part of this week. This is joined by the BoE monetary policy decision which is due on Thursday where Mark Carney is expected to keep rates and asset purchases constant.
The release of PMI figures is going to dominate the early part of the week, where the construction and service sectors are back in the spotlight. As usual, the more important of these two releases will be the services PMI which provides a gauge of how purchasing managers view the sector in terms of employment, demand, supply and alike. In general, we expect to see the strongest market response from this figure owing to the fact that the services sector makes up more than two thirds of total UK output. Subsequently, whilst manufacturing and construction is important, if the services sector isn’t optimistic, it is a massive cause for concern. However, this month looks a positive one, where the market expectations point towards a figure around 58.1 from 57.7.
Whilst the services PMI is the most important, this does not mean you should necessarily completely discount the remaining releases and I will be watching the construction PMI figure closely at a time when the sector is both booming but at risk of cooling down significantly. Mark Carney’s insistence that the housing market remains as the biggest risk to the UK recovery means that people are becoming weary of a BoE induced slowdown. Recent measures that have been introduced are unlikely to significantly quell the market, however with higher rates around the corner, mortgage providers are likely to start factoring this into rates and thus many will begin to find the market unaffordable. This potential weakening of the construction sector is expected to be reflected in the PMI figure, where expectations point towards a fall from 62.6 to 62.1.
Finally, the BoE monetary policy decision on Thursday is expected to bring more of the same from Mark Carney, where asset purchases and interest rates are likely to remain steady. For this reason, there is a high possibility that this is somewhat of a non-event. However, be on the look out for any signs of a more accurate timeline on interest rates when the statement is released. This is likely to be the only possible driver of volatility for the event.
Eurozone
The eurozone focus is likely to be dominated by Thursday’s ECB announcement, where Mario Draghi once again takes the stand once more. Draghi’s discussion will be predominantly focused upon how eurozone monetary policy is shaping up in response to a ongoing threat of deflation. I do not expect to see any more policy changes from the ECB this month and thus Draghi’s testimony will be absolutely key. With inflation having fallen to 0.4% recently, there is certainly a threat as we progress, but I believe the consensus is that the ECB will wait for another quarter to see if any of the recent measures introduced will make a positive effect upon inflation. As such, I will be looking out for the press conference to give clues as to at what point Draghi sees it fit to give up on the recent measures and instead embark upon a round of asset purchases as a means to push up prices.
Asia & Oceania
A somewhat quiet week in China sees the release of trade data make up the most notable of all releases. However, it is a little more interesting in Japan, where the BoJ’s monetary policy stance comes back to the fore.
On Friday, the Chinese trade balance is expected to bring about further clarity over exactly how the Chinese export market is developing at a time when manufacturing appears to be picking up again. It is typically the case that people are watching for the actual trade balance figure to get an idea of how the Country’s exporters and importers are faring. However, by looking at the actual progression of separate exports and imports, you can get a much more clear understanding of where the economy has been growing or shrinking in terms of trade. The headline trade balance is expected to fall from $31.6 billion to $26 billion. However, look out for the exports (7.2% last month) and imports too (5.5% last month).
In Japan, the latest BoJ monetary policy announcement is due on Friday, with expectations pointing towards little change from last month. The feeling is that data points show stronger than expected consumer activity following the April sales tax hike and this has been one of the major threats to the economic recovery for Japan. Thus with that out the way, I think the major threats that could push the BoJ towards further easing in the future would be a strong yen and too low inflation. However, there seems to be confidence on both matters that fears within the markets are overdone somewhat and thus there is unlikely to be any action in the near future. However, look out for any hints that the BoJ would be willing to act should any of these factors become more of an issue than is currently the case.
Finally, in Australia there is a major week ahead with the release of jobs data, monetary policy decisions and trade data to look out for. The most important of these is likely to be the jobs report on Thursday, given the unexpected rise to 6% unemployment last month. The government and RBA have been gearing the economy more towards domestic consumption and less towards export markets in the past year. However, this was always likely to be difficult given the strength and size of the Australian commodity and mining business. The recovery in the Australian dollar throughout 2014 recognises the confidence that has been coming back into this market and thus there is a belief that Australia is going to have a strong H2 with a resurgent China also coming into play. However, this needs to be reflected in jobs and for that reason Thursday’s release is absolutely key. Market estimates point towards the main unemployment rate remaining at 6%, while the employment change figure is expected to fall back from 15.9k to 13.5k.
The RBA rate decision on Friday is very likely to be somewhat of a non-event after last month’s very clear outline of a stable outlook for Australian monetary policy going forward. I am sure that the RBA would like to be able to push their dollar lower by enacting a looser monetary policy. However, much like the UK, Australia has clear threats from a booming housing market and thus I do not see them moving in any direction for the remainder of 2015.
A fairly busy week ahead in the markets, where a particularly interesting week for the US gives way to a more UK and global focus. As such, the US will only have the likes of the trade balance figure to look forward to. Conversely, the UK markets will be having a wide range of economic announcements in sight, where the services PMI could make up the most interesting of these. European focus will likely look towards the ECB press conference on Thursday where Mario Draghi could bring yet more volatility to the markets.
In Asia, Friday marks the day to be watching out for, where Chinese trade data is joined by the latest monetary policy from the Bank of Japan. Finally, a massive week for Australia sees the jobs report take centre stage amid multiple notable releases.
US
A somewhat less interesting week ahead in terms of economic releases in the US, where the impact of the recent FOMC announcement and jobs report data is just as likely to continue impacting the market as the upcoming new data is. The two major releases I will be looking out for are Wednesday’s trade balance data and the release of labour market data on Friday.
The trade data has become more and more important to gauge exactly how much the US export market is growing in response to the boom in shale oil and gas. This made a profound effect upon the value to outward trade in 2013 where the trade balance peaked at -$34.54 billion, coming off sub -$60 billion levels back in 2009. However, this has come back somewhat and there is an expectations that the figure will fall moderately to -$44.70 from -$44.39. Be aware of any major miss on this headline figure and also be aware of the full breakdown of imports and exports to gauge how domestic businesses are faring.
Later in the week, the release of preliminary non-farm productivity and unit labour costs provide a belated look at some of the alternate measures of labour market slack. The Fed and BoE alike are very keen on alternate measures such as part time work, the participation rate and alike. Given their new form of forward guidance, alternate measures of labour slack are almost as keenly followed as the headline payrolls and unemployment figures. Subsequently, they are certainly worth watching out for. In general, the link is that strong labour costs and strong productivity growth would be deemed conducive to an earlier move on rates, whereas poor figures would likely confirm a longer and more accommodative stance at the Fed. Markets are expecting them to both post a positive figure, yet with poor numbers arising at Fridays jobs report, I believe any surprises could be to the downside.
UK
The UK looks alot more busy this week, where last week’s manufacturing PMI figure on Friday means that we have the remaining construction and services releases in the early part of this week. This is joined by the BoE monetary policy decision which is due on Thursday where Mark Carney is expected to keep rates and asset purchases constant.
The release of PMI figures is going to dominate the early part of the week, where the construction and service sectors are back in the spotlight. As usual, the more important of these two releases will be the services PMI which provides a gauge of how purchasing managers view the sector in terms of employment, demand, supply and alike. In general, we expect to see the strongest market response from this figure owing to the fact that the services sector makes up more than two thirds of total UK output. Subsequently, whilst manufacturing and construction is important, if the services sector isn’t optimistic, it is a massive cause for concern. However, this month looks a positive one, where the market expectations point towards a figure around 58.1 from 57.7.
Whilst the services PMI is the most important, this does not mean you should necessarily completely discount the remaining releases and I will be watching the construction PMI figure closely at a time when the sector is both booming but at risk of cooling down significantly. Mark Carney’s insistence that the housing market remains as the biggest risk to the UK recovery means that people are becoming weary of a BoE induced slowdown. Recent measures that have been introduced are unlikely to significantly quell the market, however with higher rates around the corner, mortgage providers are likely to start factoring this into rates and thus many will begin to find the market unaffordable. This potential weakening of the construction sector is expected to be reflected in the PMI figure, where expectations point towards a fall from 62.6 to 62.1.
Finally, the BoE monetary policy decision on Thursday is expected to bring more of the same from Mark Carney, where asset purchases and interest rates are likely to remain steady. For this reason, there is a high possibility that this is somewhat of a non-event. However, be on the look out for any signs of a more accurate timeline on interest rates when the statement is released. This is likely to be the only possible driver of volatility for the event.
Eurozone
The eurozone focus is likely to be dominated by Thursday’s ECB announcement, where Mario Draghi once again takes the stand once more. Draghi’s discussion will be predominantly focused upon how eurozone monetary policy is shaping up in response to a ongoing threat of deflation. I do not expect to see any more policy changes from the ECB this month and thus Draghi’s testimony will be absolutely key. With inflation having fallen to 0.4% recently, there is certainly a threat as we progress, but I believe the consensus is that the ECB will wait for another quarter to see if any of the recent measures introduced will make a positive effect upon inflation. As such, I will be looking out for the press conference to give clues as to at what point Draghi sees it fit to give up on the recent measures and instead embark upon a round of asset purchases as a means to push up prices.
Asia & Oceania
A somewhat quiet week in China sees the release of trade data make up the most notable of all releases. However, it is a little more interesting in Japan, where the BoJ’s monetary policy stance comes back to the fore.
On Friday, the Chinese trade balance is expected to bring about further clarity over exactly how the Chinese export market is developing at a time when manufacturing appears to be picking up again. It is typically the case that people are watching for the actual trade balance figure to get an idea of how the Country’s exporters and importers are faring. However, by looking at the actual progression of separate exports and imports, you can get a much more clear understanding of where the economy has been growing or shrinking in terms of trade. The headline trade balance is expected to fall from $31.6 billion to $26 billion. However, look out for the exports (7.2% last month) and imports too (5.5% last month).
In Japan, the latest BoJ monetary policy announcement is due on Friday, with expectations pointing towards little change from last month. The feeling is that data points show stronger than expected consumer activity following the April sales tax hike and this has been one of the major threats to the economic recovery for Japan. Thus with that out the way, I think the major threats that could push the BoJ towards further easing in the future would be a strong yen and too low inflation. However, there seems to be confidence on both matters that fears within the markets are overdone somewhat and thus there is unlikely to be any action in the near future. However, look out for any hints that the BoJ would be willing to act should any of these factors become more of an issue than is currently the case.
Finally, in Australia there is a major week ahead with the release of jobs data, monetary policy decisions and trade data to look out for. The most important of these is likely to be the jobs report on Thursday, given the unexpected rise to 6% unemployment last month. The government and RBA have been gearing the economy more towards domestic consumption and less towards export markets in the past year. However, this was always likely to be difficult given the strength and size of the Australian commodity and mining business. The recovery in the Australian dollar throughout 2014 recognises the confidence that has been coming back into this market and thus there is a belief that Australia is going to have a strong H2 with a resurgent China also coming into play. However, this needs to be reflected in jobs and for that reason Thursday’s release is absolutely key. Market estimates point towards the main unemployment rate remaining at 6%, while the employment change figure is expected to fall back from 15.9k to 13.5k.
The RBA rate decision on Friday is very likely to be somewhat of a non-event after last month’s very clear outline of a stable outlook for Australian monetary policy going forward. I am sure that the RBA would like to be able to push their dollar lower by enacting a looser monetary policy. However, much like the UK, Australia has clear threats from a booming housing market and thus I do not see them moving in any direction for the remainder of 2015.
Alpari UK
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UK Opening Call from Alpari UK on 4 August 2014
Markets cautious as 'buy the dip' becomes less clear
• Markets cautious despite dovish outlook from jobs report
• Possible effects of Russian sanctions impacting sentiment
• Gaza conflict drawing to a close, but at what expense?
• Spanish unemployment expected to fall further
• UK construction PMI likely to fall
European markets are looking for a positive open despite a somewhat mixed bag over in Asia, where dovish sentiment derived from Friday’s jobs report did little to spur buying. The substantial sell-off seen last week is still fresh in the mind as traders seek to determine whether this is just an anomaly within a clearly defined uptrend, or else a sign of something more significant. European markets are expected to open higher, with future markets pointing towards the FTSE100 opening +17, CAC +15 and DAX +12 points.
The overnight session saw somewhat of a damp squib which failed to muster much positive sentiment despite the fact that Friday brought about a somewhat dovish jobs report which saw payrolls fall by 91k. However, with Thursday seeing the likes of the Dow wipe what was remaining of this year to date’s gains, some caution has crept into the market. There has been a lot of talk regarding the threats within the markets, with geo-political fears being compounded by weakening volumes. Something had to give and it did so in spectacular fashion. The ability of markets to bounce back throughout the recent bull market has been driven by the willingness of investors to buy into the dips. This could come into fruition today, however there seems to be an initial unwillingness where we seek signs that the worst is over.
From a geo-political standpoint, most of the market threats should now be factored in, with potential Russian sanctions having been a hot topic for some time now, whilst the Israeli military campaign in Gaza seemingly approaching the end as troops began pulling back yesterday. However, the report from Adidas which saw a profit warning of -12.5% owing to a sanction driven loss of business in Russia has now been reflected in many of the 40 or so blue chips which derive over 5% of their revenues from the Russian market.
The conflict in Gaza has been building both in intensity but also in terms of international outrage given the degree of civilian casualties in the region. However, yesterday did show some signs that this could be coming to an end in the near future as the majority of troops pulled back to near the Israeli border. The military campaign which focused upon crippling Hamas and removing the threat of the underground tunnels that have been built to enter Israel. However, the methods undertaken have been deemed as disproportionate and the feeling is that this has the ability to drive further radicalisation across the Middle East. With ISIS advancing into Kurdish regions of Iraq over the past few days, it is clear that they are gaining in strength. Thus given their end goal of confronting Israel, I believe the actions in Gaza will drive the popularity of ISIS higher at a time when it is becoming increasingly difficult to see a solution to the problem.
Looking ahead to the European session, it looks moderately interesting from an economic standpoint. The release of the Spanish unemployment change figure is trumped only by the construction PMI figure out of the UK. Spanish unemployment has been making the long and protracted move towards a respectable unemployment rate in recent months, with the country experiencing some of the worst labour market conditions of any European nation. However, in recent months signs have been pointing towards an improvement of sorts. The cyclical nature of Spanish unemployment means that we typically see a fall in the months of May to august and this is happening yet to a greater extent. Expectations point towards another solid fall of -116.3k which would show that things are starting turn around, albeit gradually.
In the UK, the construction PMI figure is expected to bring somewhat of a less positive outlook, with median estimates pointing towards a fall from 62.6 to 62.0. The slowdown in the housing sector has been gradual in the past month or so and for many this has taken the form of a more ‘normal’ demand for houses rather that the frenzied clamour we have grown used to in the past year. With this, the construction sector as a whole is likely to suffer somewhat as valuations of projects begin to fall. Thus I believe we will see this figure pull back somewhat in H2 as interest rate hikes become ever nearer and investors become more cautious.
Markets cautious as 'buy the dip' becomes less clear
• Markets cautious despite dovish outlook from jobs report
• Possible effects of Russian sanctions impacting sentiment
• Gaza conflict drawing to a close, but at what expense?
• Spanish unemployment expected to fall further
• UK construction PMI likely to fall
European markets are looking for a positive open despite a somewhat mixed bag over in Asia, where dovish sentiment derived from Friday’s jobs report did little to spur buying. The substantial sell-off seen last week is still fresh in the mind as traders seek to determine whether this is just an anomaly within a clearly defined uptrend, or else a sign of something more significant. European markets are expected to open higher, with future markets pointing towards the FTSE100 opening +17, CAC +15 and DAX +12 points.
The overnight session saw somewhat of a damp squib which failed to muster much positive sentiment despite the fact that Friday brought about a somewhat dovish jobs report which saw payrolls fall by 91k. However, with Thursday seeing the likes of the Dow wipe what was remaining of this year to date’s gains, some caution has crept into the market. There has been a lot of talk regarding the threats within the markets, with geo-political fears being compounded by weakening volumes. Something had to give and it did so in spectacular fashion. The ability of markets to bounce back throughout the recent bull market has been driven by the willingness of investors to buy into the dips. This could come into fruition today, however there seems to be an initial unwillingness where we seek signs that the worst is over.
From a geo-political standpoint, most of the market threats should now be factored in, with potential Russian sanctions having been a hot topic for some time now, whilst the Israeli military campaign in Gaza seemingly approaching the end as troops began pulling back yesterday. However, the report from Adidas which saw a profit warning of -12.5% owing to a sanction driven loss of business in Russia has now been reflected in many of the 40 or so blue chips which derive over 5% of their revenues from the Russian market.
The conflict in Gaza has been building both in intensity but also in terms of international outrage given the degree of civilian casualties in the region. However, yesterday did show some signs that this could be coming to an end in the near future as the majority of troops pulled back to near the Israeli border. The military campaign which focused upon crippling Hamas and removing the threat of the underground tunnels that have been built to enter Israel. However, the methods undertaken have been deemed as disproportionate and the feeling is that this has the ability to drive further radicalisation across the Middle East. With ISIS advancing into Kurdish regions of Iraq over the past few days, it is clear that they are gaining in strength. Thus given their end goal of confronting Israel, I believe the actions in Gaza will drive the popularity of ISIS higher at a time when it is becoming increasingly difficult to see a solution to the problem.
Looking ahead to the European session, it looks moderately interesting from an economic standpoint. The release of the Spanish unemployment change figure is trumped only by the construction PMI figure out of the UK. Spanish unemployment has been making the long and protracted move towards a respectable unemployment rate in recent months, with the country experiencing some of the worst labour market conditions of any European nation. However, in recent months signs have been pointing towards an improvement of sorts. The cyclical nature of Spanish unemployment means that we typically see a fall in the months of May to august and this is happening yet to a greater extent. Expectations point towards another solid fall of -116.3k which would show that things are starting turn around, albeit gradually.
In the UK, the construction PMI figure is expected to bring somewhat of a less positive outlook, with median estimates pointing towards a fall from 62.6 to 62.0. The slowdown in the housing sector has been gradual in the past month or so and for many this has taken the form of a more ‘normal’ demand for houses rather that the frenzied clamour we have grown used to in the past year. With this, the construction sector as a whole is likely to suffer somewhat as valuations of projects begin to fall. Thus I believe we will see this figure pull back somewhat in H2 as interest rate hikes become ever nearer and investors become more cautious.
Alpari UK
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US Opening Call from Alpari UK on 4 August 2014
Markets off to a good start ahead of data heavy week
• Stocks off to a good start following a woeful week just gone;
• Data heavy week could help support the markets at these levels;
• UK construction picks up in July as record job creation is seen;
• Eurozone investor confidence falls to lowest since last August.
US indices are expected to open higher on Monday following an awful week that saw the Dow slip into negative territory for the year, while the S&P suffered four consecutive losses to end the week down more than two and a half percent. Ahead of the open, the S&P is seen 6 points higher, the Dow 40 points higher and the Nasdaq 11 points higher.
Despite this slightly positive start to the week, there does appear to be a little caution in the markets. Investors are a little concerned that the sell-off which started last week is not offer and could lead to something much bigger. Given the significant increase in the number warnings related to the stock markets as of late, this worry of a larger correction every time we see a bad week is hardly surprising. However, if you look back at the three other times that we’ve had poor weeks, the markets have bounced back pretty quickly so all this worry may be short lived.
Fortunately the week is looking data heavy which could provide plenty of support for the markets, especially when you look at the data we’ve seen recently, with everywhere except the eurozone enjoying a pretty solid second quarter. Today is one of the quieter days though, which may just give the markets some time to absorb all of the events from last week.
The morning has been pretty quiet in Europe as well, although there has been a couple of noteworthy data releases. The one that stands out was the UK construction PMI which aside from exceeding expectations with respect to the headline number, contained some very encouraging points in the report. The rise in residential construction in response to increasing demand along with the record increase in job creation is very positive, with the latter pointing to a sustained improvement expected in the sector.
The other notable release was the eurozone sentix investor confidence figure which fell to 2.7 in August from 10.1 the month before. This is the lowest reading since August last year and once again highlights the slowdown being seen in the region, not to mention the value that is no longer seen here. This could all feed into the euro weakness that many expect going forward, with investment in the region still weak and stocks and bonds now looking far from the cheap alternatives they were a year ago.
Markets off to a good start ahead of data heavy week
• Stocks off to a good start following a woeful week just gone;
• Data heavy week could help support the markets at these levels;
• UK construction picks up in July as record job creation is seen;
• Eurozone investor confidence falls to lowest since last August.
US indices are expected to open higher on Monday following an awful week that saw the Dow slip into negative territory for the year, while the S&P suffered four consecutive losses to end the week down more than two and a half percent. Ahead of the open, the S&P is seen 6 points higher, the Dow 40 points higher and the Nasdaq 11 points higher.
Despite this slightly positive start to the week, there does appear to be a little caution in the markets. Investors are a little concerned that the sell-off which started last week is not offer and could lead to something much bigger. Given the significant increase in the number warnings related to the stock markets as of late, this worry of a larger correction every time we see a bad week is hardly surprising. However, if you look back at the three other times that we’ve had poor weeks, the markets have bounced back pretty quickly so all this worry may be short lived.
Fortunately the week is looking data heavy which could provide plenty of support for the markets, especially when you look at the data we’ve seen recently, with everywhere except the eurozone enjoying a pretty solid second quarter. Today is one of the quieter days though, which may just give the markets some time to absorb all of the events from last week.
The morning has been pretty quiet in Europe as well, although there has been a couple of noteworthy data releases. The one that stands out was the UK construction PMI which aside from exceeding expectations with respect to the headline number, contained some very encouraging points in the report. The rise in residential construction in response to increasing demand along with the record increase in job creation is very positive, with the latter pointing to a sustained improvement expected in the sector.
The other notable release was the eurozone sentix investor confidence figure which fell to 2.7 in August from 10.1 the month before. This is the lowest reading since August last year and once again highlights the slowdown being seen in the region, not to mention the value that is no longer seen here. This could all feed into the euro weakness that many expect going forward, with investment in the region still weak and stocks and bonds now looking far from the cheap alternatives they were a year ago.
Alpari UK
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Daily Market Update - 4 August 2014 - Alpari UK
Markets cautious following sell-off - 00:32
Geo-political risks seem to be calming - 01:06
Busy Australian week sees retail sales start off well - 03:34
Moderate fall in UK construction PMI likely to be the beginning of further losses - 04:22
Markets cautious following sell-off - 00:32
Geo-political risks seem to be calming - 01:06
Busy Australian week sees retail sales start off well - 03:34
Moderate fall in UK construction PMI likely to be the beginning of further losses - 04:22
Alpari UK
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UK Opening Call from Alpari UK on 5 August 2014
European services PMI figures set to dominate
• Asian services PMI figures largely mixed
• RBA keeps rates constant
• Western markets start to show sign of strength
• European services PMI figures set to dominate
European markets are hoping to post a broadly more positive start to Tuesday than has been provided by the Asian outlook which has been dragged down by a disappointing services PMI number out of China. However, with the bailout of Portuguese Banco Espirito Santo yesterday, the Europeans are hoping to see more green after yesterday bucked the negative trend of last week. Futures point towards a largely positive open, with the FTSE100 +1, CAC +11 and DAX +38 points.
Overnight saw markets begin to focus upon the services sector on a day where most of the major economies looks set to disclose their latest PMI figure. A somewhat mixed back saw the Japanese figure rise above the crucial 50 mark, posting an expansionary figure of 50.4 after last month’s number of 49. However, the focus was largely upon the Chinese figure, which fell to the lowest ebb since the creation of this statistic. Resting precariously on the 50 mark, it is clear that whilst the manufacturing sector has begun strengthening once more, the Chinese services sector remains highly weakened. This poor figure is likely to be driven by the slowdown in the housing market, where residential prices and demand are seeing a correction after years of runaway growth. What is interesting about today’s figure is that it presents yet another problem to the authorities in China and as such it could drive the expansion of stimulus measures to specifically target this sector.
This morning, the RBA decided to leave rates unchanged for another month. The actions of Glenn Stevens and co has become increasingly predictable as they seek to offer a period of stability between rate cuts and rate hikes. As such, today’s announcement left little out there for investors, choosing to tout a largely unchanged line from last month.
Yesterday saw the European markets finally buck the downward spiral seen in the back end of last week. The confirmation from US markets provided an element of security amid a period where investors remained cautious of a more protracted downturn given the incessant rises in the major indices over the past year or so. There is no guarantee that we have avoided a more protracted sell-off, which in my opinion is both necessary and healthy. However, a strong first half of this week would go some way to allaying the fears that this market of constant buying does also go down.
Today’s European session is likely to be focused upon the services sector as the Eurozone and UK post their July PMI readings. Whilst some of the major European countries are not as reliant upon the services sector as the UK, they still provide a significant chunk of growth and thus today’s reading will make key reading for those seeking to find the direction of European growth in Q3. Predictably it is the Germans that are in front once again, with market expectations looking for a massive boost to 56.6 following a figure of 54.6. However, I am more interested in whether the French services sector can drag itself out of contraction this month following a figure of 48.2 last month. The UK services sector reading is the main event as this counts as one of the key barometers of future GDP growth. Standing at 57.7, the sector is no doubt in rude health and thus there is not too much to worry about. However, the ability to further grow and develop at a faster rate is crucial to attaining the kind of leading growth expected by the IMF and alike. UK growth is made up of around two thirds services to one thirds manufacturing and industry. Thus should we see this figure move higher yet, I expect us to see UK output rise yet further in Q3.
European services PMI figures set to dominate
• Asian services PMI figures largely mixed
• RBA keeps rates constant
• Western markets start to show sign of strength
• European services PMI figures set to dominate
European markets are hoping to post a broadly more positive start to Tuesday than has been provided by the Asian outlook which has been dragged down by a disappointing services PMI number out of China. However, with the bailout of Portuguese Banco Espirito Santo yesterday, the Europeans are hoping to see more green after yesterday bucked the negative trend of last week. Futures point towards a largely positive open, with the FTSE100 +1, CAC +11 and DAX +38 points.
Overnight saw markets begin to focus upon the services sector on a day where most of the major economies looks set to disclose their latest PMI figure. A somewhat mixed back saw the Japanese figure rise above the crucial 50 mark, posting an expansionary figure of 50.4 after last month’s number of 49. However, the focus was largely upon the Chinese figure, which fell to the lowest ebb since the creation of this statistic. Resting precariously on the 50 mark, it is clear that whilst the manufacturing sector has begun strengthening once more, the Chinese services sector remains highly weakened. This poor figure is likely to be driven by the slowdown in the housing market, where residential prices and demand are seeing a correction after years of runaway growth. What is interesting about today’s figure is that it presents yet another problem to the authorities in China and as such it could drive the expansion of stimulus measures to specifically target this sector.
This morning, the RBA decided to leave rates unchanged for another month. The actions of Glenn Stevens and co has become increasingly predictable as they seek to offer a period of stability between rate cuts and rate hikes. As such, today’s announcement left little out there for investors, choosing to tout a largely unchanged line from last month.
Yesterday saw the European markets finally buck the downward spiral seen in the back end of last week. The confirmation from US markets provided an element of security amid a period where investors remained cautious of a more protracted downturn given the incessant rises in the major indices over the past year or so. There is no guarantee that we have avoided a more protracted sell-off, which in my opinion is both necessary and healthy. However, a strong first half of this week would go some way to allaying the fears that this market of constant buying does also go down.
Today’s European session is likely to be focused upon the services sector as the Eurozone and UK post their July PMI readings. Whilst some of the major European countries are not as reliant upon the services sector as the UK, they still provide a significant chunk of growth and thus today’s reading will make key reading for those seeking to find the direction of European growth in Q3. Predictably it is the Germans that are in front once again, with market expectations looking for a massive boost to 56.6 following a figure of 54.6. However, I am more interested in whether the French services sector can drag itself out of contraction this month following a figure of 48.2 last month. The UK services sector reading is the main event as this counts as one of the key barometers of future GDP growth. Standing at 57.7, the sector is no doubt in rude health and thus there is not too much to worry about. However, the ability to further grow and develop at a faster rate is crucial to attaining the kind of leading growth expected by the IMF and alike. UK growth is made up of around two thirds services to one thirds manufacturing and industry. Thus should we see this figure move higher yet, I expect us to see UK output rise yet further in Q3.
Alpari UK
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US Opening Call from Alpari UK on 5 August 2014
US services and manufacturing data is focus Tuesday
• Eurozone services PMIs rise but downward revisions weigh on sentiment;
• UK services PMI highest since November;
• US services and manufacturing data to come today.
Another positive start in Europe appears to suggest fears of a greater market sell-off are easing, as uncertainties surrounding the Portuguese banking system subside, while news the Israel is withdrawing troops from Gaza is helping to lift sentiment.
One thing that has weighed slightly on risk appetite this morning has been the eurozone services PMI readings for July. While many have improved on the numbers from the month before, the downward revision to the German and eurozone readings from the initial release appears to have served as a quick reminder that the eurozone is likely to continue to crawl its way back to health, with even Germany now suffering as a result of the ongoing conflict in eastern Ukraine.
On the bright side, retail sales in the eurozone were much stronger than expected, compared to a year ago, thanks to revisions of previous releases. A 2.4% increase compared to the same month a year ago is hardly mind blowing by any stretch of the imagination but let’s face it, any sign that consumer spending is improving shouldn’t be brushed off as it’s likely to take a long time until consumer activity reaches pre-2008 levels in many countries.
That said, consumer spending in these countries is not as important as it is in the UK, which is far more dependent on the consumer for growth. We are seeing evidence that business investment is beginning to take some of the load of the back of the consumer but the latter still takes the brunt of it. It’s a good thing, therefore, that confidence in the services sector is on the rise again, with the number having risen to 59.1 in July.
There’s still plenty more economic data to come today and the focus will remain very much on the services sector with both the official and ISM PMI readings being released shortly after the opening bell on Wall Street. The official reading will also be accompanied by the composite number which covers both the services and manufacturing sectors and therefore gives a view on confidence across a large part of the economy.
Also released today is factory orders data for June, which provides good insight into the manufacturing sector including demand both domestically and abroad and provides an indication of future activity. A 0.5% increase is expected to June following a similar decline for May.
Ahead of the open, the S&P is seen 4 points lower, the Dow 27 points lower and the Nasdaq 10 points lower.
US services and manufacturing data is focus Tuesday
• Eurozone services PMIs rise but downward revisions weigh on sentiment;
• UK services PMI highest since November;
• US services and manufacturing data to come today.
Another positive start in Europe appears to suggest fears of a greater market sell-off are easing, as uncertainties surrounding the Portuguese banking system subside, while news the Israel is withdrawing troops from Gaza is helping to lift sentiment.
One thing that has weighed slightly on risk appetite this morning has been the eurozone services PMI readings for July. While many have improved on the numbers from the month before, the downward revision to the German and eurozone readings from the initial release appears to have served as a quick reminder that the eurozone is likely to continue to crawl its way back to health, with even Germany now suffering as a result of the ongoing conflict in eastern Ukraine.
On the bright side, retail sales in the eurozone were much stronger than expected, compared to a year ago, thanks to revisions of previous releases. A 2.4% increase compared to the same month a year ago is hardly mind blowing by any stretch of the imagination but let’s face it, any sign that consumer spending is improving shouldn’t be brushed off as it’s likely to take a long time until consumer activity reaches pre-2008 levels in many countries.
That said, consumer spending in these countries is not as important as it is in the UK, which is far more dependent on the consumer for growth. We are seeing evidence that business investment is beginning to take some of the load of the back of the consumer but the latter still takes the brunt of it. It’s a good thing, therefore, that confidence in the services sector is on the rise again, with the number having risen to 59.1 in July.
There’s still plenty more economic data to come today and the focus will remain very much on the services sector with both the official and ISM PMI readings being released shortly after the opening bell on Wall Street. The official reading will also be accompanied by the composite number which covers both the services and manufacturing sectors and therefore gives a view on confidence across a large part of the economy.
Also released today is factory orders data for June, which provides good insight into the manufacturing sector including demand both domestically and abroad and provides an indication of future activity. A 0.5% increase is expected to June following a similar decline for May.
Ahead of the open, the S&P is seen 4 points lower, the Dow 27 points lower and the Nasdaq 10 points lower.
Alpari UK
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UK Opening Call from Alpari UK on 6 August 2014
Russian threats drive riskoff sentiment back into the markets
• Global markets tumble as Russia brings the geopolitical risk back to the table
• New Zealand jobs report largely positive despite NZD selloff
• Somewhat quiet day ahead with focus open industrial figures in Europe.
Global indices are seeing a knock on effect today, where a poor Asian session overnight led by risk aversion in the US is now filtering through to the European markets. The build-up of troops at the border between Russia and Ukraine has pushed the potential of a war in the region back onto the agenda, whilst mixed New Zealand jobs data represented the only major economic release overnight. European markets are thus expected to follow suit, with futures pointing to a broadly lower open. The FTSE100 is expected to open -44, CAC -32 and DAX -87 points.
The overnight session was predominantly driven by sentiment carried forward from a poor US showing which saw weakness across the board. The return of risk aversion driven by geopolitical factors never seems to be too far away and this time it has been driven by the announcement by Poland that it has noticed a significant build-up of military presence of the border between Russia and Ukraine. Of course this is not something new, with Russia having built up a major border presence throughout the conflict. However this recent build-up marks a return to the aggressive tactics of old, representing the largest military build-up since those same military personnel were told to withdraw in May. Of course this does give us some idea that Putin sees such a move as a valuable tool to exert pressure and it is telling that this comes on the day that Putin has ordered his government to retaliate against European and US sanctions. Thus with Russia poised to ‘pressure or invade’ Ukraine, along with a raft of retaliatory measures being aimed at European and US interests, it is not hard to see why the markets are seeing such weakness in the past 24 hours.
Some more positive news overnight saw the New Zealand unemployment rate fall to the lowest rate in over five years. At a time when New Zealand has been moving aggressively with continued rate hikes, figures such as this drive home the notion that we could see further moves from the RBNZ in the near future despite their call to remain cautious following consecutive hikes. However, unfortunately the jobs report wasn’t all positive, with the employment change figure falling to 0.4% from 0.9%, along with a reduction in the participation rate from 69.2% to 68.9%. Nevertheless, with the participation rate at historically elevated levels anyway, this is not the end of the world and NZD bulls will have been rubbing their hands with glee. However, as is often the case in financial markets, things are often not as simple as that with the value of the NZ dollar falling across the board in response to the news that whole milk powder prices tanked 11.5% to a two-year low.
A somewhat mixed bag in terms of European economic announcements today, with German factory orders and UK manufacturing production figures provide a more industrial beginning to the day. Nevertheless, we also have the notable NIESR GDP estimate for the UK being released in the afternoon along with US trade data. Ultimately I expect the focus of the day to be driven by Russian developments and as such an extension of the risk off sentiment seen throughout both US and Asian markets alike.
Russian threats drive riskoff sentiment back into the markets
• Global markets tumble as Russia brings the geopolitical risk back to the table
• New Zealand jobs report largely positive despite NZD selloff
• Somewhat quiet day ahead with focus open industrial figures in Europe.
Global indices are seeing a knock on effect today, where a poor Asian session overnight led by risk aversion in the US is now filtering through to the European markets. The build-up of troops at the border between Russia and Ukraine has pushed the potential of a war in the region back onto the agenda, whilst mixed New Zealand jobs data represented the only major economic release overnight. European markets are thus expected to follow suit, with futures pointing to a broadly lower open. The FTSE100 is expected to open -44, CAC -32 and DAX -87 points.
The overnight session was predominantly driven by sentiment carried forward from a poor US showing which saw weakness across the board. The return of risk aversion driven by geopolitical factors never seems to be too far away and this time it has been driven by the announcement by Poland that it has noticed a significant build-up of military presence of the border between Russia and Ukraine. Of course this is not something new, with Russia having built up a major border presence throughout the conflict. However this recent build-up marks a return to the aggressive tactics of old, representing the largest military build-up since those same military personnel were told to withdraw in May. Of course this does give us some idea that Putin sees such a move as a valuable tool to exert pressure and it is telling that this comes on the day that Putin has ordered his government to retaliate against European and US sanctions. Thus with Russia poised to ‘pressure or invade’ Ukraine, along with a raft of retaliatory measures being aimed at European and US interests, it is not hard to see why the markets are seeing such weakness in the past 24 hours.
Some more positive news overnight saw the New Zealand unemployment rate fall to the lowest rate in over five years. At a time when New Zealand has been moving aggressively with continued rate hikes, figures such as this drive home the notion that we could see further moves from the RBNZ in the near future despite their call to remain cautious following consecutive hikes. However, unfortunately the jobs report wasn’t all positive, with the employment change figure falling to 0.4% from 0.9%, along with a reduction in the participation rate from 69.2% to 68.9%. Nevertheless, with the participation rate at historically elevated levels anyway, this is not the end of the world and NZD bulls will have been rubbing their hands with glee. However, as is often the case in financial markets, things are often not as simple as that with the value of the NZ dollar falling across the board in response to the news that whole milk powder prices tanked 11.5% to a two-year low.
A somewhat mixed bag in terms of European economic announcements today, with German factory orders and UK manufacturing production figures provide a more industrial beginning to the day. Nevertheless, we also have the notable NIESR GDP estimate for the UK being released in the afternoon along with US trade data. Ultimately I expect the focus of the day to be driven by Russian developments and as such an extension of the risk off sentiment seen throughout both US and Asian markets alike.