Alpari UK
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UK Opening Call from Alpari UK - 23 October 2014
US markets tumble again
European markets could be set for a negative start today after US markets ended their positive run and correction to post substantial losses. Asian markets have also followed suit overnight with equities mixed but the Yen falling lower. Yet again the reasons for the fall on Wall Street are not substantial ones and it seems yet again that anything can spook equity markets in to losing recent gains and dropping aggressively lower.
After yesterday saw the BOE meeting minutes take centre stage the UK remains in the spotlight for today’s session as Retail sales numbers are released first thing this morning. The retail sales are an important number and a good barometer for the strength of the UK economy, they show behavioural patterns of consumers and show just how much faith the general public has in their economy by showing how much they are willing to spend when they put their hand in their pockets. Expectations for today are for a pretty substantial fall after a good few months of gains. The predicted fall in retail sales goes a long with the recent fall in equity markets and talk of low inflation. Consumers have been hit with headlines of economic woe despite not much changing apart from equity markets levels. When confronted by such aggressive market moves it is no surprise we are seeing sentiment and sales hit.
There is a small amount of US data out this afternoon including the initial jobless claims however with not much on the horizon it could be left to traders to guide the markets by letting us know what they think of current levels. There would be no surprise to see a fall in equity markets with a lack of data around but the issue could lie In whether investors feel there is yet more downside to come or whether markets are ready to restart the rally at this lower level as has been indicated in the last few trading sessions.
US markets tumble again
European markets could be set for a negative start today after US markets ended their positive run and correction to post substantial losses. Asian markets have also followed suit overnight with equities mixed but the Yen falling lower. Yet again the reasons for the fall on Wall Street are not substantial ones and it seems yet again that anything can spook equity markets in to losing recent gains and dropping aggressively lower.
After yesterday saw the BOE meeting minutes take centre stage the UK remains in the spotlight for today’s session as Retail sales numbers are released first thing this morning. The retail sales are an important number and a good barometer for the strength of the UK economy, they show behavioural patterns of consumers and show just how much faith the general public has in their economy by showing how much they are willing to spend when they put their hand in their pockets. Expectations for today are for a pretty substantial fall after a good few months of gains. The predicted fall in retail sales goes a long with the recent fall in equity markets and talk of low inflation. Consumers have been hit with headlines of economic woe despite not much changing apart from equity markets levels. When confronted by such aggressive market moves it is no surprise we are seeing sentiment and sales hit.
There is a small amount of US data out this afternoon including the initial jobless claims however with not much on the horizon it could be left to traders to guide the markets by letting us know what they think of current levels. There would be no surprise to see a fall in equity markets with a lack of data around but the issue could lie In whether investors feel there is yet more downside to come or whether markets are ready to restart the rally at this lower level as has been indicated in the last few trading sessions.
Alpari UK
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US Opening Call from Alpari UK - 23 October 2014
Traders turn to US data following mixed bag in Europe
• Encouraging PMIs from Germany and eurozone but France continues to disappoint;
• UK retail sales fall more than expected in September;
• Plenty of data and earnings for traders to get their teeth stuck into today.
US futures are pointing to a strong open despite receiving little direction from Europe on Thursday. Stocks in Europe are quite mixed as we approach the middle of the trading session, while in the US, the S&P is expected to open 13 points higher, the Dow 116 points higher and the Nasdaq 25 points higher.
We’ve had a mixed bag of data from Europe this morning which probably explains the lack of direction in the markets. Once again, the focus was largely on the eurozone and whether it can show any signs of delivering growth in the near future. Stagnation has almost become an accepted norm for the eurozone in recent years, with even marginal growth being celebrated.
Now that the stagnation has spread to the core and the region is at risk of falling back into recession, people are beginning to worry. It is vitally important that Germany leads the return to growth and unfortunately, all we’re seeing is the sad fact that it can no longer do it all alone. It’s time for the other big countries in the region to step up and if they don’t, we may have to get used to low growth in Germany.
Fortunately, the PMI readings for Germany and the eurozone this morning we’re a little encouraging. Unfortunately, the sick man of the eurozone has once again let the side down. France has been a constant disappointment throughout the crisis with its poor growth and refusal to commit properly to fiscal responsibility and reforms. We’ve seen another example of this recently with it drawing up a budget that falls outside of the eurozone’s agreed deficit reduction plan. If it was at least showing signs of returning to growth, people may be willing to overlook this, but it isn’t. The PMI readings this morning fell further into contraction territory, highlighting that things are likely to get worse before they get better.
UK retail sales figures were also disappointing but then again, unlike the eurozone, it is showing strong signs of growth and confidence remains high. A small decline in retail sales, while not being ideal given the UK’s dependence on the consumer, isn’t the end of the world. They’re still up 2.7% year on year and the country is expected to post growth of 0.7% in the third quarter when the figure is released on Friday. This equates to growth of 3% over the last 12 months.
Focus will now shift to the US where we have a combination of economic data and earnings being released. Jobless claims last week fell to a 14 and a half year low which helped to lift investor sentiment and spur the recovery in the stock market that until that point was looking pretty heavy. Another figure even close to this would provide further evidence that the US economy is on course for a strong 2015. Also being released is the manufacturing PMI for October, the CB leading indicator for September and the house price index for August so there’s plenty for traders to get their teeth stuck into. We’ll also get earnings from 45 S&P 500 companies, including Amazon and Microsoft so there’s certainly not shortage of events today.
Traders turn to US data following mixed bag in Europe
• Encouraging PMIs from Germany and eurozone but France continues to disappoint;
• UK retail sales fall more than expected in September;
• Plenty of data and earnings for traders to get their teeth stuck into today.
US futures are pointing to a strong open despite receiving little direction from Europe on Thursday. Stocks in Europe are quite mixed as we approach the middle of the trading session, while in the US, the S&P is expected to open 13 points higher, the Dow 116 points higher and the Nasdaq 25 points higher.
We’ve had a mixed bag of data from Europe this morning which probably explains the lack of direction in the markets. Once again, the focus was largely on the eurozone and whether it can show any signs of delivering growth in the near future. Stagnation has almost become an accepted norm for the eurozone in recent years, with even marginal growth being celebrated.
Now that the stagnation has spread to the core and the region is at risk of falling back into recession, people are beginning to worry. It is vitally important that Germany leads the return to growth and unfortunately, all we’re seeing is the sad fact that it can no longer do it all alone. It’s time for the other big countries in the region to step up and if they don’t, we may have to get used to low growth in Germany.
Fortunately, the PMI readings for Germany and the eurozone this morning we’re a little encouraging. Unfortunately, the sick man of the eurozone has once again let the side down. France has been a constant disappointment throughout the crisis with its poor growth and refusal to commit properly to fiscal responsibility and reforms. We’ve seen another example of this recently with it drawing up a budget that falls outside of the eurozone’s agreed deficit reduction plan. If it was at least showing signs of returning to growth, people may be willing to overlook this, but it isn’t. The PMI readings this morning fell further into contraction territory, highlighting that things are likely to get worse before they get better.
UK retail sales figures were also disappointing but then again, unlike the eurozone, it is showing strong signs of growth and confidence remains high. A small decline in retail sales, while not being ideal given the UK’s dependence on the consumer, isn’t the end of the world. They’re still up 2.7% year on year and the country is expected to post growth of 0.7% in the third quarter when the figure is released on Friday. This equates to growth of 3% over the last 12 months.
Focus will now shift to the US where we have a combination of economic data and earnings being released. Jobless claims last week fell to a 14 and a half year low which helped to lift investor sentiment and spur the recovery in the stock market that until that point was looking pretty heavy. Another figure even close to this would provide further evidence that the US economy is on course for a strong 2015. Also being released is the manufacturing PMI for October, the CB leading indicator for September and the house price index for August so there’s plenty for traders to get their teeth stuck into. We’ll also get earnings from 45 S&P 500 companies, including Amazon and Microsoft so there’s certainly not shortage of events today.
Alpari UK
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UK Opening Call from Alpari UK on 24 October 2014
Stress test results and new Ebola case hit risk appetite
• Market jitters continues as investors panic on reports of new Ebola case in the US;
• EU bank stress test results this weekend may prompt some risk aversion today;
• UK seen posting another strong growth reading;
• German consumer confidence expected to fall to nine month low.
The markets look set to end the week on a slightly more downbeat note, with European indices seen opening around half a percentage point lower, tracking moves in the US overnight where indices pulled back late in the session, apparently in response to reports of a new Ebola case in New York.
As I've said repeatedly in the last couple of weeks, I am not convinced in the slightest that these market moves reflect investor concerns over the spread of Ebola. Market jitters reflect the fact that investors are on edge at the moment and the spread of Ebola is just an excuse. That's not to say we didn't see profit taking yesterday shortly after these reports emerged, what it does say is that investors are looking for any reason to get out of their long positions, or even short the market, which is concerning.
The fact of the matter is, only one person in the US has died from Ebola and therefore any genuine market panic attributed to it spreading is just nonsense in my opinion. As far as I'm concerned, the fact that we've retraced around two thirds of the move from September highs to last week's lows and run into technical resistance around the 100-day SMA in the S&P 500 better explains the profit taking.
One more thing that could explain a more cautious approach from traders today is the fact that results from the bank stress tests are due to be released over the weekend which could have a massive impact on next week's opening levels. There have been rumours that 11 banks from six countries have failed the stress tests but these haven't been confirmed by the ECB.
There's just so much potential for disappointment from this report that I believe investors will be a little more risk averse today, particularly as we approach the close. Even if most banks pass, a large bank failing the test could be enough to raise contagion fears again. This is also true if one of the banks at the core fail, such as in Germany or France where the banking system is perceived to be in much better shape than in the periphery.
The first reading of UK third quarter GDP will be released this morning and is expected to show the country grew by 0.7%. This would be another strong figure for the UK, especially at a time when most of the rest of the world appears to be experiencing a slowdown, particularly the eurozone which is once again stagnating. We have already been warned that this could impact growth in the UK due to it being its largest trading partner, although as of yet we're seeing few signs of it. Growth for the year is expected to be 3%, which is again the kind of growth many other countries in Europe could only dream of right now.
Also being released this morning is the Gfk consumer confidence survey. While the consumer is less important to the German economy than it is to the US or the UK, many people believe that in order to see growth return in the euro area, we need to see German consumers spending more. Not only would this boost economic activity in Germany itself, it would also, in theory, mean Germany importing more goods from other eurozone countries, thereby benefiting their economies as well. The only problem is that for this to happen, we may need to see more wage growth in Germany which doesn't appear to be happening yet. The Gfk reading is expected to fall to the lowest level since January this morning which doesn't give with much hope that the German consumer driven recovery is on the horizon just yet.
The FTSE is expected to open 25 points lower, the CAC 26 points lower and the DAX 34 points lower.
Stress test results and new Ebola case hit risk appetite
• Market jitters continues as investors panic on reports of new Ebola case in the US;
• EU bank stress test results this weekend may prompt some risk aversion today;
• UK seen posting another strong growth reading;
• German consumer confidence expected to fall to nine month low.
The markets look set to end the week on a slightly more downbeat note, with European indices seen opening around half a percentage point lower, tracking moves in the US overnight where indices pulled back late in the session, apparently in response to reports of a new Ebola case in New York.
As I've said repeatedly in the last couple of weeks, I am not convinced in the slightest that these market moves reflect investor concerns over the spread of Ebola. Market jitters reflect the fact that investors are on edge at the moment and the spread of Ebola is just an excuse. That's not to say we didn't see profit taking yesterday shortly after these reports emerged, what it does say is that investors are looking for any reason to get out of their long positions, or even short the market, which is concerning.
The fact of the matter is, only one person in the US has died from Ebola and therefore any genuine market panic attributed to it spreading is just nonsense in my opinion. As far as I'm concerned, the fact that we've retraced around two thirds of the move from September highs to last week's lows and run into technical resistance around the 100-day SMA in the S&P 500 better explains the profit taking.
One more thing that could explain a more cautious approach from traders today is the fact that results from the bank stress tests are due to be released over the weekend which could have a massive impact on next week's opening levels. There have been rumours that 11 banks from six countries have failed the stress tests but these haven't been confirmed by the ECB.
There's just so much potential for disappointment from this report that I believe investors will be a little more risk averse today, particularly as we approach the close. Even if most banks pass, a large bank failing the test could be enough to raise contagion fears again. This is also true if one of the banks at the core fail, such as in Germany or France where the banking system is perceived to be in much better shape than in the periphery.
The first reading of UK third quarter GDP will be released this morning and is expected to show the country grew by 0.7%. This would be another strong figure for the UK, especially at a time when most of the rest of the world appears to be experiencing a slowdown, particularly the eurozone which is once again stagnating. We have already been warned that this could impact growth in the UK due to it being its largest trading partner, although as of yet we're seeing few signs of it. Growth for the year is expected to be 3%, which is again the kind of growth many other countries in Europe could only dream of right now.
Also being released this morning is the Gfk consumer confidence survey. While the consumer is less important to the German economy than it is to the US or the UK, many people believe that in order to see growth return in the euro area, we need to see German consumers spending more. Not only would this boost economic activity in Germany itself, it would also, in theory, mean Germany importing more goods from other eurozone countries, thereby benefiting their economies as well. The only problem is that for this to happen, we may need to see more wage growth in Germany which doesn't appear to be happening yet. The Gfk reading is expected to fall to the lowest level since January this morning which doesn't give with much hope that the German consumer driven recovery is on the horizon just yet.
The FTSE is expected to open 25 points lower, the CAC 26 points lower and the DAX 34 points lower.
Alpari UK
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US Opening Call from Alpari UK on 24 October 2014
Investors cautious ahead of EU stress test results
• Ebola case in New York weighs on sentiment ahead of the US open;
• Investors cautious ahead of EU stress test results;
• German economy may be turning a corner as consumer confidence rises;
• Housing data and earnings in focus as the week comes to an end.
The week looks set to end on a slightly more negative note, after investors were once again spooked by a confirmed case of Ebola in New York, while the results of the EU bank stress tests on Sunday will also be feeding into the more cautious tone.
Despite what many people are saying, I don’t believe for a second that these Ebola stories are weighing on the markets because of fear of it spreading. There has only been one fatality in the US which, despite being very unfortunate, is not evidence that we have a pandemic on our hands or even that we have anything to worry about.
What this suggests is that there is still a lot of anxiety in the markets and there is still great potential for some big sell-offs, similar to those seen last week. The markets may have performed well since hitting 6 month lows, but I’m not convinced that this means the anxiety that led to the sell-off has gone.
What may also be feeding into the risk aversion today is the fact that the EU bank stress test results will be released on Sunday. These have the potential to cause significant turmoil in the markets, whether that be because more banks than expected fail, a large bank unexpectedly fails it or we see evidence that banks in the core countries like Germany and France are struggling. With this in mind, I expect to see further risk aversion as we approach the end of the week.
It’s been a quiet morning on the economic data side and this is going to continue throughout the US session. Consumer confidence in Germany surprisingly turned higher in October according to a survey compiled by Gfk. Given that this follows encouraging PMI readings earlier this week, it may suggest that the country is turning a corner and the end of the year won’t be as bad as initially thought. A preliminary reading of UK output confirmed that the economy grew by 0.7% in the third quarter, bringing annual growth to 3%.
With only new home sales data due out today, focus is likely to remain on earnings season with 16 S&P 500 companies reporting on the third quarter. While there may not be as many companies reporting today, the list does include some big names such as Procter & Gamble, State Street and Ford so it’s certainly worth monitoring.
The S&P is expected to open 4 points lower, the Dow 27 points lower and the Nasdaq 14 points lower.
Investors cautious ahead of EU stress test results
• Ebola case in New York weighs on sentiment ahead of the US open;
• Investors cautious ahead of EU stress test results;
• German economy may be turning a corner as consumer confidence rises;
• Housing data and earnings in focus as the week comes to an end.
The week looks set to end on a slightly more negative note, after investors were once again spooked by a confirmed case of Ebola in New York, while the results of the EU bank stress tests on Sunday will also be feeding into the more cautious tone.
Despite what many people are saying, I don’t believe for a second that these Ebola stories are weighing on the markets because of fear of it spreading. There has only been one fatality in the US which, despite being very unfortunate, is not evidence that we have a pandemic on our hands or even that we have anything to worry about.
What this suggests is that there is still a lot of anxiety in the markets and there is still great potential for some big sell-offs, similar to those seen last week. The markets may have performed well since hitting 6 month lows, but I’m not convinced that this means the anxiety that led to the sell-off has gone.
What may also be feeding into the risk aversion today is the fact that the EU bank stress test results will be released on Sunday. These have the potential to cause significant turmoil in the markets, whether that be because more banks than expected fail, a large bank unexpectedly fails it or we see evidence that banks in the core countries like Germany and France are struggling. With this in mind, I expect to see further risk aversion as we approach the end of the week.
It’s been a quiet morning on the economic data side and this is going to continue throughout the US session. Consumer confidence in Germany surprisingly turned higher in October according to a survey compiled by Gfk. Given that this follows encouraging PMI readings earlier this week, it may suggest that the country is turning a corner and the end of the year won’t be as bad as initially thought. A preliminary reading of UK output confirmed that the economy grew by 0.7% in the third quarter, bringing annual growth to 3%.
With only new home sales data due out today, focus is likely to remain on earnings season with 16 S&P 500 companies reporting on the third quarter. While there may not be as many companies reporting today, the list does include some big names such as Procter & Gamble, State Street and Ford so it’s certainly worth monitoring.
The S&P is expected to open 4 points lower, the Dow 27 points lower and the Nasdaq 14 points lower.
Alpari UK
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Weekly market preview from Alpari UK – 27 October 2014
A busy week ahead in the markets, where the US and eurozone are expected to provide the most interest from an economic standpoint. The US FOMC announcement will no doubt be one of if not the main event of the week, when markets look out for a potential end to asset purchases. In the eurozone, the latest CPI figure is certain to bring the problem of disinflation back to the table following a year long downtrend. In Asia, the Japanese economy will be the main focus, with the release of the latest monetary policy decision from the BoJ.
US
A major week ahead in the US, where the FOMC meeting is going to dominate the week. Alongside this, the release of the US GDP, consumer confidence and Core PCE figures will mean that we are due to see a busy week ahead.
The main event takes place on Wednesday, when the latest FOMC meeting comes to a conclusion, with many expecting to see QE3 finally come to an end. The question over whether we would see asset purchases end in October has been somewhat non-existence in the past 6 months, with markets believing Janet Yellen when she disclosed that this month would mark the end of QE. However, with disinflationary pressures spreading from the eurozone to China, the UK and US, we have seen recent calls from Fed members to delay the end of asset purchases. I do not expect this to happen, yet should we see the FOMC delay this final nail in the coffin, it would shock markets significantly and push back many people’s mental timelines for interest rate hikes. Thus be aware of whether asset purchases end this month, but also be on the ball for the FOMC statement where everyone will be on the lookout for any signs with regards to whether the interest rate hike timeline is going to shift in the fact of falling inflation.
On Tuesday, the CB consumer confidence figure is due out, with many expecting to see a resumption of the uptrend that has been evident throughout the majority of 2014. The US economy is driven to a large extent by domestic consumption, which dominates growth levels given that around 70% of GDP is accounted for by domestic consumer activity. This highlights the importance of the consumer base within the US and as such, confidence is surely a precursor to strong activity from consumers. Market estimates put this months figure around 87.7, following last months number of 86.0.
On Thursday, the release of the US GDP figure is sure to draw attention from the market as dollar strength and resurgent stock markets highlight an economy which many believe will be the strongest developed economy in 2015. The annualised GDP figure is set to be the main attraction, where the previous number of 4.6% is widely expected to fall back towards the 3.1% region. Ultimately, the US appears to be best positioned to move forward and this is set to be tested once more with Thursday’s figure.
Finally, the core PCE price index is going to be a major release of note on Friday, with many expecting to see a major pullback from the 2% levels seen last month. The core PCE figure is widely known as the Fed’s preferred measure of inflation and given the clear downward trajectory of the CPI reading in recent months we are expecting to see the same start to show here. There have already been calls from Fed members Bullard and Williams to either delay the end of QE or even to introduce QE4 should disinflation persist. Thus should we see a major move lower, it could be seen as likely to induce a more dovish outlook for the Fed.
Eurozone
Another major week ahead in the eurozone, where the main event is likely to be the CPI figure, due on Friday. However, before that there is going to be a focus upon the German economy, with the release of retail sales and a business climate survey due on Monday.
The main event of the week is going to be Friday’s CPI flash estimate reading, where the pressure could be ratcheted up yet again upon Mario Draghi should disinflation persist in the eurozone. This downward trajectory of inflation within the eurozone has lasted three years now, with the Q4 2011 reading of 3% deteriorating to the current 0.3% seen to in September 2014. The markets are expecting this figure to alleviate the pressure somewhat, with estimates of 0.4%. Either way, a move in this figure could be major for the markets, with any move lower likely to spark fresh calls for further actions from the ECB. Also be aware of the core CPI figure, which strips out volatile factors such as energy, alcohol, tobacco and food. In particular, energy prices have been moving lower recently, with oil tanking in recent months so Draghi is likely to look past that to some extent and will be as likely to watch the core figure as the headline one.
The rest of the focus this week is going to be directed towards the German economy, where the business climate survey (Monday) and retail sales (Friday) numbers are due out. The Ifo business climate survey is going to be key given the downturn that has been evident in recent months. The deterioration in sales, employment, GDP growth and more means that business leaders are likely to be finely attuned to exactly how bad it is in the economy at the moment. Given that this is a survey, it means that we should be able to provide a up to date idea of exactly where the economy currently is and thus this is an important predictive release. Market estimates point towards a fall from 104.7 to 104.1 which would be a continuation of the trend seen in the past 6 months and thus is likely.
On Friday, the German retail sales provides a good indication of demand within the German economy, with the consumer making up a considerable amount of demand for services and alike. The ability of the German economy to move out of this current downturn is going to be largely down to domestic consumption, given the weakness within the eurozone and imposition of sanctions. Thus I will be watching this figure closely for signs of strength or weakness in the recovery.
Asia & Oceania
A mixed week ahead, where an almost non existent Chinese and Australian schedule means that the focus will be solely upon Japan to lead the way. The event to be watching out for this week is going to be the BoJ monetary policy decision out of Japan, where Kuroda is largely expected to keep asset purchases and interest rates constant. However, with inflation waning and the government debt ballooning, there is a likeliness that at some point, the BoJ could be interested in moving the rate of asset purchases higher. As such, be on the lookout for any more dovish tones from the BoJ which I believe will become increasingly regular going forward.
A busy week ahead in the markets, where the US and eurozone are expected to provide the most interest from an economic standpoint. The US FOMC announcement will no doubt be one of if not the main event of the week, when markets look out for a potential end to asset purchases. In the eurozone, the latest CPI figure is certain to bring the problem of disinflation back to the table following a year long downtrend. In Asia, the Japanese economy will be the main focus, with the release of the latest monetary policy decision from the BoJ.
US
A major week ahead in the US, where the FOMC meeting is going to dominate the week. Alongside this, the release of the US GDP, consumer confidence and Core PCE figures will mean that we are due to see a busy week ahead.
The main event takes place on Wednesday, when the latest FOMC meeting comes to a conclusion, with many expecting to see QE3 finally come to an end. The question over whether we would see asset purchases end in October has been somewhat non-existence in the past 6 months, with markets believing Janet Yellen when she disclosed that this month would mark the end of QE. However, with disinflationary pressures spreading from the eurozone to China, the UK and US, we have seen recent calls from Fed members to delay the end of asset purchases. I do not expect this to happen, yet should we see the FOMC delay this final nail in the coffin, it would shock markets significantly and push back many people’s mental timelines for interest rate hikes. Thus be aware of whether asset purchases end this month, but also be on the ball for the FOMC statement where everyone will be on the lookout for any signs with regards to whether the interest rate hike timeline is going to shift in the fact of falling inflation.
On Tuesday, the CB consumer confidence figure is due out, with many expecting to see a resumption of the uptrend that has been evident throughout the majority of 2014. The US economy is driven to a large extent by domestic consumption, which dominates growth levels given that around 70% of GDP is accounted for by domestic consumer activity. This highlights the importance of the consumer base within the US and as such, confidence is surely a precursor to strong activity from consumers. Market estimates put this months figure around 87.7, following last months number of 86.0.
On Thursday, the release of the US GDP figure is sure to draw attention from the market as dollar strength and resurgent stock markets highlight an economy which many believe will be the strongest developed economy in 2015. The annualised GDP figure is set to be the main attraction, where the previous number of 4.6% is widely expected to fall back towards the 3.1% region. Ultimately, the US appears to be best positioned to move forward and this is set to be tested once more with Thursday’s figure.
Finally, the core PCE price index is going to be a major release of note on Friday, with many expecting to see a major pullback from the 2% levels seen last month. The core PCE figure is widely known as the Fed’s preferred measure of inflation and given the clear downward trajectory of the CPI reading in recent months we are expecting to see the same start to show here. There have already been calls from Fed members Bullard and Williams to either delay the end of QE or even to introduce QE4 should disinflation persist. Thus should we see a major move lower, it could be seen as likely to induce a more dovish outlook for the Fed.
Eurozone
Another major week ahead in the eurozone, where the main event is likely to be the CPI figure, due on Friday. However, before that there is going to be a focus upon the German economy, with the release of retail sales and a business climate survey due on Monday.
The main event of the week is going to be Friday’s CPI flash estimate reading, where the pressure could be ratcheted up yet again upon Mario Draghi should disinflation persist in the eurozone. This downward trajectory of inflation within the eurozone has lasted three years now, with the Q4 2011 reading of 3% deteriorating to the current 0.3% seen to in September 2014. The markets are expecting this figure to alleviate the pressure somewhat, with estimates of 0.4%. Either way, a move in this figure could be major for the markets, with any move lower likely to spark fresh calls for further actions from the ECB. Also be aware of the core CPI figure, which strips out volatile factors such as energy, alcohol, tobacco and food. In particular, energy prices have been moving lower recently, with oil tanking in recent months so Draghi is likely to look past that to some extent and will be as likely to watch the core figure as the headline one.
The rest of the focus this week is going to be directed towards the German economy, where the business climate survey (Monday) and retail sales (Friday) numbers are due out. The Ifo business climate survey is going to be key given the downturn that has been evident in recent months. The deterioration in sales, employment, GDP growth and more means that business leaders are likely to be finely attuned to exactly how bad it is in the economy at the moment. Given that this is a survey, it means that we should be able to provide a up to date idea of exactly where the economy currently is and thus this is an important predictive release. Market estimates point towards a fall from 104.7 to 104.1 which would be a continuation of the trend seen in the past 6 months and thus is likely.
On Friday, the German retail sales provides a good indication of demand within the German economy, with the consumer making up a considerable amount of demand for services and alike. The ability of the German economy to move out of this current downturn is going to be largely down to domestic consumption, given the weakness within the eurozone and imposition of sanctions. Thus I will be watching this figure closely for signs of strength or weakness in the recovery.
Asia & Oceania
A mixed week ahead, where an almost non existent Chinese and Australian schedule means that the focus will be solely upon Japan to lead the way. The event to be watching out for this week is going to be the BoJ monetary policy decision out of Japan, where Kuroda is largely expected to keep asset purchases and interest rates constant. However, with inflation waning and the government debt ballooning, there is a likeliness that at some point, the BoJ could be interested in moving the rate of asset purchases higher. As such, be on the lookout for any more dovish tones from the BoJ which I believe will become increasingly regular going forward.
Alpari UK
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UK Opening Call from Alpari UK on 27 October 2014
Europe seen higher following satisfactory stress test results
• Markets approve of rigorous eurozone stress test results;
• Second TLTRO take up may still be weak as demand for loans remains low;
• FOMC decision on Wednesday the next potential banana skin for the markets;
• German confidence readings key this morning.
European indices look set to get the week off to a good start after the results of the eurozone bank stress tests were released and were not as bad as some people had feared.
While 25 of the 130 banks that were tested failed, 12 have already raised the capital needed fill the gap leaving only 13 to make up the shortfall. This is fewer than the markets had been anticipating which is a relief given that the last thing the euro area needs right now is for people to lose faith in them again. The previous stress tests were heavily criticised for being too easy on the banks but it appears people are more satisfied this time around which should in fact help to restore confidence, rather than erode it.
With the stress tests now completed, it will be interesting to see what the demand is like for the next offering of cheap loans (TLTROs). Many people believe that the stress tests were behind the poor take up of the first TLTRO offering and that the banks were simply waiting for the results before deciding how much to borrow.
While the stress tests have been a big success in forcing banks to raise the capital necessary to withstand another shock and, in turn, rebuilding confidence in the sector that had previously been severely damaged, there is no guarantee that the TLTROs will be a success. Banks may be more willing, and in a better position, to take the loans and lend, but that doesn't mean the demand will be there. For this to work, there needs to be supply and demand and I'm not convinced enough has been done by governments to ensure that demand for loans will be there.
The eurozone is having a very tough year and could well fall into recession. Even the countries at the core are struggling which is a major concern for the markets. Add to this the long period of low inflation, that could soon turn to deflation, and you are a million miles from the kind of environment in which companies and households want to borrow. With that in mind, I'm far than convinced that demand for the second TLTRO offering will be much better than the first.
With one potential banana skin out of the way, investors will now look ahead to the FOMC meeting on Wednesday which could potentially do some damage to this new found sentiment. There is still a lot of anxiety in the markets following that rapid sell-off earlier this month and I don't think it will take much from the Fed to spook everyone again. While I do expect the Fed to follow through and bring QE3 to an end, I think it'll maintain its commitment to keeping rates low as taking it out could create massive waves in the market.
As for today, focus will be on the few pieces of economic data that we have. The latest batch of sentiment readings for Germany will be released shortly after the open and are expected to show a further deterioration in confidence in October. It should be noted that the Gfk consumer confidence reading for the same month exceeded expectations on Friday and actually improved from last month, so it wouldn't be a huge surprise to see a similar result today. If we do, then it may suggest the country is turning a corner and the fourth quarter is looking better the the preceding two. Later on in the US, we'll also get the latest services PMI reading and the pending home sales figures for September.
The FTSE is expected to open 27 points higher, the CAC 20 points higher and the DAX 36 points higher.
Europe seen higher following satisfactory stress test results
• Markets approve of rigorous eurozone stress test results;
• Second TLTRO take up may still be weak as demand for loans remains low;
• FOMC decision on Wednesday the next potential banana skin for the markets;
• German confidence readings key this morning.
European indices look set to get the week off to a good start after the results of the eurozone bank stress tests were released and were not as bad as some people had feared.
While 25 of the 130 banks that were tested failed, 12 have already raised the capital needed fill the gap leaving only 13 to make up the shortfall. This is fewer than the markets had been anticipating which is a relief given that the last thing the euro area needs right now is for people to lose faith in them again. The previous stress tests were heavily criticised for being too easy on the banks but it appears people are more satisfied this time around which should in fact help to restore confidence, rather than erode it.
With the stress tests now completed, it will be interesting to see what the demand is like for the next offering of cheap loans (TLTROs). Many people believe that the stress tests were behind the poor take up of the first TLTRO offering and that the banks were simply waiting for the results before deciding how much to borrow.
While the stress tests have been a big success in forcing banks to raise the capital necessary to withstand another shock and, in turn, rebuilding confidence in the sector that had previously been severely damaged, there is no guarantee that the TLTROs will be a success. Banks may be more willing, and in a better position, to take the loans and lend, but that doesn't mean the demand will be there. For this to work, there needs to be supply and demand and I'm not convinced enough has been done by governments to ensure that demand for loans will be there.
The eurozone is having a very tough year and could well fall into recession. Even the countries at the core are struggling which is a major concern for the markets. Add to this the long period of low inflation, that could soon turn to deflation, and you are a million miles from the kind of environment in which companies and households want to borrow. With that in mind, I'm far than convinced that demand for the second TLTRO offering will be much better than the first.
With one potential banana skin out of the way, investors will now look ahead to the FOMC meeting on Wednesday which could potentially do some damage to this new found sentiment. There is still a lot of anxiety in the markets following that rapid sell-off earlier this month and I don't think it will take much from the Fed to spook everyone again. While I do expect the Fed to follow through and bring QE3 to an end, I think it'll maintain its commitment to keeping rates low as taking it out could create massive waves in the market.
As for today, focus will be on the few pieces of economic data that we have. The latest batch of sentiment readings for Germany will be released shortly after the open and are expected to show a further deterioration in confidence in October. It should be noted that the Gfk consumer confidence reading for the same month exceeded expectations on Friday and actually improved from last month, so it wouldn't be a huge surprise to see a similar result today. If we do, then it may suggest the country is turning a corner and the fourth quarter is looking better the the preceding two. Later on in the US, we'll also get the latest services PMI reading and the pending home sales figures for September.
The FTSE is expected to open 27 points higher, the CAC 20 points higher and the DAX 36 points higher.
Alpari UK
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US Opening Call from Alpari UK on 27 October 2014
Constancio comments weigh ahead of US services PMI
• Constancio comments undo positive moves following stress test results;
• German confidence continues to decline according to Ifo surveys;
• US services PMIs seen pulling back slightly in October;
• Caution expected ahead of FOMC decision on Wednesday.
US futures are pointing marginally to the downside ahead of the open, tracking similar losses being made in Europe at the start of the week.
Everything was looking more positive earlier on in the session but it seems that the relief that came from the results of the stress test results has been short-lived. I imagine this hasn’t been helped by comments from ECB Vice President Vitor Constancio who claimed that the tests did not take into consideration a deflationary scenario because they didn’t consider that it was going to happen.
This seems completely ridiculous given that inflation is currently at 0.3% and was below 1% while the tests were carried out. These tests are meant to take into consideration the worst case scenario and for some bizarre reason, they have failed to do so because the very people that have been wrong on inflation repeatedly over the last couple of years, didn’t believe it would happen. It’s no wonder the relief was short-lived.
Of course there are positives to take from this in that a number of banks have raised capital in order to pass the stress tests and are therefore in a better position to face a financial crisis when it occurs. This will have rebuilt some of the confidence lost in the banks over the last four years. However, it’s all well and good having a banking system that is able to lend but unless there are people and businesses that want to borrow, it won’t happen. At a time when the eurozone is stagnating, confidence is on the decline and deflation is a risk, there is very little incentive for people to borrow.
We saw more evidence of confidence in the euro area dwindling today in the German Ifo readings for October. All three numbers declined and fell short of expectations which is very disappointing given that we’d seen signs last week that the country is potentially turning a corner, with improvements being seen in the PMI and ZEW readings.
The start of the week in the US is looking pretty quiet, with only a couple of pieces of data being released and the number of companies reporting third quarter earnings significantly reduced. The October services PMI reading is expected to fall slightly to 58 this month, which may worry people in the current market environment in which people panic very easily. In reality, despite the services sector making up more than two thirds of UK output, this shouldn’t cause any concern as it’s still a strong figure and all other data points to a strong US economy, by current standards.
The start of the week may see a little caution on the part of investors due to the Fed meeting on Wednesday when the QE3 program is expected to come to an end. While there have been murmurings that it could be delayed or even increased, this is very unlikely and the chances are that the final $15 billion taper will take place and be accompanied by dovish comments to ease concerns over the timing of the first rate hike.
The S&P is expected to open 1 point lower, the Dow 4 points lower and the Nasdaq 1 points lower.
Constancio comments weigh ahead of US services PMI
• Constancio comments undo positive moves following stress test results;
• German confidence continues to decline according to Ifo surveys;
• US services PMIs seen pulling back slightly in October;
• Caution expected ahead of FOMC decision on Wednesday.
US futures are pointing marginally to the downside ahead of the open, tracking similar losses being made in Europe at the start of the week.
Everything was looking more positive earlier on in the session but it seems that the relief that came from the results of the stress test results has been short-lived. I imagine this hasn’t been helped by comments from ECB Vice President Vitor Constancio who claimed that the tests did not take into consideration a deflationary scenario because they didn’t consider that it was going to happen.
This seems completely ridiculous given that inflation is currently at 0.3% and was below 1% while the tests were carried out. These tests are meant to take into consideration the worst case scenario and for some bizarre reason, they have failed to do so because the very people that have been wrong on inflation repeatedly over the last couple of years, didn’t believe it would happen. It’s no wonder the relief was short-lived.
Of course there are positives to take from this in that a number of banks have raised capital in order to pass the stress tests and are therefore in a better position to face a financial crisis when it occurs. This will have rebuilt some of the confidence lost in the banks over the last four years. However, it’s all well and good having a banking system that is able to lend but unless there are people and businesses that want to borrow, it won’t happen. At a time when the eurozone is stagnating, confidence is on the decline and deflation is a risk, there is very little incentive for people to borrow.
We saw more evidence of confidence in the euro area dwindling today in the German Ifo readings for October. All three numbers declined and fell short of expectations which is very disappointing given that we’d seen signs last week that the country is potentially turning a corner, with improvements being seen in the PMI and ZEW readings.
The start of the week in the US is looking pretty quiet, with only a couple of pieces of data being released and the number of companies reporting third quarter earnings significantly reduced. The October services PMI reading is expected to fall slightly to 58 this month, which may worry people in the current market environment in which people panic very easily. In reality, despite the services sector making up more than two thirds of UK output, this shouldn’t cause any concern as it’s still a strong figure and all other data points to a strong US economy, by current standards.
The start of the week may see a little caution on the part of investors due to the Fed meeting on Wednesday when the QE3 program is expected to come to an end. While there have been murmurings that it could be delayed or even increased, this is very unlikely and the chances are that the final $15 billion taper will take place and be accompanied by dovish comments to ease concerns over the timing of the first rate hike.
The S&P is expected to open 1 point lower, the Dow 4 points lower and the Nasdaq 1 points lower.
Alpari UK
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UK Opening Call from Alpari UK on 28 October 2014
Markets calm ahead of Wednesday’s FOMC decision
• Markets very calm ahead of Wednesday's FOMC decision;
• No data expected from Europe;
• US durable goods orders and consumer confidence in focus later.
It's been a very calm start to the week in the financial markets, especially by recent standards, driven largely by the lack of economic data and corporate earnings, and the Fed's latest policy decision on Wednesday.
It's very common for investors to be a little on edge in the run up to the latest FOMC decision because even when everyone thinks they know what's going to happen, the Fed has a knack of doing otherwise and creating complete chaos in the markets. The kind of volatility we can see following these announcements, even in response to the smallest things, can be unappealing to a lot of traders and therefore we tend to get less activity in the days before.
I think any major surprises tomorrow is very unlikely simply because there is no press conference following the decision, which means there would be no opportunity to question any big changes in policy or stance. There will be a statement released alongside the announcement but I think the FOMC would rather save any big announcements for those meetings when they can explain themselves, the next one of which is in December. With this in mind, I expect them to do as the markets are expecting and bring an end to the quantitative easing program with the final $15 billion taper and leave the statement largely unchanged, maintaining its commitment to keep rates low for a considerable amount of time.
This period of calm is probably a good thing for the markets when you consider what we've seen in the last few weeks. Everyone wants volatility in the markets but the kind of volatility we were seeing was excessive and driven by fear and panic, which makes life very difficult. This brief period of calm may help to ease some of that anxiety, while hopefully maintaining some of that volatility that has been lacking in the markets in recent years.
I expect another fairly calm day today, with the Fed decision only a little over 24 hours away. On top of that, there's few catalysts for the markets with the economic calendar looking a little bare. In fact, there's no notable data expected from Europe this morning and only a couple from the US later on in the session. Core durable goods orders for September is always one to keep a close eye on as it tells you a lot about confidence in the long term health of the economy. Consumer confidence is also important for the US given how big a role the consumer plays in total output. Both of these numbers are expected to improve which provides even more evidence of the strong recovery in the US.
The FTSE is expected to open 26 points higher, the CAC 17 points higher and the DAX 34 points higher.
Markets calm ahead of Wednesday’s FOMC decision
• Markets very calm ahead of Wednesday's FOMC decision;
• No data expected from Europe;
• US durable goods orders and consumer confidence in focus later.
It's been a very calm start to the week in the financial markets, especially by recent standards, driven largely by the lack of economic data and corporate earnings, and the Fed's latest policy decision on Wednesday.
It's very common for investors to be a little on edge in the run up to the latest FOMC decision because even when everyone thinks they know what's going to happen, the Fed has a knack of doing otherwise and creating complete chaos in the markets. The kind of volatility we can see following these announcements, even in response to the smallest things, can be unappealing to a lot of traders and therefore we tend to get less activity in the days before.
I think any major surprises tomorrow is very unlikely simply because there is no press conference following the decision, which means there would be no opportunity to question any big changes in policy or stance. There will be a statement released alongside the announcement but I think the FOMC would rather save any big announcements for those meetings when they can explain themselves, the next one of which is in December. With this in mind, I expect them to do as the markets are expecting and bring an end to the quantitative easing program with the final $15 billion taper and leave the statement largely unchanged, maintaining its commitment to keep rates low for a considerable amount of time.
This period of calm is probably a good thing for the markets when you consider what we've seen in the last few weeks. Everyone wants volatility in the markets but the kind of volatility we were seeing was excessive and driven by fear and panic, which makes life very difficult. This brief period of calm may help to ease some of that anxiety, while hopefully maintaining some of that volatility that has been lacking in the markets in recent years.
I expect another fairly calm day today, with the Fed decision only a little over 24 hours away. On top of that, there's few catalysts for the markets with the economic calendar looking a little bare. In fact, there's no notable data expected from Europe this morning and only a couple from the US later on in the session. Core durable goods orders for September is always one to keep a close eye on as it tells you a lot about confidence in the long term health of the economy. Consumer confidence is also important for the US given how big a role the consumer plays in total output. Both of these numbers are expected to improve which provides even more evidence of the strong recovery in the US.
The FTSE is expected to open 26 points higher, the CAC 17 points higher and the DAX 34 points higher.
Alpari UK
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US Opening Call from Alpari UK on 28 October 2014
US data in focus as FOMC begins two day meeting
It’s been another quiet start to the trading session on Tuesday, which isn’t surprising given the severe lack of economic data being released. The one barely notable release we have had though appears to be having an impact on the markets, particularly those in Germany, after the latest import price index reading for September showed a rise of 0.3%.
This may not sound like much but when there are growing fears throughout the eurozone about deflation, this is potentially a sign that some inflationary pressure is appearing. The 0.3% rise in the import price index in September was ahead of expectations of -0.1% and the August reading, also of -0.1%. In fact it’s the first inflationary reading since June and only the second this year. On top of that, it’s the highest monthly rise since February last year so while we do need to see more evidence that inflationary pressures are returning, even if the reason is weakness in the currency, it is encouraging. Especially as many believe that there’s plenty more downside to come for the euro.
The US session has a little more on offer, starting with core durable goods orders an hour before the open on Wall Street. This release is a great indicator of both current and future sentiment and should therefore not slip under the radar. The decision to invest is goods that last longer than three years shows both confidence in the current economic situation and the longer term outlook, giving it the effective benefit of hard data and a confidence survey all in one. While these numbers can be volatile, the core reading can give a good indication of how the economy is performing and we’re expecting a 0.5% increase, which is consistent with other data we’ve had recently that points to a strong economic recovery in the US.
Shortly after this we’ll get the latest consumer confidence reading for October, which is expected to rise to 87, just short of the near seven year high hit in August. The consumer is extremely important to the US economy and therefore this number is seen as a potentially high impact realease.
The S&P is expected to open 11 points higher, the Dow 84 points higher and the Nasdaq 23 points higher.
US data in focus as FOMC begins two day meeting
It’s been another quiet start to the trading session on Tuesday, which isn’t surprising given the severe lack of economic data being released. The one barely notable release we have had though appears to be having an impact on the markets, particularly those in Germany, after the latest import price index reading for September showed a rise of 0.3%.
This may not sound like much but when there are growing fears throughout the eurozone about deflation, this is potentially a sign that some inflationary pressure is appearing. The 0.3% rise in the import price index in September was ahead of expectations of -0.1% and the August reading, also of -0.1%. In fact it’s the first inflationary reading since June and only the second this year. On top of that, it’s the highest monthly rise since February last year so while we do need to see more evidence that inflationary pressures are returning, even if the reason is weakness in the currency, it is encouraging. Especially as many believe that there’s plenty more downside to come for the euro.
The US session has a little more on offer, starting with core durable goods orders an hour before the open on Wall Street. This release is a great indicator of both current and future sentiment and should therefore not slip under the radar. The decision to invest is goods that last longer than three years shows both confidence in the current economic situation and the longer term outlook, giving it the effective benefit of hard data and a confidence survey all in one. While these numbers can be volatile, the core reading can give a good indication of how the economy is performing and we’re expecting a 0.5% increase, which is consistent with other data we’ve had recently that points to a strong economic recovery in the US.
Shortly after this we’ll get the latest consumer confidence reading for October, which is expected to rise to 87, just short of the near seven year high hit in August. The consumer is extremely important to the US economy and therefore this number is seen as a potentially high impact realease.
The S&P is expected to open 11 points higher, the Dow 84 points higher and the Nasdaq 23 points higher.
Alpari UK
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Webinar - 28 October 2014 - Alpari UK
Weekly Market Webinar
Live every Tuesday afternoon our chief market analyst James Hughes, market analyst Craig Erlam and research analyst Joshua Mahony take a look at the major stories moving the markets. They will also look at some of the charts and discuss the big technical levels traders should be looking out for.
Click here to Register for our Webinar
Weekly Market Webinar
Live every Tuesday afternoon our chief market analyst James Hughes, market analyst Craig Erlam and research analyst Joshua Mahony take a look at the major stories moving the markets. They will also look at some of the charts and discuss the big technical levels traders should be looking out for.
Click here to Register for our Webinar
Alpari UK
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UK Opening Call from Alpari UK on 29 October 2014
Data and earnings due this morning, Fed eyed later
• Positive US and Asian sessions feed through to Europe ahead of the open;
• US consumer confidence at seven year high as we enter the holiday season;
• Investors increasingly dovish ahead of the latest policy decision from the Fed;
• Low level data and more earnings on offer during the European session today.
A positive end to the trading sessions in the US and Asia overnight looks to be feeding through to Europe ahead of the open on Wednesday, where the FTSE is expected to open 24 points higher, the CAC 6 points higher and the DAX 28 points higher.
Most of this appears to be stemming from the US, where consumer confidence is at a seven year high according to the latest survey carried out by the conference board. At a time when people are desperate to question to strength of the global economy, it's very encouraging to see the US going from strength to strength. And what better time for consumer confidence to be at a seven year high than in the run up to the holiday season. It's clearly still early doors yet but this could be a very good quarter for the US.
Ahead of the latest monetary policy decision from the Federal Reserve this evening, we're also seeing evidence that people are anticipating a more dovish Fed in response to the slowdown in the eurozone and the disinflation that has been gripping many of the major economies. A survey compiled by CNBC showed that market participants are already scaling back their rate hike expectations to July, from June previously. There's also been a lot of suggestions that it could be put back further to the end of next year, while some have even speculated about the potential for QE4 even with QE3 only expected to come to an end this month.
These expectations are far more dovish than what we had a couple of months ago before that sell-off in the markets knocked everyone's confidence. If they're correct though, this is positive for the markets and could help them push beyond the current highs if confirmed by the Fed. With no press conference following today's decision, only the usual statement, I don't expect any significant shift such as that although I wouldn't write it off at the next meeting in December. Fed Chairwoman Janet Yellen is particularly dovish and I'm sure she'd welcome delaying the first rate hike, with wage growth still non-existent and productivity still an issue.
Back in Europe, there's not a huge amount for the markets to focus on today. There is some UK data being released that centre's around credit availability to households which may be of interest but is unlikely to have much of an impact on the markets. The same applies to the latest French consumer confidence reading and retail sales figures for Spain. While both are obviously of interest, market reaction to them tends to be non-existent.
This leaves us to focus on corporate earnings season, which has got off to a wobbly start this morning as Deutsche Bank posted a surprise net loss. There is still a large number of companies left to report in both Europe and the US before we get the latest announcement from the Fed today and with so little on offer on the economic calendar, this is likely to be a key driver of the markets. That said, people have built up the Fed to be so dovish at this stage, I would be surprised to see a little more caution creep in as we approach the decision, with the Fed now having a lot to live up to. Should we see no change in stance and just the end of QE, the markets may actually be a little disappointed.
Data and earnings due this morning, Fed eyed later
• Positive US and Asian sessions feed through to Europe ahead of the open;
• US consumer confidence at seven year high as we enter the holiday season;
• Investors increasingly dovish ahead of the latest policy decision from the Fed;
• Low level data and more earnings on offer during the European session today.
A positive end to the trading sessions in the US and Asia overnight looks to be feeding through to Europe ahead of the open on Wednesday, where the FTSE is expected to open 24 points higher, the CAC 6 points higher and the DAX 28 points higher.
Most of this appears to be stemming from the US, where consumer confidence is at a seven year high according to the latest survey carried out by the conference board. At a time when people are desperate to question to strength of the global economy, it's very encouraging to see the US going from strength to strength. And what better time for consumer confidence to be at a seven year high than in the run up to the holiday season. It's clearly still early doors yet but this could be a very good quarter for the US.
Ahead of the latest monetary policy decision from the Federal Reserve this evening, we're also seeing evidence that people are anticipating a more dovish Fed in response to the slowdown in the eurozone and the disinflation that has been gripping many of the major economies. A survey compiled by CNBC showed that market participants are already scaling back their rate hike expectations to July, from June previously. There's also been a lot of suggestions that it could be put back further to the end of next year, while some have even speculated about the potential for QE4 even with QE3 only expected to come to an end this month.
These expectations are far more dovish than what we had a couple of months ago before that sell-off in the markets knocked everyone's confidence. If they're correct though, this is positive for the markets and could help them push beyond the current highs if confirmed by the Fed. With no press conference following today's decision, only the usual statement, I don't expect any significant shift such as that although I wouldn't write it off at the next meeting in December. Fed Chairwoman Janet Yellen is particularly dovish and I'm sure she'd welcome delaying the first rate hike, with wage growth still non-existent and productivity still an issue.
Back in Europe, there's not a huge amount for the markets to focus on today. There is some UK data being released that centre's around credit availability to households which may be of interest but is unlikely to have much of an impact on the markets. The same applies to the latest French consumer confidence reading and retail sales figures for Spain. While both are obviously of interest, market reaction to them tends to be non-existent.
This leaves us to focus on corporate earnings season, which has got off to a wobbly start this morning as Deutsche Bank posted a surprise net loss. There is still a large number of companies left to report in both Europe and the US before we get the latest announcement from the Fed today and with so little on offer on the economic calendar, this is likely to be a key driver of the markets. That said, people have built up the Fed to be so dovish at this stage, I would be surprised to see a little more caution creep in as we approach the decision, with the Fed now having a lot to live up to. Should we see no change in stance and just the end of QE, the markets may actually be a little disappointed.
Alpari UK
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US Opening Call from Alpari UK on 29 October 2014
All eyes on the Fed as QE comes to an end
• US futures treading water ahead of FOMC decision;
• QE3 seen ending in October and statement unlikely to change significantly;
• World Bank fails to ease Chinese growth concerns.
US futures are treading water ahead of the opening bell on Wednesday, which will come as no surprise to many given that the FOMC is due to announce its latest policy decision later on in the day.
This also comes following a good showing on Tuesday, which was driven by a combination of a much better than expected consumer survey and a expectations that the first rate hike will come a little later than previously anticipated. The survey, carried out by CNBC, showed that market participants now see the first rate hike in July, a month later than previously though. This could continue to be pushed back if the inflation data continues in line with the current trend which would make it very difficult for the Fed to hike rates. There are even some that are already talking about the potential for QE4 which displays a massive change in thinking from a couple of months ago when people were discussing the prospect of an earlier rate hike.
What most people do seem to agree on is the fact that the Fed will bring its third quantitative easing program to an end this month with its final $15 billion taper. I would be very surprised to see anything different given that the rest of the tapering process has run so smoothly.
I would also be very surprised if the Fed significantly changes the language of the accompanying statement, which would include the remove of its commitment to keep rates low for a considerable amount of time. Not only have the conditions that Chairwoman Janet Yellen laid on in relation to wage growth not really improved but the inflation scenario is deteriorating both in the US and around the world. It wouldn’t make any sense to deliver a more hawkish statement at this time.
There would also be no opportunity to answer any questions if they did opt to change the statement significantly or delay the end of QE as this meeting will not be followed by a press conference. Given that the Fed will not want to contribute to more market drama if it can be avoided, I imagine any changes would be put off until December. I also can’t see what the benefit of delaying the end of QE would be. People only care about the first rate hike and the pace of increases thereafter. No one cares about QE any more unless there’s going to be a brand new stimulus package, which at this point is extremely unlikely.
The World Bank attempted to ease market concerns about the rate of growth in the Chinese economy today after it claimed that the country can afford to cut its 2015 growth target to 7% while maintaining a health labour market. There have been fears that China is facing a few very tough years after growth slowed 7.3%, its lowest rate since the start of 2009, in the third quarter. However, based on the World Bank’s remarks, there is no risk to the Chinese economy at these levels and it can even afford to slow a little further before the risks begin to build. Based on the muted reaction in the markets, it appears investors are not encouraged by this, potentially suggesting that they see much lower growth than 7% in the coming years.
The S&P is expected to open unchanged, the Dow up 8 points and the Nasdaq down 14 points.
All eyes on the Fed as QE comes to an end
• US futures treading water ahead of FOMC decision;
• QE3 seen ending in October and statement unlikely to change significantly;
• World Bank fails to ease Chinese growth concerns.
US futures are treading water ahead of the opening bell on Wednesday, which will come as no surprise to many given that the FOMC is due to announce its latest policy decision later on in the day.
This also comes following a good showing on Tuesday, which was driven by a combination of a much better than expected consumer survey and a expectations that the first rate hike will come a little later than previously anticipated. The survey, carried out by CNBC, showed that market participants now see the first rate hike in July, a month later than previously though. This could continue to be pushed back if the inflation data continues in line with the current trend which would make it very difficult for the Fed to hike rates. There are even some that are already talking about the potential for QE4 which displays a massive change in thinking from a couple of months ago when people were discussing the prospect of an earlier rate hike.
What most people do seem to agree on is the fact that the Fed will bring its third quantitative easing program to an end this month with its final $15 billion taper. I would be very surprised to see anything different given that the rest of the tapering process has run so smoothly.
I would also be very surprised if the Fed significantly changes the language of the accompanying statement, which would include the remove of its commitment to keep rates low for a considerable amount of time. Not only have the conditions that Chairwoman Janet Yellen laid on in relation to wage growth not really improved but the inflation scenario is deteriorating both in the US and around the world. It wouldn’t make any sense to deliver a more hawkish statement at this time.
There would also be no opportunity to answer any questions if they did opt to change the statement significantly or delay the end of QE as this meeting will not be followed by a press conference. Given that the Fed will not want to contribute to more market drama if it can be avoided, I imagine any changes would be put off until December. I also can’t see what the benefit of delaying the end of QE would be. People only care about the first rate hike and the pace of increases thereafter. No one cares about QE any more unless there’s going to be a brand new stimulus package, which at this point is extremely unlikely.
The World Bank attempted to ease market concerns about the rate of growth in the Chinese economy today after it claimed that the country can afford to cut its 2015 growth target to 7% while maintaining a health labour market. There have been fears that China is facing a few very tough years after growth slowed 7.3%, its lowest rate since the start of 2009, in the third quarter. However, based on the World Bank’s remarks, there is no risk to the Chinese economy at these levels and it can even afford to slow a little further before the risks begin to build. Based on the muted reaction in the markets, it appears investors are not encouraged by this, potentially suggesting that they see much lower growth than 7% in the coming years.
The S&P is expected to open unchanged, the Dow up 8 points and the Nasdaq down 14 points.
Alpari UK
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Daily Market Update - 29 October 2014 - Alpari UK
Markets higher, yet awaits FOMC announcement - 00;26
US GDP expected to confirm strong US end of year - 03:50
Eurozone CPI set to see out the week - 04:01
Research analyst Joshua Mahony discusses the markets as traders focus upon the release of the latest FOMC announcement and statement later today. Alongside this, Joshua touches on the US GDP release tomorrow and Friday’s Eurozone CPI figure.
Markets higher, yet awaits FOMC announcement - 00;26
US GDP expected to confirm strong US end of year - 03:50
Eurozone CPI set to see out the week - 04:01
Research analyst Joshua Mahony discusses the markets as traders focus upon the release of the latest FOMC announcement and statement later today. Alongside this, Joshua touches on the US GDP release tomorrow and Friday’s Eurozone CPI figure.
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Alpari UK
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UK Opening Call from Alpari UK on 30 October 2014
Focus on German unemployment and CPI as Fed ends QE
• Fed ends QE3 and adds more hawkish notes to its statement;
• Market reaction to hawkish Fed not as bad as it could have been;
• German unemployment seen rising for fifth month in six;
• Latest German inflation numbers accompany US jobs data this afternoon.
With the quantitative easing program now behind them, the Federal Reserve may be fully focused on that first rate hike and coming across a little more hawkish in its language, but that doesn't appear to be concerning investors as much as you may expect.
The decision to end its third round of quantitative easing came as absolutely no surprise to the markets, despite arguments in recent weeks from certain officials that the final taper could be delayed or the program even increased. In reality, to do so would have been pointless and I think these comments were largely made to quell the excessive market volatility we were seeing and stop the panic selling that was making people lose all perspective.
Despite returning back near to the levels that led to the panic selling, the markets appear to be in a much happier place at the moment, even though nothing has actually changed. The Fed got away pretty much scot free last night despite adding clear hawkish elements to its statement. References to the substantial improvement in the labour market and the broader economy, along with the hawkish tone on inflation, did not go unnoticed by the markets and we US indices did reverse gains to end lower, while US Treasury yields rose, the dollar appreciated and Gold fell. This is all consistent with a more hawkish Fed but still, these moves were only small and could well be reversed today.
Maybe the Fed's decision to leave its commitment to keep rates low for a considerable amount of time in the text was enough to offset the more hawkish comments elsewhere. I would say this doesn't really change anything from the Fed's perspective and that the first rate hike is still likely in the middle of next year, based on current data. The biggest factor may now well be the path of inflation in the coming months, with other countries similarly facing a disinflationary environment.
This morning attention is going to be back on the data with a selection of numbers being released for the euro area. The latest labour market data for Germany is expected to show the unemployment rate remaining at 6.7%, which is still extremely low when compared to its fellow eurozone countries, while the number of those unemployed is seen rising for a fifth month in six, by 5,000. This may be marginal but it's also a worrying trend and clearly highlights the weakness in the economy right now.
The rest of the data is not viewed as being particularly notable from a markets perspective, simply because the reaction tends to be muted. However, I still think it's worth paying attention to, particularly the October sentiment surveys for the eurozone. We may have learned all we need to know from the PMI readings last week, along with other surveys that have been released since, but these provide detailed insight into what areas of the economy are more confident going into the holiday season and those where issues could arrive. Unfortunately, we're expecting a decline in most of the surveys, with only consumer confidence improving slightly. While this will help, businesses are clearly not as optimistic.
This will be followed this afternoon by some US growth and jobless claims data, as well as inflation numbers for Germany. We saw earlier this week that import prices rose in September which could mean more inflation pressure in the coming months. As of yet, that is not expected to be the case with forecasts still suggesting that consumer prices will fall this month by 0.1%, although on an annual basis this brings CPI inflation up to 0.9%.
The FTSE is expected to open 6 points higher, the CAC 8 points higher and the DAX 22 points higher.
Focus on German unemployment and CPI as Fed ends QE
• Fed ends QE3 and adds more hawkish notes to its statement;
• Market reaction to hawkish Fed not as bad as it could have been;
• German unemployment seen rising for fifth month in six;
• Latest German inflation numbers accompany US jobs data this afternoon.
With the quantitative easing program now behind them, the Federal Reserve may be fully focused on that first rate hike and coming across a little more hawkish in its language, but that doesn't appear to be concerning investors as much as you may expect.
The decision to end its third round of quantitative easing came as absolutely no surprise to the markets, despite arguments in recent weeks from certain officials that the final taper could be delayed or the program even increased. In reality, to do so would have been pointless and I think these comments were largely made to quell the excessive market volatility we were seeing and stop the panic selling that was making people lose all perspective.
Despite returning back near to the levels that led to the panic selling, the markets appear to be in a much happier place at the moment, even though nothing has actually changed. The Fed got away pretty much scot free last night despite adding clear hawkish elements to its statement. References to the substantial improvement in the labour market and the broader economy, along with the hawkish tone on inflation, did not go unnoticed by the markets and we US indices did reverse gains to end lower, while US Treasury yields rose, the dollar appreciated and Gold fell. This is all consistent with a more hawkish Fed but still, these moves were only small and could well be reversed today.
Maybe the Fed's decision to leave its commitment to keep rates low for a considerable amount of time in the text was enough to offset the more hawkish comments elsewhere. I would say this doesn't really change anything from the Fed's perspective and that the first rate hike is still likely in the middle of next year, based on current data. The biggest factor may now well be the path of inflation in the coming months, with other countries similarly facing a disinflationary environment.
This morning attention is going to be back on the data with a selection of numbers being released for the euro area. The latest labour market data for Germany is expected to show the unemployment rate remaining at 6.7%, which is still extremely low when compared to its fellow eurozone countries, while the number of those unemployed is seen rising for a fifth month in six, by 5,000. This may be marginal but it's also a worrying trend and clearly highlights the weakness in the economy right now.
The rest of the data is not viewed as being particularly notable from a markets perspective, simply because the reaction tends to be muted. However, I still think it's worth paying attention to, particularly the October sentiment surveys for the eurozone. We may have learned all we need to know from the PMI readings last week, along with other surveys that have been released since, but these provide detailed insight into what areas of the economy are more confident going into the holiday season and those where issues could arrive. Unfortunately, we're expecting a decline in most of the surveys, with only consumer confidence improving slightly. While this will help, businesses are clearly not as optimistic.
This will be followed this afternoon by some US growth and jobless claims data, as well as inflation numbers for Germany. We saw earlier this week that import prices rose in September which could mean more inflation pressure in the coming months. As of yet, that is not expected to be the case with forecasts still suggesting that consumer prices will fall this month by 0.1%, although on an annual basis this brings CPI inflation up to 0.9%.
The FTSE is expected to open 6 points higher, the CAC 8 points higher and the DAX 22 points higher.