Forex research

[Alpari UK]

US Opening Call from Alpari UK on 11 April 2014

US futures treading water following Thursday’s losses

* US futures treading water following Thursday’s significant losses;
* UoM consumer confidence number key today;
* JP Morgan and Wells Fargo kick off earnings season for the banks.

US futures are treading water on Friday, a day after all three major indices made quite significant losses as investors embarked on another wave of growth stock selling. Ahead of the open, the S&P is seen unchanged at 1,833, the Dow up 4 points at 16,174and the Nasdaq down 8 points at 3,479.

Over in Europe, indices are trading deep in negative territory, tracking yesterday’s move in the US session. There’s a lot of pessimism in the markets right now driven largely by the disappointing data of recent months, the potential for another flare up in the Ukraine, the Fed’s decision to continue scaling back its asset purchases and the low expectations as we head into earnings season. The severe lack of anything positive for investors to latch onto is also not helping matters.

There’s been a lack of significant data releases this week, with the most important economic event being the release of the FOMC minutes on Wednesday. Today’s preliminary reading of the UoM consumer confidence figure could give traders something to be a little more optimistic about. Traders appear to be more concerned with the forward looking data at the moment, probably because the backward looking numbers are distorted by the unusually poor winter weather making them difficult to analyse. With that in mind, this consumer confidence figure could be one of the most important economic releases at the moment as the consumer is so important to the US economy. Any sign that consumer activity is picking up is very encouraging following such a difficult few months. We’re expecting a slight improvement in confidence today, with the number rising to 81 from 80 in March.

Aside from this the focus will be on first quarter earnings figures, as it will be for the next month or so, with investors looking to these results for evidence that the economy can continue to grow without the additional support of the Fed. Unlike in previous quarters, I doubt investors will be willing to accepts mediocre results, with companies barely beating their own lowered earnings expectations and missing on revenues. Investors may well put additional focus on revenues in this quarter for signs that the earnings growth seen in previous quarters is sustainable. There’s only so many times a company can cut costs to support the bottom line and these methods may begin to wear a little thin with investors this year.

 

[Alpari UK]

Daily Market Update - 11 April 2014 - Alpari UK

00:09 Financials lead US stocks lower following JP Morgan earnings
00:30 Further selling of growth stocks weighs heavily on Europe
02:35 US consumer confidence rises more than expected in April

 

[Alpari UK]

Weekly Market Preview – 14 April 2014

We are coming into a key week for the markets, with many of the major indices posting multiweek losses and thus bringing increased anxiety and volatility. With this in mind, it is worth watching out for potential market-moving events which have the potential to greatly influence the week’s proceedings. In the US, the main event of note comes in the form of the CPI inflation figure, due on Tuesday. The UK focus will likely peak on Wednesday, when the job report is announced for February. Meanwhile, a relatively quiet week in the eurozone is likely to see significant volatility around Wednesday’s CPI figure.

Within Asia, the Chinese GDP release on Wednesday is going to dominate as we seek to find further evidence of the recent downturn. Meanwhile, a sparse week in Japan will no doubt bring substantial attention to the two speeches from BoJ governor Kuroda on Wednesday and Thursday. Finally, in Australia the RBA minutes from their 1 April meeting will be key.


US

The US economy looks set for an interesting week, given the protracted and unexpected sell-off seen in recent weeks. However, whilst markets have been particularly volatile, last week actually provided very few events of note to provide such movement. This week, there are a whole raft of economic announcements due with the most noteworthy coming in the form of the retail sales and CPI figures.

On Monday, the retail sales data looks set to dominate, providing us with a greater degree of understanding in relation to how the everyday consumer is behaving in the current climate. Of course, this figure is influenced greatly by factors such as current employment and earnings, along with future expectations of inflation, interest rates and jobs. Much of this feeds into Janet Yellen’s idea of ‘spare capacity’ which has been incorporated into the forward guidance policy. Ultimately, the ability of retail sales to grow positively shows a vibrant and active economy. Given that consumer spending accounts for around 70% of GDP, there is no doubt that this figure provides us with one of the core gauges of economic growth and health. Expectations point towards a positive month on month growth in March, with median estimates forecasting a figure around 0.8%, after a 0.3% rise in February.

Possibly the most important release of the week comes in the form of the CPI measure of inflation, due on Tuesday. The influence of inflation upon monetary policy is growing in recent months. Of course, inflation is absolutely key to all central banks. However, with CPI failing to break above the 2% target since November 2012, the fall to 1.1% last month was a worrying sign for the Fed. This reversed three weeks of positive movement in this figure, which brought it back from the 1% figure seen in October 2013. Thus the ability of price growth to rise back towards 2% will play into the Fed’s hands to continue apace with their tapering and possible interest rate hikes next year. However, with any further downside in this figure, the possibility of deflation or at least disinflation could threaten to throw things off course. The release of the PPI figure recently highlighted an above expectations rise in food and services prices, gaining the most since June. Subsequently, the market forecasts of a rise back to 1.5% on the annual figure seems viable.

UK

A somewhat mixed week, where the existence of relatively few events are made up for by their importance, with the CPI figure and jobs report set to dominate. The CPI figure is due to be released on Tuesday, which is set to play a similar role to the US. This is because unlike the eurozone story, we have not yet seen any actual monetary policy action taken in the UK or US to counteract low inflation in recent years. However, with the 2013 trend of above target rates finally reversed, it is now a weaker than desired rate which is coming into question. That being said, I do not feel the current rate is anything worry about and thus this figure should be kept track of going forward. The markets expect to see the annual figure fall marginally to 1.6% from 1.7%, which would represent the sixth consecutive month of price growth decreases.

The main event of the week is likely to be the jobs report, due for release on Wednesday. The importance of both the claimant count and unemployment rate figures has always been undoubtable given that the jobs market represents probably the most closely followed point of reference of economic health after the GDP figure. However, what with forward guidance being largely focused upon employment data, there has been greater volatility around this release given it’s potential effect upon policy going forward. The unemployment rate has taken much of the focus since Mark Carney took charge, with the initial phase of forward guidance targetting 7.0% for potentially hiking rates. However, with the figure falling faster than expected, there has been a switch towards a more complex and vague form of guidance. Despite this, the employment data will remain the backbone of any monetary policy going forward and thus both these figures are likely to bring significant volatility. Forecasts point towards a somewhat weaker claimant count change figure of 30k, from 34.6k in January, along with a reduction in unemployment from 7.2% to 7.1%. Also keep on the look out for the change in average earnings for a gauge of how the real wage gap is tightening. The forecast of 1.8% would mean that finally we could see wages outstrip inflation for the first time

Eurozone

A quiet week in the eurozone, where the major event of note comes on Wednesday, with the release of the CPI measure of inflation. Unlike the US and UK, this figure is actively impacting monetary policy within the ECB right now. This has been evident within recent months, where the anxiety surrounding potential deflation has led to markets factoring a looser monetary policy from Mario Draghi and co. In an unprecedented step, Bundesbank’s Jens Weidmann has come out in favour of a possible round of QE. This increased noise from key figures within the ECB and eurozone is likely to be providing an accomodative environment within which Draghi can take radical measures without the worry of a backlash. That being said, the ECB failed to act this month, despite the fall in CPI to 0.5%. Should the rate fall any further this month, it would certainly put further pressure upon the ECB. However, markets are expecting no change to the rate of CPI this month which despite representing stability in the figure, still highlights a distinct lack of price growth in the region.

Asia & Oceania

The main event of note out of Asia this week is going to certainly be the Chinese GDP growth figure, due out on Wednesday. The slowdown within China, as highlighted by the contractionary HSBC manufacturing PMI figure, weakening trade balance figures, and the first corporate default have put ever more pressure upon the worlds second largest economy. Of all the data points that we watch out for from China, the most important to the ruling party is always going to be the GDP. A high rate of growth stamps continued approval upon the ruling party in the eyes of the Chinese people and without the circa 7.5% growth seen in recent years, questions will be asked as to the quality of custodianship being undertaken. The fact of the matter is that China has a big problem with over-investment and the subsequent overcapacity that has become apparent. The default of Chaori solar is one of the signs that the ruling party is set to allow some of this over-capacity to actually impact upon business going forward rather than constantly propping up embattled firms. However, this is likely to impact the rate of growth and thus we are looking to see if this growing trend is set to impact the GDP figure. However, signs are that any weakness within the economy will likely be dealt with through the implementation of further stimulus. The markets are expecting to see a fall in this figure to 7.3%, from 7.7% in Q4 2013. Should we see this, it is likely that questions will be asked regarding potential further steps from the PBOC.

In Japan, the dual speeches from BoJ governor Kuroda on Wednesday and Thursday will be key as we head into the week. The implementation of the sales tax on 1 April has brought about heightened expectations in relation to a possible rise in the amount of asset purchases the BoJ undertakes per month. In all likeliness, there will be no steps taken until the true effects of the tax are borne out of data, which will mean a possible 2-3 month wait. However, with the value of the yen recently increasing as a response to increased market fears, there is an growing feeling that Kuroda will take drastic measures to try to push it back on its path lower. That being said, I personally believe Kuroda will use qualitative measures for the time being, choosing to highlight the possibility of measures rather than actually taking a major step.

Finally, in Australia the release of minutes from the RBA meeting, which took place earlier this month, is likely to dominate market focus. The meeting saw rates remain constant as expected. However, with the economy beginning to transition towards a more domestically focused strategy and a booming housing market in the limelight, I see the RBA becoming largely more hawkish as we go on, despite the slowdown in China. Thus be on the lookout for any hints of potential rate hikes in the near future from these minutes.

 

[Alpari UK]

Daily Market Update - 14 April 2014 - Alpari UK

Markets continue to tumble, as Ukraine fears escalate - 0:09
A look at the week ahead - 02:05

 

[Alpari UK]

UK Opening Call from Alpari UK - Wednesday 16th April 2014

Good Morning all!

It was a mixed start to trading in Asia overnight after Asian equity markets were initially boosted by another rebound in US tech stocks and general equity markets. The Nasdaq finished higher by 22 points while the Dow added another 89 points in trading on Tuesday night. However it wasn’t all plain sailing for Asian stocks as investors weighed on Chinese growth numbers. The Chinese GDP reading came in at 7.4%, down from last quarter’s 7.7% but slightly higher than the 7.3% expected by the market. The number still saw the Chinese economy grow at its slowest pace in six quarters. Despite this the GDP reading is not considered too bad, scare mongering and market rumours have led to extremely volatile markets around all aspects of Chinese data but most have to consider whether this slowdown in China’s growth is temporary or a longer term problem. I would say that the market is currently split on that, but expectations on more negativity in the second quarter based on a slump in house prices won’t help those investors with a more bullish outlook on China.

After yesterday’s CPI inflation readings out of the UK and US today is the turn of the Eurozone, arguably where inflation is the biggest issue facing the single currency economy. Expectations are for inflation to remain steady at 0.5%, which if happens will have to be seen as a positive reading for the ECB. Mario Draghi has been trying to halt the slide in inflation for a number of months but to no avail. The fear of course is that the downward trend will continue for CPI in the Eurozone, something that would yet again put more pressure on the ECB to act to quell the fear of deflation. Mario Draghi and the ECB have continuously told press conferences that they have the power and tools to act if inflation continues to fall. If a more negative reading is shown this morning then it may well be that finally actions need to speak louder than words and the ECB have to act, whether they will or not is another question entirely. The ECB could well become the first established central bank to adopt a policy of negative interest rates, a move that would help halt the fall in inflation but could well have huge repercussions for financial market stability. Of course the ECB will be hoping for some relief in the CPI reading, however it would have to be a sharp move higher to take the pressure off of Mario Draghi and the ECB.

As we approach the long Easter weekend, today sits as the highlight of the week when it comes to economic data. Added to the readings stated above this morning we also see the UK unemployment figures announced. Ever since the BoE second round of forward guidance many market participants have started looking at a lower unemployment figure in the UK as the positive reading it is, and today’s figures are likely to show that the jobs market in the UK is continuing to improve. Expectations are for a fall to 7.1%, still below the 7% threshold the BoE bought in under their first round of forward guidance but still a solid move in the right direction. Many had worried that the 7% threshold could trigger a swift change in monetary policy in the UK and see a rise in interest rates. Today’s number will hopefully be taking as a positive if it comes home lower than expected, and with radio silence from the BoE after last week’s rate decision it seems that the UK economy would still be in a situation of steadily moving forward with nothing significant to report.

Finally the situation in Ukraine showed signs of escalating further yesterday as the government started to move forward with their plan of anti-terrorist action. Ukraine began its operation in the east as forces reclaimed an airport held by separatists, all this came amongst reports that Russian special forces were supporting the anti-government groups. It could well be that this move by the Ukrainian government begins the most worrying part of this whole crisis, as it is expected that the number of violent clashes will rise as Russia continue to support those people it says rely on the Russian Federation and Ukraine acts to rid its country of these terrorist groups.

As ever the financial markets will be keeping an eye on developments in the Ukraine with Gold already jumping higher as the old fashioned safe haven moves start all over again.

Ahead of the open this morning we expect the FTSE to open 52 points higher with the German Dax higher by 64 points.

 

[Alpari UK]

UK Opening Call from Alpari UK - Thursday 17th April 2014

Markets mixed as Ukraine conflict quells recent strength

* Janet Yellen’s speech provides more of the same
* Heightened Ukraine conflict raises fears of Russian intervention
* Potential sanction from west likely to be weak as domestic impact is considered
* BoJ’s Kuroda maintains accomodative stance and Japan seeks 2% inflation.

The European open looks set to be a mixed affair as global indices seem undecided as to whether they are actually ready to start moving back towards highs seen back in February or else continue to correct lower which has been a running theme of the past fortnight. The impact of Janet Yellen’s most recent testimony, coupled with a growing fear of Russian sanctions have served to pull sentiment both ways, largely resulting in a mainly flat start to the day. The FTSE100 is expected to open -5 points, DAX -6 and CAC flat.

Following yesterday’s European close, Janet Yellen struck a somewhat dovish tone, insisting that the Fed remained committed to providing support for the global recovery. Yet again, she insisted that the maintenance of near zero rates will be reliant upon how far the US economy remains from their employment and inflation goals. However, this was much of the same from Yellen, with no actual major insight past what was provided at the conclusion of the latest FOMC meeting. The slip that rates were likely to rise 6 months following the end of asset purchases remains something which hangs over Yellen and thus she has been reiterating where possible that this decision is data, not time dependant. As such, Yellen’s insistence that there will be a ‘considerable time’ between the end of QE and the beginning of rate hikes was actually treated with disappointment as markets had hoped for something a little more meaty rather than a regurgitation of past policy announcements.

Meanwhile in Ukraine, tensions have finally turned to actions, with the Ukrainian military taking steps to take back key government and public buildings within East Ukraine from pro-Russian activists. There remains a degree of scepticism as to whether some of these activists are actually being paid by the Kremlin given the existence of well coordinated military uniforms and weapons. Thus there is a widespread expectation that whilst Russia currently stands back to watch crisis spread throughout the region, it is highly likely that this will form a precursor to Russia taking control of those parts of Ukraine to protect those Russian speaking nationals in much the same manner as in Crimea. The latest news that clashes have resulted in multiple deaths to pro-Russian activists will raise the likeliness of further action from the Kremlin in the near future.

Talks are due to take place today in Geneva between Russia, Ukraine, US and European union representatives, set against a backdrop of increased threats of sanctions from the west. However, with increased pressure coming from multinationals which reflect the fear of diminished Russian investment hurting firms here, it appears that sanctions are just as unpopular home as they are abroad. Thus with a European union that appears unwilling to take any significant steps out of fear of hurting their own economy, along with a US whose trade with Russia is minimal, any sanctions are unlikely to have a substantial impact going forward.

Overnight, BoJ governor Kuroda maintained that the Japanese economy remains on a steadily improving path which includes accomodative monetary policy for as long as it is required to achieve the 2% inflation target. This comes off the back of a meeting with Shinzo Abe which actually led to a somewhat more hawkish stance than usual, with QE expected to raise the monetary base to $2.7 trillion by the end of 2014. The absence of further forecasts has subsequently left markets considering the possibility of an end of QE in 2015. That being said, everything is going to be contingent upon the inflation rat, and with only modest improvements underway and a inflation representing a notoriously difficult measure to control, I believe Kuroda and Abe will need some time to reach their target.

Looking ahead, today marks the last day of the week for many of the developed economies, with bank holidays across Europe and Canada. The events to really watch out for are going to come in the US session, where the Canadian CPI, US unemployment claims and Philly Fed manufacturing index have the potential to move markets.

 

[Alpari UK]

Daily Market Update - 17 April 2014 - Alpari UK

Markets mixed as Yellen and Ukraine impact sentiment - 00:21
Janet Yellen says a lot yet a little - 00:33
Ukraine conflict raises fear of further Russian involvement - 01:50

 

[MobiusGrey]

lol

 

[Alpari UK]

UK Opening Call from Alpari UK - Tuesday 22nd April 2014

Financial markets reopen today after the long Easter weekend and it seems that traders will have the opportunity to ease back into markets as data looks light on Tuesday. However as the week moves on the economic calendar will get a little busier and traders will finally have something to get their teeth into. However it is not just the economic calendar that will generate the news flow, as the on-going crisis between Russia and Ukraine remains the story that investors must keep one eye on to protect themselves from any kind of unexpected market moves.


Today’s session is likely to be a fairly quiet one as traders return from the long weekend. The economic calendar shows that construction output and consumer confidence out of the Eurozone are the only numbers of any note. The consumer confidence reading will be an interesting one as many people will be looking to see what kind of impact potential sanctions on Russia has on confidence in the Eurozone. Last week’s German and Euro area ZEW survey showed a mixed message when it came to this particular issue and with the IFO reading coming later in the week the consumer confidence number may well give us a sneak preview of what to expect. The possibility of sanctions being imposed on Russia if they do not cooperate is causing all sorts of problems for financial markets, but the threat to Russia from the west has so far been a pretty limp one. President Vladimir Putin has already expressed his desire to retaliate to sanctions imposed by the west with sanctions of his own, and any such move could have huge repercussions for Europe and especially Germany. Last week showed certain European companies lobbying governments trying to make sure no sanctions were imposed on Russia. The only place that seems to have a stomach for the fight at the moment is the US, with the White House have thought to have already spoken to a number of major corporations preparing them for the inevitability of sanctions against Russia. However the annual trade between Russia and the US is only worth around $40 billion per year, a drop in the ocean compared to trade between Russia and Germany. It does seem that most involved in the crisis could do without it, Europe has the most unstable economic recovery so therefore any sanctions could be crippling, Ukraine, with elections fast approaching would of course rather a peaceful resolution and contrary to popular belief the Russians can’t afford it either. That leaves the US, yet again acting as the knight in shining armour looking to save the day, but with the least to lose in the whole situation, it’s no surprise.

As the week moves on we will get more data that is likely to get the markets moving again with the likes of the MPC meeting minutes, PMI readings from the Eurozone and UK retail sales. However truth be told, in terms of the economic calendar the markets may not really ever get going this week, but with earnings season in the US still in full flow and worries over tech stocks still causing investors sleepless nights, there is likely to remain that hint of volatility and with everyone returning from their spring breaks we could well see volume increase as well.

Ahead of the open we expect to see the FTSE open higher by 26 points with the German DAX higher by 56 points.

 

[Alpari UK]

US Opening Call from Alpari UK - Tuesday 22nd April 2014

US futures look to extend gains made on Monday

* US futures look to extend gains made on Monday;
* Corporate earnings continue to support gains in stocks;
* Another decline expected from US existing home sales.

US futures are pointing to a moderately higher open on Tuesday, following a positive start to the week that saw the S&P and extend its winning streak to five consecutive days. As it stands, the S&P is expected to open unchanged at 1,871, the Dow 2 points higher at 16,451 and the Nasdaq 5 points higher at 3,564.

Corporate earnings season is helping support stock markets right now despite the problems in the Ukraine failing to go away. Earnings season hasn’t really been that great so far but once again we’re seeing the bar being set very low, making it quite easy for companies to surprise on the upside. The unusually poor weather in the first quarter is behind these low expectations in many cases, which has effectively given companies a free pass on this occasion. The same is unlikely to be offered in a few months time.

With European markets reopening following the long bank holiday weekend, trading volume should improve significantly today. That said, the start of the week is looking a little quiet, with the majority of the data being released over the next few days. Of the data being released today, existing home sales for March will be key, with this being the first batch of housing data that has not been heavily impacted by the weather.

This should therefore provide further insight into what impact rising rates are having on the housing market and therefore what we can expect to see over the course of this year. The number of sales is expected to have slowed again in March, with only 4.55 million homes being sold, marking the third consecutive monthly decline. Anything better here could be viewed as a sign that the weather has been largely responsible for the decline in the first two months of the year. However, I still expect the number of sales to slow this year as rates rise and the economy recovers slower than previously thought.

Earnings will once again be key today, with plenty of companies reporting first quarter earnings before the opening bell and after the close later on. Of the companies reporting before, BNY Mellon and McDonald’s clearly stand out, but I imagine far more attention will be paid to AT&T earnings this evening.

 

[Alpari UK]

Daily Market Update - April 22 2014 - Alpari UK

Ukraine fears dominate focus - 00:21
A look ahead to tomorrows Chinese PMI and RBNZ rate statement - 02:21

 

[Alpari UK]

UK Opening Call from Alpari UK - Wednesday 23rd April 2014

Chinese manufacturing contraction fails to quell the markets

* Chinese manufacturing slowdown eases somewhat
* Australian inflation puts pressure upon AUD
* Ukraine conflict continues to escalate.

European markets look to continue apace this morning, following on from a largely mixed Asian session which saw the Shanghai composite fall 0.35%, yet the Nikkei rose 0.76%. The dominant themes through the overnight session centered around the Australian CPI fall, along with the marginal rise in the HSBC manufacturing PMI figure. It is the latter which is expected to feed into the European markets, where futures point towards a largely higher open with the CAC +3, DAX +21, yet the FTSE100 -5 points.


Today’s HSBC manufacturing PMI out of China has been widely followed for this reading has acted as the prime indicator of the recent economic slowdown within the Asian powerhouse. The move into contraction over the past three months within the manufacturing sector as measured by this figure has heightened fears of a more widespread crisis, where the reliance upon credit and easy money as a core driver of economic growth could finally be coming to an end, with significant consequences for the global economy. However, there is a distinct possibility that China will choose to monetise away this problem in much the same way it has in the past and that appears to be the case now. With the reading finally posting a positive increase following six months of decline, this can be seen to some as a mini victory and a step in the right direction. However, with both the PBOC and government having stepped in with stimulus efforts, today’s efforts are somewhat unimpressive.

The focus within the HSBC reading upon small to medium sized businesses means that it was always likely for this measure to be impacted more significantly than the headline figure, which is centered upon more large-scale an d government backed firms. The decision from the PBOC and government that 2014 would represent the year within which they allow the overcapacity to be taken out of the system would invariably mean some paid in the near term. However, it seems as if there is actually less appetite for this than expected as stimulus has greeted pretty much any period of relative weakness. That being said, following the recent ‘mini-stimulus’ measure from the government, their stance is now that no further action will be taken to prop up the economy in what is perceived as a temporary slowdown. This would represent a major change in tact should it play out, yet prior performance typically shows us that when faced with dipping popularity due to economic worries, the government will more often than not step in.

In Australia, the Aussie dollar fell to a two week low after the inflation rate fell to 0.6% on a month on month basis. This unexpected tumble in prices caught the markets off-guard somewhat, bringing about a more concerted sell-off in what has been one of the strongest currencies of recent weeks. The wider impact of this figure is likely to mean an RBA which holds off somewhat in terms of their next interest rate move, which was expected to be a hike. The move towards a disinflationary stage for Australia is consistence with many of the other major economies such as the UK, US and Eurozone. In much the same manner, the move towards a low inflation environment bring a number of issues, not least the fact that a contractionary monetary policy would be likely to exacerbate the problem and could drive a move towards deflation. For now this figure can be taken in isolation, yet should we continue upon this path then the expected rate hike around mid-2015 would likely have to be pushed back further.

In Ukraine, the crisis appears to be worsening, with the Russians appearing to disregard their pledge to call upon pro-Russian separatists to pull back from the key governmental buildings which have been occupied in recent weeks. This is an unsurprising development given that many of these people have been clearly led by Russian commanders in unmarked uniforms. However, as the world considers whether sanctions are likely and in what form they would have, the US has decided to embark upon their own military ‘drills’ in the region in a clear show of willingness to bring a military presence to the table. The torture of two people by pre-Russians yesterday only served to feed into the current tensions in the region and yet the markets appear to be taking little notice for now. There is largely due to the fact that many of the major western economies involved would be unlikely to shoot themselves in the foot with effective sanctions given the reliance upon Russia as a key trade partner. Thus in all likeliness, Russia will continue with it’s master plan irrespective of blunt threats from the EU and alike, with this issue set to roll on for some time now.

Looking ahead, the European session is likely to be dominated by the release of both manufacturing and services PMI figures from some of the major Eurozone economies, followed closely by the BoE minutes and votes from the meeting earlier this month. Unfortunately the BoE minutes and votes are somewhat of a non-event nowadays given the relative stability brought about under Mark Carney. However, the existence of the manufacturing PMI release from the US in the afternoon is likely to signify a fairly busy and possibly volatile day.

 

[Alpari UK]

US Opening Call from Alpari UK - Wednesday 23rd April 2014

Not all doom and gloom despite negative markets

* Not all doom and gloom despite negative markets on Wednesday;
* Eurozone PMI exceed expectations;
* First Portuguese bond auction in three years well covered;
* US earnings in focus, with particular attention paid to Apple after the close;
* US manufacturing and housing data also being released.

US futures are marginally lower ahead of the opening bell on Wall Street following a negative morning session in Europe. The S&P is expected to open 1 point lower, the Dow 3 points lower and the Nasdaq unchanged.

It hasn’t all been doom and gloom in Europe on Wednesday, in fact there’s been plenty to be encouraged by, although this clearly isn’t filtering through to investors at the moment. The PMI readings from the eurozone this morning have actually been quite good, despite the small miss in the French readings. The most important thing is that the manufacturing and services PMIs were all above 50, signalling growth in both sectors in April, while the eurozone as a whole exceeded expectations.

These numbers are being tracked closely right now, by investors looking for any indication that this prolonged period of stagnation is going to be replaced with steady growth. There may be another six months of stagnation before we see that but these forward looking surveys should provide the earliest signal that confidence is improving which should then be seen in the hard data further down the road. Clearly as it stands, the numbers aren’t blowing people away which suggests more stagnation is expected for some time yet.

Another positive this morning came from the successful auction of Portuguese 10-year debt, the first auction the country has completed in three years. It seems investors’ appetite for eurozone periphery debt is not waning after Portugal sold €750 million in 10-year bonds this morning at a yield of 3.5752%. Demand for Portuguese debt was very high – as we saw when Greece sold short term debt a few weeks ago – with the auction being covered by 3.5 times. This came after yields on Portuguese debt fell to eight year lows, which is incredible for a country that appeared to be on the brink of default less than two years ago.

Like the PMI readings, this has been brushed off though, with investors potentially paying more attention to the HSBC manufacturing reading for China, which was released overnight. While there was a slight improvement in the number, it still fell slightly short of expectations and remained in contraction territory for a fourth consecutive month, adding to concerns that the slowdown in China isn’t easing and the government and central bank is doing very little to help the situation. While fears of a hard landing may be exaggerated, growth below 7% for the year may not be out of the question which would represent a slow year by China’s own standards. This could also act as a drag on global growth which is why we’re seeing it weigh on sentiment globally.

With only a couple of pieces of economic data scheduled for release from the US today, attention is likely to remain on earnings season, which has so far been a little disappointing. There is a large number of companies reporting today, none bigger than Apple after the closing bell. The company is expected to report flat revenue growth in the first quarter with only a small improvement in earnings. Investors are not overly concerned about this though as it has already been largely priced into the stock. Of more importance will be details relating to declining margins and new product offering, although we rarely get details of the latter. Hints at the release of the iWatch or a new TV, more so the latter, would surely get people buzzing about Apple again, something we haven’t seen for a while. Details of an increase to the dividend or another share buyback could also help the share price.

On the economic data side of things, we’ll get the preliminary reading of the US manufacturing PMI shortly after the open, which is expected to rise slightly to 56. This will be followed by new home sales for March, which are also expected to rise slightly, as the end of the unusually poor weather hopefully boosts sales.

 

[Alpari UK]

Daily Market Update - 23 April 2014 - Alpari UK

Markets pull back following strong recent gains - 00:09
Chinese HSBC manufacturing PMI provides first rise in 3 months - 00:24
Australian inflation comes short - 01:24
Eurozone PMIs mixed - 02:42
BoE minutes show mixed views of labour market slack - 03:35

 

[Alpari UK]

UK Opening Call from Alpari UK - Thursday 24th April 2014

Markets back in the green while RBNZ raises rates

* RBNZ raises rates for second consecutive month
* Mario Draghi speech set to dominate European session
* Russian rhetoric ramps up

European indices are attempting to reverse yesterday’s losses, following on from an Asian session which has done exactly that. The outperformance of the Nikkei yesterday despite losses in the likes of the Shanghai composite have been all but undone, with significant losses in Japan set against a marginal increases across many of the other major Asian markets. In Europe, yesterday’s selloff is expected to be shortlived, with future pointing to an open of the FTSE100 +17, CAC +18 and DAX +39 points.

Overnight saw the second interest rate hike from the RBNZ in as many months, with the official cash rate rising 25 basis points to 3.00%. This has come against a backdrop of increased inflationary fears particularly within the construction and non-tradables sector. In much the same manners as the Australian market, one of the biggest fears stems from the booming housing sector, where the existence of historically low interest rates have driven both demand and new home building to a peak, highlighting the potential for yet another asset bubble. However, the job of the RBNZ remains somewhat of a balancing act, where the imposition of higher interest rates is further fuelling the incessant rise of the NZD, which hit a 2 1/2 year high earlier this month against the dollar. Despite this possibly reducing the inflationary pressures by reducing demand for domestic goods and driving interest for lower priced imports, this is not necessarily desirable for an economy which is attempting to get over recent threats to their key export sector.

Today’s European session looks like it could be a quiet one, where the real major event of note comes from Amsterdam, where Mario Draghi is due to speak. With eurozone inflation caught within the ‘danger zone’ below 0-1% for six months now, the pressure has never been so high for the ECB to act decisively to raise inflation and support the recovery within the single currency. In stark contract to the last impulsive and unexpected reduction in interest rates back in November, Draghi has been playing the long game, deciding to hold off on any real major measures since. This seems somewhat sensible given that many of the factors to the recent deflationary environment in the eurozone, such as low energy prices, would feel little effect from another interest rate cut; the likes of which have been shown to impact CPI to such a small extent that a cut is hardly justified.

However, with the rise of the euro feeding into yet lower demand for domestically produced goods, in favour of lower priced imports, there has emerged yet another reason for Draghi to act. In his address earlier this month, Draghi noted that any further increases in the value of the euro could spark additional stimulus from the bank, yet it is difficult to gauge whether this is just another in a long list of dovish comments which seek to impact markets without having to actually follow up with actions. We will be watching today’s speech closely for any further indication of where the ECB will move next, with the EURUSD currently around a very similar price to that when he gave his last comments.

The Ukraine crisis appears to be reemerging as a worry, where Russia stepped up it’s rhetoric citing that any attack upon Russian speaking or pre-Russian separatists in Ukraine will be deemed an attack upon Russia itself. Of course, this step was always expected in the master plan following the unwillingness of Russia to actually attempt to persuade Russian speaking militants to vacate the key government buildings in Eastern Ukraine. Unfortunately it appears that Crimea represented a practice run for the wider target of Ukraine itself which little by little is likely to come under Russian control. The western world is trying to do it’s bit for Ukraine, with the IMF offering one of their infamous loan deals in the form of a $17 billion ‘staff support’ package. This comes at a time when the government is struggling to put together a coherent strategic defence policy throughout Eastern Ukraine. Thus there is the possibility that much of that money is spent on defence rather than being able to implement the structural investments and reforms needed to get the beleaguered nation back onto a stable footing. However, for now the markets are choosing to ignore this issue until something more drastic happens that will effect the west.

 

[Alpari UK]

US Opening Call from Alpari UK - Thursday 24th April 2014

US futures higher on strong earnings

* Strong earnings drive markets higher, particularly tech stocks;
* A good earnings season is just what the doctor ordered;
* US data also improving, durable goods and jobless claims up next;
* Five Dow companies scheduled to report on Thursday.

Another batch of better than expected earnings is driving stock markets higher on Thursday, with European indices up more than half a percentage point and US futures pointing to a similar open. Key behind today’s surge has been strong results from Apple and Facebook, which is driving the recovery is tech stocks following the recent mauling the sector has received. With that in mind, the Nasdaq is expected to lead the way after the open, with futures currently 49 points higher, or 1.39%, while the S&P is seen 10 points higher and the Dow 56 points higher.

Corporate earnings season appears to have given investors the boost they have been craving for months. Although results until now have perhaps only been good as a result of the bar once again being set quite low following a number of profit warnings over the last month, there’s been a noticeable improvement this week that has given investors a lot more confidence. This was especially true of the results from Apple and Facebook after the close on Wednesday, with both easily exceeding expectations, while Apple also made a few investor friendly announcements including another share buyback, an increase to the dividend and a seven-for-one stock split.

A good earnings season is just what the doctor ordered following a few depressing months for the markets. The ongoing crisis in Ukraine, the reduction in monetary stimulus from the Fed and the poor economic data in the first quarter have left investors feeling fairly downbeat. The recent sell-off in tech and internet stocks was just the icing on the cake, acting as a warning sign that these massive valuations will no longer be tolerated.

It couldn’t have come at a better time as well, with economic data expected to improve in the US following the end of the unusually poor winter weather. We could be looking at a very good second quarter for the markets, as long as we don’t get another flare up in Ukraine which is far from unlikely. However in this case, the impact on the markets would be determined largely by the size of the flare up rather than the existence of it. A certain amount of geopolitical risk is already priced into the markets so I imagine it would take something pretty significant from Russia to significantly hit the markets again.

The end of the week is looking pretty quiet from an economic data standpoint, with durable goods orders and jobless claims the only notable releases today. Durable goods data is a very good indicator of long term confidence in the economy from both businesses and consumers so I expect this to be followed closely. A number in line with expectations of 2%, or 0.6% for the core reading would be very encouraging. Weekly jobless claims have flirted with sub-300,000 territory for a couple of weeks now and while expectations are currently for 310,000 last week, a number below 300,000 would be another very encouraging sign for the current quarter.

There’s also plenty of companies reporting earnings again today, including 3M, Verizon and Caterpillar before the opening bell, with Visa and Microsoft reporting after the close. This is a sixth of the Dow components all reporting on the same day so the next 24 hours could be fairly volatile for the markets.

 

[Alpari UK]

Daily Market Update - 24 April 2014 - Alpari UK

Market Analyst Craig Erlam gives an update on what is driving markets higher on Thursday and looks ahead to the rest of the session with some key economic data and more earnings scheduled for release.

 

[Alpari UK]

UK Opening Call from Alpari UK - Friday 25th April 2014

Market fragility highlighted by rumours of Putin presser

* Japanese inflation outlook boosted following strong Tokyo CPI figure
* Rumours of Russian action spook markets, highlighting fragility
* UK retail sales set to dominate European session.

European markets look set to pull back today, following a somewhat tumultuous US session yesterday which saw the likes of the S&P500 tumble on the leaked news of a potential emergency press conference by Russia’s Putin. Despite being refuted later into the session, this highlighted the current fragility within the markets and that there appears to be significantly more threat to a downside shock than to the upside. Asian markets also suffered a tough overnight session, where the Hang Seng fell over 1.4% following the declaration of bigger than expected bad loans on the books of their banks. European markets are expected to open lower, with the FTSE100 -9, CAC -5 and DAX -20 points.

In Japan, the ongoing focus upon inflation was brought bang up to date, with the latest release of the Tokyo CPI reading; commonly viewed as the leading indication of nationwide inflation. The announcement that Tokyo’s prices rose 2.7% in April from a year earlier is thus a major step forward for Shinzo Abe and Abenomics. Being that this is the highest rate of inflation seen within Japan since 1992, I see it in two contradicting lights. Firstly, this major step forward no doubt shows that current measures and rates of asset purchases are adequate to push the country forward towards the goals set out by Abe back in 2012, thus threatening the notion that we could be set for a further increase in the near future from the BoJ. However, it also gives a significant amount of credibility to Abe and Kuroda to undertake policies as they see fit, given that they have managed to do something which no other leadership has achieved in 22 years within Japan. Ultimately, it is the national CPI figure excluding fresh food which is the target for a 2% long term rate, which at 1.3% remains some way from target. Yet with the ongoing impact of the sales tax feeding into higher prices, the pathway seems to be set towards higher price growth in Japan following years of deflation.

Ukraine fears came back to the fore yesterday, when rumours of an emergency presser from Putin sparked an immediate sell-off in risk assets. This came following the reported deaths of 5 pro-Russian activists within Eastern Ukraine. Ultimately, this proved a somewhat false dawn, with the press conference failing to come to light and indices gradually returning to the levels seen prior to the rumour. However, this proved an invaluable exercise in demonstrating the risks within the markets to the ongoing Ukraine conflict. In recent weeks, the market approach has been to disregard the ongoing fears of a civil war or a return to a cold war mentality between Russia and the west. In part, this shows the strength of the markets which seek to push higher despite a lingering threat of conflict. However, there is a clear threshold that is being respected, with any decision from Russia to move into Eastern Ukraine to step up their own military use in Ukraine likely to bring a sharp retraction in the markets. With today’s decision from Ukraine to stop the current ‘antiterrorist’ push owing to the activation of Russian troops on the border, it is clear that we could be nearing the moment that Russia does feel it has sufficient justification to intervene.

Looking ahead to today’s European session, the major event of note comes in the form of the UK retail sales figure due out this morning. The importance of retail sales has grown recently, with Mark Carney now including factors such as consumption into his ‘forward guidance 2.0’ policy. Thus there is a greater awareness of this already important figure as a gauge of both economic health and potential future monetary policy. However, despite Mark Carney’s new found interest in this figure, it is already one of the top indicators of economic health within the wider economy, representing both a quantitative and qualitative aspect of consumer activity. The quantitative side shows that the rate of retail sales growth is fluctuating more than ever in recent months, indicating an inconsistent sales environment for firms within which to work in. However, the quantitative side shows that in reaching the highest rate of month on month growth since 2009 back in January, people’s expectations for employment, wage growth, prices and economic growth are all improving to the extent that people are willing to spent money in the near term, safe in the knowledge that they will be financially secure going forward. In accordance with the usual fluctuations in this figure, we are expecting a figure around -0.4% on a monthly basis, however with expectations of around 3.8% on a year on year basis, there is a clear and strong growth in sales helping to carry the UK economy.

 

[Alpari UK]

US Opening Call from Alpari UK - Friday 25th April 2014

Fears of Russian intervention in Ukraine hits risk appetite

* US futures lower as we approach the end of the week;
* Fears of escalation in Ukraine driving risk aversion;
* US consumer sentiment, services PMI and earnings in focus

US futures are pointing lower on Friday, with the S&P expected to open down 2 points, the Dow down 33 points and the Nasdaq down 2 points.

It’s been a very good couple of weeks for the markets, which have been buoyed by stronger than expected earnings reports from Europe and the US. An element of today’s losses may simply be a case of profit taking following quite a good run. There are more companies scheduled to report earnings again today, although the calendar is looking much lighter than it has in previous days, with no Dow companies and only a little over a dozen S&P 500 companies reporting.

While there may be an element of profit taking driving markets lower today, I think a bigger contributing factor is the recent flare up in eastern Ukraine and the war of words now taking place between the US and Russia. US Secretary of State John Kerry gave a strongly worded warning to Russia yesterday, advising them not to intervene in Ukraine after five pro-Russian protestors were killed. There is a strong belief that the uprising in eastern Ukraine has been orchestrated by Russia in an effort to justify it sending troops into the country.

We’ve already seen on numerous occasions what impact this has had on the markets, with even the slightest hint of Russian intervention prompting a flight for safety among investors. The most recent example of this came yesterday when rumours emerged of an emergency press conference being called by Russian President Vladimir Putin. In a matter of minutes, European indices wiped out all gains on the day and fell deep into negative territory, as did their US counterparts with only the Nasdaq managing to hold on to small gains. These did recover later once the rumours were dismissed but the message from investors was very clear.

With that in mind I don’t expect there to be too much appetite for risk today and we could even see a pickup in risk aversion as we near the end of the session. A lot can happen over the weekend in the Ukraine and there’s plenty of traders that will not want to be caught on the wrong side of things.

There’s also going to be very little to convince traders otherwise today, with earnings season taking a bit of a breather and the economic calendar offering very little. The only notable releases today will be the preliminary reading of the April services PMI, which is expected to rise to 56, and the UoM consumer sentiment reading, also for April. This is a revised figure which can lessen the impact on the markets. The number is expected to be revised slightly higher from the preliminary reading, to 83 from 82.6.

 

[Sigma-D]

If we're into a Risk Off scenario, surely that has money flowing out of equities and into bonds which would see yields falling and the US Dollar strengthening - neither of which appear to be happening.