Forex research

UK Opening Call from Alpari UK on 3 July 2013

Europe to open lower on Chinese growth concerns

Today's UK opening call provides an update on:

• Chinese services figures weigh on Asian and European equities;
• Eurozone PMIs expected to improve across the board in June;
• UK services expected to remain comfortably in growth territory;
• Plenty of data out of the US, with markets shut tomorrow for Independence Day.

European futures are in the red across the board on Wednesday, following in the footstep of their Asian counterparts over night, which fell on concerns about Chinese growth.

The official services PMI for China fell slightly in June, to 53.9, while the HSBC PMI rose marginally to 51.3. However, the latter was accompanied by HSBC Chief Economist, Hongbin Qu, claiming that growth in services will probably slow in the coming months.

Next up, we have the release of the services PMIs for the eurozone, shortly after the European open this morning. Following the release of the manufacturing PMIs on Monday, when the majority showed a significant improvement in June, expectations are probably going to be raised ahead of these PMI releases. As it is, all of them are expected to show an improvement in June, although only Germany is expected to be in growth territory.

This is still an encouraging sign though from the eurozone, given that the services sector of most members have been stuck deep in contraction territory for most of the year so far. And with the rest of the data out of the eurozone showing vast improvement in recent months, we could be looking at a strong end to the year for the single currency block, following a miserable few years.

One of the key contributors to growth in the eurozone, which has been lacking over the last couple of years, has been consumer spending. This is hardly surprising when you take into consideration the record levels of unemployment, the sky rocketing youth unemployment levels and the freeze on many people's wages which leaves people worse off in real terms.

With unemployment now looking to have peaked around the 12.2% level and the EU actively trying to tackle the youth unemployment problem, albeit with only a token effort, we could see an improvement in consumer spending in the second half of the year. Retail sales in May are expected to increase by 0.2%, which would represent the first improvement in the figure since January.

The services PMI is hugely important for the UK, given that the services industry accounts for around three quarters of GDP. The improvement in the services industry recently has been one of the key reason for the stronger performance in the UK, especially in the first quarter of the year. The PMI is expected to show that the industry remained strong in June, with the figure falling slightly to 54.5, which is still well in growth territory. Manufacturing and construction both weighted heavily on growth in the first quarter, but with both showing significant improvement in recent months, we could be looking at a pretty solid growth figure in the second quarter.

There's plenty of data out of the US today, including the weekly jobless claims which are usually released on Thursday. These are being released on Wednesday this week due to the fact that it's Independence Day in the US on Thursday and markets will therefore be closed. Also being released is the ADP non-farm employment change figure, ahead of the release of the non-farm payrolls on Friday and the services PMI for June.

Ahead of the open we expect to see the FTSE down 33 points, the CAC down 18 points and the DAX down 37 points.
 
US Opening Call from Alpari UK on 3 July 2013

US employment data eyed ahead of jobs report

Today’s US opening call provides an update on:

* Chinese growth concerns weigh on risk appetite;
* European stocks hit by resignations in Portugal;
* WTI Crude hits $102 as tensions grow in Egypt;
* Services PMIs mixed in Europe;
* US economic calendar full ahead as markets close tomorrow.

European indices are trading lower on Wednesday, dragged down by concerns over Chinese growth and potential early elections in Portugal.

It’s been no secret in recent months that China is experiencing a slowdown in growth as it begins its transformation from an investment driven economy that relies heavily on exports to one with a growing middle class and higher levels of domestic spending.

However, the slowdown seen in China has been made worse by the cash crunch, as interbank lending rates rise and the People’s Bank of China refuse to step in and bring rates back down to the levels seen earlier this year. Now we’re starting to see that reflected more and more in the economic data, with manufacturing activity contracting and services looking like heading in the same direction. The official services PMI fell to 53.9 in June, while the HSBC PMI rose slightly but came with a warning that the figures will likely fall in the coming months.

Also weighing on sentiment this morning is the resignations in Portugal of both the Finance Minister and the Foreign Minister in the last couple of days. With anti-austerity rallies gathering support, it’s looking increasing likely that we’ll see early elections in Portugal. This is far from ideal for the eurozone at a time when it has benefitted from not being centre stage for a few months, and only a couple of months before the elections in Germany. The last thing Angela Merkel needs in the run up to the election is more bailout and austerity discussions with a new Portuguese government.

Oil prices are spiking again today, with Brent crude rising to above $105 earlier in the session while WTI is back above $100. The rise in oil prices has come as a result on the increasing tensions in Egypt after President Mohammed Morsi refused to resign despite warnings from the military that it will intervene at the end of the 48 hour deadline, which was set on Monday. A conflict now looks inevitable, which has the potential to disrupt oil supplies.

Services PMIs were mixed in Europe this morning, with many coming in below expectations, but still well above May’s number. The PMI figures are looking really encouraging for the eurozone, which appears to have turned a corner, although until we see this reflected in the data over the course of a few months, it has to be taken with a pinch of salt.

The same can be said with the UK data, which has also been much better recently. June’s services PMI came in at 56.9, up from 54.9 a month ago. This is very encouraging for the UK, given how much the country relies on its services industry. Although, as with the eurozone data, unless it’s reflected in the GDP and employment figures, it’s not worth getting carried away with it.

The US economic calendar is packed full on Wednesday, with markets being shut on Thursday for Independence Day. The jobless claims are the most notable release to have been brought forward as a result of the bank holiday, while we also have ADP non-farm employment change data due out ahead of the jobs report on Friday, as well as the June services PMI and MBA mortgage applications.

The ADP figure is meant to be an estimate of the non-farm payrolls release on Friday, however it is rarely accurate, which means we only get any kind of reaction when we the number massively deviates from the expected figure. If we see this today, the reaction in the markets should give an indication to how investors will react on Friday. For example, will they buy a strong figure as it suggests the recovery is gathering pace, or sell it as it means the Fed will begin tapering later this year, and vice versa.

Ahead of the open we expect to see the S&P down 8 point, the Dow down 73 points and the NASDAQ down 17 points.
 
UK Opening Call from Alpari UK on 4 July 2013

BoE and ECB in focus as US markets close for bank holiday

Today’s UK opening call provides an update on:

• Lower trading volumes expected ahead of central bank rate decisions, while US markets close for Independence Day;
• Improvement in UK data likely to see no change in policy from BoE following Carney’s first meeting as Governor;
• ECB likely to leave rates unchanged, with Draghi pointing to improved data as a sign of recovery in the eurozone;
• Eurozone first quarter GDP expected to be unchanged at -0.2%, leaving the area in recession.

European indices are expected to open higher on Thursday, as investors turn slightly more optimistic following the release of strong employment figures out of the US yesterday.

It’s likely to be a pretty quiet start to the European session on Thursday, with very little economic data out and two central bank rate decisions coming around midday. We tend to see lower trading volumes in the lead up to these rate decisions, not just in case either announce stimulus measures, but also because of Mario Draghi’s tendency to send financial markets all over the place in the press conference shortly after.

Contributing to those lower trading volumes today will be the fact that US markets are closed for Independence Day. What we could see as a result is more volatility than normal during Draghi’s press conference, as lower volumes can bring higher volatility.

The rate decisions themselves are actually likely to be quite uneventful, with both the Bank of England and the ECB expected to leave monetary policy unchanged. There has been a lot of focus on these in recent months, with former Bank of England Governor Sir Mervyn King, along with two other policy makers, Miles and Fisher, unsuccessfully pushing for more quantitative easing (QE), while at the ECB, there have been in depth discussions about negative deposit rates.

It’s the beginning of a new era at the Bank of England, with Mark Carney, the first ever non-British Governor, taking over from King, who retired at the end of last month. There’s been a lot of chatter about whether Carney will try and kick off this new era with a bang, either by pushing for more QE or a commitment to lower rates until a certain date in the future, or until certain conditions are met.

This looks unlikely though at this early stage, given that we’ve seen a significant improvement in the economic data in the last few months. If two thirds of the MPC couldn’t be convinced to vote in favour of more stimulus when the UK was facing a triple dip recession, that’s unlikely to have changed now, no matter how much Carney works his charm. Unlike at the Bank of Canada, Carney only has one vote here so he’s going to have to make a lot more effort to get people of his side, which is likely to take more than one meeting. That is of course, if Carney is actually dovish himself. Given the improvement in the data, there a good chance that Carney would rather leave policy as it is for a few months to see how things play out.

The ECB has been a lot more active than the BoE in recent months, cutting interest rates to record lows and seriously considering cutting the deposit rate into negative territory, which would effectively charge banks to deposit their money with the ECB. There’s also been a lot of talk about the ECB adopting some kind of Fed-style QE, however this has been rejected by certain ECB officials and looks extremely unlikely at a time when the ECB doesn’t want to be seen as financing governments and encouraging them to take their foot off the gas in their austerity efforts.

While rate cuts are likely to have been discussed among the ECB, with inflation on the rise again, despite still being well below the 2% target level, any action today looks quite unlikely. Draghi is instead likely to point to the recent improvements in the economic data and suggest the recovery is underway, despite the fact that anti-austerity rallies in Portugal have forced two members of the government to quit and may force early elections.

We also have the release of the final first quarter GDP figure for the eurozone this morning, which is expected to remain unchanged at -0.2%, leaving the eurozone mired in recession.

Ahead of the open we expect to see the FTSE up 14 points, the CAC up 10 points and the DAX up 20 points.
 
Technical Analysis from Alpari UK on 4 July 2013

EURUSD

The rally in the dollar over the past couple of days has finally pushed the pair below 1.30, which had been providing significant support recently. Just below here though it ran into further support, around 1.2922, from the ascending trend line, dating back to July last year. This suggests that, in the short to medium term, the pair is going to remain in the consolidation phase that it’s been in all year. This could now prompt a move back towards the upper end of the consolidation range, around 1.34. Along the way, it should find resistance around 1.3030, 1.3077 and 1.31. Two major levels for the pair will be 1.3169 and 1.3227, the 50 and 61.8 fib levels, of the move from June’s highs to yesterday’s lows. Alternatively, we could see further pressure on the ascending trend line, a break of which should prompt a move, initially, to 1.2837.

timthumb.php


timthumb.php


GBPUSD

A rally in the pair yesterday saw it climb 150 pips before finding resistance around 1.53, a previous level of support and resistance. This is also where the 100-day SMA intersects the 50 fib level that the pair originally broke below last week, which could be quite a bearish signal, especially given that the 61.8 fib was also broken last week. That said, just below the 61.8 fib, we have an ascending trend line, dating back to 12 March, which is providing significant support for the pair. If this is broken, it should prompt a move back towards 1.50, followed by 1.4830. Alternatively, a continued push higher could see the pair target 1.56, the upper end of the consolidation range that the pair has traded in this year. Along the way, the pair should find resistance around 1.5342, 1.5442, 50% retracement of the move from last months highs to yesterday’s lows, and 1.5476.

timthumb.php


timthumb.php


USDJPY

We’re continuing to see a pull back in the pair this morning, following the rally towards the end of June, which saw it climb almost 400 pips. Yesterday, the pair found support around99.25, from the 50-day SMA, before rallying towards the end of the session. This morning again we’re seeing more pressure on the pair, which has found support around 99.50 and is currently trading above the ascending trend line, dating back to 19 June lows. If this trend line is broken, it should prompt a move back towards 98.9, where another ascending trend line, dating back to 17 June lows, intersects the 50 fib level, of the move from 25 June lows to 3 July highs. Along the way though it should find support around 99.25, yesterday’s lows. If we see a push higher, the pair should find resistance around 100, followed by 100.45 and 100.85, yesterday’s highs.

timthumb.php


timthumb.php
 
UK Opening Call from Alpari UK on 5 July 2013

US jobs report wraps up a hectic week for the markets

Today’s UK opening call provides an update on:

• Asian shares boosted by BoE and ECB commitment to low rates;
• Is it forward guidance when there’s no benchmark?;
• US jobs report in focus on Friday.

Investors responded very positively yesterday to comments from both the Bank of England and the ECB in relation to forward guidance. European indices ended the session 2-3% higher, while Asian stocks also benefitted from the more dovish stance from both banks, with the Nikkei, Topix and Hang Seng all currently posted more than 1% gains. Usually there’s a lot more caution among investors ahead of the US jobs report but this doesn’t appear to be the case in Asia.

Taking the comments from Mario Draghi and Mark Carney into consideration though, can’t help but think the markets have overreacted here once again. The statement following the BoE rate decision only claimed that they will assess forward guidance for August, which in itself tells us nothing. Firstly, it was always expected that the BoE would issue some form of forward guidance, it’s the details of the guidance that matters and we know none of these. As far as I’m concerned, we’re no more clear now than we we’re this time yesterday.

The ECBs attempt at forward guidance was no better. Draghi did what he does best in this press conference, told us absolutely nothing we don’t already know while managing to talk down the euro and yields on eurozone bonds. He claimed that the rates will remain at present or lower levels for an extended period of time, before suggesting that will be longer than 12 months, although he never actually gave a date. The problem here is that without a benchmark, whether it be a date, unemployment target or growth target, it actually means nothing. No one expected the ECB to lift interest rates in the next 12 months, the eurozone could still be in recession at this point. Draghi did also hint that rates could be lowered, but again this is not surprising. I think what we’ve seen once again is a commitment to nothing and the markets have just taken the bait.

Now that we have the BoE and ECB meetings out of the way, attention can now shift back to the US for the release of the monthly jobs report. While this release is generally seen as the most important item on the economic calendar each month, between now and the end of the year, it’s going to be that little bit more important, with the Fed monitoring the employment situation closely as it plans for life without quantitative easing.

Bernanke claimed last month that the Fed will begin tapering later this year if the economy begins to improve in line with projections. The Fed has pair particularly close attention to the employment situation in the US over the last few years and has even used it as a benchmark for when rates will begin to rise again. As a result, it’s safe to say that if the employment situation continues to improve, the probability of tapering in September or December will rise with it.

The interesting thing today is going to be how investors respond to the data. The ADP figure, an estimate on the non-farm payrolls figure, released Wednesday, came in well above expectations at 188,000, which would ordinarily be seen as a positive thing for the US and therefore prompt a rally in the equity markets. However, over the last few years, with investors more concerned about Fed stimulus rather than the economy, it hasn’t been unusual for them to sell on strong data. This wasn’t the case on Wednesday though, investors bought on the stronger figure, which suggests that they have now accepted that QE is not permanent feature in the markets and some normality is beginning to return.

I therefore expect a similar reaction again today, as long as the NFP figure comes in above expectations of 165,000, which the ADP figure suggests it will. That said, the ADP figure is well known for its inaccuracy when the first estimate is released so it’s probably not worth paying much attention to. The unemployment rate is expected to fall to 7.5% today, from 7.6% last month.

Ahead of the open we expect to see the FTSE up 15 points, the CAC up 6 points and the DAX up 15 points.
 
US Opening Call from Alpari UK on 5 July 2013

Today’s US opening call provides an update on:

  • US futures higher on dovish BoE and ECB comments;
  • Traders cautious ahead of US jobs data’
  • Stronger dollar and rising NFP expectations weigh on Gold.

US indices are expected to open around 1% higher on Friday, after the markets were closed on Thursday due to Independence Day.

The gains in US futures are broadly down to the comments that came following the Bank of England and ECB rate decisions on Thursday. The BoE released a rare statement along with the rate decision yesterday, in a bid to clarify the new direction of the central bank under Mark Carney.

In the statement, the BoE suggested that the higher rates seen in the bond markets are not warranted, while pointing out that the inflation rate is expected to fall to the 2% target in the longer term. This suggests that the door to further asset purchases in the coming months is certainly open. The statement also confirmed that guidance on interest rates, which has been expected ever since Osborne announced the BoEs new remit during the budget, will probably be announced next month.

The ECBs statement was much more ambiguous, and the reaction a little over the top. While Mario Draghi confirmed that forward guidance had been discussed and agreed by all members, the lack of detail in relation to this guidance makes it worthless. Mario Draghi did not set a target for unemployment or growth, and avoided naming a date when rates would rise again. All he confirmed was that rates would remain at or below 0.5% for an extended period of time, which was already pretty obvious.

Today, markets are pretty mixed ahead of the US jobs report. Most European indices are paring some of yesterday’s strong gains, while the FTSE is continuing to push higher, currently up around 0.6%. As always, there’s an element of caution in the run up the release of the jobs data.

Not only do these figures have a significant impact on when the Fed will begin tapering, there’s also an element of uncertainty about how traders will react to the data. Ordinarily, strong jobs data would be positive for equities and other risk assets. However, given that an strong data could result in tapering of QE, which is negative for stocks, the opposite reaction could be seen. That said, the reaction to the ADP figure, which came in well above expectations on Wednesday, was positive for stocks. This may suggest that investors now accept that QE is on borrowed time and have already moved on.

One thing that won’t benefit from tapering is Gold. The price has plummeted over the last few months, and is currently trading lower again today. A combination of a stronger dollar, following the sell-off in the euro and sterling yesterday, and higher expectations for the payrolls figure today is weighing on Gold again today.

Ahead of the open we expect to see the S&P up 14 points, the Dow up 130 points and the NASDAQ up 27 points.
 
UK Opening Call from Alpari UK on 8 July 2013

Europe higher ahead of German and eurozone data

Today’s UK opening call provides an update on:

• Europe higher following Friday’s better than expected payrolls;
• Bernanke speech and FOMC minutes Wednesday may provide tapering clues;
• German trade balance and industrial production released this morning, along with eurozone investor confidence figure;
• Mario Draghi due to speak before the Committee on Economic and Monetary Affairs.

European indices are expected to open more than half a percentage point higher on Monday, after much better than expected US jobs data on Friday provided a major boost to investors.

While the non-farm payrolls figure released on Friday does increase the chances of Fed tapering later this year, investors appear to have accepted that this is going to happen now and are more focused on the fact that the US labour market is improving more than originally thought. The most encouraging part of Friday’s data was actually the fact that the participation rate rose last month, which suggests that the message of an improving economy is starting to filter through to those who had previously given up looking for work.

The participation rate has been falling for a while now, which has helped bring the unemployment rate down but not in a positive way. Now that we’re seeing the participation rate on the rise, it may take longer for the unemployment rate to drop, in fact it could even rise to begin with. However, this is a positive thing as it means that people who have previously given up now believe they can find work again.

We should learn more about how Friday’s data impacts the Fed decision on Wednesday, when we hear from Ben Bernanke. Bernanke is due to speak shortly after the release of the FOMC minutes from last month, which should also provide further insight into when the Fed plans to begin tapering its asset purchases.

This week, things are looking much quieter in the markets, especially when compared to last. On Monday, we have a few pieces of economic data being released, starting with Germany’s trade surplus which is expected to fall slightly to €17.5 billion in May. Shortly after we have the sentix investor confidence figure for June, which is expected to rise slightly to -10, followed by German industrial production, which is expected to fall by 0.5% in May, it’s first drop in four months.

The eurogroup of finance ministers will also meet on Monday, to discuss Greece’s next tranche of its bailout. The Troika was in Greece over the weekend to determine whether Greece had made the necessary reforms in order to receive the next bailout payment. This process has never been straightforward in the past, so I imagine it will be the same today.

Finally, we’ll hear from Mario Draghi a couple of times this afternoon, when he appears before the Committee on Economic and Monetary Affairs. During this, Draghi may provide more insight into the ECBs forward guidance which was issued during the press conference on Thursday. The forward guidance that was given was very vague when compared with other central banks. Draghi may use today to clear this up, or at least provide more insight into why the ECB has chosen now to offer some kind of guidance on rates.

Ahead of the open we expect to see the FTSE up 32 points, the CAC up 18 points and the DAX up 38 points.
 
US Opening Call from Alpari UK on 8 July 2013

Alcoa to kick off corporate earnings season

Today’s US opening call provides an update on:

* Alcoa kicks off corporate earnings season;
* Earnings more important now Fed plans to taper;
* German and eurozone data disappoints, although markets push higher;
* Draghi to speak before the Committee on Economic and Monetary Affairs;
* Finance ministers meet to discuss next Greek bailout payment.

The US is going to remain in the spotlight in the coming weeks, as investors try to make sense of companies second quarter earnings at a time when the Fed is looking to withdraw its support and begin tapering its asset purchases.

Corporate earnings season gets under way on Monday, starting with Alcoa after the closing bell. In the last few quarters, earnings season has been largely overshadowed by other major events in the US, with investors focusing more on the fiscal cliff, the sequestration and the Fed’s quantitative easing program. On top of that, in respect to earnings, the bar has been lowered so much that it’s actually very difficult for companies to disappoint.

This time round, with nothing to distract investors and the Fed looking to taper its asset purchases later this year, I expect to see earnings come under a lot more scrutiny. I’m not convinced that investors will let companies off with reporting earnings that are largely driven by efficiency savings and staff layoffs, especially when they’re accompanied by lower revenues as they have been recently. If the stock markets are going to push on higher, we need to see real signs that companies are performing better and are on course for a sustainable recovery. We need proof that the US economy can continue to recover without the support that the Fed has offered since last September.

European markets have had quite a bright start to the week, with all major European indices trading comfortably in the green. US futures are currently pointing to a similar open, with the S&P, Dow and Nasdaq expected to open more than half a percentage point higher.

The positive feeling in the equity markets comes despite the economic data out of the eurozone this morning being rather disappointing. A 2.4% drop in German exports had a negative impact on the country’s trade surplus in May, falling to €14.1 billion from €17.5 billion the month before. Industrial production also fell at a faster rate than expected, falling 1% in May, rounding off a pretty poor morning for German data. The eurozone sentix investor confidence did little to improve things, falling back to -12.6 in July.

Still to come today, we have Mario Draghi who is due to speak before the Committee on Economic and Monetary Affairs. These events are always monitored closely, especially with people looking for more clarity on the ECBs forward guidance, which was offered for the first time on Thursday, although it barely passes as forward guidance given the complete lack of detail.

Finally, we have the eurogroup meeting, where finance ministers will discuss whether Greece will receive the next tranche of its bailout. The Troika was in Greece over the weekend, trying to find out if the government has held up its side of the bargain and implemented the necessary reforms and made the agreed cuts to its spending. Given the complications in the past, we can’t expect this to be a smooth process.

Ahead of the open we expect to see the S&P up 11 points, the Dow up 89 points and the NASDAQ up 19 points.
 
UK Opening Call from Alpari UK on 9 July 2013

UK in the spotlight as NIESR releases Q2 GDP estimate

Today’s UK opening call provides an update on:

• Europe to open higher as investors focus more on fundamentals;
• Earnings season off to a good start as Alcoa beats earnings forecasts;
• UK manufacturing and industrial production figures released this morning;
• UK Q2 GDP estimate expected to show stronger growth.

European indices are expected to open around half a percentage point higher this morning, as investors continue to focus on the positives surrounding the improving economic situation in the US, rather than what it means for quantitative easing.

A major problem for the Federal Reserve throughout this year has been how it is going to wind up its asset purchase program without causing a crash in the markets and undoing everything it has achieved. However, despite an initial sell-off in equities, which saw indices in the US and Europe fall between 5% and 10%, the markets have reacted relatively well to the news.

In fact, the sell-off, which started mid-May when Bernanke conceded that tapering could begin this summer, could even be seen as a normal correction that many had been predicting since the Dow and S&P first started hitting record highs back in March. Regardless of what caused the correction, normality appears to have returned to the markets, with investors buying on good news and selling on bad. In other words, the Fed appears to have got off lightly, with investors becoming bored with the unusual market behaviour, instead shifting their focus back to the fundamentals.

That should make earnings season all the more interesting, given the tendency in the last few quarters for companies to report average results, which had been dressed up to look far better. Already in the lead up to this earnings season, there’s been a large number of companies that have issues profit warnings for the second quarter, which has led to the bar being lowered even further than it had already been set.

A perfect example of this was Alcoa, who unofficially kicked off earnings season last night. The company reported earnings of $0.07 per share, above expectations of $0.06 per share, but below original forecasts which were altered following a profit warning a few months ago. Revenues at Aloca were also down from a year earlier, another common trend in recent earnings season.

Now that investors are more focused on the fundamentals than they’ve been since the Fed announced its QE3 program last year, it will be interesting to see whether they still view these earnings as positive, or if they begin to demand more, with constant revenue misses being punished. In the last few quarters this hasn’t been a problem, however there’s only so long that any company can report earnings growth based on staff reductions, efficiency savings and low interest rates.

Looking ahead to today and much of the focus will be on the UK, starting with manufacturing and industrial production figures being released this morning. Both are expected to show small month on month increases, which is another positive sign for the UK, given that the manufacturing industry has weighed heavily on growth over the last few years. The trade balance figure remains an issue for the UK, with the deficit expected to creep up to £8.4 billion in May. This is still above the levels seen before the financial crisis began, despite the government’s rebalancing efforts.

Finally we have the NIESR GDP estimate for the UK for the second quarter. The UK has performed better across the board in the second quarter, so I wouldn’t be surprised to see this above 0.6%. Especially after the UK’s growth forecast was revised significantly higher for 2013 by some major banks earlier this week.

Ahead of the open we expect to see the FTSE up 36 points, the CAC up 16 points and the DAX up 47 points.
 
US Opening Call from Alpari UK on 9 July 2013

Europe higher as Greek payment gets stamp of approval

Today’s US opening call provides an update on:

  • Greek €3 billion bailout payment get eurozone finance ministers stamp of approval;
  • Chinese inflation jumps to 2.7% in June;
  • Mixed data out of the UK ahead of Q2 GDP estimate.
European indices are trading around 1% higher on Tuesday, after eurozone finance ministers agreed to release the next tranche of Greece’s bailout.

The discussions between Greece and its creditors have been far smoother in the lead up to today’s agreement than we have become accustomed to, which may be why investors have responded so well to it. Usually there’s plenty of back and forth between both sides, before Greece eventually backs down and implements an additional round of painful and unpopular cuts in order to avoid bankruptcy.

That isn’t to say that there won’t be trouble down the line, as Greece continues to cut public sector jobs and carry out the agreed reforms, because there probably will. However, it is encouraging to see the process move along much more smoothly than it has in the past. Greece still looks on course to return to growth next year, for the first time since it requested a bailout, although there are concerns that the process of drip feeding the bailout to Greece may delay this.

China’s CPI figure, released over night, had little impact on the markets this morning. Inflation rose to 2.7% in June, a big jump from 2.1% the month before, but still well below the target rate of 3.5%. This is unlikely to convince the People’s Bank of China to tighten monetary policy any time soon, especially given the sharp rise in interbank lending rates in recent months that has already threatened to have a significant impact on growth.

It’s been a mixed start to the day for the UK, with housing data and retail sales figures both looking strong, while manufacturing and industrial production figures were very disappointing. The RICS house price balance figure was the most encouraging this morning, coming out at +21%, meaning more surveyors reporting rising house prices than at any point since January 2010.

The manufacturing and industrial production figures were surprisingly poor, given the improvement seen in the PMIs in recent months. That said, they do show once again that PMIs, while generally being a good indication of future data, are not entirely reliable. The sector does look to have improved in the second quarter, although maybe not as much as we first thought.

Next up we have the second quarter GDP estimate from NIESR. While there are no official analyst forecasts for this release, the general consensus seems to be for growth at around 0.5-0.6% for the second quarter.

Ahead of the open we expect to see the S&P up 7 points, the Dow up 54 points and the NASDAQ up 11 points.
 
UK Opening Call from Alpari UK on 10 July 2013

Europe lower on disappointing Chinese trade data

Today’s UK opening call provides an update on:

• Chinese exports fall 3.1% as government acts against false invoicing;
• Aussie dollar slides on weak Chinese import figures;
• FOMC minutes to be released;
• Fed Chairman Ben Bernanke speaks later.

European indices are expected to open lower this morning, following the release of some disappointing Chinese trade data.

While the overall Chinese trade surplus was slightly better than expected, at 27.1 billion, the breakdown of the data was quite concerning. Chinese exports fell by 3.1% in June, despite expectations of a 4% increase, while imports fell 0.7%, despite expectations of an 8% increase. The collapse in Chinese exports is likely due to a government crackdown on false invoicing by exporters, who were attempting to conceal capital inflows into the country.

It will probably be a few more months still until we see any kind of accurate trade figures out of China, which should then allow for accurate growth forecasts for this year. Given that these false export figures contributed to higher growth in the first quarter, the actual rate of growth in China this year could actually be much smaller than even recent forecasts suggest.

Premier Li Keqiang doesn’t appear to be overly concerned about these lower growth expectations and remains determined to continue with his policy of restructuring and reforms. As a result, any loosening of monetary policy by the People’s Bank of China at this stage in response to the slowing growth looks unlikely.

The Aussie dollar was initially hit quite hard following the release of the data, however it has since recovered to trade at one week highs. The reason for the initial drop off is the surprising fall in imports, particularly raw materials, due to falling internal and external demand for Chinese products. This is not a good sign for Australian going forward, given its reliance on its exports to China, and could convince the Reserve Bank of Australia to cuts interest rates once again in the coming months.

With the economic calendar looking quite empty during the European session, the focus today is going to be on the US, with FOMC minutes from last month being released later and Fed Chairman, Ben Bernanke, due to speak. At a time when everyone is trying to predict when the Fed is going to begin tapering, a lot of attention is going to be paid to anything the FOMC members have to say.

While the minutes will be important in giving us the views of the other policy makers on tapering, the meeting did take place before the release of the jobs report last week. Given the significant beat in the non-farm payrolls figure, at 195,000, and the increase in the participation rate, Bernanke comments on tapering are likely to have a much bigger market impact. Any suggestion that tapering could come as early as September should prompt further dollar buying and potentially a sell-off in equities, who’s prices have clearly been supported by Fed easing this year.

Ahead of the open we expect to see the FTSE down 23 points, the CAC down 9 points and the DAX down 12 points.
 
US Opening Call from Alpari UK on 10 July 2013

Investors turn to Fed minutes and Bernanke for taper hints

Today’s US opening call provides an update on:

  • Equities lower as Chinese trade figures disappoint;
  • China potentially heading towards 5% growth this year;
  • FOMC minutes released later;
  • Ben Bernanke speaks for first time since Friday’s impressive employment data.

US indices are expected to track their European counterparts lower on Wednesday, following the release of some very disappointing, but not entirely surprising, trade figures.

For months now there’s been a lot of people in the markets that have raised questions about the accuracy of the trade figures out of China, particularly in relation to exports. The improvement in exports is thought to be largely down to exporters creating false invoices in order to conceal the amount of capital inflows coming into the country, due to the capital controls that are currently in place.

With the government now clamping down on these activities by exporters, it was only ever a matter of time until we saw a significant reduction in the export figures. That said, it’s not clear at this stage just how big an impact stripping out these false exports will have. There have been suggestions that it could reduce growth in China this year to as low as 5%, which is not only bad news for commodity countries, like Australia, it also suggests demand from consumer countries is falling rapidly, which isn’t a positive sign in terms of the global recovery.

Looking ahead to the rest of the session, the focus is going to be on the US, in particular, the Federal Reserve. A lot of what has driven market sentiment this year has been what the Fed is doing and how long it’s likely to continue pumping $85 billion into the financial system.

Fed Chairman, Ben Bernanke, suggested after the last meeting of the FOMC in June that the Fed is looking to begin tapering its asset purchases later this year, as long as the economy performs in line with projections. What that means now, is every comment from a Fed policy maker is going to be analysed in depth for clues as to when the Fed will begin tapering.

Later on today, we have the release of the minutes from the FOMC meeting in June, followed shortly after by a speech from Ben Bernanke, when he’s likely to be questioned on what the strong jobs report on Friday means for tapering. The minutes will be useful in hearing the thoughts of FOMC members, however it’s worth noting that this took place before the release of June’s jobs report. Therefore, Bernanke’s comments are likely to be followed much more closely for a more up-to-date view on the situation.

Ahead of the open we expect to see the S&P down 2 points, the Dow down 18 points and the NASDAQ down 5 points.
 
UK Opening Call from Alpari UK on 11 July 2013

Europe rallies on dovish Bernanke comments

Today’s UK opening call provides an update on:

• Equities rally on dovish comments from Bernanke;
• BoJ revises down its end of year inflation and growth forecasts;
• Australian unemployment highest since November 2009;
• ECB monthly report and US jobless claims to come today.

European indices are expected to open significantly higher on Thursday, following some rather dovish comments from Fed Chairman, Ben Bernanke, last night.

During a speech in Boston last night, Ben Bernanke appeared to successfully divert market attention away from asset purchases and tapering and back on to interest rates. Mr Bernanke’s insistence that interest rates will not automatically rise when unemployment falls to 6.5% was seen as very dovish in the markets, with the greenback tumbling against the other major currencies, while European and US futures pointed to a significantly higher open for the indices.

The decision by Bernanke to focus more on interest rates last night sent a clear message that days of large scale asset purchases are numbered. The Fed appears more focused on damage limitation for the markets than trying to prolong the purchases for a few more months to avoid spooking investors, hence the reassurances that rates will remain at record lows beyond the point when unemployment hits 6.5%, which was the benchmark set by the Fed last year.

What is encouraging is that the minutes from the FOMC meeting were clearly quite hawkish, in relation to the asset purchases, and yet investors overlooked this, instead focusing on Bernanke’s dovish comments on interest rates. This is clearly the response Bernanke was hoping for last night, following the huge overreaction to his comments back in May and again in June in relation to tapering. With investors now more focused on interest rates, the Fed can go about its business of tapering later this year, potentially as early as September, without fear of a mass exodus from the stock markets, similar to what we saw previously. That is, of course, assuming that the fundamentals continue to improve and support the stock markets during that time.

That may very well depend on how companies perform during the second quarter earnings season, which unofficially got underway on Monday, when Alcoa reported higher than expected earnings. The rest of the week so far has been a little quiet on the earnings front, as we’re used to seeing in the first week, however this should pick up tomorrow when JP Morgan and Wells Fargo kick things off for the banks.

The Bank of Japan meeting over night didn’t produce too many surprises. As expected, the bank left monetary policy unchanged, after only committing to huge amounts of asset purchases back in April. The decision by the bank of Japan to slightly lower its end of year growth and inflation forecasts, each by 0.1%, wasn’t taken too well in the markets, with the yen and Nikkei both falling immediately following the revision, although both have since recovered to trade higher.

The revision from the BoJ clearly highlights the difficult road ahead for the central bank as it attempts to bring inflation back from negative territory to its new 2% target. That said, the early signs have certainly been positive and I think many have been surprised by the positive impact “Abenomics” has had in Japan in such a short period of time.

Over in Australia, things appear to be going from bad to worse, after unemployment was seen rising to 5.7% in June, up from 5.6% a month earlier, which itself was an upward revision from the original 5.5% figure. With Australia being heavily dependent on exports to a slowing Chinese economy, things are likely to get worse down the line, which should open the door to further rate cuts by the Reserve Bank of Australia, despite rates already sitting at record lows. That said, we may have to wait a few months for inflation to ease before the RBA acts, after the CPI figure for July rose to 2.6%, up from 2.3% in June.

Thursday is expected to be a little quieter, ahead of some major earnings tomorrow. The ECB monthly report will be monitored closely, although no surprises are expected. Later on in the US session, the weekly jobless claims will be watched closely, although now that investors appear to have moved on from Fed tapering later this year, we should see more of a normal reaction to the report, with a lower figure being positive for investor sentiment and the dollar.

Ahead of the open we expect to see the FTSE up 114 points, the CAC up 57 points and the DAX up 131 points.
 
You must log in or register to reply here.

Similar threads

B
best place to research.
Replies
0
Views
2K
boyes51
B
J
DailyFX.com Releases Top Forex Trading Ideas for 2011
Replies
0
Views
3K
jsales
J
M
research participants?
Replies
7
Views
2K
mikaelsegerberg
M
R
Re: RvdMarkets best trading terms for currency trading
Replies
9
Views
3K
rep.rvd
R
M
Forex Prop Trading Firms and Operational Research
Replies
9
Views
7K
shahkhan
S
Top