Forex research

UK Opening Call from Alpari UK on 15 July 2013

Markets boosted by Chinese second quarter growth

Today’s UK opening call provides an update on:

• Chinese second quarter growth slows to 7.5%;
• Consumer spending in China rises for fourth month;
• US retail sales and Citigroup earnings in focus later.

European indices are expected to start the week higher on Monday, after both the S&P and Dow in the US closed at record highs on Friday.

The new record highs seen in the US came as company fundamentals begin to play a much larger part in driving market sentiment. Better than expected earnings from JP Morgan and Wells Fargo got earnings season off to a strong start for financials, an area that is going to be monitored closely this earnings season for signs that economic conditions in the US are improving. Next up, we have earnings from Citigroup on Monday, which are expected to improve significantly from the same quarter a year ago.

The economic data out of China over night was relatively well received in the markets, with the Shanghai Composite and the Hang Seng both pushing higher following the release. Chinese second quarter growth slowed to 7.5%, in line with expectations, which is likely to be met with a mixture of relief and doubt in the markets.

Questions have been raised over the credibility of the official Chinese data since the start of the year, especially in relation to the export figures. Despite the improvement in the accuracy of the data recently - since the government began to crack down on exporters passing off capital inflows as exports - it is still likely that the actual growth in China is much slower than the official data suggests.

Official growth forecasts are therefore expected to be revised lower in the coming months, unless the government commits to another round of spending in order to support the economy during these times of slowing growth. There has been a reluctance to do this so far, with the government instead choosing to focus on restructuring and reforming the world’s second largest economy. However, it may have no choice in the next couple of years if it’s going to avoid a hard landing.

A real positive point in the Chinese data was the retail sales figure, which showed an increase of 13.3% in June, up from 12.9% the month before. The improvement here is going to be essential in the coming years, as China attempts to change course, from an investment driven economy to a consumer driven one.

The focus will now be on the US on Monday, with no economic data due out of Europe. Things will start to pick up on the earnings front this week, starting with Citigroup reporting before the opening bell. In terms of economic data, June’s retail sales figure will be watched closely for signs of improvement, although the recent rise in oil prices may begin to be reflected in this figure, with consumers disposable incomes becoming more squeezed. We also have the release of the Empire State manufacturing index this morning, while voting FOMC member Daniel Tarullo is due to speak in Washington.

Ahead of the open we expect to see the FTSE up 17 points, the CAC up 12 points and the DAX up 27 points.

Read the full report at Alpari News Room​
 
US Opening Call from Alpari UK on 15 July 2013

Bank in focus as earnings season gets into full swing

Today’s US opening call provides an update on:

  • Europe higher despite slowing Chinese growth;
  • Chinese retail sales encouraging;
  • US corporate earnings drive sentiment;
  • US retail sales in focus on Monday.

Investors in Asia and Europe responded surprising well to the Chinese data released over night, despite the fact that it showed growth slowing once again in the world’s second largest economy.

The reaction to the data really highlights just how pessimistic investors are about China right now. Achieving 7.5% growth in the second quarter, in line with forecasts, is now seen as a positive thing, despite expectations at the beginning of the year among most major banks being that China would grow between 8-8.5% this year.

As the year progresses, growth expectations are likely to fall further, especially if we continue to see a deterioration in export data as the ruling party cracks down on false invoicing. One thing that may support growth is another round of fiscal stimulus, however there is a clear reluctance to do this by the ruling party as they try to focus more on restructuring and reforms.

A 13.3% rise in Chinese retail sales was more encouraging, given China’s new focus on consumer led growth. This is the fourth consecutive month that we’ve seen an increase in growth in retail sales, which suggests that domestic consumption may be able to pick up some of the slack from the falling investment and government spending.

Corporate earnings season gets into full swing this week, with the banks once again taking centre stage. JP Morgan and Wells Fargo got things off to a good start on Friday reporting higher than expected earnings, while revenues also surpassed those from a year ago. Next up we have Citigroup today, followed by Goldman Sachs and Bank of America on Tuesday and Wednesday, respectively.

There are a few items of note on the economic calendar on Monday. US retail sales are going to be key, given how much consumer spending contributes to US growth. It’s going to be interesting in the coming months to see what impact the recent rise in oil prices will have on consumer spending.

Also today, we have the Empire State manufacturing index, which is expected to fall to 5.2 from 7.8. We’ll also hear from voting FOMC member, Daniel Tarullo, who is due to speak in Washington. With the Fed looking to taper its asset purchases later this year, any comments from Fed members, particularly voting members, are going to be monitored very closely and have the potential to cause a big move in the markets.

Ahead of the open we expect to see the S&P flat, the Dow up 1 point and the NASDAQ down 1 point.

Read the full report at Alpari News Room​
 
UK Opening Call from Alpari UK on 16 July 2013

Europe flat ahead of earnings and inflation data

Today’s UK opening call provides an update on:

• Investors already over Fed tapering plans as S&P and Dow close at record highs again;
• Earnings season picks up with Goldman Sachs, Johnson & Johnson and Yahoo reporting;
• Economic calendar won’t be overshadowed by earnings ahead of Bernanke testimony;
• UK and eurozone inflation in focus ahead of next month’s BoE and ECB meetings.

European indices are expected to open slightly higher this morning, after the S&P and Dow in the US closed at record highs for a second consecutive day. These record closes came despite lower than expected retail sales in the US in June, and still high expectations that the Fed will begin tapering in September or December.

There’s two ways we can look at this. Either investors have already accepted the fact that the Fed will begin tapering and have moved on, which suggests they believe the fundamentals justify these record highs, or the disappointing retail sales figure has convinced them that tapering is unlikely now until at least December. The latter would make more sense, however, it’s increasing looking like the former is what’s now driving the markets higher, which is a major concern given the global economic backdrop. If this is the case, we’re surely setting ourselves up for a crash later down the line, whether it be this year or next.

Corporate earnings season is going to play an much bigger part in driving market sentiment in the coming weeks, than it has over the last couple of years. With investors no longer able to rely on the Fed to drive equity markets higher, they have to make do with focusing more on the fundamentals, and nothing gives us a better overview of these than company earnings reports and their expectations for the coming quarters.

As always, it’s been a slow start to the corporate earnings season, however things really got into full swing on Friday, with JP Morgan and Wells Fargo reporting strong second quarter results. Citigroup continued the strong start for the banks yesterday, reporting significantly higher earnings than expected, while revenue was up more than 10% compared to a year ago. Today we have a number of major companies reporting again, although the focus is likely to be on Goldman Sachs, who is due to release earnings before the opening bell.

Ordinarily, earnings season would somewhat overshadow what’s on the economic calendar, however that could not be any less the case this week. With a number of inflation reports due out on Tuesday, and Fed Chairman, Ben Bernanke, due to testify before the House and the Senate on Wednesday and Thursday, respectively, there is going to be plenty of focus on economic releases. Especially following the disappointing retail sales figure yesterday, which led many to downgrade their growth forecasts for the US this year.

It’s not only the US that’s going to be in focus on Tuesday. With both the Bank of England and the ECB coming across more dovish at recent meetings, inflation in both the UK and the eurozone is also extremely important. In the UK, the figure is expected to rise to 3% in June, up from 2.7% in May, and the highest it’s been at since April last year. This may restrict what the BoE can do to stimulate the economy at the next meeting in August, although with the central bank confident that inflation will return to 2% in two years and George Osborne offering them more flexibility earlier this year, the bank’s hands aren’t completely tied.

Inflation in the eurozone is also likely to have risen last month, from 1.4% to 1.6%. However, unlike the BoE and the Fed, the ECBs sole focus is on price stability, which gives it less room to manoeuvre when inflation is on the rise and approaching its target of at, or below, 2%. ECB President, Mario Draghi, tried his old trick of verbally talking down the euro and boosting markets at the meeting this month, with a vague offering of forward guidance. However, if inflation picks up any more than expected, we shouldn’t even expect any more clarity on this at the next meeting.

Ahead of the open we expect to see the FTSE up 2 points, the CAC down 1 point and the DAX up 3 points.
 
US Opening Call from Alpari UK on 16 July 2013

US earnings in focus as attention shifts to fundamentals

Today’s US opening call provides an update on:

* UK CPI leaves the door slightly ajar for more easing from BoE;
* German ZEW disappoints, but eurozone at highest level since March;
* US earnings in focus as attention shifts to fundamentals;
* Increase in US inflation expected on higher gas and food prices.

The FTSE is one of the few indices trading in the green on Tuesday, after June’s CPI figure came in below expectations, meaning Mark Carney avoided writing his first inflation letter to Chancellor George Osborne after only two weeks in the job.

Inflation in the UK rose to 2.9% in June, up from 2.7% in May, but still slightly short of the 3% forecast figure. If the inflation figure had risen in line, or above, market expectations, it would have been very difficult for Governor Carney to convince the other policy makers, namely the six that previous Governor Sir Mervyn King failed to win over, to vote in favour of more asset purchases in the coming months.

Carney still has a tough task on his hands, and has actually done a good job in convincing policy makers to sign up to forward guidance, which based on the statement from this month’s meeting is expected in August. The weaker pound that will come with this forward guidance will only provide further upward pressure on the inflation figure in the coming months. That said, a more flexible mandate for the bank of England may still allow for asset purchases in the coming meetings, especially with the CPI coming in below expectations, and inflation expected to fall to 2% in two years.

Most other European indices aren’t faring as well this morning. The release of the German ZEW economic sentiment figure, which came in well below expectations at 36.3, is weighing on sentiment this morning. The small beat in the eurozone equivalent wasn’t enough to counter this drop, although it is still encouraging, having risen to its highest level since March.

Over in the US, there’s going to be a key focus on corporate earnings on Tuesday. JP Morgan, Wells Fargo and Citigroup have got things off to a flying start for the banks, next up is Goldman Sachs, who will report before the opening bell. There’s also a number of other major companies reporting second quarter earnings today, as the season gets into full swing, including Coca-Cola, Johnson & Johnson and Yahoo.

There’s going to be a lot more emphasis on earnings this quarter, now that the Fed is looking to withdraw some of its support. It will be interesting to see if investors give companies an easy ride as they have in recent quarters, by rewarding earnings that come in above very low expectations, while turning a blind eye to the lower revenues.

We also have some economic data out of the US today, starting with the CPI figure for June. US inflation has been extremely low this year, to the point that deflation has become a bigger concern to many than high inflation. As a result, the expected rise in inflation to 1.5% is unlikely to cause much of a stir in the markets as it’s unlikely to have any impact on the Fed’s monetary policy.

Also in the US we have the release of the industrial production figure for June, which is expected to rise by 0.2%, and we’ll hear from FOMC voting member Esther George, who may provide insight into what we can expect when Fed Chairman, Ben Bernanke, testifies before the House and Senate on Wednesday and Thursday, respectively.

Ahead of the open we expect to see the S&P flat, the Dow up 5 points and the NASDAQ flat.

Read the full report at Alpari News Room​
 
UK Opening Call from Alpari UK on 17 July 2013

Markets looking for three things from BoE minutes

Today’s UK opening call provides an update on:

• Three things markets will be looking for in BoE minutes;
• Investors look for tapering clues when Bernanke testifies before House Financial Services Committee;
• One eye remains on corporate earnings, with BoA, eBay, IBM and Intel all reporting.

To kick things off this morning, we have the release of the minutes from the Bank of England meeting earlier this month, Mark Carney’s first as Governor. From the minutes, there’s going to be three particular things that the markets are going to be looking for. Firstly, is how Mark Carney voted and whether he tried to pursued the other policy makers to increase the asset purchase facility, or at the very least offer some forward guidance. We know the latter was discussed and will probably come at the next meeting in August. However, it will be interesting to see just how much Carney pushed for it and how many policy makers were on board with it.

Next, is how the policy makers voted on asset purchases and interest rates. We’re not expecting any surprises on the interest rate vote, which will probably remain unanimously against it. In respect to the asset purchase facility, it’s likely that Miles and Fisher once again voted in favour of another £25 billion. However, it’s going to be interesting here to see if Mark Carney could do what his predecessor failed to, and convince any of the remaining six policy makers to vote for more QE.

Finally, in relation to the forward guidance, which is expected to be announced next month, hopefully with more details than what the ECB offered earlier this month, we will be looking for any clues about what the guidance will be. Will the low rates be tied to a particular date in the future, the unemployment rate, economic growth, or something original that we haven’t come across yet.

This afternoon it will be over to the US, where Fed Chairman, Ben Bernanke, will deliver the semi-annual monetary policy report to the House Financial Services Committee. The testimony will be released at 1.30pm BST, which is when we’ll see the initial reaction in the markets, although the real moves will come roughly an hour and a half later in the Q&A section.

This is when Bernanke is going to be grilled on the success of the Fed’s policy so far, and the policy going forward. Bernanke has come across relatively hawkish, on the Fed’s behalf, on asset purchases recently, stating that tapering will probably begin later this year, while remaining extremely dovish on interest rates. At this stage, I don’t think rising interest rates are a concern, despite last month’s jump in the inflation figure.

The most important thing we’re likely to get out of the testimony on Wednesday is going to be when the Fed is likely to begin tapering, September or December. Also, which assets will be reduced first, will it be mortgage backed securities, the purchases of which have helped the housing market perform well this year, or government bonds, despite the fact that yields have soared since Bernanke hinted at tapering back in May.

Despite the focus on central banks on Wednesday, investors will have one eye on earnings, given the increasing importance of fundamentals in the market. The decision by the Fed to begin tapering later this year means companies are likely to come under more scrutiny from investors, as they can no longer rely on the central bank’s stimulus program to continue to push share prices higher.

While earnings and revenues are obviously going to be important to investors, the company’s expectations going forward is what they really care about. We saw a fine example of this last night, when Yahoo announced higher than expected earnings, while only slightly missing on revenues. However, it was the downward revision to full year earnings and revenue forecast that sent the share price tumbling in after-hours trading.

There are plenty more companies due to report second quarter earnings on Wednesday, including Bank of America before the opening bell. So far, all of the major banks have delivered a strong performance in the second quarter, so the pressure is now on BoA to keep the run going.

Ahead of the open we expect to see the FTSE down 4 points, the CAC down 2 point and the DAX flat.
 
US Opening Call from Alpari UK on 17 July 2013

Bernanke testimony next after Carney carnage grips the markets

Today’s US opening call provides an update on:

* FTSE tumbles and sterling rallies on unanimous BoE rate and QE decision;
* Carney carnage in the markets following the release of the minutes;
* Focus now on Bernanke’s testimony in front of House Financial Services Committee;
* BoA, eBay, IBM and Intel to report second quarter earnings.

The UK FTSE 100 is trading more than half a percentage point lower on Wednesday, closely followed by its other European counterparts, after the Bank of England appeared to close the door on more asset purchases.

The minutes from Mark Carney’s first meeting as Governor, earlier this month, caught the markets by surprise, with the biggest shock of all coming from the vote on the asset purchase facility. The vote over the last five months has stood at 6-3 to leave it unchanged, however this was expected to fall to 7-2 following the departure of former Governor Sir Mervyn King.

Instead, Carney managed to unite the MPC, who voted 9-0 on both rates and QE, although it was noted that some members claimed further stimulus is warranted. This suggests that Fisher and Miles once again put forward the case for more QE, however the MPC agreed on the 9 – 0 vote in a bid to appear united in Carney’s first meeting. It will now be interesting to see if the vote remains the same in future meetings. Carney probably has a couple of months now, at most, to come up with a viable alternative to asset purchases before the certain members push hard again for more stimulus.

Miles and Fisher may struggle to gather support though, given the improvement in the UK economy in the second quarter. We saw another encouraging sign again today, with the claimant count falling by 21,200 in June, the biggest drop since May 2010 and much higher than was forecast. With the economy improving and inflation close to 3%, it’s going to be difficult to convince any of the other members that more QE is required. At best we’ll get forward guidance on rates in August but I think that’s all for now.

One thing is clear, Carney has certainly made an impact since beginning his role a little over two weeks ago. Carney carnage played havoc with the markets once again today, just as it did following the meeting on 4 July. Sterling rallied almost 100 pips against the greenback within one minutes of the release, before settling at 1.52. The FTSE went from trading 35 points higher on the day to 30 points lower shortly after the release of the minutes.

The focus will now shift to the US, for Fed Chairman, Ben Bernanke’s testimony in front of the House Financial Services Committee. There’s likely to be plenty of volatility in the markets around this speech, especially given that it takes place during the overlap between the European and US session.

I’m not necessarily expecting too many surprises here from Bernanke, just potentially more clarity on the timetable for tapering. Looking at his recent comments, I think it’s pretty clear where the Fed stands on both asset purchases and interest rates. The only thing that’s unclear at the moment is whether it will be September or December when the Fed will begin tapering and how much they will reduce the facility by. Although, as always, traders will interpret Bernanke’s comments in whatever way suits them, so there’s likely to be some big moves in the markets.

Corporate earnings will also be in focus today, with Bank of America the next bank due to report. Also reporting second quarter earnings today, we have eBay, IBM and Intel.

Ahead of the open we expect to see the S&P down 3 points, the Dow down 25 points and the NASDAQ down 2 points.
 
UK Opening Call from Alpari UK on 18 July 2013

Retail sales in focus as the UK recovery gathers pace

Today’s UK opening call provides an update on:

• Expectations for Bernanke testimony in front of the SBC low following dull events in the House;
• Second month on month increase in UK retail sales expected for first time in a year;
• Spanish and French yields expected to rise at auction today;
• US earnings season continues with Verizon, Morgan Stanley, Google and Microsoft reporting.

Ben Bernanke’s testimony in front of the House Financial Services Committee turned out to be a bit of a disappointment given all the hype in the lead up to it. Usually in these semi-annual grilling, Bernanke will be backed into a corner and give something away that creates chaos in the markets, however there was nothing like this yesterday. With it probably being his last semi-annual monetary policy report before his term ends this year, members of the House seemed more focused on telling him what a great job he’s done and how much they admire him, than actually trying to get any further information out of him.

One thing that did give a small boost to the markets came in the statement, but even this wasn’t new information. Bernanke essentially claimed that the Fed remains flexible on its asset purchases and could begin tapering earlier, as expected or later, depending on how the economy performs. The fact that he followed it by claiming the economy is not performing as well as hoped, while highlighting the ongoing weakness in the labour market, suggests they may be looking at December, at the earliest, to begin tapering.

On Thursday, Bernanke is due to face the Senate Banking Committee, and if yesterday’s testimony is anything to go by, it will probably be another dull affair. That said, it’s always worth keeping one eye on any Bernanke testimony because as we’ve seen in the past, he can throw a spanner in the works at any point. Especially if he’s pressured into giving more information on when and how the Fed plans to taper.

Elsewhere today, we have UK retail sales for June being released at 9.30. We’re expecting a significantly lower increase here compared to last month’s unexpected rise of 2.1%, of only 0.2%. This would still be a positive reading for the UK, given May’s surprisingly strong figure. Also, it would be the first time we’ve seen two consecutive month on month increases in retail sales since last August, which is another good sign that the economy is recovering. Given how much consumer spending contributes to the UK economy, it should not be underestimated just how important this is.

It’s going to be a relatively quiet day in the eurozone, although we do have a few bond auctions, with Spain hoping to raise €3 billion in three, five and 10-year debt and France hoping to raise up to €8 billion in two, four and five year debt. We can probably expect to see yields rising at these auctions, in line with what we’ve seen in the bond markets since Bernanke hinted at tapering back in May. We’ll also hear from the ECBs Assmussen, who is due to speak just before the European open in Lithuania.

This afternoon, the focus will be back on the US, with the release of the weekly jobless claims figure. Following last week’s surprising jump to 360,000, this is likely to be watched more closely, with another figure above 350,000 potentially pointing to some early weakness in the labour market as we head into the summer. Also being released is the Philly Fed manufacturing index, which is expected to fall to 7.8.

Once again, there will be a lot of focus on the corporate earnings season as it the number of big companies reporting begins to rise. Reporting second quarter earnings before the opening bell in the US, we have Verizon and Morgan Stanley, with Google and Microsoft then reporting later on tonight.

Ahead of the open we expect to see the FTSE down 4 points, the CAC down 2 point and the DAX flat.
 
US Opening Call from Alpari UK on 18 July 2013

Next up: Ben Bernanke’s testimony – take two

Today’s US opening call provides an update on:

* Expectations low as Bernanke prepares to testify in front of the Senate Banking Committee;
* Attention may now turn to corporate earnings season, with Morgan Stanley and Verizon reporting;
* Initial jobless claims in focus, following last week’s slip up.

All eyes are going to be on Ben Bernanke again on Thursday, as he once again testifies on the semi-annual monetary policy report, this time before the Senate Banking Committee.

Yesterday’s testimony was relatively uneventful in the end, which is unusual when Bernanke speaks on the Fed monetary policy. Especially at a time when the markets are trying to work out when the Fed is planning to begin tapering its asset purchases.

One reason why it was so uneventful may simply be due to the transparency in Bernanke’s comments in recent months. He has repeatedly stated that the Fed will taper later this year as long as the economy performs in line with projections. In respect to interest rates, he has made it very clear that the Fed will only discuss raising rates when unemployment reaches 6.5%, and even then they probably won’t raise them immediately. The markets always want more specifics, but it seems at this time, the Fed has told the markets everything it knows. Anything else is dependent on the data.

As a result, today’s testimony is likely to be just as uneventful, which may divert attention back towards corporate earnings. Earnings season is starting to get into full swing now and has actually started surprisingly well. Earnings have been strong so far, most notably among the major banks, and revenues appear to be improving as well. That said, it’s still very early days yet.

There are plenty of S&P 500 companies reporting second quarter earnings on Thursday, most notably Morgan Stanley and Verizon Wireless before the opening bell, followed by Google and Microsoft after the close. With investors refocusing their attention away from central bank stimulus and back towards the fundamentals, this earnings season could be key in determining how the markets will perform over the summer. The S&P and Dow are both back to closing at record highs now and these earnings will probably determine whether this is going to continue, or another correction is about to occur.

In recent quarter, investors have been obsessed with company earnings, which are of course important, but have overlooked the disappointing revenue figure. I don’t think they’ll be as forgiving this time around. Also, there’s likely to be additional focus on the company outlook, now that the Fed is planning to withdraw its support for the economy.

Initial jobless claims are going to be watched closely today, following the slip in the figure last week. Ben Bernanke claimed yesterday that the labour market is not performing as well as they’d like, so if we start to see a deterioration in these figures, it may prolong the shelf life of the asset purchase program.

Also due to be released is the Philly Fed manufacturing index, which is expected to drop to 7.8 in July, down from 12.5 the month before.

Ahead of the open we expect to see the S&P up 1 point, the Dow down 27 points and the NASDAQ down 2 points.
 
UK Opening Call from Alpari UK on 19 July 2013

Europe to open lower despite dovish Bernanke comments

Today’s UK opening call provides an update on:

* Dovish comments from Bernanke and encouraging earnings fail to boost European markets;
* Quiet end to the week for corporate earnings, after Google and Microsoft disappoint;
* UK public sector net borrowing expected to fall to £9.45 billion in June.

European indices are expected to open lower on Friday, despite hints from Ben Bernanke that we may have to wait a little longer for the Fed to begin tapering as the data has been “mixed” since the last meeting. What this essentially means is that the economy is not performing as well as the Fed had hoped and therefore, tapering is unlikely to begin until December at the very earliest.

A combination of the prospect of prolonged Fed easing and strong second quarter earnings helped the S&P close at record highs, although the message doesn’t appear to have fed through to Europe and Asia. Futures are currently pointing to a lower open in Europe while indices in the Asia are relatively mixed.

It looked as though markets were over the whole “will they taper or won’t they” scenario, but what we saw yesterday suggests otherwise. Despite Bernanke claiming the data is “mixed”, the Dow hit record highs during the US session, while the S&P closed at all time highs. This suggests there’s still hope out there that the Fed will continue with its $85 billion of asset purchases until December at the earliest.

Corporate earnings are still clearly important, and I still think that strong earnings are going to support the rally, but the prospect of prolonged Fed easing is clearly also playing a part. With no major companies reporting on Friday and the economic calendar looking a little empty, we could be in for a quiet end to the week.

The European session is expected to be relatively quiet this morning, with only the German PPI for June and UK public sector net borrowing figures due to be released. The borrowing figure is expected to be another positive sign for the UK, falling to £9.45 billion in June, from £10.54 billion the month before. However, these numbers are quite volatile, so it’s unlikely to have a major impact on the final figure at the end of the year, with the UK still likely to borrow a similar amount to what it did in 2012/2013.

Ahead of the open we expect to see the FTSE down 19 points, the CAC down 6 point and the DAX down 14 points.

Read the full report at Alpari News Room​
 
UK Opening Call from Alpari UK on 22 July 2013

Abe secures the double as LDP gets upper house majority

Today’s UK opening call provides an update on:

• LDP majority win in upper house priced into the markets;
• Shinzo Abe now able to focus on his third arrow, reforms;
• Housing data in focus as rising mortgage rates threaten the recovery;
• Earnings season gets into full swing with McDonalds and Netflix reporting.

European indices are expected to open higher on Monday, following a mixed night in Asia which saw the Nikkei 225 after Shinzo Abe’s LDP party secured an expected majority in the upper house.

There was never any real doubt that the LDP would secure the majority in the upper house, given the party’s current approval ratings, so to an extent the victory was already priced in. The win in the upper house for Abe’s LDP party will now allow him to push on with implementing his third and final arrow, in his attempt to revive the Japanese economy which has been stagnated for the last two decades.

The first two arrows, being fiscal and monetary stimulus, aimed at providing a boost to the economy and hitting the new 2% inflation target, are already underway. The third arrow, reforming the economy to increase its competitiveness, was always going to be the most difficult for Abe, although a majority in both the upper and lower houses now should make things much easier. Had the LDP not won a majority in this election, the success of “Abenomics” would have been under serious threat.

We could be in for a relatively quiet start to the week, if the economic and earnings calendars are anything to go by. The only noteworthy economic release on Monday is the US existing home sales, which are expected to rise by 0.5% in June to 5.26 million. The housing market has been a real strong point for the US economy this year, although the improvement seen here may come under significant pressure in the coming months as mortgage rates begin to rise.

The recent jump is US Treasury yields will have a significant impact on home owners mortgage rates in the second half of this year, which could act as a deterrent anyone considering buying a house. The low mortgage rates over the last couple of years have acted as a real incentive for people to get back on the housing ladder, however with rates now on the rise, they may start to think twice. That said, it is probably too early for this to have any impact on today’s figure. It’s more something to keep an eye out for in the data in the months ahead.

Corporate earnings season is likely to be the key focus this week, with the economic calendar looking quiet on most days. Today, we have McDonalds reporting second quarter earnings before the open, followed by Netflix after the closing bell. Earnings season then gets into full swing tomorrow, with Apple, the biggest component of the S&P, reporting its second quarter earnings.

As we’ve mentioned over the past couple of weeks, while earnings, as always, are going to be important, there’s likely to be more focus on the outlook for the companies reporting, given the significant headwinds facing the US in the next 12 months. With the Fed looking to taper its asset purchases, consumers are going to be faced with higher interest rates coupled with rising fuel costs which could really squeeze disposable incomes.

Ahead of the open we expect to see the FTSE up 5 points, the CAC up 9 point and the DAX up 20 points.

Read the full report at Alpari News Room​
 
US Opening Call from Alpari UK on 22 July 2013

US corporate earnings in focus this week

Today’s US opening call provides an update on:

* Abe secures majority in the upper house over the weekend;
* LDP free to press ahead with reforms;
* US housing data to be watched closely in the coming months;
* US corporate earnings to drive sentiment this week.

European indices are trading slightly higher on Monday, in what has been a relatively quiet start to the week.

With no economic data scheduled to be released in Europe, and the first US companies only due to release earnings just before the opening bell, there’s been nothing to really drive the markets in either direction.

Even the upper house elections in Japan over the weekend had barely any impact on the Asian markets over night. That said, it was expected that the LDP, led by Shinzo Abe, would secure the majority here as well, so it was most likely already priced into the markets. The major moves would have come had they failed to secure a majority.

Now the LDP hold a majority in both the upper and lower houses, there should be little resistance to Abe’s plan to implement a number of reforms in order to restore growth to the country, having been left in a state of stagnation for two decades. Although, it still won’t be entirely straight forward, with some members of Abe’s party believed to oppose the reforms that he has put forward.

Things should pick up a little as the day goes on, with one major piece of economic data due out of the US, and a some S&P 500 companies due to report second quarter earnings. That said, it is the end of July, which tends to be a quieter period in general for the markets.

US existing home sales is the only piece of data due to be released on Monday, although it is one that is going to become increasingly important in the coming months. Housing data has been a real strong point for the US this year, however the increase in mortgage rates which have risen in line with US Treasury yields is likely to weigh on the data. We may not see an impact in the June figure, but the months ahead will definitely be interesting. Especially given that incomes are already going to be squeezed by rising fuel costs.

The economic calendar throughout the week is actually looking pretty light, which means corporate earnings are going to be increasingly influential. Especially given that 157 of the S&P 500 stocks are due to report this week, including Apple, the biggest stock in the index. On Monday, the most notable earnings results will come from McDonalds before the open and Netflix after the closing bell.

Ahead of the open we expect to see the S&P up 3 points, the Dow up 16 points and the NASDAQ up 5 points.
 
UK Opening Call from Alpari UK on 23 July 2013

Markets boosted by Chinese plans to support growth

Today’s US opening call provides an update on:

• Chinese stocks push higher as Vice Premier Gaoli hints at more stimulus;
• BBA mortgage approvals expected to rise in June;
• Eurozone consumer confidence expected to improve for seventh month;
• Corporate earnings season in full swing as Apple and AT&T prepare to report.

European futures are pointing to a higher open on Tuesday, tracking gains in Asia over night where the Nikkei is currently 0.36% higher, while Chinese indices are posting gains of more than 2%.

Chinese stocks received a boost over night from comments by Vice Premier Zhang Gaoli, who claimed that while they are focused on restructuring, they would support infrastructure and social welfare investments. In other words, the country remains committed to transitioning China into a more consumer led economy, however the ruling party will continue to support growth, which many see falling below 7% without more fiscal stimulus.

We could see another slower start to the European session on Tuesday, with investors clearly focused on the US at the moment. Between corporate earnings season and constant tapering speculation, investors are not paying a huge amount of attention to Europe at the moment. This is also not helped by a lack of economic releases or major news in Europe.

Trading volumes have also been lower over the last week, although this is hardly unusual for this time of year. The heatwave in the UK is probably not helping matters, with traders opting to take advantage of this rare period of good weather, rather than sit in front of their computer. That said, things should pick up as the week goes on, with a number of manufacturing and services PMIs being released tomorrow and UK second quarter GDP on Thursday.

This morning, the focus will be on the BBA mortgage approvals in the UK, which is expected to rise to 38,500 in June, as the economic recovery continues to gather momentum. The recovery in the UK housing market is essential if we’re going to see a sustainable economic recovery, all you have to do is look at the impact it’s having on the US economy to see how important it is.

Later on this afternoon, we have the release of the eurozone consumer confidence figure, which is expected to rise slightly to -18.3. This is still deep in negative territory, meaning consumers remain very pessimistic. However, the consistent improvements since the start of the year have been encouraging and suggest we could see a return to positive territory either later this year, or early 2014.

With no major economic releases in the US on Tuesday, the focus will be on corporate earnings again. Almost a third of S&P 500 companies are reporting second quarter earnings this week so this is likely to be the key driver in the markets. There are plenty of companies reporting before the opening bell, including Dominos Pizza, DuPont and UPS, although most of the action will come at the end of the session, when Apple and AT&T report.

Ahead of the open we expect to see the FTSE up 17 points, the CAC up 12 point and the DAX up 29 points.
 
US Opening Call from Alpari UK on 23 July 2013

US corporate earnings in focus as Apple reports

Today’s US opening call provides an update on:

* Markets boosted by comments from Chinese Premier and Vice Premier;
* Focus on earnings, with no major economic releases due out;
* Apple to report second quarter earnings after the closing bell.

Comments from both Premier Li Keqiang and Vice Premier Zhang Gaoli over night provided a real boost to risk appetite over night. Li is believed to have said that the government would not allow growth in China to fall below 7%, a level which many now see as an ambitious growth target this year.

At the same time, Vice Premier Zhang suggested that while the focus of the ruling party remains on reforms, they would support infrastructure and social welfare investments. This suggests that the ruling party is preparing to announce a new package of stimulus measures which should prevent a hard landing in China in the coming years.

While additional stimulus measures may not be ideal for China’s long term health, it’s clearly seen as a positive thing now. European indices are currently tracking their Asian counterparts higher, while US futures are also in the green, with the S&P, Dow and Nasdaq expected to open around one fifth of a percentage point higher.

With the economic calendar still looking pretty empty, the focus is going to remain on corporate earnings on Tuesday. With 72% of S&P 500 companies having beaten earnings expectations, according to Bloomberg, the season has got off to a good start. So far, the banks have been the standout performers, although there’s still plenty more companies to report.

Before the opening bell, we’ll get earnings from Dominos Pizza, DuPont and UPS. However, all eyes on Tuesday will be on Apple, the largest component of the S&P 500, who is due to report second quarter earnings after the close in the US.

Ahead of the open we expect to see the S&P up 2 points, the Dow up 23 points and the NASDAQ up 5 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