Tuesday, 12 December 2017

Market Data (18)

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Market Comment 30th October 2014

Written by Sunday, 14 December 2014 00:00
Market DataEuropean equities are set to open flat as traders try to decipher last nights Fed moves.

 
As expected the plug was pulled on QE. However, there was no additional sweetener to keep markets happy, just a reiteration of the “considerable time” phrase but putting the bulls on a slightly awkward footing was the acknowledgement of improvements in the labour market.

Currency traders certainly thought it was a hawkish signal with significant strength in the dollar across the board but equities traders are still to make up their minds up about it.?As widely anticipated, the Federal Reserve confirmed it ended its asset purchasing program showing confidence the US economy is strong enough to stand on its own feet.

Having rallied earlier on, the Dow Jones dropped sharply but the commitment to keep interest rates low for a ‘considerable time’ spurred a rebound towards the close. The Dow Jones finished unchanged at 16,987 as investor were still trying to figure out if this time around the US economy has enough velocity to self sustain.?Confident the US labour market is strong enough, the Fed also downplayed risk of a drop in inflation with the odds now increasing the rates will be hiked by October next year.

That supported the greenback and hurt the euro on a relative basis with the EUR/USD pair resuming its slump and closing 104 pips to 1.2632.?Early strength for the euro versus the dollar drove the crude prices higher yesterday. However, a sudden plunge after the FOMC announcement together with a slide in stock markets pushed oil prices back down but due to initial gains the WTI managed to end the day 40 cents up at $81.55 a barrel.?Not a good day for gold bugs as the bond buying came to an end. Demand for alternative assets was hit which in turn triggered a selloff in the precious metal. As a result gold prices lost $16.2 to $1212.?

Market Comment 29th October 2014

Written by Sunday, 14 December 2014 00:00
Market DataEuropean equities are set to start with gains tracking overnight momentum from the US and Asia. 

 The usual apprehension before a Fed meeting seems to have been shrugged off even though the end of its quantitative easing program is a dead cert. The end has been widely telegraphed but it is the implicit ‘deal’ that has been struck between markets and the Fed where the risks lie.

 In exchange for pulling the plug, markets will need to get something in return or they could throw another taper tantrum. So, traders are getting bullish positioning themselves long the market in anticipation that the Fed will be extremely dovish with its forward guidance to prevent the bottom falling out of the market. The US consumer confidence data surpassed estimates keeping investors optimistic regarding the economic growth.

Additionally, corporate results impressed the markets again overshadowing lower than predicted growth for home prices. So, the Dow Jones continued its rebound from under 16,000 reached two weeks ago, gaining 170 points yesterday to close at 17,008. It has been reported that reluctance in the euro zone to use QE when faced with the risk of deflation/ recession has attracted record outflows. But on the other hand the US is recognizing that Europe could pull the world biggest economy back into trouble as well so it appears to be having second thoughts on raising rates. That seems to have stopped (for now ?)a free fall in the euro which yesterday recovered 34 pips against the greenback to 1.2735.

 Renewed optimism about the US consumer was a breath of fresh air for oil prices with the WTI posting a 93 cents rally to $81.59 a barrel. However, weaker oil demand is a reality and the success of the US fracking could make it hard for the current trend to restart its upward trajectory in the immediate future. Before the conclusion of the Fed meeting, gold prices gained $2.6 to $1228.4 amid reports that Turkey and Russia were in the market to add bullion to their reserve. The precious metal is still struggling to post a meaningful recovery after recently falling below $1200.00 mark.

Market Comment 28th October 2014

Written by Sunday, 14 December 2014 00:00
Market Data
European equities are set to pare back some of yesterday’s losses and start with modest gains. 

There isn’t anything particularly bullish but the US and Asian markets were trading mixed so there’s the presumption that if that was the best the bears could muster then the path of least resistance is still higher. There’s naturally some caution building ahead of this week’s main event, the FOMC meeting, and the expectation that the plug will be pulled on QE3.

The logical view to hold is that the withdrawal of the stimulus will be a negative for equities. However, the bulls are seeing a silver lining. The last time the Fed pulled the plug on QE 1 & 2, equities plunged so to prevent a repeat, the bulls will be hoping for something extremely dovish in the statement to placate the urge to dump risky assets. Ahead of the FOMC meeting, the Dow Jones had a relative quiet trading session rising just 20 points to 16836.

The wait and see attitude is the result of the fact that despite widespread expectations of an end to monthly asset purchases, the US officials expressed concerns of economic slowdown. Encouraging is that a dip in oil prices below $80.00 level hardly had any effect on the index.

The European Central Bank announced that it bought covered bonds worth 1.7 billion euro last week in an attempt to spur economic growth in the common area. Although the move was seen as rather aggressive, more stimulus is expected. In the meantime, the euro gained 20 pips against the greenback to 1.2699 with investors feeling at ease that no major bank failed the stress tests.

As oil market remains oversupplied amid a weaker demand, the outlook for crude prices does not look healthy, a feature also endorsed by Goldman Sachs. Yesterday, a brief dip below $80.00 mark, made headlines with market price now at the weakest in more than two years. However, the WTI recovered most of the initial losses, closing 61 cents down at $80.65. News that holdings in exchange traded funds backed by gold declined to the lowest in more than five years, sent the precious metal $4.8 down to $1225.5. It seems the Fed will delay raising rates despite bets they will end QE and that does not bode well for gold prices.

uk-rates-2014 Mark Carney wants to see unemployment hit 7% before interest rates rise
Interest rates in the UK are unlikely to rise this year, according to a snapshot of views of the UK's top economists from the BBC.

 

An overwhelming majority, 93% of the 28 economists polled, think rates will still be 0.5% at the end of 2014, with more than half predicting the first rise in the second half of 2015.

More than 40% believe unemployment will fall to 7% in 2014, from 7.4% now.

Two-thirds also think wage increases will overtake inflation this year.

Some observers have suggested recent rises in house prices could force the Bank of England to raise rates sometime in 2014, but the majority of economists used by the Treasury and polled by the BBC rejected this view.

Almost 80% think rates will begin to rise in 2015, with 15% saying they will not increase until 2016. Only 7% of those polled think rates will rise in 2014.

The unemployment rate of 7% is significant because this is the level the Bank has said needs to be breached before it considers raising interest rates.

The snapshot suggests there is less certainty in the City about unemployment levels than there is about interest rates.

Although more than 40% think the jobless rate will hit 7% this year, exactly half think that will not be until 2015. Just 8% think it will not be until 2016.

Three respondents actually believe rates will rise before unemployment falls to 7%, which would mean the Bank abandoning its forward guidance on interest rates.

But some economists warn about getting too fixated on the 7% unemployment rate. Kate Barker, a former member of the Monetary Policy Committee, says unemployment could fall and wages could rise, without raising concern over inflation.

"The real question for the economy this year is not just about interest rates. It's actually about what is going to happen to productivity, if we see productivity start to recover we could see wages pick up quite a bit without any damage to inflation - so there are more things to look at other than employment," she said.
Eurozone crisis

A major concern for many in the UK during the economic downturn is a fall in living standards as inflation outstrips pay rises, but two-thirds of the economists think wages will start to rise faster than inflation at some point this year.

The remaining one-third think this will not happen until 2015.

Finally, the economists were asked about their views on the eurozone crisis, which has hit economies including Greece, Portugal and the Republic of Ireland particularly hard in recent years.

Alan Clarke from Scotiabank told the BBC the worst of the eurozone crisis was over but it was "too soon to relax"

Half think the crisis is not yet over, and of those who think that it is, many believe it could easily flare up again.

One-third of the economists polled think the eurozone economy will grow by more than 1% this year, while two-thirds think it will grow by less than 1%.

Almost 20% think growth will be as low as 0.5% or less.

Alan Clarke is the UK and eurozone economist at Scotiabank and took part in the survey. He said: "I think we're seeing the periphery economies, Italy and Spain starting to move in the right direction. They're not booming but at least they are not shrinking as much as they were.

"But you still have the problem child of France in Europe at the moment. Its survey indicators are more downbeat and it may struggle to grow in the year end period."

European stocks are seen opening mixed on Friday,

ahead of a batch of U.S. data that should shed light on the outlook for the U.S.

Federal Reserve's stimulus programme.

    Financial spreadbetters expect Britain's FTSE 100 to open around 1

point, or 0.02 percent, lower, Germany's DAX to open 5 points, or 0.06

percent, higher and France's CAC 40 to open up 5 points, or 0.13

percent.

    European stocks inched higher on Thursday, as downbeat U.S. economic data

including lower-than-expected GDP growth, a rise in new jobless benefits claims

and tepid pending home sales reassured investors that the Fed would not scale

back its bond buying soon.

    Investors await the Thomson Reuters/University of Michigan's May consumer

sentiment index due at 1355 GMT, personal income and consumption data due at

1230 GMT, and the Chicago PMI due at 1345 GMT.

--------------------------------------------------------------------------------

  MARKET SNAPSHOT AT 0518 GMT:

 

                                    LAST       PCT CHG  NET CHG

 S&P 500                            1,654.41   0.37 %   6.05

 NIKKEI                             13,831.68  1.79 %   242.65

 MSCI ASIA EX-JP                    545.05     -0.31 %  -1.69

 EUR/USD                            1.3032     -0.12 %  -0.0016

 USD/JPY                            101.00     0.28 %   0.2800

 10-YR US TSY YLD                   2.108      --       -0.01

 10-YR BUND YLD                     1.511      --       -0.01

 SPOT GOLD                          $1,417.51  0.3 %    $4.26

 US CRUDE                           $93.74     0.14 %   0.13

 

  > GLOBAL MARKETS-Asian shares up as soft U.S. data eases QE fears 

  > Wall St ends up on optimism Fed stimulus to remain 

  > Nikkei up as Fed concerns ease, investors still wary after rout 

  > TREASURIES-Prices near flat as investors weigh Fed's course 

  > FOREX-Dollar near 3-week low vs euro as talk of Fed tapering eases 

  > Gold hits 2-week top on hopes Fed stimulus will stay 

  > METALS-Copper heads for gains in May after 3-month drop 

  > Crude oil ends mixed, swayed by views on economy and Fed

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