Forex research

[Alpari UK]

US Opening Call from Alpari UK on 8 October 2014

Attention turns to FOMC minutes and earnings season

• Attention shifts to FOMC minutes following equity sell-off;
• Alcoa kicks off the third quarter earnings season.

With the sell-off over the last 24 hours now behind us, investors can look forward to the next two big events that are likely to dominate the markets in the coming weeks, the Fed and earnings season.

The stance of the Fed is always a major talking point for the markets, particularly when we appear to be approaching a change in monetary policy and even more so when it’s the first rate hike since June 2006. Later on today we’ll get the release of the FOMC minutes from the September meeting and people are going to look very closely at these for signs that the Fed is becoming more hawkish and could bring forward its first rate hike.

The dot plots that we saw after the last meeting, along with the fact that we now have two dissenting members of the Fed – Charles Plosser and Richard Fisher – suggests certain members, at least, are becoming more hawkish. However, there are still plenty of dovish policy makers including Chairwoman Janet Yellen, who is widely viewed as one of the most dovish of the group.

This is why the message coming from the Fed continues to promise these low interest rates for a considerable amount of time, but that can only continue for so long. At some point this will need to be dropped from the statement and there has been a lot of speculation recently that the time has come. Some expected this to happen at the September meeting but instead we may have to settle for clues in the minutes that it will be dropped in the coming months. If that comes this year, people may be forced to bring forward their hike expectations from the middle of next year, which is when many expect the first hike to come.

Alcoa unofficially kicks of corporate earnings season after the closing bell today, which could for the next month or so turn people’s attention away from economic data and even central banks to an extent, and towards company reports. People have been clinging to anything central bank related recently simply because there hasn’t been much else to focus on and even though the first hikes from the Fed and BoE aren’t expected for another six months at least.

Earnings season should provide great insight into both how companies performed in the third quarter and how confident they are in the economic recovery. For a long time, investors have focused primarily on earnings growth, regardless of how it was driven, which has enabled stocks to continue to rally even at a time when economies were not performing well and central banks were being forced to provide extraordinary support. Now, economies are recovering and investors may be less inclined to accept austerity driven earnings growth, bringing revenue growth back into focus. We need to see organic growth if this recovery is going to be sustainable, not to mention evidence that companies are investing and confident in the economic outlook.

Ahead of the opening bell on Wall Street, the S&P is seen unchanged at 1,935, the Dow up 1 point at 16,720 and the Nasdaq up 2 points at 3,960.

 

[Alpari UK]

Daily Market Update - 8 October 2014 - Alpari UK



US markets looking technically vulnerable - 00:16
IMF downgrades growth estimates - 00:50
A look at the FOMC meeting - 02:48

Research analyst Joshua Mahony discusses the IMF downgrades that have led to selling in the markets. He also provides a preview to the FOMC meeting minutes released later today

 

[Alpari UK]

UK Opening Call from Alpari UK on 9 October 2014

BoE rate hike close but no change expected today

• Indices rally as Fed minutes offer less hawkish tone than expected;
• Another volatile Australian jobs report makes assessing the labour market difficult;
• BoE unlikely to make changes to interest rates or asset purchases;
• US jobless claims the only notable release this afternoon.

European futures are pointing to a very strong start on Thursday, with most major indices seen opening more than 1% higher after even larger gains were made in the US overnight.

You would imagine that gains of this nature would come off the back of some pretty significant news but in fact, it's just another sign that the markets are acting very irrationally at the moment. Only a day ago, we were talking about the fact that indices shed more than 1% after the IMF revised down its global growth forecasts in a move that no one could be surprised about and, in fact, most were expecting.

Now we've seen even larger gains as a result of the Fed not appearing more hawkish in the minutes from the September meeting. At the same time, the central bank did not appear more dovish and, in fact, there were discussions on removing its commitment to keeping rates low for a considerable amount of time, but there was concerns about what impact this would have on the markets. All things considered, this doesn't strike me as something worth cheering to that extent, by any stretch of the imagination, which certainly makes the recent moves quite bizarre.

The fact that investors are still clearly rather obsessed with that first rate hike is a little concerning and it doesn't fill me with confidence that the markets can withstand even slightly more hawkish language from the Fed. Once again, it just suggests that investors are very sensitive at these levels which suggests it's only a matter of time until the markets come crashing down. I don't think a 10% decline would be a bad thing to be honest, the concern is if we go beyond that. We've seen many times before just how quickly large amounts of cash can be wiped off the stock market and what that does to confidence.

There's been a lot said recently about the volatility in the Australian jobs data and how difficult it makes providing an accurate assessment of the labour market. This hasn't just come from the markets, only 24 hours ago the Reserve Bank of Australia made similar comments. Well, that volatility continued overnight and the new methodology regarding seasonal adjustments doesn't appear to have helped much.

We were expecting 20,000 net new jobs to be created in September but instead there was a decline of 29,700 leading to a rise in unemployment to 6.1%. The rise could potentially have been more but for the unexpected decline in the participation rate to 64.5%. The only plus side in all of this was that the decline in the jobs figure was driven by a significant drop in part-time employment while full-time employment actually rose by 21,600. This is only a small positive from the report but still a positive nonetheless.

The rest of the day, as has been the case all week, is looking a little quiet. We'll get the latest rate decision from the Bank of England later, which is likely to be something of a none event due to the central bank's insistence on offering no corresponding statement or press conference, as we get from most other major central banks. Instead, all we're likely to get is confirmation that rates and asset purchases are unchanged at which point we'll have to wait for the minutes and voting in a couple of weeks. The chances of any change are slim despite the fact that two members have voted in favour of hiking rates recently, but we'd need to see three more policy makers join them which is very unlikely at the moment.

The US session is also looking a little quiet, with the weekly jobless claims figure the only notable release. Alcoa unofficially kicked off corporate earnings season last night but that won't get into full swing now until next week, at which point investors will be very interested to see exactly how US companies are performing and whether they're actually confidence enough in the economic outlook to invest in it.

Ahead of the European open, the FTSE is expected to open 60 points higher, the CAC 54 points higher and the DAX 113 points higher.

 

[Alpari UK]

US Opening Call from Alpari UK on 9 October 2014

Jobless claims in focus as BoE leaves policy unchanged

• Fear driven markets may signal imminent correction;
• Alcoa gets earnings season off to a flyer;
• Four sub-300,000 claims not seen since 2006;
• BoE expected to leave policy unchanged.

We’re expecting another positive start to the trading session in the US on Thursday, following the strong gains made on Wednesday after the Fed maintained its dovish stance on interest rates.

There’s a lot of fear in the markets at the moment and it’s all centred around the Federal Reserve, when it will raise interest rates and the pace of hikes after the first one takes place. That fear is leading to some irrational moves in the markets which concerns me given that it’s occurring at these record high levels. Investors are clearly quite uncomfortable with current valuations and are hitting the panic button at the first sign of trouble, for example on Tuesday after the IMF revised down its global growth forecasts.

The Fed is very aware of this which is why it opted to maintain its commitment to keep rates low for a considerable amount of time. At some point this language will have to be removed and when it does, it could prompt a significant correction. What we need now to calm the nerves is a very good earnings season, something that shows us that we don’t need Fed stimulus to justify current valuation, that companies are performing well and things are only going to get better.

Alcoa got things off to a great start on Wednesday evening but they are not considered the bellwether they once were. What they did show though is that all of the cost cutting pain of recent years was not for nothing and the company is now in a great position going forward. That is the message we need to get from the rest of earnings season and if we can see companies beating on both earnings and revenue expectations while keeping profit warnings to a minimum, it may be enough to ease investors’ concerns about interest rate hikes.

Today is shaping up to be a fairly quiet day with not much due on the data side of things. The only notable release is the weekly jobless claims number which is expected to rise slightly to 294,000. This would mark a fourth consecutive week of sub 300,000 claims which would be the first time since the start of 2006. Needless to say that says a lot about the progress made in the US over the last 12 months and further suggests that the economy no longer needs such an accommodative central bank.

We’ll also get the latest monetary policy update from the Bank of England before the open, although no change is expected in either interest rates or asset purchases. The fact that the BoE doesn’t release a statement or follow up with a press conference, this tends to make it something of a non-event despite it having the potential to cause major ripples in the markets.

The S&P is currently seen opening 5 points higher, the Dow 27 points higher and the Nasdaq 13 points higher.

 

[Alpari UK]

Daily Market Update - 9 October 2014 - Alpari UK

 

[Alpari UK]

UK Opening Call from Alpari UK on 10 October 2014

Investors head for the exit as fear grows in the market

It's been an incredible week in the markets in which we've seen huge amounts of volatility that have quite frankly been driven by nothing but fear. As we approach the final trading session of the week, early market indications suggest we're in for another roller-coaster day, with Europe's main indices seen opening more than 1% in the red. The FTSE is currently expected to open 80 points lower, the CAC 53 points lower and the Nasdaq 114 points lower.

People around the world are trying to rationalise the moves and attribute them to any minor event, economic release or comment that hits the news wires, but the simple fact of the matter is that at times, there's no rationalising the irrational. These moves are being driven by fear and nothing else. Markets have lingered around these record highs for too long and investors are very uncomfortable.

I don't for a second believe that German export number, despite them being very poor, prompted a 2% decline in the US on Thursday, nor do I believe it was driven by comments from Mario Draghi or any Fed officials because to be frank, it's the same old material we've heard for months.

This kind of irrational behaviour strikes me as something that comes just before we get that big 10% correction that people have spoken about for so long that makes everyone a little more comfortable with stock market levels. This buy the dip mentality finally appears to be fading and once that goes, the decline could be quite rapid, as we've now seen on both Tuesday and Thursday.

One saving grace for the markets could be corporate earnings season which unofficially got under way on Wednesday but kicks into full swing next week. A good set of earnings could relax investors a little and take some away some of the anxiety that has crept into the markets. We've already seen some great numbers from Alcoa, if that continues then all of a sudden people have reason to buy the dips again.

Unfortunately, that's not going to help us today and with the economic calendar offering little that could halt the decline, we could be in for another day of very volatile trading and potentially big losses. We're already on course for one of the worst weeks this year and it could get much worse before the day is out.

In terms of economic data, UK trade balance figures are the only notable release of the day but even then, this is only medium impact data and quite often has a minimal impact on the markets. That said, as we've seen already this week, markets have been far more responsive than normal to these figures so I wouldn't be surprised to see a disappointing number here prompt another wave of selling.

 

[Alpari UK]

US Opening Call from Alpari UK on 10 October 2014

US futures edge lower as DAX monthly losses exceed 10%

Stock markets are getting battered again in morning trade on Friday, as the German DAX extends its weekly losses to a staggering 5.65% taking its losses from last month’s highs until now to 10.82%.

People have been talking for such a long time about when we will get a big correction in the markets but these figures suggest that not only are they under way, we’ve actually surpassed a 10% correction and momentum is not slowing. The DAX appears to be a bit of a special case given that many of the concerns right now are focused around the slowdown in the eurozone, with poor German numbers attracting particular attention.

While US losses are lagging their German counterpart’s, both the S&P and the Dow are down 2% this week and look likely to extend these losses before the end of the week. They’re also down around 4.5% and 4%, respectively, since hitting new highs last month so the correction that people fear may be well under way. A lot has been blamed for these losses but I think it’s clear that they are being driven by fear. No one wants to be the last out and it’s become perfectly clear recently that people are uncomfortable with the current levels.

One thing that may support stocks in the coming weeks is earnings season, which unofficially started on Wednesday when Alcoa announced results for the third quarter. If we get a good earnings season that includes above expected earnings and revenues as well as minimal profit warnings and generally positive outlooks, I would expect fears to ease and people may look quite favourably on the buying opportunities that have been created.

As far as today is concerned, there is very little scheduled for release in terms of economic data or earnings, which means there is little to stop the sell-off. What we could see towards the end of the session is some profit-taking given the size of the losses over the last 24 hours.

The S&P is currently expected to open 9 points lower, the Dow 84 points lower and the Nasdaq 35 points lower.

 

[Alpari UK]

Daily Market Update - 10 October 2014 - Alpari UK

 

[Alpari UK]

Weekly market preview from Alpari UK on 13 October 2014

A somewhat mixed week ahead in terms of economic announcements, where the quantity of releases is negated by a lack of quality. In the US, a speech from Janet Yellen on Friday allows markets to gauge exactly where the Fed stands following somewhat dovish FOMC minutes. In the UK, Wednesday’s jobs report looks to take centre stage in a somewhat quiet week otherwise. Meanwhile, the eurozone focus is likely to be geared towards the German ZEW sentiment figure following a shockingly poor few months for the industrial powerhouse. Finally, in Asia the Chinese trade balance is going to be key, given it’s ability to shed light upon the export and import statistics for September.


US

A somewhat busy week ahead for the US economy, where the release of retail sales, Philly Fed manufacturing index and the UoM consumer sentiment figures are likely to dominate. However, possibly the most noteworthy event of the Aweek is Janet Yellen’s speech on Friday. The recent release of minutes from the last FOMC meeting provided markets with an insight into the current stance of the committee and for the most part it was more cautious and dovish than many expected. The focus upon potential weaknesses in inflation, along with global growth risks from the likes of the eurozone meant that many took the release as one which pushed back the potential 2015 interest rate hike. However, for the most part, it is the view of Janet Yellen which most people in the market follow closest and as such Friday’s speech will be key to determining whether she wishes to purvey a more dovish or hawkish stance.

On Wednesday, the release of the September retail sales figures provide yet another look into consumer behaviour and habits following a strong reading of 0.6% growth last month. The US economy is particularly reliant upon the spending patterns of domestic citizens owing to the substantial growth and demand that originates from domestic consumption. In much the same way that the Chinese and Australians are trying to realign their economies towards domestic consumption, the US economy is a prime example of what they strive to be. Therefore, strong retail sales figures provide us with an idea that there will be strong output too for the month. Market estimates put the MoM figure around 0%, yet I am hoping for something a little higher given that the past four years have seen an average of 0.8% growth in September.

The final two releases to look out for are major surveys, with the Philadelphia Fed manufacturing index and University of Michigan (UoM) consumer sentiment figures. Of these two, I would expect Friday’s UoM consumer sentiment number is going to be the most important, given the reliance of the US economy on it’s consumer base. Market estimates are pointing towards a marginal fall from 84.6 to 84.3, following a massive spike last month. Given that August saw the biggest jump in this reading in 10 months, I would not be surprised to see it pull back somewhat.


UK

A quiet week ahead for the UK economy, where the inflation readings and jobs report are the only figures due out of note. Tuesday’s CPI figure brings a focus back upon the consistent deterioration of inflation which has been in place since late 2011. The worries surrounding weak inflation is currently an issue facing most of the developed countries globally, with the the likes of Japan, the eurozone, US and UK all seeking to avoid further disinflation. The UK hasn’t been in too much trouble so far, however with estimates pointing towards the year-on-year figure falling to 1.4% from 1.5%, we could yet see the lowest level in 5 years.

Wednesday sees the focus shift to the UK jobs report, where the unemployment rate is expected to fall to the lowest level since December 2008. Conversely, the claimant count figure is expected to pull back somewhat from -37.2k to -34.2k. Those two headline figures typically move the markets and as such, a unidirectional move in both should be enough to swing the markets. The use of the unemployment data as a key barometer of when the BoE will chance monetary policy means that any strong swings in either direction for this report will no doubt be associated with either a longer or shorter term timeline for interest rate hikes. However, with that in mind, it is important to watch out for the average earnings figure too which provides an idea of how much people’s wages are growing by. When compared against the inflation figure from Tuesday, you can obtain an idea of the real change in wage growth. Estimates point towards a rise from 0.6% to 0.7%.

Eurozone

An interesting week ahead for the eurozone, where significant weaknesses across the indices have put further pressure on the region. The main events of note to be watching out for are Tuesday’s German ZEW economic sentiment reading and the final CPI reading on Thursday.

The German economy has been having a particularly tough time recently, with the much fabled manufacturing sector in particular suffering, as personified by poor factory orders, manufacturing PMI figures, industrial production numbers and subsequent export numbers. With that in mind, Tuesday’s German ZEW economic sentiment figures are going to be key to determine what the current sentiment is surrounding the German economy within analysts and institutional investors. This continued weakness is expected to be shown in Tuesday’s figure, where estimates are pointing towards a fall to 0.2 from 6.9. The 0 mark separates optimism and pessimism and thus should we see this number fall below 0, it could bring further attention in the markets.

Thursday sees the final CPI reading for the eurozone, where the focus returns to the continued weakness of prices in the single currency. Previous falls in this figure have brought about continued loosening of monetary policy from the ECB and thus any further downside is likely to pressure Mario Draghi to take firmer actions. For the most part, the final reading tends to rarely sway from the preliminary number, which came in at 0.3%. However, should we see this fall further, there is likely to be yet more focus upon whether the recent measures implemented by Draghi are going to be enough to raise prices.

Asia & Oceania

A quiet week across Asia, where Chinese data represents the only events of note to watch out for. The biggest event from China is the trade data release on Monday, where diverging export and import figures are expecting to provide a picture of strength for the Asian powerhouse. The headline figure is always the total trade balance which markets expect to fall back somewhat from $49.83 billion to $41 billion. However, I always watch out for the specific export and import numbers, where we are expecting to see a different pathway, with exports looking to rise from 9.4% to 11.8% and imports expected to fall from -2.4% to -2.7%.

 

[Alpari UK]

UK Opening Call from Alpari UK on 13 October 2014

Dollar weakens and equities fall ahead of busy week

If it has been the Fed and the US dominating markets over the last few weeks we are about to see that change this week as economic data from the UK and Europe yet again takes centre stage. Of course markets will still be looking towards the US as heavy falls on equity markets look set to give the week a somewhat jittery start. Earning season also gets into full swing this week with some of the major Banks getting set for release. Fears over growth on Wall Street are starting to cause concern after as earnings season looks to get going, after a couple of poor weeks for equity markets traders are now starting to expect a rather week set of corporate numbers this quarter.


The week starts in a fairly subdued way as Columbus Day in the US means that US markets are closed, add to that the fact that there is next to no economic data due for release today and we get the fact that we may as well start by looking straight to Tuesday’s numbers. Saying that however Asian markets have managed to find something to keep the slide going as losses were extended across the board overnight, this has hit futures and could well see the negativity continue into the new trading week. It seems that yet again fears over ultra low rates in the UK, US and Eurozone are causing the issues. Last weeks FOMC meeting saw no significant change to the language meaning that Janet Yellen’s timeline for a rate hike still hasn’t changed. I feel this is a potential turning point for the equity markets after such a strong rally over the last 12 months. Traders are now using the same news that saw them rally in the past as a catalyst for negative moves and that is a worrying sign for the state of current equity market levels.

With everything looking so quiet on Monday, traders will naturally look ahead to the rest of the week for the big events. Tuesday and Wednesday will undoubtedly take centre stage as CPI inflation readings in the UK and Eurozone are released on Tuesday and Wednesday sees the UK unemployment figure. Both of these sets of readings are important for both central banks, of course Mario Draghi and the ECB have been fighting the war against ultra low inflation and the fear of deflation for almost 2 years now, however the numbers shows no sign of improvement. A continued low figure could well be met with a positive equity market move as it would seem to force the hand of Mario Draghi and move the ECB a step closer to a full round of quantitative easing. The UK on the other hand will be keeping an eye on the average earnings figure within its Jobs report on Wesnesday. Mark Carney has already indicated that rates will not start to move higher until he is convinced that wages are moving in the same direction, this will be interesting to see as recent months have shown an increase in the average earnings number, but only a minor one. The BoE will definitely want to see a sustained move before making a further decision on interest rates.

All in all markets will start quietly this week but will no doubt have traders bracing themselves for a whole host of data later in the week, not just from the UK and European economy but from a US corporate perspective as well. Ahead of the open we expect to see the FTSE 100 open lower by 57 points and the German DAX lower by 87 points.

 

[Alpari UK]

Daily Market Update - 13 October 2014 - Alpari UK



Market indecision marks start to the week - 00:09
Chinese trade balance posts surprisingly strong numbers - 00:47
A look ahead to tomorrows UK CPI and German ZEW numbers - 04:48

Research analyst Joshua Mahony discusses a somewhat quiet day in the markets, where the Chinese trade data has dominated. Other than that, Joshua discusses tomorrows UK and German ZEW figures.

 

[Alpari UK]

UK Opening Call from Alpari UK on 14 October 2014

More bad news for Europe weighs further on sentiment

• More bad news for Europe weighs on sentiment;
• Eurozone industrial production and economic confidence take another hit;
• UK inflation continues to slide, falling to five year low;
• Earnings season may provide support for equity markets.

European indices are on the decline again on Tuesday, as further bad news for Europe puts another dent in sentiment in the region.

It’s been a very busy morning on the economic data front and unfortunately, it’s just been yet another collection of disappointing and worrying figures. The most concerning are the figures from the eurozone where we saw a significant decline in industrial production in August, much larger than forecasts which were already rather gloomy. On top of this, the ZEW survey on economic sentiment showing another sharp drop from 14.2 to 4.1, while the German reading fell below 0, to -3.6, for the first time since November 2012.

The eurozone growth story may be an old one at this stage, but the rate of decline only appears to be accelerating and were seeing nothing from the surveys to suggest confidence is bottoming out. This doesn’t bode well for the end of the year, nor does it suggest that ECB efforts to slow it are having any impact. While I still firmly believe that quantitative easing is not a road that the ECB are interested in going down, they are running out of options. They are either going to have to get creative in the coming months or give in to the fact that it the only thing that can get the eurozone economy moving again, as it has in other major economies.

The Bank of England is facing a dilemma of its own in the coming months. The central bank has been keen to return to normality on interest rate policy, at one point even suggesting it could come this year. That appears to be off the table now but their job is being made much more difficult by the fact that inflation in the UK, as in many other countries right now, is falling and is now at a five year low of 1.2%. This can’t even be blamed on things like falling oil prices, as the core reading also fell last month to 1.5% from 1.9%. If this trend persists, the BoE will find it tough to justify a rate hike, which I’m sure is something many people in the UK will be happy about.

What will be key for the markets over the next couple of months is corporate earnings season. There has been so much volatility over the last week, driven largely by fear, that investors need a reason to buy again. We may only be around two thirds of the way into the 10% correction that so many believe is necessary, but solid earnings reports could make the current levels look quite attractive.

I think the coming earnings season is going to be quite strong for the US, with the economy continuing to recover and move towards a scenario in which Fed support is no longer required. There are likely to be a few common themes throughout earnings season though which are likely to hinder some companies and help others.

One of these is exchange rates following the strong appreciation of the dollar in recent months. Any companies with large overseas operations are going to see the dollar value of these profits fall quite dramatically, which could weigh on overall earnings. Another theme will be exposure to Europe, with the economy here coming to a standstill in the third quarter. European operations are likely to be an issue for a large number of companies and investors will want to know what is being done to overcome this. One final theme which could help many companies, excluding producers, is the slide in oil prices. Reducing costs will help the bottom line which may help cover hits being made elsewhere.

Earnings season will get properly underway today, with Citigroup, Wells Fargo and JP Morgan kicking things off for the banks. We’ll also hear from Intel and Johnson & Johnson, giving investors plenty to focus on to drive the markets. The only question now is whether they’ll be good enough to rid the markets of all this unease and fear that has created all of the recent volatility and selling.

The S&P is currently seen opening 2 points higher, the Dow 19 points higher and the Nasdaq 5 points higher.

Read the full report at Alpari News Room​

 

[Alpari UK]

UK Opening Call from Alpari UK on 15 October 2014

US futures flat ahead of retail sales and earnings

• Healthcare stocks lead the FTSE lower;
• European pessimism weighs further on sentiment;
• US retail sales seen slowing in September;
• Earnings season picks up with financials back in focus.

Another disappointing start to the European session on Wednesday appears to be dragging on US futures ahead of the opening bell on Wall Street.
Health care stocks are a major drag on European indices this morning after AbbVie announced that it is reconsidering a $54 billion takeover over Shire. We saw earlier this year how volatile health care stocks were as a result of all the M&A activity and Shire at the time was at the centre of it all as many people picked it out as an ideal takeover target. With the deal now appearing to be on the verge of falling through, due to a change in tax rules in the US, the stock has plummeted almost 25% and the entire sector is down almost 7% in the UK.
This is unsurprisingly having a much greater impact on the FTSE than on other European indices, which are also trading lower again today as economic data continues to paint the picture of a region that is destined to fall into another recession. The most concerning aspect of this is the lack of a leader in the euro area at the moment, with Germany appearing to be coping no better than anyone else. The recent data points to the country falling into recession in the third quarter and confidence surveys are showing no signs of bottoming out, suggesting that things are likely to get worse before they improve.
US futures are pretty much flat at the moment, which is how they ended on Tuesday following another volatile session that saw them trading up more than 1% at one stage. The fact that we saw a halt in the slide could make today’s trading very interesting. It could be argued that the halt is a sign that the selling has at least temporarily come to an end which may prompt buying at what could be viewed as more attractive levels. Alternatively, the inability of indices to hold onto gains yesterday may suggest that this is just a breather and selling will continue. If we see a close above yesterday’s high today, it would suggest to me that we could see a more positive end to the week, while a break of yesterday’s low would suggest there’s further downside to come.
There’s plenty for investors to get their teeth into today, with both economic data and third quarter earnings reports due for release. On the economic data front, retail sales figures for September stand out as the most important release. The US economy is very consumer driven and therefore this data can provide great insight into how the economy is performing. It been a great year for the US in terms of retail sales growth but this is expected to have slowed in September, with forecasts currently being for a 0.1% decline.
There’s also a number of companies reporting third quarter earnings, with focus again being on the financials. Among those reporting are Blackrock, Bank of America and American Express. Outside of this sector we’ll get earnings from eBay and Netflix so investors have plenty to get their teeth stuck into.
The S&P is currently seen opening 1 point higher, the Dow 14 points higher and the Nasdaq 9 points higher.

Read the full report at Alpari News Room​

 

[Alpari UK]

US Opening Call from Alpari UK on 15 October 2014

Markets respond despite poor Chinese data

Asian markets rose with the US dollar overnight as oil prices and gold fell away after another busy day in equity markets. Us markets had a mixed session in the end yesterday with the Dow managing to post small gains yet the S&P falling away slightly. The moves bring to an end a fairly aggressive run that has seen big falls and uncertainty around the equity markets. However the rest bite may only be a brief one as investors remain nervous around equity markets as they continue to show signs of weakness at the very same news stories that have in the past caused no issues. However Asian markets did manage to rally despite poor data from China, the CPI inflation figure fell to 1.6%, it’s the lowest level in 5 years showing yet more signs that the Chinese economy is slowing down. Of course this number comes after disappointing CPI numbers out of the UK and a day before the all-important Eurozone CPI readings tomorrow morning.


Today’s session will be dominated by numbers out of the UK and Eurozone yet again as CPI out of Germany is followed by the unemployment reading from the UK. Germany remains one of the big problem areas for Mario Draghi ahead of his speech this morning. Yesterday’s negative ZEW survey showed that confidence is at an almost 3 year low, with growth and inflation not faring much better. Today we will get the CPI reading and with no movement expected in the 0.8% rate there is no doubt that will be seen as a positive result. Mario Draghi will no doubt face questions over the next step for the ECB when he delivers a speech this morning and any hint towards a round of QE will be seen a positive move by the markets and the only logical next step.

With a rather different picture the UK government and BoE await the latest jobs report in the UK as expectations rise that the unemployment number will continue to improve and now the all-important average earnings number is also expected to show small signs of improvement. Governor Mark Carney outlined average earnings as a key figure that needs to rise before his team start to consider a rate hike in the UK, despite a raft of positive economic data. This seems like a sensible approach with and with that number only creeping to the upside over the last few months the BoE may well feel they have a little more time to play with. Mark Carney also mentioned last week that the BoE will not take into account general election timelines when making his decision over an interest rate hike. That is an interesting comment after sceptics out there, including myself, have been asking whether a rate hike before the general election would be the final nail in the coffin for the Conservative party in May 2015. One thing people do not like is the potential that a government could be taking money out of their pockets just as they step into the ballot box.

All in all today’s session as the potential for yet more in the way volatility with the key economic announcements due for release. Investors will also be looking towards earnings season in the US to give equity markets a further break. Yesterday saw JP Morgan Citi and Wells Fargo and Intel all post fairly strong earnings helping to boost belief that this strong rally isn’t quite over yet. Ahead of the open we expect to see the FTSE 100 open lower by 12 points with the German DAX lower by 7 points.

Read the full report at Alpari News Room​

 

[Alpari UK]

UK Opening Call from Alpari UK on 16 October 2014

Plenty more volatility expected as US futures turn lower

The dash for safe haven assets is continuing on Thursday, as stocks continue to be sold in favour of German bunds, Gold and the yen.
This has been going on for days now and despite the rally into the close yesterday, it looks likely to carry on today. That said, one thing we’ve learned from the last week is that opening levels aren’t necessarily an indication of how the coming session will go. There’s been so much whipsawing during the session that I wouldn’t be surprised to see everything reverse shortly after the open.
As it stands though, investors are very risk averse. Most eurozone bonds are really suffering today, with peripheral debt taking a particular beating. I’m sure people will cite many reasons for this in the coming days, such as the slight upward revision in the core CPI reading but I think this, like most other excuses being used for the market sell-off, is nonsense. This has been in the works for a long time because the market has been overly inflated and the time has just come for them to correct.
Yesterday, the S&P came within 0.1% of achieving a 10% sell-off from the highs reached a month ago, which is what many people have been saying is necessary for so long. The Dow is lagging behind the S&P slightly, having fallen just over 8.6% from its highs during yesterday’s session, before recovering, which suggests there may still be a little downside to come. Regardless, we’re now close to some very interesting levels because if the indices comfortably surpass the 10% correction mark, it will prompt talk of a much larger correction and even an end to the five year bull market. That won’t exactly help with the fear aspect that has been so apparent in the markets recently.
The problem we’re facing right now is the opposite of what we had a year ago. Absolutely everything is being seen as a reason to sell, whether it be low inflation, poor data, ebola or poor growth in the eurozone. In fact, not long ago, low inflation and low growth in the eurozone was boosting the markets because it increased the likelihood of more monetary stimulus. As for the poor growth aspect, the US and UK is actually growing at quite an impressive rate while the eurozone has been hit and miss for years. I’m not buying into these excuses, I think it is just an overdue sell-off and pretty soon, we’re going to see investors look at valuations as a bit of a bargain.
Earnings season could play a big part in the market bottoming out because if companies are performing well and giving positive outlooks, it’s going to make people question why they’re still selling. Not a lot has been said when it comes to earnings season so far as people are too busy trying to work out why the markets are collapsing around them. I remain convinced that will pass and earnings should provide the lift the markets need.
Economic data doesn’t appear to be able to do anything to support the markets right now. Good numbers get ignored while any slight miss prompts more selling. There are a number of pieces of data being released today throughout the morning of the US session so I expect a lot of volatility during this time. We’ve also got jobless claims and industrial production figures ahead of the open which could have a big impact on the opening levels, as could Dennis Lockharts speech half an hour before the opening bell. We’ll also hear from Narayana Kocherlakota and James Bullard throughout the session, who may attempt to calm the nerves in the markets and slow the decline.
The S&P is currently expected to open 27 points lower, the Dow 178 points lower and the Nasdaq 66 points lower.

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[Alpari UK]

UK Opening Call from Alpari UK on 17 October 2014

Data, earnings and speeches to test bullish sentiment

• Markets rally after monumental effort on Thursday;
• S&P looking more bullish after 10% correction;
• Economic data, earnings and speeches to test new bullish sentiment;
• Yellen speech could stir things up again in the markets.

Equity markets are finally back in the green on Friday, following more than a week of extreme negativity that saw the S&P come very close to a 10% drop from its record highs reached in September.
It took a monumental effort to turn things round though which says a lot about just how bad things had got. In the space of a few hours the ECB announced the reduction of haircuts on Greek debt, Fed officials talked up the potential for more quantitative easing and jobless claims fell to a 14 year low, while a number of other economic releases also exceeded expectations. Even after all this, indices only managed to erase losses and end the session pretty much flat on the day.
Things have got off to a more positive start today though, with European indices currently posting around 2% gains, while US futures are around 1% higher. If there’s one thing we’ve learned over the last week though, things can turn around rapidly so it’s far too early to suggest with any real confidence that this sell-off has ground to a halt.
That said, it’s been clear over the last few days that investors were being tempted into becoming buyers again. On Tuesday, the Dow and the S&P closed near their opening levels, suggesting a cooling in selling pressure, while on Wednesday, markets rallied into the close which is quite a bullish signal. Given that this rally occurred after the S&P had fallen 9.9% from its highs, extremely close to the 10% correction so many had called for, it may suggest that investors are happier with these levels. The fact that we didn’t see indices break below Wednesday’s lows is also quite a bullish technical signal in my opinion.
The real test will be how the market now responds to negative news, such as a disappointing economic release, poor earnings or a slightly hawkish comment from a Fed official. Well, all of these will be tested today. Ahead of the open, we’ll get some housing data for September, with housing starts and building permits numbers being released. Both are expected to rise slightly compared to August which could provide a boost, especially following yesterday’s disappointing NAHB housing market index number. We’ll also get the preliminary UoM consumer sentiment reading for October, which is expected to fall to 84.1 from 84.6. The consumer is very important to the US so this is always worth watching out for, especially at a time when the market is so sensitive.
Janet Yellen is due to speak today which cause a stir in the markets. The Dow rallied 150 points in the space of a few minutes yesterday after James Bullard suggested that the end of QE could be delayed and even increased. Bullard isn’t a voting member of the Fed so you can only imagine what would happen if we got similar admissions from Yellen today.
The S&P is currently expected to open 19 points higher, the Dow 172 points higher and the Nasdaq 40 points higher.

Read the full report at Alpari News Room​

 

[Alpari UK]

Daily Market Update - 17 October 2014 - Alpari UK

 

[Alpari UK]

Weekly market preview from Alpari UK on 20 October 2014

A big week ahead in the markets, where the emergence of an unexpected correction has seen volatility return with a bang. The focus within the US markets will be geared towards the CPI release in the wake of the disinflationary worries that have dominated affairs in recent weeks. Meanwhile the UK GDP figure is likely to push forward talk of whether rates should move despite tumbling inflation. On the other hand, the eurozone has a somewhat quiet week, where a whole raft of PMI figures look set to dominate affairs.

In Asia, the busy week continues, with Chinese GDP set to draw focus upon a somewhat unpredictable economy of late. Finally, the Australian monetary policy minutes are likely to be the main event to watch out for amid mixed signals from the RBA.

US

The US markets are likely to see significant volatility given the major moves that saw over 10% wiped off most of the major indices. Many of these moves have been attributed to jittery traders who sold off the back of a handful of moderately negative economic releases. Whilst I do not think this is necessarily the full story, it is clear that the markets are highly sensitive at the moment and as such the economic calendar becomes more important than ever. With this in mind, the release of US CPI and manufacturing PMI figures should attract significant interest this week.

The most notable of these two releases is no doubt Wednesday’s CPI reading which will dominate given the current furore surrounding disinflation. Recent comments from Fed members Bullard and Williams have put the potential for a delay or increase in QE on the cards, all of which stems from clear downward pressure upon inflation across the world. Tumbling CPI in the US, UK, eurozone, China and alike has put the topic back on the agenda and monetary policy would typically become more accommodative as a response to any disinflationary threat. With that in mind, Wednesday’s CPI reading will be absolutely crucial for the markets and could cause significant volatility.

The month-on-month CPI reading is expected to improve somewhat, from -0.2% in August to a flat 0%. This is expected to be accompanied by a flatlining year-on-year figure of 1.7%. Another figure to be watching out for is the core number, which strips out volatile elements such as food and energy prices. Interestingly the core estimates point towards the yearly figure remaining at 1.7% and a month-on-month number of 0.2%. Thus for the most part, the markets expect a steady report this month, but with markets fully aware of what further downside could mean, there will be very close attention being paid to this release.

Later in the week, the flash manufacturing PMI is released on Thursday, where markets are expecting to see it pull back somewhat from 57.5 to 57.2. This number is likely to take on a greater significance with the current volatility within the markets, with poor data points leading to a theory that the economy could still do with some more easing. That being said, the US economy has been faring well in the past year and for that reason, I don’t personally follow that rhetoric too much. Ultimately, this is yet another major economic indicator that could move the markets and with a negative move predicted, it could yet help the downbeat story seen within the markets recently.

UK

A somewhat busy week ahead in the UK, where BoE minutes, retail sales and GDP figures allow for a likely continuation of the volatility that we have seen recently.

Wednesday’s BoE monetary policy minutes are going to the be first major event of the week in the UK, with a focus upon interest rates back on the cards. At the time of the last meeting, much of the pressure was geared towards tightening monetary policy in the near term and raising rates in Q2/3 2015. However, what a difference a week or two can make, where the global downside shocks to inflation means that there is a renewed feeling of anxiety within the central banks about raising rates too soon. As such, these minutes will be negated somewhat should we see a more hawkish view given recent developments. However, with the markets feeling like there could be more loose policy around the corner, it makes sense that any dovish minutes would be taken as particularly potent given that the next month’s minutes are likely to be dovish in comparison.

Thursday sees the retail sales figures shine a light upon the consumer base at a time when confidence is high in the UK recovery. For the most part, this measure is pretty volatile and we can see monthly swings into and out of positive growth on a regular occasion. However, last year saw 6 of 12 months with negative growth in MoM retail sales. This year has seen just 2 months out of 8 and so it will be interesting to see if the estimates of a -0.2% fall are set to give a third month of downside YTD. Given the volatility of the MoM figure, I believe markets will take any moderate downside with a pinch of salt. However, any major swings in these figures will be highly notable given the linkages between consumer activity and output growth.

Finally, the release of UK GDP for the third quarter of the year will no doubt dominate trading on Friday, with market interest focusing upon whether the strength seen in the first 6 months can be matched. For the most part, there is not too much pressure upon the UK what with the strong growth that has been seen recently. For that reason, the expected pullback from 3.2% to 3.0% wouldnt be the worst thing in the world given that 3.2% represents the highest rate of growth since 2007. However, any major move in this figure would no doubt be taken as a strong indicator with regards to the health of the economy going forward and thus the onward sentiment will be built on such a move.


Eurozone

A bit of a quiet week in the eurozone, where the major economic releases come in the form of the PMI figures, due out throughout Thursday morning. These surveys have been some of the first indicators of the downturn that has been evident within the likes of Germany in recent months and thus a poor or strong reading can provide a clue to the coming months for the eurozone. The focus of the markets will be particularly geared towards the German manufacturing PMI figure, which posted the first contradiction figure for 15 months in September. Given the reliance upon Germany within the eurozone, the recent downturn has unsurprisingly been treated as a bit of a disaster for the single currency region. Thus should we see further deterioration it would no doubt mean yet more calls for QE from the ECB. Ultimately, the attention will generally be upon whether there is a move in a certain direction for many of the readings. That being said, I believe the most important are the likes of the eurozone numbers, along with French and German manufacturing PMIs. Be aware of the eurozone composite figure which provides a good overview of the whole single currency region given that it includes both manufacturing and services sectors.

Asia & Oceania

A busy week in China, where the Hong Kong protests has somewhat dampened any renewed positivity given the possible impact it could have upon political stability within the Asian powerhouse. However, with the release of the GDP figure along with the HSBC manufacturing PMI number, the focus can try to return to the economic stance of China once again. The GDP figure is of course the most important number when it comes to China, with an economy and political system built on strong growth and high unemployment growth as a result. What we have seen in Hong Kong is no doubt the kind of thing that would be more commonplace should China not see the kind of improvement in living standards that has become apparent over the past decade. As such, it is important for China to remain strong going forward. For some of us, there is the belief that GDP isn’t necessarily everything, with much of the growth coming from artificially propping up many much of the economy. However, for now the focus is upon quantity over quality of growth and thus markets will definitely be closely watching for any movement in this figure. Estimates point towards a pullback to 72.5% in Q3 from 7.5% in Q2.

Thursday sees the release of the HSBC manufacturing PMI figure, where markets will focus upon the ability of the Chinese manufacturing sector to convincingly push out of the slowdown that has been evident in H1 2014. Recent months have been stronger than many expected, yet the pullback towards the 50 mark (which separates expansion from contraction) is certainly worrying for China. Thus this month will be crucial. Should we see this number fall back below 50, it could mean further downside for Chinese manufacturing to come and thus a potential next round of stimulus from the PBOC. Otherwise, a strong reading would accompany solid export numbers seen recently and bring alot more confidence in the recovery.

The main event in Australia is likely to be the release of the monetary policy minutes, due on Tuesday. The focus of the RBA recently has been one of stability, where the economy is too weak in its recovery for any sort of rate rise and the housing sector is too buoyant to reduce rates any more. As such, minutes are always the ideal opportunity to see whether the RBA are going to be leaning more towards a dovish or hawkish outlook.

 

[Alpari UK]

UK Opening Call from Alpari UK - 20 October 2014

European futures higher as focus turns to German inflation

It looks like the volatility in equity markets may not yet be over as investors seem to have decided we can re rally from the lows seen over the last few weeks or so. US and European markets staged an impressive comeback on Friday managing to help lead a recovery to the correction. However we cannot yet rest easy and get back into the long term buying trend, with a whole host of economic data due for release this week and the all-important Chinese GDP figures set for release no one could rule out yet more selling.

The trading week will start a little more subdued this week, much the same as last Monday, with the economic calendar looking rather light of any big releases. However this is likely to be the calm before the storm as early morning on Tuesday we will get the GDP release from China. Chinese growth has been a worry for the markets for a long time, with the Chinese government focussing on that level of 7.7% growth. Tomorrows figures is expected to show growth down as low as 7.2%, a move that could have the potential to spook global equity markets further. Of course the GDP figure is one that is diluted somewhat, with much of the growth coming from stimulus measures. The importance to the market is not dampened by this though and there is real potential for more volatility around this number. With fears over the strength of the US economy, a weaker number from the world’s second largest economy would be a big blow for the global growth story.

Asia and China remains in focus as we move through the week with Thursday seeing the release of the HSBC manufacturing PMI number. Recent months have seen a much stronger figure here, giving investors optimism that China’s manufacturing power can get them out of the slowdown. So yet again a weaker reading could well give traders a reason to dump more stock.

There will be some European data this morning with PPI from German and current account data from the Eurozone, however after Friday’s strong performance in equities and with Asian markets following suit overnight it may well be a case of investors trailing that positive feeling over the weekend. The major indices are very much sitting on a knife edge at the moment. There is the potential for more downside after the falls of the last couple of weeks but Friday would have given people renewed optimism that the global rally could well still be on. This week will be pivotal in telling us whether we have already seen the worst or whether we could well see another 10% fall up towards the end of the year.

Ahead of the open we expect to see the FTSE100 open higher by 29 points, with the German DAX higher by 38 points.

 

[Alpari UK]

US Opening Call from Alpari UK - 20 October 2014

Earnings may provide a lift ahead of another volatile week

Volatility has been a massive talking point over the last week and this looks set to continue following some more big moves in Asia overnight and Europe this morning.

I’m not sure we’ll get the kind of volatility seen last week in the coming days, which I’m sure traders will be more than happy about, but compared to the last few years it is likely to remain elevated. It goes without saying that traders like volatile markets as they’re necessary in order to create tradable opportunities, but too much volatility can be as unwelcome as none at all.

The big question this week is going to be whether the correction has played out if what we’re seeing is simply the bears taking a breather. I personally think we have either reached or come very close to the lows we’re going to see this year. I wouldn’t exactly say I’m bullish yet as I think we could yet see a retest of those lows from last week, or even a move slightly below, but I’m not bearish either.

The giveaway could be how traders react to a retest of those lows. Last week the response was panic is why we saw such aggressive selling at even the tiniest piece of negative news flow. If we get a similar response this week then there could be plenty more downside to come but I’m not convinced we will. The S&P came close to a 10% decline from its all-time highs and I think this area will now be well supported.

Earnings season could play a much bigger part in the coming weeks with many more companies reporting on the third quarter. This week alone, around a fifth of the S&P 500 companies are scheduled to report earnings which, given how quiet a week it is on the economic data side of things, could well have a big impact on investor sentiment.

Today there is nothing noteworthy in terms of economic data, but on the earnings front we will get numbers from Apple and IBM, among others. It’s certainly worth keeping an eye on how these perform because it could impact sentiment which affects all markets.

The S&P is expected to open 4 points higher, the Dow 37 points higher and the Nasdaq 8 points higher.