Forex research

[Alpari UK]

UK Opening Call from Alpari UK on 19 September 2014

Scots vote for independence as focus turns to devolution

• Scotland votes to remain within the United Kingdom
• Europe boosted by idea that it will remain united
• Focus now moves towards the devolution of powers as promised by David Cameron

European markets are waking up to a historic decision by Scotland to reject independence, bringing with it a guarantee of a stable United Kingdom and a reduction in the likeliness that Europe will see a raft of breakaway states form. This boost has returned the certainty to the markets for what is expected to be the strongest growing western economy in 2014, and because of this we are seeing European futures point towards a buoyant open, with FTSE100 expected to open +98, CAC +16 and DAX +77 points.

Scotland has decided to reject independence following a hard fought two year campaign which saw a wide ‘No’ majority shrink to rumours of a potential ‘Yes’ vote in the last week. This vote has shaken the political spectrum within the UK and whilst a decision to remain within the Union has been made, there is no doubt that a drive towards change for regional powers which should shape politics for the foreseeable future. However, the important step ahead is clearly going to involve a discussion between both Yes and No campaigners to appease the inevitable feeling of unhappiness amongst the 1.5 million plus voters that chose to take the step and vote for independence.

The story does not end here, with plans for further devolution to be discussed as early as October, which is going to be followed by a white paper in November and finally, some new laws are expected to pass by January 2015. The issues at hand are wide ranging and dependent upon the degree to which power is devolved, will be likely to appease many within the Yes campaign. This includes the control of factors such as income tax, VAT, benefits, air passenger duty, inheritance tax, capital gains tax and benefits as a whole. The question now is whether this will act as a spark to drive increased calls from the likes of Wales and Northern Ireland to gain the same powers.

That being said, despite the loud campaign for independence gaining significant numbers over the recent weeks, it is clear that a strong majority are unwilling to leave a Union that provides Scotland with more revenue than they put in. The fact of the matter is that the Union is bigger than the sum of its parts and Westminster will be buoyed by the news that their influence will remain strong in the world whilst the Scottish can be happy knowing that they voted for stability and prosperity rather than uncertainty on several absolutely key issues. The news is also going to be welcomed by the Europeans, who have been fighting against the idea of breaking up ever since Mario Draghi’s “whatever it takes” speech. Given the feeling that an independent Scotland would lead to an inevitable fight for similar steps to be taken in breakaway regions such as Catalonia and Bavaria, today’s vote is a major boost for the European project as a whole.

Markets have been responding in a somewhat predictable manner in line with the somewhat smooth election process which at no point looked providing a win for the independence. Despite this, GBPUSD has been moving higher overnight, gaining over 1% today alone, which actually failed to match the gains seen yesterday, showing that markets have strongly backed a ‘No’ vote. In the future markets, the FTSE100 has move 1.6% higher which is being filtered throughout the European markets as a whole.

 

[Alpari UK]

US Opening Call from Alpari UK on 19 September 2014

Markets rally as Scots say no to independence

US futures are pointing to a positive open on Friday, with indices currently seen up around four tenths of one percent. The S&P is currently seen 7 points higher, the Dow 75 points higher and the Nasdaq 17 points higher.

Following weeks of uncertainty in the markets regarding Scotland’s position within the UK, the people have voted and decided to remain a part of the 307 year old union. Despite many polls in recent weeks suggesting the race was neck and neck, with one even claiming that the “yes” campaign was ahead, it was a fairly comfortably win in the end for the better together campaign, with 55% of people voting against independence.

What’s more, at no point during the counting process did the “yes” campaign ever look likely to win, so the volatility that we could have seen in the markets wasn’t really there. As the regions announced the results and it became apparent that Scotland would not get independence, investors did respond but not as strongly as some may have expected.

The pound, which appeared to anticipate the result in the 24 hours before the result was confirmed, rallied as the results were announced but it has reversed all of its gains since and now trades lower on the day. This is about as clear an example of buying the rumour and selling the news as you can hope to see. With the uncertainty of the referendum now behind us, it will be interesting to see whether the pound can make up the lost ground of the last couple of months or if the dollar can continue to run the show and drive the cable pair back towards 1.60.

The FTSE is trading higher on the day, with the result having a particularly positive impact on RBS and Lloyds, both of which have their head offices in Scotland and had threatened to move them to London should the Scots get independence. It’s not just UK companies that had a vested interest in the referendum, those in Spain were also keeping a close eye on the result as independence for Scotland may lead to further calls from Catalonia for the vote. The failure of the Scots to get independence has been judged to have weakened the Catalonians campaign, which has resulted in Spanish yields falling by 7 basis points and the IBEX trading 1% higher.

With the two major risk events of this week now out of the way, the other being the Fed decision, investors have very little to focus on, which is likely to make it a very quiet end to the week. There is no major economic data due out this afternoon and everything in the news is likely to continue to focus on the referendum result.

 

[Alpari UK]

Daily Market Update - 19 September 2014 - Alpari UK

 

[Alpari UK]

Weekly Market Preview from Alpari UK on 22 September 2014

With two major risk events now behind us – Fed decision and the Scottish referendum - attention is likely to shift back to the economic data and whether we’re seeing a strong enough numbers to justify an earlier rate hike in the US and UK, or weak enough numbers to justify further monetary stimulus in China, the eurozone or Japan.

The coming week may not be the busiest of the month but there’s still plenty of key figures being released that have the potential to create waves in the markets, such as the September PMI readings, not to mention a number of speeches from Fed officials a week after Richard Fisher joined Charles Plosser in calling for a hike and more members brought forward their rate hike forecasts to 2015.

US

It’s not going to be the biggest of data weeks for the US, but there is a steady flow of important releases coming through the week that are certainly worth monitoring. The week gets underway with some housing data on Monday and Wednesday and if last weeks housing numbers are anything to go by, they could be quite disappointing. The housing market is one of those areas that was key to the economic recovery in the US last year but has not really recovered to pre-financial crisis levels. Rising rates later this year may weigh on the housing numbers in the coming months, as we saw last year, although if this recovery is as strong as we hope, maybe people will be in a better position to take it and the numbers won’t be too negatively affected.

The biggest release this week in my view is the durable goods numbers, which can be overlooked by some but actually provide fantastic insight into the state of the economy and confidence in it going forward. People and businesses only tend to invest in goods that last more than three years when things are going well and they are confident that this isn’t going to change. As a result, this can be seen as both backward and forward looking which is quite unusual in a piece of data. The only problem with these is they can be quite volatile, especially the headline figure which is why is can be best to pay more attention to the core reading.

The second quarter GDP reading and UoM consumer sentiment readings on Friday may be something of a non-event given that they are both final revisions, although you can never get complacent when it comes to these figures as big revisions do happen and can move the markets.

The biggest event could well be the Fed speeches since Fisher became the second dissenter at last week’s meeting, while two more members brought forward their forecast for the first rate hike to next year. This may not seem a big deal as people had priced it in for the middle of 2015 anyway, but together they represent an increasingly hawkish Federal Reserve and that is not something the markets want to see.

UK

There are no major events in the UK this week.

Eurozone

This week we have one big day of data, with German, French and eurozone PMIs being released for the manufacturing and services sectors and a couple of German surveys later in the week, so as with everywhere else, it’s looking a little quiet. The PMI readings will be keenly watched for any indication that the eurozone is going to bounce back from the slump it has become entrenched in. We always knew that any recovery in the eurozone was going to be slower than anywhere else and it was going to run into a few problems but the fact that this one has also gripped Germany is a concern.

The PMI readings are expected to show another across the board decline in confidence in both sectors, which would suggest the slump will continue right up until the end of the year. The only bright side is that the expected declines are very small which may be a sign that the numbers are about to bottom out in the coming months. Or maybe I’m just clutching at straws, this is the eurozone after all!

The two German survey’s are Ifo business climate and Gfk consumer climate and both are seen as key readings for the economy, particularly the former given that the economy is less geared towards the consumer than that of the US and UK. We’ve seen four consecutive declines in the business climate number, if we get a fifth this week, we could well be looking at a recession in Germany given that the country contracted by 0.2% in the second quarter.

We’ll also hear from ECB President Mario Draghi on Monday as he testifies before the European Parliament’s Economic and Monetary Committee in Brussels. People are very focused on the ECB at the moment because for the first time, it seems very wiling to provide monetary stimulus for the eurozone economy and not wait until there is absolutely no other option available. Whether we will ever get quantitative easing is another question altogether and I remain very doubtful despite people’s expectations that it could even come this year. Draghi may provide some hints at this event so we should be prepared for some potential volatility.

Asia & Oceania

It’s going to be a very quiet week in Asia, which means we’re unlikely to get too much market direction ahead of the European session. There are a couple of data pieces to watch out for, in particular the HSBC flash manufacturing PMI on Tuesday. The September reading is expected to point to another drop in confidence in the sector, with the number seen falling to 50, the level that separates growth from contraction. I’m not convinced people will be too concerned though given that we learned last week that the People’s Bank of China has injected large sums of cash into its largest banks and cut the short term borrowing rate. This will take time to have an impact so as long as the PMI reading isn’t too woeful, I think investors will accept it.

Finally we’ll get the Tokyo core CPI reading on Friday. As Japan’s largest city, this is seen as one of the more important readings but the market impact doesn’t tend to be too great unless the release is wide of the mark. People are looking very closely at the inflation figures for Japan for signs that we could get more stimulus from the Bank of Japan so this is certainly worth following.

 

[Alpari UK]

UK Opening Call from Alpari UK on 22 September 2014

Focus returns to ECB policy as Draghi takes the stand

• Markets lower after buoyant Friday
• Europe returns to focus upon Eurozone monetary policy
• Mario Draghi set to address the European Parliaments

Global indices are looking to start the week on a somewhat softer tone, with the Asian markets leading the way lower overnight. Following the excitement of Friday’s Scottish referendum and Alibaba IPO, things have come down with a bump, especially in China and Japan where a fall in commodity prices hit valuations. Europe is subsequently looking for a negative open, with the FTSE100 -25, CAC -32 and DAX -67 points.

A somewhat quiet start to a quiet week in stall today, where the European markets have to realign their thought processes following a scare last week where polls started pointing towards the possibility of a move to independence for Scotland. With the existence of further regions (such as Catalonia and Bavaria) who just like Scotland were seeking to form breakaway states, it is believed that Friday’s result should go some way to putting to bed the idea for some of these other regions too. Thus the emphasis within the Eurozone is likely to shift back towards the norm, which is an ongoing picture of low inflation, low growth and ineffective monetary policy. The recent shock announcement that Mario Draghi’s much heralded TLTRO programme had only seen €82.6 billion in takeup from the major banks, despite a possible total allowance for the first two rounds of €400 billion. This has put pressure upon Draghi should we not see an increased interest at the December round.


Over the weekend, US Treasury Secretary Jack Lew called out Europe and Japan as two regions which were holding the world back and called upon them both to do more to spur on growth and help the global recovery. This highlights the importance of success for Mario Draghi and increasingly there appears to be less and less options but to implement a fully blown quantitative easing programme in the near future. The introduction of the ABS scheme at the last ECB meeting is essentially a halfway house to such a step, yet the importance of a QE scheme is as much in its name as anything else given the now commonly known implications for jobs, growth and asset prices. It is evident that until Draghi takes that step, there will always be indecision and mistrust of the direction of the Eurozone and that leads to weak investment and a lack of prospects.

The European focus for the day will be geared towards a speech from Mario Draghi in the afternoon. Draghi’s testimony in front of the European Parliament’s Economic and Monetary Committee should make for an interesting watch, with monetary policy set to take centre stage yet again. There is likely to be an interest in the inability of previous measures to spur on growth in jobs, output and inflation, which is sure to bring the question of what else can be done to do exactly that. Therefore markets will be well aware of the possibility for major volatility in during Draghi’s testimony as everyone awaits those two little letters, ‘QE’.

 

[Alpari UK]

US Opening Call from Alpari UK on 22 September 2014

FOMC’s Dudley hoping to give clarify on Fed outlook

• US markets expected to pull back following recent strength;
• G20 meeting bring questions on European and Japanese growth;
• FOMC back in focus as Dudley speaks in New York.

A weak open to the European markets has followed on from what is a pretty disappointing start to the week with the Japanese Nikkei, Hang Seng and Shanghai composite all posting significant falls to start the week. The US markets are expecting a very similar mood, where futures point towards the S&P500 opening -8 points lower, Nasdaq -21 points and DJIA -30 points.

Friday’s Alibaba driven excitement came off the back of a strong Scottish referendum result which provided a definitive conclusion to an event which provided significant degree of uncertainty within the markets. With new alltime highs recorded in the S&P500 last week, it comes as no surprise that we are seeing an element of profit taking come into the market, which has also been seen in the USDJPY currency pair following the strongest period of upside since January 2013.

This indecision within the markets today was always likely given the relatively quiet day ahead. Over the weekend, the G20 finance ministers meeting hosted in Cairns provided a reminder of where the global recovery currently stands, with the Eurozone and Japan being singled out as particularly dragging upon G20 growth. However, for the most part this has been highlighted as possibly being achieved through fiscal infrastructure investment as opposed to monetary policy per se.

In the US session, the focus will largely be geared towards the release of existing home sales data, due out soon after the markets open. This is accompanied by a speech from FOMC member William Dudley in New York. At a mixed FOMC meeting, the markets saw Janet Yellen somehow bring about both a more bullish and bearish outlook, thus pushing the emphasis of providing more clarity upon the other members of the Fed committee. With a tighter timeline for rate hikes, set against a continued hold-off on providing a start date for the first rate hike, it will be interesting to see if Dudley can provide any clarity on either points.

 

[Alpari UK]

Daily Market Update - 22 September 2014 - Alpari UK

 

[Alpari UK]

US Opening Call from Alpari UK on 23 September 2014

Weak PMIs and attack on IS leave markets in the red

• Chinese manufacturing PMI fails to boost markets
• Eurozone PMIs continue to disappoint
• Coalition forces attack ‘Islamic State’ positions in Syria for the first time
• FOMC speeches dominate US session.


European and Asian markets are continuing the negative start to the week, posting further losses following a raft of poor eurozone PMI releases this morning. This comes despite a strong Chinese manufacturing PMI figure overnight, which managed to keep only the Shanghai composite above water. Meanwhile, the shelling of ISIS positions saw the first of many coalition military operations against the militant group within Syria. US markets are expected to follow European indices lower, with futures pointing towards the S&P500 -7, Dow – 43 and Nasdaq -17 points on the US open.

Today is clearly dominated by the release of various PMI figures across China, the Eurozone and US. Measuring the outlook of purchase managers within specific industries in relation to business conditions such as employment, demand and prices, the PMI figures typically provide markets with an idea of exactly where production, exports and jobs figures are going to move in the coming weeks and months.

The Chinese HSBC manufacturing PMI release overnight has been absolutely key in determining the degree of weakness within the manufacturing sector during the H1 slowdown this year, given the focus upon SME’s (small to medium sized enterprises). However, despite the clear influence of this figure, today’s strong reading made little impact upon the Asian markets, with the Shanghai representing the only market to post a gain. This inability to respond positively to strong data out of China shows an innate weakness within the markets, and geared us up towards the release eurozone figures which were expected to follow the pattern of weak figures seen in recent months.

True to form, the figures out of the Eurozone came in to the downside yet again, with the only main boost coming in the form of the French manufacturing sector, which managed to rise from 46.9 to 48.8. However, with the French manufacturing and services sectors now both contracting, there is little to shout about across the Atlantic. German manufacturing appears to be following suit, with the current level standing a mere 0.4 away from contraction (50.3). Ultimately, the Eurozone is in a mess, with inflation, growth, jobs and industry all weak. This is music to the ears of Vladimir Putin whose actions have driven the imposition of sanctions from the likes of Germany and France. However, with those measures showing little signs of easing due to ongoing Ukrainian conflict, there is clearly an underlying threat to Eurozone growth and it is something that will have to be addressed sooner rather than later. Mario Draghi has taken various steps, which have failed to make a significant impact as yet, however as seen in his Jackson Hole speech, the feeling is that this could be a problem which has both fiscal and monetary solutions and it will be interesting to see whether the emphasis will shift towards greater spending from the likes of France and Germany.

Overnight, the US was joined by their ‘coalition partners’ in attacking a number of ISIS positions in Syria. This represents both the first attack upon the ‘Islamic State’ within Syria (without the permission of Assad), along with the first attack of Middle Eastern countries upon the terrorist group. Of the coalition partners involved, military jets from Bahrain, Saudi Arabia, Jordan and the UAE were all cited as being involved in today’s attack. This is a major step given the importance of involvement from forces in the region and to some extent will appease the fears of many within the US that this will be another war which will be seen down the line as the US against Islam or the Middle East. The threat of ISIS is clearly as relevant to those within the Middle East as it is to the US and a global effort to avoid the genocide, beheadings and slavery that has been commonplace under the groups expansion is clearly something which is going to be one of the biggest global challenges this decade. That being said, the escalation of the conflict will of course raise questions over the risk appetite of many within the markets, who are no doubt worried about a major war which appears to be unfolding. As such, gold and Oil have seen a round of buying this morning, with global indices selling off. However, the moderate degree to which such moves have occurred shows that there is a degree of inevitability to today’s announcement.

The US session looks somewhat more quiet from an economic data point of view, with markets generally focusing upon speeches from two FOMC members, Powell and Kocherlakota. The FOMC has been in spotlight over the past 24 hours, with yesterday’s announcement that the Philidelphia Fed President William Plosser will retire in March 2015. This is a major shift, with Plosser representing the most hawkish and vocal dissenter of the committee. However, with regards to today’s speeches, the interest will largely be geared towards Jerome Powell, given the fact that Narayana Kocherlakota already spoke overnight and will thus be likely to repeat much of the same comments. Kocherlakota cited low inflation as an ongoing worry and thus there is the chance that monetary policy will remain accommodative for a longer time than desired, simply to help raise the rate of price growth. It will be interesting to see if Powell will tread a similar path and given the typical method of committee members preparing the ground for any changes in policy from the governor through their public views, it is likely we will see an estimate of when rates will rise from a member well ahead of Yellen herself.

 

[Alpari UK]

Daily Market Update - 23 September 2014 - Alpari UK

 

[Alpari UK]

UK Opening Call from Alpari UK on 24 September 2014

German survey could provide more eurozone negativity

• Long term conflict in Middle East impacts market sentiment
• New Zealand trade balance improves
• German survey could provide yet more bad news for the eurozone

Global markets continue to move lower for a third day today, as the threat of a drawn out campaign against the ‘Islamic State’ becomes ever more likely. Overnight trade data out of New Zealand provided markets with a more buoyant outlook and which could lead to further interest rate hikes. A quiet European session sees a focus upon the German business climate which is expected to see further weakness. All of this means that we are looking for a lower open for European markets, with the FTSE100 -21, CAC -1, and DAX -10 points in the futures markets.

Yesterday saw the beginning of a new era, as the US was joined by a handful of Arabic nations in attacking ISIS positions in Syria. Whilst many have seen this as a positive, given the importance of Middle Eastern involvement, the true impact upon the market is one of risk aversion. An announcement from the Pentagon warned of a sustained campaign that could last years and thus the new norm has been born where habitual attacks upon positions in the Middle East are now expected to be a common recurrence. For now, this is not too major, yet the call for boots on the ground has already been touted by the likes of Tony Blair and Iran, which while currently forming the minority opinion, are likely to be correct should there be any sort of willpower to fully eradicate the ‘Islamic State’ down the line. As this conflict develops, the ability to find members and positions of the group will no doubt become more difficult and as yesterday’s bombings show, the publicity attached to aerial attacks will always focus upon the deaths of civilians and children, as Israel very well knows. It is a PR nightmare and given the success ISIS have had in utilising social media to their advantage, I have no doubt that the civilian death toll in Syria and Iraq will be both public and embellished. However, the involvement of those Arabic nations means that there can be greater confidence that the conflict is not seen as the US vs Islam.

New Zealand saw their trade deficit almost cut in half, as imports sharply fell, whilst export saw a lower than expected drop in August. This came despite the fall in dairy prices, meaning that we could be seeing increased demand from abroad owing to the new reduced price for milk powder and alike. The New Zealand dollar some upside off the back of this result and with the RBNZ currently trying gauge when the next interest rate hike should be, todays numbers will no doubt be a positive which could push the country towards yet another shift in the coming months.

A quiet European session sees markets focus upon the release of the German IFO business climate survey, due out in the morning. Confidence in the German economy has been somewhat hard to come by in recent months, with Russian sanctions hitting business interests, growth falling to -0.2% for Q3, manufacturing nearing contraction and exports suffering. These developments have been reflected in recent months by this survey, which has seen a peak of 111.2 pull back to 106.3 last month. Expectations are for yet another fall, towards 105.7 which would represent the lowest level since December 2012. With European markets already reeling from a raft of PMI figures yesterday which saw French services and manufacturing in contraction, whilst German manufacturing gets ever closer, the release of yet further negative data this morning could compound the weakness seen overnight and lead to a third day of losses in Europe.

 

[Alpari UK]

US Opening Call from Alpari UK on 24 September 2014

Weak German survey points to the need for stimulus

• Coalition attack on IS important to draw together common interests
• German IFO survey falls to lowest level since April 2013
• Death cross in the Russell 2000 points to potential weakness.

US markets are expected to open flat, as the selloff that has personified the first half of this week is finally looking to ease somewhat. The risk-off sentiment driven by US and Arabic raids in Syria are easing somewhat and a moderate response to yet further poor figures out of Germany point to a market which may be oversold. However, with many in the markets pointing to a death cross in the Small cap Russell 2000, many are wondering whether the technical are pointing towards further losses to come. US futures are pointing towards a mixed open, with the S&P500 and Nasdaq looking flat, whilst the DJIA is expected to open +2 points.


Yesterdays news that the US has launched attacks upon Islamic State targets in Syria did not come as much of a surprise. However, with the involvement of five Arabic states, this marked the first time in 23 years that the US has been joined by any Arab allies in any such military operation. The threat is certainly known, yet the extent of the coalition that has been put together by John Kerry was yet to be exposed. Today the UK woke up to an announcement from David Cameron that the UK is also not in a position to stand by without taking a military presence in this affair too. However, probably the most important element of the attacks so far is the involvement of Saudi Arabia, which is a Sunni muslim Kindom with traditional values. The purpose of Kerry requiring the Iraq government to forge a new coalition which represents both Sunni, Shiite and Kurdish interests is to reflect the fact that this is not a war against Sunni muslims, but instead the warped ideology of the Islamic State itself. Thus with Saudi Arabia becoming part of this coalition, there is a feeling that it adds credence to the idea of a coalition of not only nations and religions, but also a coalition of Kurds, Sunni and Shiite forces which is absolutely key. From a market standpoint, the interest really extends to how long and to what extent such a conflict is likely to last for. The Pentagon’s decision to cite a timeline in years shows that no one expects this to be a quick fix and as such there has been worries as reflected in lower equity prices and higher gold prices.

The European session has been dominated once more by disappointing figures out of Germany, following the close shave which saw the crucial German manufacturing PMI fall to 50.3. Today it was the turn of the German IFO business climate survey, which fell to the lowest level since April 2013 (104.7) and represented a fifth consecutive fall in this measure. This negative outlook is likely to be largely affected by Russian sanctions and has led to IFO commenting that the “Germany economy is no longer running smoothly”. Ultimately today’s release adds yet more pressure upon both the ECB and German government to act in tandem. Mario Draghi is no doubt moving closer towards a potential shift to implement QE with each measure that fails to generate growth of inflation and output. However, there is also a case to answer for the Angela Merkel who must surely start looking to release the fiscal handbrake and start spending to generate greater growth for the greater good of the Eurozone as a whole. With a report by Allianz highlighting that the low ECB rates tend to redistribute wealth from Germany to the periphery, it is surely only a matter of time until internal action is sought as the priority rather than relying upon Draghi et al.

The technical analysts amongst us have been watching the Russell 2000 carefully this week, as a ‘death cross’ has appeared for the first time since Q3 2011. Now this move of the 50 day simple moving average (SMA) below the 200 SMA can be seen by many as a strong sign of weakness in the markets. Furthermore, with the Russell 2000 often seen as a leading indicator of what is going to happen down the line in the major US indices, this is certainly something people are thinking could signal worry for the likes of the S&P500. However, the trend is your friend and with a long term primary uptrend still in play, there would be more indicators needed to gain any confidence of a major sell-off in the markets.

The US session is looking somewhat quiet with the new home sales data representing the only major data point to watch out for. Monday’s poor existing home sales release showed a potential weakness in the market over August and as such I am cautious about some of the bullish estimates in the markets. Also be on the lookout for the speech from Fed FOMC member Loretta Mester who is due to discuss monetary policy and her economic outlook in Cleveland later today.

 

[Alpari UK]

Daily Market Update - 24 September 2014 - Alpari UK



- Markets lower as risk of risk aversion and profit taking dominates
- Coalition strikes on IS positions dominate markets
- German IFO figures tumble

 

[Alpari UK]

UK Opening Call from Alpari UK on 25 September 2014

Strong US session pushes Europe higher

• Strong US housing data strengthens markets resolve
• Dovish Fed speaker provides further boost
• Quiet European session likely to see light trading

This week is beginning to looks like a tale of two halves, with yesterday witnessing substantial gains across both US and Asian indices which are now expected to carry on through to the European market today. Driven by an outstanding housing release late into the US session, easing fears that resulted from a poor existing home sales figure on Monday. With European markets virtually bereft of any notable data or economic release today, it is likely that they will follow the lead of the US and Asian markets higher. Futures point towards a positive open, with the FTSE100 +1, CAC +3 and DAX +5 points.

Yesterday’s new home sales figure took markets by surprise, punching the 500k mark to reach the joint highest figure since late 2008. Coming off the back of a period of housing sector weakness, as personified by Monday’s weak existing home sales figure, it looked like we could be in for yet another disappointment, yet in catching the markets by surprise, we have seen a strong bounce across the US indices, which has subsequently fed into the Asian markets, with the Nikkei225 in particular erasing much of the week’s losses.

Meanwhile, Chicago Fed President Charles Evans struck a particularly dovish tone yesterday, discussing how he believes that the FOMC should delay raising rates until sufficient momentum is in place. Evans called for the Fed to be exceptionally patient in their quest to remove it’s monetary stimulus, which was music to the ears of the markets, with the likes of the S&P500 following up on gains seen earlier in the session. This speech reflects to differing opinions within the Fed committee, where concurrent comments from Cleveland Fed Loretta Mester focused more upon changing the current forward guidance towards something which was data driven and could account for both longer and shorter period of time before rates rise. Ultimately, any change from the top will always be expressed in one form or another by members of the committee, the difficulty is deciphering which of the members will get their own way. For the most part it is about finding the consensus and in a week full of Fed speeches, a clear theme of thought hasn’t yet emerged which means we could see yet more indecision at the next FOMC meeting.

The European session is looking completely bare of any major event to move the markets and for the most part, people will be following the bullish gains of yesterday in the US and Asia. Given the impending week ahead, which features the likes of the US jobs report, Eurozone CPI and the latest ECB meeting, it is likely that any moves are going to be tentative as people position themselves lightly ahead of such a key week.

 

[Alpari UK]

US Opening Call from Alpari UK on 25 September 2014

Bullish momentum wanes as markets remain indecisive

• Home sales figures provide boost, yet it may not last
• Mario Draghi touts further dovish rhetoric
• US session looking towards durable goods and unemployment figures

US markets are looking a little less optimistic today, following a strong rebound to the upside off the back of yesterday’s impressive housing data. The existence of major fundamental risks next week means that there is some caution ahead with many unsure of the direction that markets should be heading. Dovish tones from ECB governor Mario Draghi have set the European markets alight, yet it remains to be seen whether this can translate to the US indices. US markets are expected to open lower, with the S&P500 -2, DJIA -2 and Nasdaq -3 points.

Yesterday’s massive existing home sales figure provided a major boost to the markets, as it posted the joint highest level of sales since late 2008. Whilst this caused the unwinding of much of the initial losses we have seen in the first half of this week, markets have regained their somewhat cautious approach today and appear to be looking at a moderately negative open. The downturn in the housing sector has been indicative of this whole crisis since 2008 and for many, the feeling of a booming housing market is one which fills people with confidence that things are finally better in relation to their personal finances. For this reason, it makes sense that figures such as these provide a major boost to confidence, yet it should be noted that given the disappointing new home sales number on Monday, the picture is still relatively murky and far from one sided.

The release of an interview from Mario Draghi in Lithuania today has caused somewhat of a stir within the markets, with the ECB chief hammering home the notion that they stand ready to act with unconventional measures should need be. For the most part I see this as a show to the markets to keep the good feeling going whilst putting further downward pressure upon the euro. I have no doubt that should we continue to see poor takeup from the TLTROs, along with negative movement in CPI and growth, then Draghi would consider a full asset purchase scheme. However, with the implementation of an ABS [purchase programme, I highly doubt that we are going to see anything at this or the next meeting from the ECB. It is really a win-win situation for Draghi as positive dovish rhetoric can provide a strong indices and weak euro environment until we see a move either way in inflation at which point we will either see further stimulus or else a recovery in the region, both of which should be good for the markets. Ongoing weakness in the likes of Germany have really been compounded recently and show that the central powerhouse of the Eurozone might have more than just a cold. For this reason, I believe that both Mario Draghi and Angela Merkel are aware of the need to act decisively should we see yet further downside. With any monetary policy scheme that doesn’t include the words ‘asset’ and ‘purchase’ looking particularly defunct and blunt, it is clearly time for each country to start looking at raising investment and fiscal expansion could be just as important as action from the ECB. The feeling is that should we see QE implemented, then it would be something that would last for a long time and thus I am sure Draghi would prefer not to embark on such a move unless absolutely necessary. Thus the onus is really on Merkel as much as Draghi right now.

The US session is largely expected to be geared towards the release of durable goods and unemployment claims figures later today. The most notable of these will likely be the durable goods figure which is expected to absolutely tank following the largest monthly rise in well over a decade last month. This month is expected to come back with a bang, with the surge in orders taken by Boeing that were responsible for the massive July figure meaning that this month will see a majorly negative figure. Estimates are looking at something between 15-20%, yet it will be hard to tell with any degree of accuracy exactly where this month’s figure will land. The fact that we are seeing such volatility in this figure is a damning indictment as to the reliability of it to properly gauge any of the other lesser durable goods orders and for that reason people will be looking carefully at the core durable goods figure to check for the rest of the sector, with aircraft orders stripped out. In which case we are expecting a move back into positive territory from -0.7% to 0.7%.

 

[Alpari UK]

Daily Market Update - 25 September 2014 - Alpari UK



Markets mixed as indecision strikes - 00:09
US existing home sales figure boosted global markets yesterday and overnight - 02:29
Durable good and unemployment claims figures key to the US session - 04:15

Research analyst Joshua Mahony discusses the somewhat mixed markets in play today. He mentions the impact yesterdays existing home sales figure had upon bullish sentiment and what he expects for the rest of the day.

 

[Alpari UK]

UK Opening Call from Alpari UK on 26 September 2014

Japanese CPI falls once more, prompting calls for BoJ action

• Yesterday’s sell-off driven by geo-political fears
• Japanese CPI falls yet again
• German consumer confidence likely to tumble once more

European markets are expected to open mixed as they try to determine whether the follow the US and Asian indices lower following the largest one-day decline in the Dow since 31 July. Driven primarily by rumours out of both Russia and Iraq, those losses could be brushed off or highly relevant, depending on what you believe. However, with Japanese CPI pulling back, a German consumer confidence survey expecting to fall, and the UK likely to announce their willingness to act in Iraq, there is little to be positive about today. European markets are expected to open mixed, with the FTSE100 +2, CAC +3 and DAX -14 points.

Yesterday saw a somewhat hum-drum trading environment lead to the deterioration across global indices, from Europe to the US and subsequently Asia. In part this selling came as a response to two major pieces of geopolitical news, as a potential ISIS attack in the West was accompanied by rumours of a drastic piece of legislation that is being drawn up in Russia. Firstly, the Iraqi PM Haider al-Abadi warned of an impending ISIS plan to attack both the Paris and New York transit systems, throwing the possibility of another 9/11 style attack back onto the table. Secondly, rumours emanating from Russia suggested that there could be plans afoot for a move towards allowing the seizure of foreign assets, which would no doubt throw those closely tied European economies back into recession in the not so distant future. This move would serve to cripple both European business but also would throw Russia back to the cold-war style era where all foreign investment that was able to would pull out and leave the economy to be isolationist once more.

The release of the August CPI reading out of Japan didn’t make for pleasant reading for many, with the headline measure of inflation pulling back for the third month in a row, prompting immediate calls for increased stimulus from the BoJ. The election of Shinzo Abe came amid a core principle that he would end the incessant deflation that has plagued Japan for decades, and return it to a 2% inflation environment by Spring next year. Whilst he has fulfilled the first of these mandates, the second is becoming increasingly elusive and thus the time could be arriving for a move in monetary policy to achieve the final piece of the jigsaw. Stripping out the 2% rise that was attributed to the sales tax hike in April, the subsequent figure of 1.3% is the lowest level since October 2013 and proves that the recent trend is no short term phenomenon. The BoJ will have to act, and act soon should they wish to get price growth back on target towards 2%.

Today we expect to hear from the UK government where the official request from the Iraqi government to provide military assistance in their fight against the ‘Islamic State’ means that we are almost certain to see the commons vote in favour of British involvement in yet another Iraqi war. For the most part this seems unavoidable, with the UK estimated to represent the second highest source of European fighters that have joined the ranks of ISIS, behind France. The role of ‘Jihadi John’ in engaging Western nations against the terrorist group comes as a stark reminder that this is an international group that is being targeted, where radicalised people from around the world have joined the ranks and hold senior positions which could pose an existential threat to lives both home and abroad. Nevertheless, the involvement of the UK in Iraq can be seen as both inevitable yet far from ideal, with markets responding to any major development in the fight against ISIS as a cue to risk off trading, which can perpetuate the losses seen in the indices so far this week.

The release of a German consumer confidence survey this morning is expected to pile further pressure upon Angela Merkel and Mario Draghi following a shocking week for the German economy which saw the manufacturing PMI approach contraction, the business climate survey post the lowest level since April 2013, and a threat that Russia may seize foreign assets. Estimates for today’s survey are conservative, yet given the trend we have been seeing I believe we will see a more protracted move lower to reflect the poor growth, jobs and inflation environment within Europe’s biggest economy.

 

[Alpari UK]

US Opening Call from Alpari UK on 26 September 2014

US GDP figure expected to highlight booming economy

• US markets hoping to pare losses driven by ISIS, Russia and Apple
• German confidence tumbles, pointing towards a worrying future for the Eurozone
• US GDP set to dominate the US session.

US markets are hoping to stabilise somewhat today following one of the worst days in the markets for months. Driven by a mix of risk-off announcements, coupled with plunging Apple stock prices, today is likely to be focused upon paring much of those losses as we gear up for a major week ahead in the markets. The release of German consumer confidence figures earlier today saw further downside for a region in crisis as a result of weak growth, production and demand. Meanwhile, the US focus will largely be geared towards the final GDP release of Q2 which is expected to continue the positive economic theme with an upward revision. US markets are expected to open higher with the S&P500 +4, Nasdaq +10 and Dow +48 points.

Yesterday saw a hugely significant sell-off in equity markets, as the threat of an ISIS attack in Paris and New York was compounded by rumours of an asset freeze being implemented by Russia in response to US and European sanctions, finally impacted by a major selloff in Apple stock. The announcement by the current Iraqi PM that ISIS captives had admitted to plans for attacks on both the New York and Paris Metros heightened fears of another 9/11 style attack. This of course drove risk aversion as markets considered the impact that it would have to resk sentiment in the markets should it occur. Alongside this, the potential for an asset freeze in Russia provided a massive threat to European assets abroad and at a time when growth is hard to come by for Eurozone countries, such a move would almost certainly move the economy towards yet another recession. Finally, the announcement from Apple that they were pulling the latest iOS version, with consumers complaining of losing connection and fingerprint functionality. Coming just days after the new iPhone drew complaints of bending phones, it has not been the best week for the biggest US tech company and this was reflected in the markets as a fall of almost 4%, dragging the S&P500 and Nasdaq lower.

The European session has been dominated by the release of German consumer confidence figures which followed trend by moving lower, posting the lowest number since January. The impact of propping up a perennially weak Eurozone, accompanied by weak economies with low growth, employment and high debt has clearly taken it’s toll on the German powerhouse, with the imposition of Russian sanctions adding to an already weak economy. The fall in the manufacturing PMI seen earlier this week showed that soon we could be seeing a Germany with both shrinking manufacturing and output; a harrowing thought for those within the Eurozone. For after all these years of bailing out peripheral nations, who is going to back up Germany in their hour of need? Most believe that job will fall to the ECB, yet the blunt impact of Mario Draghi’s measures so far point to the need for something different. Clearly until we see some sort of drastic measure implemented, monetary of fiscal, there is going to be trouble in the Eurozone and this is a problem for the global economy due to their role as a major source of demand and job creation. Until then, I believe we could see yet more disappointing figures out of Germany and the Eurozone as a whole.

The US markets are gearing up towards the final session of the week which is likely to be dominated by the release of the final Q2 GDP figure. In line with the greater trend of a strengthening US economy, the markets expect to see an upward revision to 4.6% from the 4.2% preliminary figure. Coming at a time when markets are looking for signs of strengths or weakness that could influence FOMC thinking with regards to interest rate hikes, this could come as an indication of further hawkishness from the Fed. That being said, with the Q3 figure just around the corner, it is important to remember that this is a somewhat dated figure and thus the impact could be muted by that fact.

 

[Alpari UK]

Daily Market Update - 26 September 2014 - Alpari UK

 

[Alpari UK]

Weekly market preview from Alpari UK on 29 September 2014

The first week of the month means one thing, and that is the return of fundamental risk driven by notable data and central bank releases. In the US, we are expecting to see the week dominated by employment data, starting with the ADP figure, culminating in Fridays unemployment rate and non-farm payrolls number. Meanwhile, the UK will be on the lookout for the monthly fill of PMI releases, which peaks at Friday with the services PMI figure. Looking across at the eurozone, the theme will be one of inflation and potential ECB action as Tuesday's CPI figure precedes Thursday's massive ECB monetary policy announcement from Mario Draghi.

In Asia, both China and Japan have a substantial amount of figures to be on the look out for. China is going to be geared mainly towards manufacturing PMI figures, with Tuesday's final HSBC number leading to the headline manufacturing PMI release on Wednesday. Over in Japan, the release of retail sales, household spending and average earnings figures will provide us with an idea of exactly how well the economy is recovering following the sales tax hike. A similar story in Australia, where retail sales can provide an idea of how domestic consumption is developing as they seek to reposition the economy away from export reliance.

US

The return of jobs week is always welcome in the markets as a source of major volatility, with the release of employment data leading to renewed or revised outlooks for FOMC monetary policy action (or inaction). Given that there are such key jobs releases throughout the week, it means that there is a tendency to ignore some of the other lesser figures, with the main events to watch out for being the ADP non-farm payrolls, unemployment rate and headline non-farm payrolls figures.

The ADP non-farm payrolls figure on Wednesday will provide the first opportunity to gauge the conditions of the jobs market in September. There is an ongoing discussion over the validity of this release as an indicator of where we could see the headline figure come in, which in general has been a tenuous correlation at best. However, despite this fact, it is certainly well worth watching out for this figure as it still a valid and notable reading of how employment conditions are within the economy. With the FOMC moving closer towards an interest rate hike, members have begun speaking out to express their belief with regards to whether the economy is ready to that first shift. The employment data is absolutely key in that decision and thus this ADP figure along with Friday's jobs report will be the type of data points that the Fed will be watching closely.

Friday brings out the big guns, with the jobs report representing the most reliable source of volatility out of any data releases. The non-farm payrolls and unemployment rate figures have always dominated the jobs report as the two main figures. However, it is well worth watching out for the measures that provide more information regarding the quality of the employment environment such as the participation rate, average earnings and the average weekly hours worked. With the FOMC focusing more on reducing the 'slack' or 'spare capacity' within the economy, this will be denoted by an economy where people work more hours, for more money and where fewer people are voluntarily outside of the labour force. Despite this, the initial reaction within the markets is typically in response to the unemployment rate and non-farm payrolls figures.

The non-farm payrolls figure is expected to rise back above the 200k month after tanking to 142k last month. With such a poor number last month, be on the lookout for any positive revision which I would not be surprised to see. Meanwhile, the unemployment rate is expected to remain steady at 6.1%.

UK

The first week of the month usually means that the UK economy will be looking out for three major PMI figures to give a solid understanding of where the manufacturing, construction and services sectors are currently positioned. The first of these is Wednesday's manufacturing PMI figure, which is expected to remain at 52.5. Despite pulling back somewhat in the past two months, the manufacturing sector has been resilient over the past year, remaining well above the 50 mark since April 2013. Thus a steady figure would not necessarily be such a bad thing.

The construction PMI, due on Thursday is also a very positive story, with 2014 representing a boom in the sector which saw house prices rise back to pre-crisis levels in many areas. This has been reflected in the PMI figures, with the latest reading of 64.0 representing the second highest reading since the crises began in 2007. It is worth noting that the construction sector is likely to weaken somewhat from a new homes standpoint once interest rates start to rise in 2015. However, with many of the new homeowners likely to start refurbishing their properties, I expect to see further strength in the construction sector going forward. That being said, with such lofty levels in the figure, it is only a matter of time until the slowdown in the market is reflected and thus this months estimated fall from 64.0 to 63.3 would not come as a surprise.

Finally, the release of the services PMI on Friday is likely to draw the most attention given that the sector accounts for two thirds of the UK GDP. The growth and strength of the UK's world beating services sector can therefore be held responsible for much of the performance that has led to many expecting the UK to lead the western world out of this downturn. Therefore, it is imperative that it continues to perform and grow strongly. However, with markets expecting a sizable reduction from 60.5 to 59.0, this could be the biggest drop in 2014. Either way, be aware of this figure as a potential source of volatility due to the impact the services sector can and does have upon UK growth.

Eurozone

A major week ahead for the eurozone, where the release of inflation data on Tuesday makes way for the October meeting at the ECB. The CPI measure of inflation has been the thorn in the side of the ECB since it began to tumble a year ago and unfortunately this trend has continued apace up until this day. Mario Draghi's attempts to reignite price growth has failed miserably in the past 6 months and this has led to continued calls for asset purchases by those within the markets. However, with the TLTRO's and ABS programmes coming into play, there is a hope that gradually we will start to see some upside in this measure, which could give Mario Draghi a breather. However, markets do not expect this to come on Tuesday, with estimates pointing towards the number remaining around the 5 year low of 0.3%. It is worthwhile noting that Mario Draghi will also be on the lookout for the core CPI figure as much as the headline number, given that it strips out factors such as energy, food, alcohol and tobacco prices. Certainly for the likes of energy prices, a change in monetary policy will make precious little difference to the change in price growth and thus it does make sense to discount if from the data. Currently standing at 0.9%, the markets are estimating this to also remain steady. However, a move in either figure could either put pressure or alleviate pressure upon the ECB to take further action.

On Thursday, the ECB will meet again for their monthly monetary policy decision. For the most part this is going to be determined by two things; eurozone data for the month and the current state of ECB monetary policy. Bearing this in mind, it is clear that from a data standpoint there is a need for further stimulus, with eurozone, French and German GDP at or below 0%, PMI figures at or close to contraction, whilst unemployment remains at 11.5% which is almost double that of the US. However, from a policy standpoint, I believe there is little chance of a shift this month, given Mario Draghi's recent implementation of the ABS and TLTRO schemes. It is clear that Mario Draghi is willing to act if necessary yet to make two major moves in two consecutive months would be highly unlikely as it removes the ability to properly monitor the impact of those previous actions. However, while I expect policy to remain, I will be watching the statement and Q&A session closely, where Draghi will be expected to continue talk of the ECB being willing to act if necessary.

Asia & Oceania

The Chinese week will be geared predominantly towards the release of two manufacturing PMI figures, as the final HSBC number on Tuesday is followed by the headline manufacturing PMI figure on Wednesday. Tuesday's HSBC manufacturing PMI provides an idea of how the small and medium sized businesses are performing at a time when the slowdown that has dominated the first half of the year appears to be coming to an end. This is a final figure and thus there is less expectations for either a surprise or any major market movement, especially given that markets have estimated the number to remain at 50.5. However, the headline manufacturing PMI figure is a different matter, with markets keenly watching for any move given that this is the first and final figure for September. The release of disappointing fixed asset investment, industrial production and retail sales number have highlighted underlying weaknesses within the Chinese economy and thus there is a need for this week's figures to provide a boost. With the headline figure also expected to remain steady, there is the opportunity for a surprise in either direction this week.

In Japan, Monday brings about the release of a handful of consumer based figures, with household spending and retail sales in particular providing an idea of where the economy is moving following the April sales tax hike. Rumours have persisted of another tax hike in early 2015, and thus the recovery of consumer spending within Japan is going to be key to understanding the future actions of Shinzo Abe. Market estimates are somewhat mixed, pointing towards a mild improvement in household spending to -3.5% from -5.9%, whilst retail sales are forecast to fall from 0.6% to 0.4%. However, I will be looking out for some sort of convergence in trend between the two to be able to really move the markets.

Finally, in Australia, the release of retail sales figures will provide us with an idea of how successful the shift towards domestic consumption has been. Coming off the back of a downturn, driven largely by the slowdown in China, Tony Abbot's appointment as Prime Minister was on the back of a pledge to bring the economy back from the brink by realigning towards domestic consumption and away from the export led model of old. This was never going to be easy, simply due to the strength and size of their commodity industry which will always draw resources and labour. However, for domestic consumption to truly support the economy, we would have to see substantial growth and thus the likes of retail sales data will be key. Markets expect the figure to remain steady at 0.4% in August.

 

[Alpari UK]

UK Opening Call from Alpari UK on 29 September 2014

European markets are set for an incredibly busy week as we see the first week of the new month. Last week’s economic calendar and news flow saw a return to the norm with fears over the ECB and Eurozone recovery, as well as Chinese growth fears return to the markets after being somewhat forgotten during the Scottish referendum. The major announcements of the week will happen later in the week so for the early part it will be a case of waiting and speculating over the major announcements. However this doesn’t mean that the early part of the week is without its data, in fact today’s session sees a whole host of economic data released throughout Europe and the US. Ahead of the open this morning we expect to see the FTSE open lower by 2 points while the German DAX looks set to open lower by 26.

The story overnight is yet again the strength of the US dollar as Asian markets fell led by a thrashing in Hong Kong. The strength of the US dollar is forcing investor to move away from a lot of the stock market assets and put it into the greenback. With a potential rate hike becoming more likely and the data showing constant improvement it’s no surprise we are seeing the positive move and nowhere is this more apparent than in USDJPY. However if anything is going to shift investor opinion about the dollar it could well be this week as the data is incredibly heavy. This afternoon we will get the release of the personal consumption numbers as well as pending home sales figures. Investors will be yet again looking for any kind of positive number that could force Janet Yellen’s hand into an earlier rate hike.

The timelines on the movement of rates still looks to be fairly long with no change in language in last months fed meeting. However the better the economic readings the better the more pressure is heaped on Janet Yellen. There seems to be an obsession in the market with pushing rates higher. With a movement in rates seen as a move back to normality after years of hardship. However I would ask the question do we need to raise rates? With the economic data looking so good, and the electorate only just starting to feel the benefit of these lagging indicators, a movement in rates too soon could well undo all of the hard work it has taken to get back to the place we are right now.

As the week moves on the data will increase with its importance. Tomorrow sees the UK GDP take centre stage before traders start to position themselves ahead of Thursday’s ECB rate decision and Friday’s non farm payroll data. Mario Draghi and the ECB’s rate decision is arguably the biggest bit of data of the week as it could be the time we get a full blown asset purchasing plan for the Eurozone. We have seen a number of measures thrown at the eurozones ultra low inflation and low growth issues but so far nothing has worked. It could well be that the last option Mario Draghi has is full blown QE starting potentially the month the US finally finished their plan.