Jump to content

Market News

About this blog

Entries in this blog

Brexit pains - APAC brief 11 Dec

Written by Kyle Rodda - IG Australia Day 1 of 5: Monday looks like it may be one of those days where Wall Street hesitantly pulls itself up out of the dirt in the final hours of trade. There is just under two-hours to go in the US session, and at a high level, things appear not-too-bad. Let's return to America a little later. Whichever way we happen to end the first 24 hours of trade for the week, heightened risk, growth fears and bearishness is still driving sentiment. There has been no shift in market behaviour to indicate a market turnaround is upon us yet. If anything, the headlines regarding the macro-landscape added to the negativity. The data traders received was mixed; rather it was the numerous developments in the politico-economic sphere that inflamed trader's trepidation. The Brexit tragicomedy: The big story overnight must be Brexit. This week ought to be about the state of Europe, and at its outset, it has been. If the potential consequences weren't so dire, the situation would appear comical – akin to some absurd, but all-too real life Waiting for Godot re-boot. First-up, the European Court of Justice released a ruling that the UK could unilaterally cancel Brexit and revoke its action of Article 50. UK Prime Minister Theresa May has dutifully shut down that notion. But things did get sticky when Prime Minister May announced she would delay a vote in Parliament of her Brexit bill, on the understanding she lacked anywhere near the required votes to get it passed lawmakers. European price-action: It's relatively raw news at time of writing, but Prime Minister May's decision looks as though it will drag Brexit-uncertainty into 2019. The Cable has been pummelled consequently: it has pin-dropped 1-and-a-half per cent through a few resistance levels, to familiarise itself now with the 1.25 handle. The region's share indices were unaided by the news, though of course following the Asian lead, the session was always going to be a struggle. The FTSE registered a 0.8 per cent loss, despite the plunging Pound, the DAX shed 1.5 per cent, and the Eurostoxx 50 lost 1.3 per cent. The troubles seemed also to poison the shared currency, which has pulled back into the 1.13 handle. The European bear market: The year has been a write-off for European markets. Now that the macro-narrative is dominated by fears of slower global growth, it seems any hope things can turnaround for the continent is waning. Last night's data out of the region was mixed: UK GDP printed at the 0.1 per cent forecast, but manufacturing production was shown to contract by -0.9 per cent. Data out of continental Europe is still a couple of days away; there will be little in the way of fundamentals news and information that can shift the tide for Europe, however. We are so far in a bear-market in the region, any turnaround appears unlikely. If anything, with US growth and stock market performance converging with the rest of the world, the falls could easily accelerate. Asia and the ASX yesterday: The same goes for Asian markets - and more specifically, the hitherto resilient ASX200. Major Asian indices, from China, to Hong Kong, and Japan, all gave up considerable ground in the Asian session. But it was a filthy day for Australian equities yesterday, which was at the bottom of the table in terms Asian equity market performance. Previously solid support levels were brushed aside in early trade for the ASX, as traders collectively decided the share market isn't the place to be right now. Breadth was very narrow at 10 per cent, every sector was in the red, and volume was quite high, particularly for a Monday. The financials were the main culprits, hurt most by fears of domestic economic turmoil: it contributed 57 points to the markets losses. ASX price-watch: Everything points to a bearish impulse for the overall index. SPI Futures are indicating a bounce of 30 points today, but it pales in comparison to the 128 points given up yesterday. The bottom of a decade long trend channel is exposed in the bigger picture, now: about 5380 (or so) is the level to watch. If this is the unfolding of a true bear market – a 20 per cent correction from previous highs – the stop after breaking this trend would be around 5090. Getting carried away isn't helpful here, and it's too premature to make doomsday calls on the market. However, true bear markets do often correlate with major economic slowdowns: investors could be trying to tell us something here, so if a market bull, being alert (but not yet afraid) should remain the default setting at least for the time being. Wall Street: Returning to US markets, with less than an hour to go in trade, action could be (generously) described as mixed. It’s still risk-off, however the severity of risk aversion has diminished. US Treasury Yields have climbed modestly across the curve, benefitting the US Dollar, which flexed its might again overnight. The US Dollar Index is around 0.7 per cent higher and back above the 97-mark. Credit spreads have narrowed as the session has worn-on. The S&P500 looks like it could close flat, the Dow Jones has rallied late, and the NASDAQ has added around 1 per cent. Much of this comes courtesy of a bid higher in the major, mega cap FANG stocks. A word of warning (it almost goes without saying): breadth is 40% and uninspiring, with the rally attributable to gains in a select few big-tech names. Little of what occurred on Wall Street should be considered a firm sign of an imminent turnaround.  

MaxIG

MaxIG

Markets Fall on Renewed US-China Tensions - EMEA Brief 10 Dec

The Dow will open lower today than its open price for the year following weak jobs data and the resulting sell-off of FAANG companies. US Non-farm payrolls grew by 155,000 on Friday, missing estimates of 198,000 whilst unemployment is near record lows at 3.7% Chinese markets had a poor start to the week following missed trade estimates for November. The Hang Seng has fallen 1.41%, the Shanghai composite by 0.84% and the Shenzhen composite by 1.15% The European Court of Justice has ruled this morning that the UK can unilaterally revoke Article 50 and the withdrawal from the EU. The FTSE lost over 4% last week. This was likely due to reduced confidence that Theresa May's Brexit withdrawal agreement will be agreed on by MP's when they vote on it tomorrow following last week's 5 day debate.  A range of UK data on today's economic calendar including monthly GDP growth and the October trade balance could see the FTSE and GBP crosses have an eventful start to the week Oil is up almost 4% following an announcement from OPEC that they will cut production by 800,000 barrels per day.  Gold rose 2.16% last week as we continue to see risk aversion increase with investors. New York Cocoa saw its largest single day jump on Friday, growing 4.36% coming amidst supply worries from the Ivory Coast, the top producer of the commodity. London Cocoa saw a similar jump of 3.57% Asia overnight: Japan saw a 3Q contraction of GDP by 2.5%, 0.5% more than the expected 2% reduction. However this move did not move the Nikkei significantly compared to the losses it sustained last week which almost hit 6%. The ASX is now at 2 year lows following US-China tensions as the poor trade data for China. Weaker demand from China could see commodities exports fall for Australia.   UK, US and Europe:  Whilst tensions between the US and China have risen once again, the usual suspect of a trade war is not to blame this time. Following last week’s arrest on Huawei CFO Meng Wanzhou by Canadian Authorities with the speculated intention of extradition to the U.S, China has demanded her immediate release. They have also stated that the Canadians will face consequences for their “unreasonable” actions. Ms Meng is accused of circumventing US sanctions on Iran via a subsidiary company which had been misrepresented as a separate company to Huawei. The tech giant which recently surpassed Apple to be the second largest smartphone maker in the world (behind Samsung) has seen its fair share of limelight recently. They were banned by both Australia and New Zealand over cyber-security concerns and Japan is expected to follow suit. Economic calendar - key events and forecast (times in GMT) Source: Daily FX Economic Calendar Corporate News, Upgrades and Downgrades Facebook has increased their stock buyback program to $9 Billion Nissan's Carlos Ghosn is set to be charged for under-reporting his salary Softbank has set the price of their telecom IPO at 1500 yen (£10.47). The shares will begin trading on the 19th of December Interserve shares are down 60% as they are in talks with lenders about converting debt to equity. Cronos shares were up over 20% on Friday as they announced they are in talks with Altria, the tobacco giant.  IGTV featured video Information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary. 

IGAaronC

IGAaronC

Friday's session: APAC brief 10 Dec

Written by Kyle Rodda - IG Australia Friday session: Friday capped off another horror week for Wall Street. It was US equities’ worst week since March. Traders are currently operating within a volatility trap – and there are few indications this will soon end. The VIX is elevated, above 23 at the last reading, but occupied time above the 25-mark at stages during the week. Volatility is an active trader’s friend, and for the most part the opportunities it has thrown have been relished. Liquidity is becoming thin though, and there is a sense that the risk-reward dynamics in certain asset classes have changed. For perennial bulls, or those who have long term investments in equities space, there is undoubtedly a lot of pain being experienced. If the activity across equity markets on Friday is any guide, this is something that is set to last. Shifting narratives: The narrative has definitively shifted. It might even be said for the bulls that it has gone from bad to worse. On the surface, since October, downside risks have manifested and grown in global equities. For many-a trader, whatever the root cause of this dynamic is secondary to being able to play the trend. But something interesting has happened recently, and it’s worth knowing to appreciate the way the market has changed. The initial stages of this market correction were precipitated by the fear an (over)active US Fed would hike rates to a point that would sink the global stocks. In some way, the effects of such a phenomenon played-out in markets just by way of virtue of the pricing in of those expectations. US Treasuries were rallying, the US Dollar trended higher, and growth-stocks plunged on the belief solid economic data would justify interest rate hikes. The “real” economy: But this isn’t the case anymore; this isn’t about shifts in intermarket behaviour, contained primarily to financial markets. The concerns now relate to the prospects for the real economy. To repeat: October and November were about adjusting to a Hawkish Fed. December has so far been about slower global economic growth. It’s a problem with Main Street, perhaps more than Wall Street, that traders are worried about. The bond market is king, no matter how much attention stock markets get. The best information comes from reading into what is occurring in bond markets – especially US Treasuries. As has been discussed a-plenty, the US Treasury Yield curve is exhibiting signs of inverting. Traders are telling us they think growth in the medium term will be soft. US Inflation expectations: There is another useful indicator to use in the fixed income market: the TIPS spread. More-or-less: the spread is a crude measure of future inflation. When traders were stressing-out about an over-zealous Fed, it was primarily due to fears that some (albeit modest) outbreak inflation was upon us. Interest rate hikes would be the necessary and mandated response. At this time, the TIPS spread (on equivalent 10-year securities) was about 2.20% -- that is, future inflation was tipped to be around 2.20%. Flash forward to its most recent reading, and that indicator has fallen to 1.95%. Inflation-risk is being priced out of the markets, along with the prospects of healthy economic growth. Ergo, interest rate traders have called-out the Fed and demanded the central bank “Say Uncle!”. US Non-Farm Payrolls: Whether this reaction proves justified will be fascinating. Markets are forward looking, so current economic data is only good as far as it can be used to extrapolate answers about the future. Nevertheless, the data coming out of the US is (generally) satisfactory. The latest Non-Farm Payrolls release came out on Friday, and the numbers were okay: the US unemployment rate is 3.7 per cent, and annualized wages growth held at 3.1 per cent. The jobs-added figure was a big miss, coming in at 155,000 – also, although respectable, the wages component did print below expectations. However, stripping-out the highly charged emotions in financial markets at-the-moment, the figures produced by Non-Farm Payrolls were objectively solid. The picture it painted of the US economy was good. Friday’s price action: But that doesn’t matter in this market. The bears are winning, and the bulls are looking for any excuse to sell. Wall Street experienced another poleaxing on Friday night, backing on from a mixed day in Europe: the NASDAQ was down over 3 per cent again, while the Dow Jones and S&P500 were down nearly 2-and-a-half per cent. Rates and bonds didn’t respond well to the Non-Farms data: the yield on the US 2 Year Treasury fell to 2.71 per cent, while the yield on the US 10 Year note fell to 2.85 percent, taking the spread there to 14 basis points. The US Dollar took a dive, breaking upward trend support, launching gold through resistance to $US1249 per ounce. The EUR and Yen naturally benefitted from the weaker greenback, but the AUD is still struggling, unaided by a fall in iron ore, which fell despite climbs in other commodities. ASX, and the week ahead: The last price on the SPI futures contract is indicating a 30-point drop for the ASX200 this Monday. This comes on the back of a relatively uneventful, but solid day for the index on Friday, which managed to eke out a 0.4 per cent gain. This week is filled with a litany of risk events. The first market to watch might be the oil market, after OPEC+ agreed over the weekend to cut production to stabilize falling prices. The trade war and the developments in it relating to the arrest of Huawei CFO Meng Wan Zhou will be curious. US CPI, PPI and Retail Sales data will be closely watched too, as traders gauge US economic health. The week may well prove to be more about Europe, though. There is a stack of event risk coming up. It may well not go ahead, but Brexit is scheduled to vote on UK Prime Minister Theresa May’s Brexit bill. The Cable is worth watching ahead of that event. ECB President Mario Draghi speaks, and the ECB meets, with his commentary to be perused for signals that the Europe’s central bank might be stepping away from its potential rate hikes. Whatever is said by Draghi will be assessed against a slew of PMI figures. And finally, the Italian fiscal crisis will probably continue to be a soap-opera, though hopes are rising that the Italians are going to play ball.

MaxIG

MaxIG

Dividend Adjustments 10 Dec Nov - 17 Dec

Expected index adjustments  Please see the expected dividend adjustment figures for a number of our major indices for the week commencing 10 Dec 2018. If you have any queries or questions on this please let us know in the comments section below. For further information regarding dividend adjustments, and how they affect  your positions, please take a look at the video.  NB: All dividend adjustments are forecasts and therefore speculative. A dividend adjustment is a 
cash neutral adjustment on your account. Special Divs are highlighted in orange. Special dividends this week Index Bloomberg Code Effective Date Summary Dividend Amount PSI20 RAM PL 12/12/2018 Special Div 1.15 NDX PCAR US 13/12/2018 Special Div 2 RTY AMSF US 13/12/2018 Special Div 3.5 SPX PCAR US 13/12/2018 Special Div 2 RTY CWH US 14/12/2018 Special Div 0.0732 PSI20 RAM PL 17/12/2018 Special Div 0.085   How do dividend adjustments work?  As you know, constituent stocks of an index will periodically pay dividends to shareholders. When they do, the overall value of the index is affected, causing it to drop by a certain amount. Each week, we receive the forecast for the number of points any index is due to drop by, and we publish this for you. As dividends are scheduled, public events, it is important to remember that leveraged index traders can neither profit nor lose from such price movements. This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

MaxIG

MaxIG

Brexit, December seasonality deviations, worst case Dollar and Euro - DFX Key Themes

Make or Break for Brexit?  There have already been so many twists and turns in the UK’s efforts to negotiate its separation from the European Union that that investors are getting dizzy. It is troublingly difficult to gain a reliable bead on a probable outcome for this stalemate, but the lack of time and dwindling hope of an outcome that will satisfy the majority of those involved raises the threat of a ‘bad’ outcome and even worse market response. This is not one of those events where ignoring the risks can prompt complacent gains. Once again, we are coming up to a key milestone in this saga where conditions can continue with a narrow course forward where the best case scenario still reflects considerable uncertainty and no small measure of market fallout. Or, it can be pitched into disarray. If you are monitoring the march forward of this fraught Brexit divorce – and you should whether you have direct Pound or UK investment exposure or not – highlight on your calendar Parliament’s vote on Prime Minister Theresa May’s proposal Tuesday.  The draft was made in concert with EU negotiators which produced a result that theoretically both sides could sign off on. That would seem a viable course forward if not for the level of discord in UK politics. Rhetoric surrounding the Prime Minister deal is distinctly harsh from both the conservatives who found vindication in the referendum outcome as a sign of a clean break as well as Labour and other groups who are attempting to keep economically supportive elements of EU access or do not support the withdrawal altogether. It is likely that Parliament votes the plan down which will open up a range of scenarios – very few of which are will avoid deeper trouble.  After a rejection, the government has three weeks to work another deal, but the EU will be far less interested in an agreement that asks for more and the rapidly diminishing time frame will leave little opportunity to warm counterparts to their side.  Parliament voted this past week – after finding the Prime Minister in contempt for refusing to release official legal advice on Brexit – to give itself greater say over the proceedings should her plan be rejected. This is likely to empower the MPs to demand more favorable – but perhaps ultimately unworkable – terms. It may also raise the pressure for a second referendum. Previously May has rejected the option outright, but recently she has floated the idea. It comes off more as a threat for conservatives to get in line, but she has said there is a choice of “my deal, no deal or no Brexit at all”. Two of those three options are considered assured crisis to all the relevant parties involved; and unfortunately, that third lesser evil is different for all of them. Beware Pound volatility and the risk of fast moving local capital markets which can be exacerbated by the waning liquidity in these final weeks of the year. This December is Already Bucking Seasonality Expectations As we have discussed more and more as of late, there are seasonal norms in capital markets. These unlikely cycles arise through a few different practical market occurrences. Mid-day direction changes in individual trading sessions, summer doldrums, quarterly earnings runs and more draw on reliable conditional developments that can shape conditions – though specifics like direction are still up to the unique circumstances that play out in the given period. In the final weeks of the calendar year, we have one of the most reliable norms in trading. For those that want the scene described in a short phrase, ‘Santa Claus Rally’ usually suffices as they can fill in the circumstances with their imagination. A reduction in liquidity for western holidays and/or a general sentiment is seen as the foundation for a market’s performance. The liquidity aspect is at least correct and conditions earned through collective habit can often fill in the rest. However, when we follow this theme to the assumed bullish-backed trend, there are certain environmental criteria that need to support the outcome.  Normally, the pending risks column needs to either be small or populated with issues that can readily be deferred until more convenient market conditions return. That is not the case now with growth forecasts slowing, warnings of financial risks growing more numerous (from the likes of central banks and IMF), trade war consequences kicking in and political risks splashing the headlines. These are not issues that can readily be shelved and they are receiving media attention on a regular basis. With this backdrop, there are frequent sparks that can provoke panic which makes the backdrop all the more threatening. If an otherwise contained crisis arises somewhere in the world, the thin market conditions can amplify the ill-effects of panic to spread well beyond its normal reach. And, while it may not be capable of a lengthy collapse of the financial system through such diluted conditions, it can lay the groundwork for a vicious cycle that begins the process only to catalyze fully when markets fill out – much like a nuclear reaction.  In portfolio and statistical theory, it is not advisable to position for collapse against these seasonal norms as the probabilities are still skewed in favor of the norms. However, it doesn’t mean that we need to be utterly complacent with the risks that we hold. Reducing size, diversifying away from ‘risk’ markets or buying hedges reduces your beta exposure, but it isn’t like we are missing out on opportunities through a period that will be ‘dead’ in the base case scenario. The volatility we have experienced this past week, the past two months and in two distinct periods over the year (Feb-March and Oct-Nov) are a reminder that we should be more proactive with our reducing our exposure to the capricious unknown. Who Faces the Greater (Probable) Systemic Threat: Dollar or Euro? Everything in investing is a probability – that is a mantra I repeat to myself to avoid the delusion of certainty in a view or position. To put belief into action, I try to always lay out the probable scenarios for a particular market, asset, event, etc. Even if I consider a certain outcome more likely, considering the alternatives can help to identify earlier when the theory isn’t panning out and to even help stage an actionable strategy for a lower probability path. Most of the time in trading, the focus is to identify best case (the most productive bullish) scenarios, but there is just as much value in projecting worst case outcomes and their probabilities. This can help us avoid markets with a severe probability/potential imbalance or even identify better trading opportunities – I would rather pursue a short in a productive bear trend than suffer a long exposure in a choppy bull market. In evaluating the majors for their practical ‘worst case scenarios’ (those outcomes that are severe but not wholly unlikely – or qualifiers for a true ‘black swan’ designation) I think the Dollar and Euro deserve closer observation.  For the Pound, the market is well aware of the possibility of a bad fallout from the Brexit which puts investors on guard and making moves that help to hedge risk. The Japanese Yen is so inextricably tied to risk trends and the Bank of Japan’s policy so open-ended that other issues struggle to compete for anxiety. For the Euro, a return to existential rumination on the currency union with the Italy-EU budget standoff is a still-underappreciated issue. The bulls in the market likely look back to the situation with Greece and assume a routine path for any future confrontations to be resolved in the same way. That is presumptuous to be negligent. The fact that this is occurring after Greece and during the UK’s bid for a withdrawal (admittedly from the EU and not Eurozone) should raise the level of concern significantly. It hasn’t. Perhaps the lingering premium afforded the currency for the eventual turn from extreme accommodation by the ECB will be the first dashed enthusiasm to awaken market participants of more unfavorable outcomes. If a country were to leave the currency union (EMU or Eurozone), it would fundamentally change the appeal of the currency as a global unit by significantly reducing the size of its collateral (GDP and capital) which would in turn significantly increase its perceived volatility. And, those are critical properties of a currency.  The situation is unusually similar for the US Dollar. The pursuit of trade wars inherently encourages the world to redirect funds away from the US Dollar to avoid the policy conflicts that it brings (in trading terms, the volatility). Meanwhile, the rising deficit becomes increasingly problematic as the cost to service the massive debt rises and outside demand dries up. This can lead to a general shift away from the Greenback’s use permanently which the market won’t fully appreciate until much deeper into the situation. Similarly here, the market may more readily recognize something is wrong via monetary policy as the Fed adjusts to some form of the systemic risks by slowing its pace of policy normalization. So, which currency faces the longer-term – but still reasonable – risk? The Dollar. The ubiquity of the currency globally (nearly two-thirds of all FX transactions) means that it has far far more to lose should its use diminish. And that is very likely as the threat of further credit quality downgrades occur owing to its appetite for debt and its withdrawal from the global markets. 

JohnDFX

JohnDFX

Bitcoin hits year low - EMEA Brief 07 Dec

Bitcoin hit year low falling below $3,500 after a 11% dive. Chip stocks in Europe and Asia tumbled after the arrest of Huawei CFO . AMS dived 7%, STMicroelectronics fell 4% and Dialog Semiconductor slid 3%.  Dow rebounds after falling 780 points ending the day only slightly lower yesterday.  10-year Treasury yield fell to 2.83% amid stock sell-off compared to the beginning of the week where it was above 3%. Non-Farm payrolls today expected to have expanded by 198,00 in November. Oil prices fell, Brent Crude falling below $60 a barrel, trading at $59.50, down 0.9%. This follows delayed OPEC oil cut decision, further talks to be held today with oil producing nations.  Singapore authorities cast shadow over the Noble Group's $3.5 billion debt rescue plan, stating that they would block the relisting of shares. Asian overnight: Equities have recovered from their lows, with a better session in Asia overnight following on from a steep rebound for US indices that saw the Dow recover from an initial 400-point sell-off to end the day only 80 points down. Investors continue to watch for further signs of fallout between China and the US, but so far the situation is quiet. Markets are also waiting for a decision on oil supply levels from OPEC, the cartel having failed to reach agreement yesterday. Asian stocks see some improvement after Wall Street Journal report suggests that the US interest rates may not increase as quickly as feared. Consequently, the Nikkei up 0.8%, the Hang Seng rose 0.2% and Shaghai stocks clawed back 0.4%.  UK, US and Europe: The US jobs report is the focus of attention today, with the recent strength in wages likely to recur. Also on the calendar is the Canadian jobs report, plus the Michigan confidence survey. Last night saw an amendment to the Brexit draft laid down in the House of Commons which offered MPs more say over when and if the contentious Northern Ireland backstop will be triggered. However, DUP leader Arlene Foster dismissed the amendment.  Economic calendar - key events and forecast (times in GMT) 1.30pm – US non-farm payrolls (November): payrolls to be 205K from 250K, while average hourly earnings rise 0.2% MoM, and the unemployment rate holds at 3.7%. Markets to watch: US indices, USD crosses

1.30pm – Canada employment data (November): 10,000 jobs expected to have been created, from 11,200 a month earlier, and unemployment rate to rise to 5.9% from 5.8%. Markets to watch: CAD crosses

3pm – US Univ. of Michigan consumer confidence (December, preliminary): forecast to be 93 from 97.5. Markets to watch: US indices, USD crosses Source: Daily FX Economic Calendar   Corporate News, Upgrades and Downgrades Associated British Foods said that trading for the first eight weeks of the year was in line with expectations, although November trading at Primark was described as ‘challenging’. The outlook for the current year was unchanged.  Berkeley Group reported a pre-tax profit of £401.2 million for the first half, down from £539.9 million a year earlier. Despite this drop, the firm has increased its pre-tax profit guidance for the current year by at least 5%. It sold 2027 homes in the period, down from 2190 a year earlier, but the average selling price rose to £740,000, from £721,000 a year earlier.  Premier Oil has reaffirmed annual output guidance, thanks to a stronger performance in November and December. Full-year output is forecast to be around 80k barrels/day. It has also begun drilling at the Zama-2 well offshore Mexico, and has completed the sale of its interests in the Babbage area for £30.3 million.  Walmart announce plans to buy Art.com a e-commerce home décor site. Fiat Chrysler announces plan to open new factory in Detroit. Yesterday saw 02 customers without data or facing cellular disruption for 24 hours. Akzo Nobel upgraded to buy at Jefferies
Amer Sports upgraded to accumulate at Inderes
Rotork upgraded to neutral at Credit Suisse
Schindler upgraded to overweight at Barclay BMW downgraded to reduce at Commerzbank
Scatec Solar downgraded to neutral at SpareBank
Centamin downgraded to hold at Berenberg
IP Group downgraded to under perform at Jefferies IGTV featured video Information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary. 

MichaelaIG

MichaelaIG

Panic stations - APAC brief 7 Dec

Written by Kyle Rodda - IG Australia Panic stations, still: The behaviour in financial markets is resembling cats trapped in a burning room: the air is unclear, it’s unbearably hot, and people are scrambling to find an exit – or at least, somewhere appropriate to hide. The chaos is one thing, but the true issue – as is always the case, when these situations become particularly fraught – is no one can really describe why this is going on exactly. Now, we all know the stories: the Fed has equivocated and that’s confused the heck out of markets; US-China relations are hot-and-cold; future global growth expectations are being unwound; Brexit is on-again-off-again; and a breakthrough in oil markets out of the OPEC meeting hasn’t emerged. These issues are ongoing, so it’s not any sort of surprise that they’d all be weighing on markets in some form. The confusion is why they are all conspiring to create such fireworks now. Risk-off: Maybe traders have just taken too many hits in the last 3-months, and the bulls are effectively tapping out. A premature call, here, to be sure, however there seems so little motivation to hold onto riskier assets. It seems that collectively, a clear strategy to handle the volatility isn’t yet to emerge. The classic plays into safe-havens can be seen: US Treasuries are going on a tear presently, for a variety of reasons to be discussed shortly. An unwinding of the Yen carry trade has pushed the USD/JPY to 112.50. And gold is looking at a break-out above resistance at $1240. Inversely, risk proxies have also been thumped: global equities (needless to say) are getting hammered, the AUD/USD is taking a rinsing, and commodities, led by a 3 per cent tumble in oil, and a 1.1 per cent fall in copper, are plummeting. US interest rates: Interest rates traders have taken it upon themselves to signal to the market that the Fed ought not to be going anywhere in 2019 with interest rates. A December hike is still considered locked-in for all intents and purposes, but even a single hike in 2019 is progressively being priced out by markets. It’s an incredibly aggressive play ahead of key Non-Farm Payrolls, where wage growth figures will be assessed for inflation prospects. But whether rightly or wrongly, interest rate markets are calling it: hikes-off, cycle over – the share market and the economy have peaked. The dynamic is showing up right across the US yield curve: the yield on the interest rate sensitive 2 Year Treasury note is at 2.75%, above the 5 Year note, which is at 2.74%; and the benchmark 10 Year Treasury bond is yielding 2.87 per cent. Update on the yield curve: Doing the maths: the yield curve is still inverted, and the key spread between the 2 Year and 10 Year Treasuries is about 12 basis-points. For those who believe in the indicator’s efficacy: this still is flashing signs that markets are moving to price in a recession. To be sure, it’s way too early to call such a thing; but what can be inferred with more certainty is that markets believe an economic slow-down is approaching, and the global economy can’t withstand a non-stimulatory US Fed. It’s an indictment on the economic system that it can’t hold itself to together without extraordinary support. Stepping away from the disorder, though: perhaps this big-long cycle of central banks seeking to control the business cycle is seeing such diminished returns, and that the overall structure is no longer viable or sustainable. Trade War tensions: First comes the Fed, and then everything else. It has to be when assessing these markets. There are other drivers of the current climate of fear, however, that threaten market fundamentals. The US-China trade war took a nasty turn yesterday when it was reported the Huawei’s CFO has been arrested in Canada, and faced extradition to the United States, on allegations of trade violations. Though a long way from certain, some attributed the mini-flash crash on the CME Futures exchange yesterday to the shock of this news. Nevertheless, US-Sino trade relations have become highly-charged again, with the expectation now the goodwill between the US and China as each nation works towards a trade deal is disappearing. Trade sensitive areas of financial markets got smacked-down consequently: Chinese stocks were walloped, the Yuan plunged to 6.88, and industrial stocks bled. US Session: There is about an hour-and-a-half left in trade on Wall Street, and while the isn’t as bad Tuesday’s session, it’s still far from pretty. The Dow Jones is leading losses, down 1.8 per cent, followed closely by the S&P500 which is down 1.42%. The NASDAQ is holding up a trifle better, down only 0.8 per cent. This backed up a day in Europe that saw stock indices across that region shed over 3 per cent. Brexit concerns certainly aren’t helping there. The uncertainty around the day’s OPEC meeting is enervating financial markets. The price of oil is down in the realms of 3 per cent itself, sparking jitters in credit markets and therefore global equities, as traders wait-and-hope for a deal to cut oil production by OPEC. The price of Brent Crude has dived below the $US60.00 handle in the interim, while WTI is buying just above $US51.00 per barrel. ASX200: SPI futures are pointing to another down day for the ASX200. That contract is indicating a 23-point drop at the open. It must be remarked that despite the turmoil in overseas markets, Australian shares are holding up rather well. The session closed with a relatively modest 0.2% loss yesterday, clawing back the losses sustained during the US Futures mini-flash crash. Proven again was the thick support for the index in the low 5600s, which provided a solid floor for the market to bounce off yesterday. Repeated challenges of that mark can’t last forever, but it is heartening to know the buyers are there. Also positive was a clear rotation within Australian equities yesterday: unlike other parts of the world, traders were discerning enough to rotate into defensives away from cyclical stocks, rather than dumping equities whole-sale. It shows a desire to be exposed to equities at all, at a time where, in some parts of the world, going near the asset class is toxic. A grind lower may well transpire today, with the banks surely to be hurt by falling global yields, the miners to feel the pinch of falling commodity prices, and the energy sector to suffer from oil’s spill. Once again, maybe today can be assessed today on the breadth experienced by markets, and whether defensive sectors can hold it together.

MaxIG

MaxIG

China-US cease-fire in jeoprady as Huawei CFO is arrested in Canada - EMEA Brief 06 Dec

Huawei CFO Meng Wanzhou was arrested in Canada where she faces extradition to the US for violating US sanctions, leading to growing tensions between the China and US that create further doubt about the cease-fire on the tariff war declared over the weekend. Shares in Asian suppliers to Huawei sank on Thursday after the arrest was made pubic. Asian markets fell on Thursday ahead of the highly awaited OPEC meeting to be held in Austria today. The Hang Seng was down 2.62%, the Nikkei fell 1.91% and the Shanghai composite slipped 1.26% during the morning trading session. The UK could face “protracted and reported rounds of negotiations” if it tries to exit a backstop customs union with the EU. The FTSE 100 closed 1.44% lower at 6.921,84 on Wednesday, with a general decline in its constituents led by Ashtead Group PLC, Melrose Industries PLC and NMC Health PLC who lost 5.83%, 5.05% and 5.05% respectively. European stocks were trading lower on Wednesday as continuing worries about global trade leave investors with concerns regarding the future of economic growth. The Dax was down 1.19% whilst the CAC and the IBEX  were down 1,36% and 0.55% respectively. US markets are expected to continue the sell-off on Thursday as DOW futures drop almost 400 points. As stock markets remained closed on Wednesday for the official mourning day of former US president George H.W. Bush, the growing tensions between China and the US continue to place uncertainty on the viability of the two countries honouring the cease-fire declared over the weekend, leaving investors feeling weary, which is putting downward pressure on the stock market. Palladium has become one of the best performing precious metals in the year, dethroning gold as the most valuable precious metal. The metal hit $1,257 per ounce, surpassing the price of gold for the first time since 2002. The demand for palladium is expected to rise as tougher emission laws come in to place. Copper has drifted to a one-week low as US-China tensions resurface. Join us today at 1pm to discuss the future of Base Metals where you can ask your questions to our guest experts Daniel Lacalle and John Meyer, either via youtube, twitter, facebook or by posting them on the comments section on the following link: https://community.ig.com/blogs/entry/271-igcommoditychat-base-metals/ Asian overnight: The arrest of a senior Huawei executive provided the spark for a fresh round of selling in Chinese equities, adding to a broadly grim session for Asian markets. Tech stocks in Hong Kong suffered heavily, with the overall index down 2.9%. Oil prices have begun to get the jitters ahead of the OPEC meeting today, with the decision expected at 5pm London time. UK, US and Europe: A full text of advice written by the attorney-general Geoffrey Cox was published on Wednesday, a day after MPs found the government to be in contempt of parliament by not publishing the document, in which Mr Cox states that the backstop which would keep the UK in a customs union with the EU, would “endure indefinitely” until  and alternative solution was applied to avoid a hard boarder. The general negative correlation between the sterling and the UK equity market is starting to diminish. In the past, we have seen that as the pounds weakens, the FTSE100 gains strength. This inverse relationship has faded and we are now coming to see a positive correlation between the sterling and the equities market. This is most likely due to the growing concerns that Britain will leave the EU with a “no deal”, which is seen to be catastrophic for the UK economy. The OPEC meeting is the main event, with a cut of 1.4 million barrels in daily output the baseline expectation. Anything less than this may result in fresh downward momentum in crude. Aside from this, the calendar is rather quiet although we do have the US trade balance later today. Economic calendar - key events and forecast (times in GMT) Source: Daily FX Economic Calendar 1.30pm – US trade balance (October): deficit to hold at $54 billion. Market to watch: USD crosses
3pm – Canada Ivey PMI (November): expected to fall to 60.8 from 61.8. Market to watch: CAD crosses Corporate News, Upgrades and Downgrades DS Smith said that first half revenue rose 16% to £3.07 billion, while adjusted operating profit was 32% higher at £304 million (both in constant currency terms).   Ted Baker has appointed law firm Herbert Smith to look into allegations of inappropriate behaviour. The firm added that group sales were down 0.2% for the 16 weeks to 1 December.  Hiscox and Spirax-Sarco will be joining the FTSE100 replacing Just Eat and Royal Mail. Changes will be effective from start of trading on Dec. 24. Faroe Petroleum raised to equal-weight at Barclays
Genus upgraded to buy at Kepler Cheuvreux
Takeaway raised to sector perform at RBC Capgemini downgraded to equal-weight at Barclays
Klovern downgraded to reduce at Handelsbanken
Petra Diamonds downgraded to hold at Panmure Gordon
Sage downgraded to add at AlphaValue
  IGTV featured video Information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

DanielaIG

DanielaIG

Government Found in Contempt as Theresa May Suffers Further Defeats in the House - EMEA Brief 05 Dec

UK government found in contempt of parliament for the first time due to not releasing the full legal advice regarding Brexit. The government has now agreed that it will be published which may cause more instability in the markets Markets have retreated following their rally attributed to agreements made between the US and China at the G20. The fall comes amidst increasing sentiment of an economic slowdown as well as reduced faith in trade war negotiations following officials of the Trump administration admitting it was too early to say if a longer-term deal could be reached. The Dow was down over 2.5% whereas the Hang Seng was down over 1.5%. Meanwhile, the EU volatility index was up over 7% over the course of yesterday. Australian GDP missed growth QoQ by 0.3% and YoY by 0.5%. The growth targets were 0.6% and 3.3% respectively. Oil prices have fallen again as the Chinese government has warned of a falling demand due to a slowing down of the economy whilst the US oil inventories have continued to grow according to a report by the American petroleum institute. Official US oil inventories will be released today at 15:30 GMT. Gold has fallen from its recent 5 week high and the dollar has strengthened. The dollar basket gained 0.4% yesterday. This market sell off comes as bond yields have dropped, showing a flight from equities into the less risky assets. The current US yield curve and what it means for investors is discussed here. Asian overnight: Asian markets fell sharply after a dismal day for US equities, with 3%+ losses for the Dow, S&P 500 and Nasdaq. Recession fears are rising as investors watch the yield curve warily, while growth fears hit oil prices too, reversing some of the gains from earlier in the week. UK, US and Europe: US markets are closed today for the funeral of President George H W Bush, which should result in lower volumes across the board. The pound remains in focus, after the prime minister suffered a series of reverses in Parliament, which may however mean that a no-deal Brexit is much less likely, and a possible ‘Norway option’ becomes a possibility if the current deal fails to pass Parliament. The contempt vote was another blow to British Prime Minister Theresa May as she battles to gain support for her withdrawal agreement. The vote was won by 311 votes to 293 and saw a substantial drop it the pound which briefly hit its lowest level since April 2017. The vote also saw 26 conservative MP’s vote for their leader to release the full details of the legal advice. The vote was also notably backed by the DUP who have a parliamentary pact with the conservatives, however they have been outspoken with their displeasure with how the withdrawal agreement approaches the Irish boarder issue. Jeremy Corbyn has demanded that the advice is published before the parliamentary vote on the withdrawal agreement next week, so MP’s can make an informed decision. Andrea Leadsom has only indicated that she plans to “respond” today as MP’s meet again as part of the 5-day debate. Speaker of the House John Bercow has stated it would be unimaginable that the advice is not provided before the vote. Continued division between and within the parties suggests the PM may need to increase her efforts if she wishes to get this agreement passed when the MP’s make their decision on it on Tuesday the 11th. Economic calendar - key events and forecast (times in GMT) Source: Daily FX Economic Calendar 9.30am – UK services PMI (November): activity expected to increase, with the index rising to 54.1 from 52.2. Markets to watch: FTSE 100/250, GBP crosses
1.15pm – US ADP employment report (November): 189K jobs expected to have been created, from 227K jobs a month ago. Markets to watch: US indices, USD crosses
3pm – Bank of Canada rate decision: no change in policy expected. Market to watch: CAD crosses
3pm – US ISM non-mfg PMI (November): expected to drop to 59.5 from 59.7. Markets to watch: US indices, USD crosses
3.30pm – US EIA crude inventories (w/e 30 November):stockpiles to rise by 2 million barrels, from a 3 million increase a week earlier. Markets to watch: Brent, WTI Corporate News, Upgrades and Downgrades Stagecoach suffered a pre-tax loss of £22.6 million, compared to a profit of £96.7 million a year earlier, with a writedown in the value of the US business the main culprit. Adjusted pre-tax profit was down 10% to £87 million.   Wood Group has won a $43 million contract to construct 80 miles of steel pipeline in west Texas.  Patisserie Valerie have appointed an interim finance chief following issues with their accounting reported in October The Civil Aviation Authority has announced it is taking legal action against RyanAir. The airline are claiming that they do not have to compensate customers for delays during strikes from their staff as they believe this constitutes "extraordinary circumstances". The EU mandate that passengers must be compensated for delays does not apply if the situation is deemed to be extraordinary.  Takeda have gained shareholder approval for their £46 billion takeover of Shire, the largest corporate takeover Japan has ever had Alpine shareholders have approved their merger with Alps Electric Aker Solutions upgraded to buy at Kepler Cheuvreux
Bayer upgraded to buy at DZ Bank
HeidelbergCement upgraded to overweight at JPMorgan
Salzgitter upgraded to neutral at Macquarie Electrolux cut to underweight at Morgan Stanley
Ted Baker downgraded to hold at HSBC
Glaxo downgraded to equal-weight at Barclays
Hargreaves Lansdown cut to underweight at Morgan Stanley IGTV featured video Information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary. 

IGAaronC

IGAaronC

OPEC preview

Please see the following analysis from Chris Beauchamp, Chief Market Analyst at IG, a global leader in online trading. OPEC preview OPEC faces a difficult task this week, as it aims to prop up the oil price without antagonising the US or putting too much strain on state finances by cutting production too much. The current state of demand and supply After being in deficit for 2018 and 2019, the oil market is expected to shift back to surplus next year: Crude output continues to rise despite the decline in Iranian output: Crude oil seasonality Usually oil weakens in the first two months of Q4, but it then tends to pick up from the first half of December, beginning a steady rally into the summer.   Expectations Current forecasts suggest a cut of 1.4 million barrels per day will result from the meeting. Anything less than this would likely cause another drop in prices. The meeting may not go with an explicit number, merely creating an agreement to restrict supply. Again, this is unlikely to be well-received by the oil market.   Saudi Arabia – walking a tightrope Saudi Arabia faces a difficult balancing act. On the one hand, it must avoid letting the oil price fall too far and hurt its finances (and those of the others in OPEC, though that is less of a concern). On the other, it will seek to avoid cutting too far, too fast, since this might lead to a sharp bounce in the oil price, which would annoy the White House. Saudi Arabia knows that it has outraged world opinion with its actions regarding Jamal Khashoggi, and that only the lack of outright condemnation from the US has saved them from serious consequences. Trump’s decision to equivocate on the subject, while not conditional on keeping oil prices down, may waver if they cut output by a significant amount. But then again, with a defence budget running at 10% of GDP (almost five times the global average and three times the US budget in GDP terms), plus large state spending commitments, Saudi Arabia has to look at some cuts in order to restore balance to its finances. The FT reports that the Saudi energy minister has argued that cuts of at least a million barrels per day are needed.   Russia Although not an OPEC member, Russia is Saudi’s other major partner in the oil market. Russia too is caught between wanting to boost prices and keeping its oil wells going at full production. Putin is aware that falling oil revenues put pressure on the Russian state, at a time of austerity for the Russian economy. Recent attempts to raise the pension age have not gone down well, and the president faces falling opinion poll ratings. Russia is arguably happy with the current state of affairs, but may be persuaded of the benefits of cutting production in return for higher prices. A smaller than expected cut, however, might have the opposite effect, sending prices lower and resulting in lower output for Russian wells. This would not go down well in Moscow.   The rest of OPEC Saudi Arabia could look to persuade other members to cut production. Nigeria and Libya were left out of the last round of cuts, due to the fact that their output was still recovering after shocks arising from political troubles.  But both are keen to keep producing to boost state revenues, while others like Iraq and Iran are also rather cool on the idea of reducing output. Saudi Arabia faces a tough task convincing the rest of the cartel to cut output, particularly if it does not set out its own production cuts. All trading involves risk.   Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 79% of retail investor accounts lose money when trading Spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.

Professional clients can lose more than they deposit.

The value of shares, ETFs and ETCs bought through a share dealing account, a stocks and shares ISA or a SIPP can fall as well as rise, which could mean getting back less than you originally put in. Past performance is no guarantee of future results.   No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication.   Prepared by IG Markets Ltd.    

MaxIG

MaxIG

Inverted Yield Curves -APAC brief 5 Dec

Written by Kyle Rodda - IG Australia Inverted Yield Curves: There’ll probably be a lot of talk about “inverted yield curves” and “recessions” today. For some, reading such headlines will come as a shock. Perhaps even a cause of anxiety. It’s wise to understand why such commentary has emerged – and what that may imply. The price action in US Treasuries has been quite dramatic in the past 24-hours: the (what ought to be) familiar themes regarding a looming global economic slow-down, and the prospect of softer future US inflation has seen traders cut their predictions of future rates hikes from the US Fed. The short-end of the yield curve – the end which is more exposed to the near-term actions of the Fed – has held up well; but it’s the middle-to-end of the curve – the part controlled very much by traders’ expectations about future growth and inflation – that is experiencing the greatest duress. What it all means: In short: traders are anticipating an imminent end to the Fed’s hiking cycle, and they are now trying to approximate when the Fed may cut rates again.  This is where the talk of recession starts to pop-up. As is easy enough to grasp, the Fed would need to cut rates in the event that the economy requires stimulatory support from monetary policy. Such circumstances would emerge if the economy began to slip into something resembling a recession. Hence, when yields at some point in the curve invert, it’s a reflection of traders collectively estimating that in the near-enough future, interest rates will be lower than what they are (around about) now, because the economy will enter into a period of significant weakness to require a rate cut from the Fed. No reason to panic (yet): It sounds quite ominous when the mechanics are explained. It’s doubly as bad when one considers the last time the US went into recession, it was the GFC. We all have memories of how dire that stage of history was. However, any fears elicited by talks of recession and everything that comes with it must be moderated by some counterbalancing arguments. Indeed, an inverted yield curve has portended the last 9 out 11 US recessions, but the time-lag between yield-curve-inversion and a recession should be noted. After an inversion of the US 2 Year Treasury note and the 10 Year Treasury note (the spread on these two assets being the most popular barometer for the phenomenon) it’s not for another 12-18 months that a recession is realized. US growth is solid (for now): So: while financial markets will be whipped into a frenzy about what is going on – especially as safe-haven assets like US bonds are gobbled-up as risk appetite wanes – the effects on the “real” economy are unlikely to manifest in the all-too immediate future. And justifiably so: global growth is waning, and it is not as synchronized as it was in 2017, but at least in the US, economic indicators remain relatively strong. The labour market, which is in focus this week with Non-Farm Payrolls figures released on Friday, is still very tight, leading to gradual wages growth; quarter-on-quarter GDP is still around 3-and-a-half per cent; and although business conditions are cooling, Monday’s release of US Manufacturing PMI still posted a much better than forecast result. What triggered the panic: It begs the question what precipitated this bearishness overnight. In financial markets, an underlying dynamic – such as that which has been experienced in the last 24 hours – may well be present, but it requires a catalyst to ignite it into full motion. Last night’s jitters, in a macro-sense, were brought- about by a slew of disappointing news. The post-G20 rally has been faded, as traders question the longevity and substance behind the so-called deal between the US-China, after several top White House advisers failed to substantiate what outcomes have been agreed upon between the two trade-waring nations. The trade related pessimism was exacerbated by renewed concerns regarding Brexit, and the apparent inevitability of an economically disruptive “hard-Brexit” outcome. Risk-off, havens-on: A rush to safety, and a subsequent liquidating of positions in riskier assets, has occurred. Touching again on US Treasuries: the yield on the benchmark 10 Year note has plunged to 2.91 per cent, and on the 2 Year note it has dipped to 2.80 per cent, taking the spread there to a narrow 11 points. Equities have been slaughtered, unwinding a considerable amount of last week’s gains: the Dow Jones is off 2.73 per cent, the S&P500 is off 2.3 per cent, and the NASDAQ is off 3.3 per cent (with an hour remaining in trade). The USD has climbed on its haven appeal, as has the Japanese Yen, which is back into the 112-handle, though gold has also rallied, despite the stronger greenback, to $US1238 per ounce. While in other commodities, copper is down 1.8 per cent, and oil is flat (this, leading into Thursday’s OPEC meeting). Australia today: SPI futures are predicting another punishing day for the ASX200, with that contract at time of writing indicating a 52-point fall for the local index. The heavy hitting financials and materials sectors will probably struggle today: the former due to this tumble in bond yields, the latter as traders unwind the growth optimism piqued by the weekend’s G20 meeting. In line with overseas markets, defensive sectors could be the play today, though a day similar to yesterday which saw 10 out of 11 sectors in the red on 17.5 per cent breadth shouldn’t be discounted. It’s GDP day today, and that should be watched closely, especially after the RBA at its meeting yesterday talked up the growth prospects of the Australian economy. Whatever the result the numbers produce – forecasts are for annualized growth at 3.3 per cent – it will unlikely shift Australian equities. The interest will be on the Australian Dollar and interest rate markets – the A-Dollar fell below 0.7350 again last night as risk-proxies were dumped – however the likelihood rates traders will bring forward their RBA-hike expectations in from 2020 is rather slim.

MaxIG

MaxIG

High-Stakes in the House of Commons - EMEA Brief 04 Dec

Theresa May will begin the five days of her House of Commons debate today, culminating in a historic vote on her Brexit compromise deal on December 11. The Dow Jones closed 1.13% higher at 25,826.43 yesterday, whilst both the S&P and Nasdaq posted gains of 1.09% and 1.51 percent, respectively. Asian shares fell on Tuesday as the optimism gathered from the US-China trade truce ends over doubts of a final resolution: the Hang Seng lost 0.3% as the ASX gave up 0.8% and Japan's Nikkei dropped 1.3% lower. USD was 0.3% weaker against the yen, at 113.28. Oil prices continued to rise on the back of the US-China trade truce and ahead of a key OPEC meeting this week in Vienna. US crude gained 1.2%, reaching $53.58 a barrel, whilst Brent crude is currently trading at $62.44 a barrel.  Gold rose as a result of a weaker dollar, up 0.4% to $1,235.88 an ounce.  UK, US and Europe: Five days of parliamentary debate are to begin today in the House of Commons, as Theresa May will try to secure backing on her compromise Brexit withdrawal deal, all culminating in a historic vote next Tuesday, on the 11th December. Currently, few MPs at Westminster are confident that the prime minister will win the vote, and many believe that May will suffer a defeat. A defeat next Tuesday could lead to a vote of no confidence and a parliamentary gridlock, likely resulting in further talks with Brussels to seek changes to the deal, or, in a more extreme case, a second referendum leading to a possible no-deal Brexit.  In the rest of Europe, EU finance ministers have struck a reform deal after all-night talks in Brussels. The deal includes measures to bolster the Eurozone against future financial crises by equipping the banking union with more financial backing, and to give its sovereign bailout fund extra flexibility in its ability to help out countries.  Looking ahead, volatility around GBP crosses at 9:15am GMT is likely to increase as the BOE's Mark Carney is due to speak at Parliament, along with three BOE Deputy Governors, about the Brexit Withdrawal Agreement before the Treasury Select Committee. We also have the UK Construction PMI release, which is an indicator of economic health and is expected to be lower than the previous month, signalling a slowdown in industry expansion.  Economic calendar - key events and forecast (times in GMT) Source: Daily FX Economic Calendar   Corporate News, Upgrades and Downgrades Altria, the maker of Malboro cigarettes, confirms they are in talks over a potential investment in Canadian cannabis producer, Cronos Group. Zopa, the 13 year old P2P lender has become the first of its kind to secure a full UK banking license. Unilever to acquire GSK's consumer nutrition business in a €3.3 billion deal. Glencore's billionaire chief of copper, Telis Mistakidis, to step down amid US corruption probes of the commodity giant's Africa operations. IGTV featured video Information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

JoeIG

JoeIG

A bullish Monday - APAC brief 2 Dec

Written by Kyle Rodda - IG Australia A bullish Monday: That big uplift we were all expecting after the weekend’s events at the G20 has transpired. The trade-war truce, as fleeting as it may prove to be, has supported a substantial enough boost in sentiment. Risk appetite has been teased, and risk assets across the global, beginning in the Asian session yesterday, and carrying through European and North American trade, have dutifully rallied, consequently. It’s a synchronized boost, prevailing across asset-classes, with traders relishing the double-shot of bullishness injected into markets in the last 7 days: a much more dovish Fed, which has lowered the possibility of higher global interest rates; and a de-escalation of the trade-war, which has ameliorated the concerns regarding future global economic growth. Global stocks: There remains, at time of writing, a few moments left in the North American session, and as it stands, the good-vibrations are waning somewhat. Nevertheless, Wall Street is higher, capping-off a positive day for markets overall. The NASDAQ is leading the charge, up around 1 per cent for the session, while the Dow Jones and S&P500 are 0.7 per cent higher for the day. It follows an Asian and European session which saw the Nikkei up 1 per cent, the CSI300 up 2.8 per cent, the DAX up 1.85 per cent, and the FTSE100 up 1.2 per cent. Volumes have also been very substantial, running 30 per cent above average on the S&P, and a remarkable 45 per cent above average in Chinese share markets, adding conviction behind the day’s trade. Currencies and commodities: Across the currency and commodity landscape, a comparable appetite for risk has occurred. Growth proxy currencies have generally prospered: the Australian Dollar is (presently) trading at 0.7350 – having challenged the 0.7390-mark yesterday, before a raft of soft local data gut-checked the local unit – and the New Zealand Dollar is up around 0.6920. The Loonie is also rallying, benefitting from the additional support of higher oil prices. The US Dollar has been sold-off, along with other haven currencies like the Japanese Yen, pushing the price of gold to resistance at $US1232. The Euro is modestly higher courtesy of a weaker greenback, but the Pound has left the party following news that a vote of no-confidence looms for Prime Minister May in the British parliament. Finally, Industrial metals are higher, thanks to the uplift in economic-growth-optimism, paced by LME copper, which rallied 1.6 per cent. Can it last? So that was Monday, and its undoubtedly been a day of positive price-action. But it now begs the question: beyond a sweet one-day rally, does this move higher have more legs? As far as this week goes, the matter is dubious. Markets move on surprises, whether they be good or bad, and what market participants received on the weekend was quite a surprise: a cordial outcome to the trade-talks was expected and priced-in; what wasn’t, however, was the freezing of tariffs for 90-days, coupled with the various commitments to reform certain trade practices. The rush-of-blood for traders came as they attempted to price this new information into markets – naturally, leading to a spike higher in risk-assets. The problem is now that with today’s market activity this has been completed, meaning traders will now go back to looking ahead to the next events at hand. Risk events loom: Looking forward into just this week alone, there is an abundance of information to keep traders shuffling on their toes. Economic data wasn’t particularly heavy across the globe yesterday, but the next 24 hours will set in motion a fortnight of highly significant economic data. Locally, the RBA meets today, before the big-ticket Australian GDP print is released tomorrow. A slew of PMI figures will be released in the next four days across Asia, Europe and North America, and will provide a proper gauge on the state of global growth. US Non-Farm’s come out on Friday, potentially reshaping once more perceptions regarding the US inflation outlook and possible Fed policy. And OPEC meet on Thursday (AEDT) to discuss oil markets – an event which has taken even greater significance now after Qatar announced yesterday it plans to leave OPEC. Bonds flashing warning signs: Those are just the headline grabbers, too. There’s considerably more than just that going on. Fundamentally, from a macro-perspective, a reversal in sentiment if a data-point goes the wrong way for the bulls could shift the dial once more. The signs under-the-hood are already presenting this: despite rallying across the curve briefly during Asian trade, US bond yields have retraced their gains –  the yield on benchmark US 10 Year note climbed to 3.05 per cent, before plunging back below 3.00 per cent in US trade. Most worryingly, the spread between the 10 Year and 2 Year US Treasury notes narrowed to just below 16 points, while the spread between the 3 Year and 5 Year equivalent has inverted. This is as good as a flashing light as any to suggest that markets are increasingly pricing in slower growth, if not some sort of US recession, moving into the medium-to-long term. The here and now: ASX200: That’s certainly the alarmist view – and it should be noted that it’s a problem to be confronted in the slightly-more distant future. Bringing the focus back to the here-and-now and to today’s Australian session, SPI futures are pointing to a pull-back in the ASX200 of about 20 points. The day’s trade will be highlighted by the RBA’s meeting, but the central bank will keep interest rates on hold, and there are few surprises tipped to come out of the accompanying statement. Yesterday’s session, during which breadth was a remarkable 88 per cent, could be considered a combination of a recovery from Friday’s substantial losses, and a relief rally off the back of the weekend’s G20 meeting. Maybe futures markets are telling us a necessary moderation of that excitement ought to be in store today. It was the materials space that unsurprisingly led the charge during yesterday’s trade, supported by a climb in the financials sector. The former added 29 points to the index and the latter added 16. Energy stocks were the best performing in relative terms, as traders took the cues from Russian and Saudi leaders at the G20 regarding likely oil production cuts, to climb 4.6 per cent and tip-in 14 points to the ASX200’s overall gains. Riskier momentum/growth stocks in the health care and information technology sectors experienced a solid bid – a healthy barometer of bullishness. Ultimately, across the overall index, though it may not transpire today given early indicators, a rally beyond support at 5745 towards 5786 is required to maintain a bullish-hue for the ASX200 coming into the Christmas period, to open-up a run at the more meaningful resistance level around 5875. 

MaxIG

MaxIG

US and China agree tariff ceasefire; Markets soar - EMEA Brief 3 Dec

The US and China have agreed a temporary ceasefire on additional tariffs on each others goods at the G-20 summit in Argentina to allow for trade talks to continue in the new year. Dow futures soared more than 450 points as investors have reacted positively to the US-China news. Nasdaq futures also rose around 2.7%, followed by S&P 500 futures which jumped 1.7%. The dollar depreciated on Monday as investors looked to take up positions in riskier assets, such as the Australian dollar which rallied 0.75% and the New Zealand dollar which rose 0.5%. The dollar index, which measures the value of the dollar versus six major currencies, traded down 0.36%. European markets are expected to open higher this morning, again as a result of the announcement to postpone tariff escalation. The FTSE 100 is currently trading at  7,087, 107 points higher, the DAX 208 points above it's previous close, whilst the CAC is set to open up 83 points. Asian equity markets also traded higher, the Shenzen composite rose 3.5% followed by the Shanghai composite which increased by 2.9%. The increases came following a data release from the Caixin Manufacturing Purchasing Managers' Index which indicated factory activity increased in China compared to last month. Oil prices surged on Monday due to the US-China trade war truce, WTI crude futures were up to $53.63 a barrel, up 5.4%, whilst Brent crude futures were up 4.8%.  Qatar's Energy Minister has announced that the country will leave OPEC on the 1st of January 2019, alluding to a "technical and strategic" change to develop and increase natural gas production. UK, US and Europe: The European markets are set to rally after a ceasefire in the trade war between the US and China, after Trump and Xi reached an agreement over dinner in Buenos Aires on Saturday. The deal should see both China and the US hold off on additional tariffs on each other's goods for the next 90 days, whilst negotiations continue in a bid to reach a long-term agreement. Helen Qiao, China and Asia economist with Bank of Amarica Merrill Lynch, explained that "In contrast to the fear — especially in Asia —that the hawks in US administration would make impossible demands, evidence of President Trump working towards a trade deal with China has emerged".  With the announcement of a 90-day truce in the US-China trade war, how will this impact commodities? We have seen a surge in the price of oil ahead of the much anticipated OPEC meeting, but what impact will it have on base metals? Join our #IGCommodityChat on Thursday 6 December at 1pm (UK time) to discuss how trade wars are affecting base metals with Author and Economist Daniel Lacalle and John Meyer, partner and analyst at SP Angel. Get involved in the debate by tweeting your questions to @IGTV or by commenting in the section below. Economic calendar - key events and forecast (times in GMT) Source: Daily FX Economic Calendar Corporate News, Upgrades and Downgrades Netflix is under scrutiny by HMRC as the British operation declared sales of £23.9m, way below what the Times estimates the business generates.  Convenience store chain McColl's has issued a profit warning today, as the company highlights the collapse of supplier Palmer & Harvey as a "significant supply chain disruption". Stobart Group has announced that dividends will be cut for the fourth quarter to 1.5 pence. The firm said in a statement "The board believes it is prudent financial discipline to use proceeds from further disposals in the medium term primarily to invest in value-creating opportunities based on sustainable operating cash generation and to maintain a strong balance sheet". IGTV featured video Information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary. 

GeorgeIG

GeorgeIG

Dividend Adjustments 3 Dec Nov - 10 Dec

Expected index adjustments  Please see the expected dividend adjustment figures for a number of our major indices for the week commencing 3 Dec 2018. If you have any queries or questions on this please let us know in the comments section below. For further information regarding dividend adjustments, and how they affect  your positions, please take a look at the video.  NB: All dividend adjustments are forecasts and therefore speculative. A dividend adjustment is a 
cash neutral adjustment on your account. Special Divs are highlighted in orange. Special dividends this week Index Bloomberg Code Effective Date Summary Dividend Amount STI SPH SP 6/12/2018 Special Div 4 SIMSCI SPH SP 6/12/2018 Special Div 4 RTY MBWM US 6/12/2018 Special Div 75 RTY ORIT US 6/12/2018 Special Div 15 RTY SGR US 7/12/2018 Special Div 25 RTY GLOG US 7/12/2018 Special Div 40 RTY LADR US 7/12/2018 Special Div 23 How do dividend adjustments work?  As you know, constituent stocks of an index will periodically pay dividends to shareholders. When they do, the overall value of the index is affected, causing it to drop by a certain amount. Each week, we receive the forecast for the number of points any index is due to drop by, and we publish this for you. As dividends are scheduled, public events, it is important to remember that leveraged index traders can neither profit nor lose from such price movements. This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

MaxIG

MaxIG

Trumps G20 summit - APAC brief 3 Dec

Trump’s G20 Summit: Love him or loathe him, Donald Trump seems to be able to get things done. Given he is the most powerful man in the word – at the very least, in a political sense – perhaps this isn’t such a difficult task. When you have the world’s largest economy, coupled with the world’s most potent military at your disposal, one would have all the leverage needed to get their way. But nevertheless, arguably not since Ronald Reagan has global politics experienced such a rapid ideological shift. There were plenty of little-stories, centring around a myriad of economic and political issues, that were played out at the weekend’s G20 summit. The overarching narrative however, at what was possibly the most historically significant G20 meeting since 2009 – when world leaders gathered to discuss the global economy at the depths of the Global Financial Crisis – was about the pitfalls of global trade and migration, and it had President Trump written all over it. Typical talk-fest: As generally occurs at these talk-fests, this year’s G20 summit was apparently characterized by the typical jostling and lobbying between the many tiers of power. What happens behind closed doors seemingly stays behind closed doors (it’s hardly surprising the masses treat these engagements with cynicism, if not outright paranoia), so it’s difficult to know the depth of discussion shared by world leaders. What we do get though is a nice little communique at the end of it all, summarizing the broad, shared vision of the member countries, with some normative statements articulating how the world ought to approach itself in the future. The short-term financial market implications of this year’s statement will presumably be limited, and more focused on (somewhat improving) US-Sino relations. Regardless, for those with a concern for the structural matters directing future financial and economic activity, an appreciation of what was spoken over the weekend gives a keyhole insight into what can be expected in tomorrow’s world. Trumpian philosophy wins: True to Trump’s historic influence, the financial and economic world of tomorrow, if the G20’s communique is a reliable indicator, is one of greater nationalism, higher trade-barriers, and less liberal movement of people. For the first time in its (albeit short) history, the G20 avoided disavowing protectionism, and instead stated that the world trade system is “falling short of its objectives and there is room for improvement”. It pointed out, too, the necessity of institutional reform, naming and shaming the World Trade Organisation as a body failing to meet its mandate, and calling on supranational bodies to do more to ensure fairness in the global economy. Ultimately, the culmination of many days of talks lead to an implied (and what can probably be judged a reluctant, at least for most member-states) rebuke of globalisation, and the liberal democratic order that grew out of the post-World War II world. A New World Order? Although the reactionary face of this growing impulse of isolationism, nationalism and protectionism in parts of the global political stage possesses the fake-tanned ugliness of US President Donald Trump, some of the genuine criticisms relating to the liberal politico-economic order ought to be treated with some credibility. The virtues of free-trade, liberalization, globalization and the like haven’t always been lived-up to by world leaders, who sometimes have appeared to bastardize the system to preserve the special interests of those who exploit the system. Not only that, in a practical sense, trade-barriers, high borders, and the unequal treatment of certain nations have always existed in some sense, despite the pontificating of world leaders about the benefits of multilateralism, freeness and fairness of the liberal order. It may not ultimately be true that internationalism and institutionalism is undesirable, however whatever the truth, the perception amongst many is that the system is corruptible, ineffective, opaque and (dare it be said) “fake”. Realism reigns: It’s where the brutal appeal of realist politics – which is exemplified today by Trump, Brexit and other forms of “populism” – takes its hold. It harks back to a notion (an old cliché, really) spouted famously by Paul Keating, channelling his mentor Jack Lang: “In the race of life, always back self-interest: at least you know it’s trying.” Such a brutal, Machiavellian view of the world, if delved into, especially too deeply, is highly disturbing – almost misanthropic. Though for all its base savagery, the idea does seem self-evidently true, and fundamentally real. It isn’t as if such extreme real politick ever truly disappeared as the liberal-democratic global order, and the global economy it produced, emerged and flourished. Ostensibly, it was always there in come capacity, moving the gears of history in one way or another. The difference now – in a time of social crisis, apparently defined by “fake news” and “alternative facts – is that extreme self-interest can be understood, trusted, openly embraced, and even lionized. Trade-truce to be the focus: In the end, evening if begrudgingly, this system – epitomized by serving the (collective and individual) self at the expense of all others – was tacitly endorsed by G20’s communique, paving the way for meaningful, structural change in the global economy. The potential impacts of this are unlikely to manifest in notoriously short-termist financial markets: whatever the effects, they will be considered and experienced some way down the road. Traders will search for information in the next 24 hours that influence the here and now – and given that the summit appeared to go ahead cooperatively, it ought to be presumed a bullish sentiment will reign across markets. The primary reason this may prove true is that at the coda of the event, the highly anticipated dinner between US President Trump and Chinese President Xi Jinping reportedly went along well, with both trade war combatants appearing cordial, and agreeing in principle to halt new tariffs on one another’s countries for at least 90 days. Possible price reaction: This being so, risk appetite may well be piqued today, and risk assets could be poised to rally. The last price of SPI Futures have the ASX200 up 25 basis points, having shed a remarkable 1.6 per cent on Friday to close at 5667. Asian equities will surely be beneficiaries today, however considering the major ramifications of the weekend’s events, indices throughout Europe and North America stand to gain, too. Growth currencies like the Australian Dollar and New Zealand Dollar may climb, with the A-Dollar eyeing minor resistance at 0.7360 – a break of which could enable a run to 0.7430. The risk-on tone, combined with a fall in US Treasury yields across the curve, will probably produce a weaker greenback – with other havens in the form of CHF and JPY likely to experience the same. While in commodities prices, notably precious and base metals, should move higher, though it must be stated oil specifically will likely track its own idiosyncratic trading-patterns.  

MaxIG

MaxIG

Liquidity is thinning, Fed is telling us something, a true G20 breakthrough? - DFX key themes

Weeks Left of Liquidity, A Laundry List of Unresolved Fundamental Threats We have officially closed out November Friday and we are now heading into the final month of the trading year. Historically, December is one of the most reserved months of the calendar year with strong positive returns for benchmark risk assets like the S&P 500 along with a sharp drop in volume and significant drop in traditional volatility measures (like the VIX index). There is a natural, structural reason for this moderation. The abundance of market holidays, tax strategies and open windows for various funds all contribute to this norm. That said, there is another element that plays as significant a role in the seasonal pattern as any practical influence – if not more – and that is habit. Mere anticipation of quiet during this period does as much to ensure a self-fulfilling prophecy as the practical developments of the period. Yet, assumptions of quiet when the market as a whole – and most traders individually – have so much exposure to surprise financial squalls would be particularly poor risk management.   Looking ahead, it is first important to assess the practical time lines of full liquidity. The next two weeks (the first half of December) are only sheltered from unforeseen storms by expectations alone. It would be prudent to at least be engaged and dynamic in the markets through this period. The third week of the month will see position squaring take its toll on speculative positioning and liquidity. This is a useful time as we can establish where investors believe the most aggressive risk exposure is held (‘risk on’ or ‘risk off’) as they unwind anything with a shorter-duration holding period. Through the final full week of the year, the markets will be severely drained by market closures and limited time and market depth to meet the tax and portfolio redistribution windows. To general a strong market move – trend or even a severe drive – would take an exceptionally disruptive event for the financial system. I am concerned over the complacency in the market, but not so apprehensive as to believe we will tip the beginning of a lasting financial crisis through the final week of the year – and yes, it would be a bearish run if anything as there is virtually no chance of a sudden wave of greed that will bring investors back to such a fragmented and thin market.  That said, there is still plenty of potential/risk that conditions could deteriorate exponentially through the first half of the month owing to the convergence of structural and seasonal circumstances. In general, a near-decade of uninterrupted speculative advance has started to lose traction as market participants have recognized their dependence on extreme but limited monetary policy, the growth of securitized leverage and sheer self-enforcing momentum. In 2018, we have seen conviction built on that unreliable mix start to falter with severe bouts of momentum in February and October with sizable aftershocks in March and November. This speaks to the underlying conditions in the market that could fuel a sweeping fire if properly ignited by any of a number of systemic threats that we are tracking across the global markets. Trade wars, Fed policy, convergence of global monetary policy, lowered growth forecasts, breaks in trade relationship (Brexit, Italy, US,etc) and other issues are systemic threats that have gained some measure of purchase these past months. If there were a sudden panic spurred by recession fears for example, then the drain on liquidity naturally associated with this time of year could in turn amplify fear into a full-blown panic with systemic deleveraging into 2019.  Now Everything Fed-Related Carries More Consequence  There has been a notable shift in Fed policy intent, and the markets will be engrossed with interrupting exactly what this course correction will mean for the capital markets. Though there has been subtle evidence of a waning conviction in pace for some weeks, FOMC Chair Jerome Powell made it explicit (well, as explicit as their careful control of forward guidance would allow) in his prepared speech on the bond markets in which he remarked that the group was perhaps closer to its neutral rate than previously expected. Now, some would say that is merely practical observation that after three rate hikes in 2018, they have closed in on their projected ‘neutral rate’ range of 2.50 to 3.50 percent. We could still keep pace and extend the most hawkish forecasts and hit the top end of that scale. That is true, but we have to remember what the central bank’s primary monetary policy tool has been over the past half-decade.  It hasn’t been changes to the benchmark rate or adjustments to the balance sheet but rather forward guidance. They have gone to exceptional lengths to signal their policy intent without making promises for the course so that they could back away from extreme easing without triggering a speculative panic based on exposure leveraged by years of excess backed by the vaunted ‘central bank put’. If so much effort is being put into this tool, then changes should be taken seriously rather than downplayed for convenience of a comfortable trading assumption. If there was intent behind the subtle change in rhetoric, it is an effort to acclimate the markets in advance of an event whereby the forecast will be delivered in black-and-white without the ability to establish nuance before the market’s respond with speculative shock (an event like the December 19 rate decision whereby the Summary of Economic Projections will make explicit the rate forecasts).  If indeed this is the objective to temper the market before the frank forecast is offered, then each speaking engagement and key data update between now and then will carry greater consequence. In the week ahead, we have Powell testifying before the Joint Economic Committee, which is a perfect opportunity to slightly extend the effort to make its intentions known. Recognition of this undertaking is the first step. Establishing what it means for the Dollar with rate premium and risk trends that have found confidence in the central bank’s reassurances will be critical.  G20 Aftermath Produces an Official Communique and US-China Trade War Pause  Pop the corks. The G20 has agreed to an official communique while the US and Chinese Presidents made a breakthrough on the escalation of their escalating trade war. Yet, before we over-indulge in risk exposure build up, we should perhaps look further ahead to the hangover that confidence in which this development is likely to lead us. Typically, an official press briefing that all the leaders agree to (dubbed the ‘communique’) is routine. However, with the rise of populism in the global rank and subsequent deterioration of relationships, simply signing off a commitment to shared goals of growth and stability has become an exceptional milestone. The leading consensus heading into this gathering in Argentina was that no official briefing would be released as the United States would not approve anything that would set its America-first agenda into a negative light. Further, China would not sign off on a statement that cast its own policies as unfair trade.  Perhaps recognizing the deteriorating sentiment amongst businesses, investors and consumers globally; the other parties would not demand these inclusions as protest for making so little traction with their constant protests. The indirect references to US and Chinese policies were left out. That is not genuine progress but simply self-preservation. As for the more remarkable ‘breakthrough’ in US and Chinese relations, the countries’ leaders found enough common ground to compromise a pause in the rapid escalation of their trade war. For discussing key economic issues between the two countries, the US agreed to delay the increase in its tariff rate on $200 billion in Chinese imports from 10 to 25 percent due previously to take effect on January 1st. The threat made by President in the weeks preceding this gathering of adding another $267 billion in Chinese goods to the tax list didn’t seem to warrant specific reference – perhaps as a backdoor strategy or because it would assumed to be included.  This is a pause in the escalation of activities rather than a genuine path back to a state of normalcy where collective growth is the foundation for the global economy. This is the bare minimum for registering an ‘improvement’ in relations, and it will be this thin veneer of progress that will truly test the market’s appetite to source anything of ancillary value to build up speculative exposure. I doubt this will inspire a true effort to significantly build up exposure in these unsteady times. In years past, such a development may have spurred the next leg of a yield chase; but recognition of the risk/reward imbalance is far too prominent nowadays. The question is how long this pause in an explicit outlet of fear lasts? Long enough to carry us through the end of the year? We’ll find out soon enough. 

JohnDFX

JohnDFX

High Stakes at the G20 Summit - EMEA Brief 30 Nov

The G20 summit in Argentina begins today, where discussions around trade, Brexit, and tensions between Russia and Ukraine are expected to be the dominant topics to take centre-stage.  FOMC minutes released yesterday pointed towards another rate hike in December, with concerns that trade tensions and corporate debt could impact growth. China’s official PMI fell to 50.0 in November from 50.2 last month, adding pressure on the country to implement more economic support measures amid the trade war. The Dow Jones fell 0.11% on Thursday, whilst the S&P 500 and the Nasdaq Composite dropped 0.22% and 0.25%, respectively. MSCI's index of Asia-Pacific shares outside Japan was last up 0.1%, making a 2.7% gain for the week and reflecting a rebound from the recent sell-off. The Nikkei was up 0.4%. USD fell 0.07% against the yen to 113.39. Pakistani Rupee plunges 6% in a suspected devaluation of the currency by its central bank, amidst ongoing bailout talks with the IMF.  US Crude rises 2.3%, settling at $51.45 yesterday as Russia is expected to accept OPEC’s decision in the need to cut oil production. Oil producers are expected to meet in Vienna next week to discuss supply cuts. Gold is currently trading at $1,224.34 an ounce. UK, US and Europe: The G20 summit begins today in Buenos Aires, Argentina. The outcome of which has become increasingly more significant due to recent weeks for a few reasons. Firstly, Donald Trump and Xi Jinping are expected to discuss trade this weekend, a meeting that will be watched very closely for clues on the path of the ongoing tensions between the US and China, after repetitive duty and tariff increases have amounted to a total of $360 billion across both sides. The escalation between the world's two largest economies has been a major threat to the global economy, the upcoming meeting will attribute to whether the world calms its nerves or continues on edge. Then there is Brexit, where Theresa May has the chance to secure international backing for as she attempts to sell her Brexit deal to world leaders at G20. Finally, amid heightening tensions and the flare-up of exchanges between Russia and Ukraine, Trump has cancelled a planned meeting with Putin, blaming specifically on Russia's failure to return ships and sailors seized from Ukraine last week in the Black Sea.  Oil prices have rebounded to par some of the steep losses in recent weeks, as confidence returned in the commodity on the back of expectations that Russia will co-operate with OPEC next week in Vienna, where the oil cartel and non-OPEC countries are to formulate an agreement on a supply cut that will stabilise crude prices. After hitting a four-year high at the beginning of October, the commodity has tumbled around 30% as sanctions against Iran's supply has proved to be less impactful than expected and concerns over a slowing global economy has curbed demand. Watch the IGTV featured video below, where industry advisor Malcolm Graham-Wood and Spencer Welch, director of oil markets at IHS Markit, discuss the future of the oil market. Economic calendar - key events and forecast (times in GMT) Source: Daily FX Economic Calendar Corporate News, Upgrades and Downgrades Volkswagen and Tesco to build UK's largest free car-charging network, funding as many as 2,500 electric car charging bays. Unilever has announced that Alan Jope will take over the helm from former CEO Paul Polman. Deutsche Bank's offices in Frankfurt were raided by police yesterday over alleged claims of money laundering. Shares fell 3% on the back of the news. Nio, one of the main Chinese electric car-makers and rival to Tesla, has announced that its U.S. head will step down. Audi has unveiled a concept electric sedan car that is expected to challenge the Tesla Model S and to be in full production by late 2020. Autonomy's co-founder and CEO, Mike Lynch, has been charged with defrauding shareholders in the sale of the company for $11bn to HP back in 2011. IGTV featured video Information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

JoeIG

JoeIG

Relief rally - APAC Brief 30 Nov

Written by Kyle Rodda - IG Australia A relief rally, now onto the next risk: The relief rally for market-bulls was sweet, but fleeting: it’s on to the next risk event now. Traders are being inundated by information, much of it speculative. Against this backdrop, volatility reigns: while off its highs still, the VIX is up 2.7 per cent on the day. To be clear, the Fed’s dovishness and Mr. Powell’s-famous-Put is underwriting the potential for future bullishness. But market participants can’t afford to let their guard down in this environment. We have the world’s most powerful politicians converging on Argentina, and with so many fissures running-through global political economy, the number of issues threatening market stability is considerable. One assumes that every generation thinks of themselves as existing at the end of history – reference: we can thank Fukuyama for that notion, perhaps – but it does sometimes feel that with the world-order trembling, we are living through a historical juncture of some description. Markets want what’s familiar: Markets don’t like this. They desire support and stability and a protection of the status quo. It’s why, in part, seeing the Fed ostensibly step in to support financial markets is so emboldening, and sparks all sorts of bullish impulses. This is especially so within equity markets, which being able to gorge on cheap credit for years, became spoilt and fattened. The fundamentals of the system itself are shaky. Although this ought to be an inherent virtue when it comes to the nature of capitalism – the notion of creative destruction, as economist Joseph Schumpeter expressed it, whereby viable investments prosper, and wasteful inefficiencies are purged –  for the better part of a decade, policy makers (rightly or wrongly) have sought to resist this process to maintain a semblance of economic constancy and social confidence. Withdrawal symptoms: The problem is weening the macroeconomy and financial markets off the opiate. This is what the Fed is ultimately attempting to do, but with capital having allocated itself to places it ought not to have, removing the support from the system, along with the perverse incentives it produced, is proving no simple task. The Fed yesterday morning – articulated in Powell’s speech –  almost certainly backed down in the face of the implicit pressure applied by markets. The message was clear from marker participants: we don’t like the risks of macroeconomic and geopolitical instability, we think growth will slow, we need support, otherwise we’ll melt-down. And so, in the tradition of Fed board’s gone by, Powell did. The message was only affirmed in this morning’s FOMC Minutes: the idea of “further hikes” passed December is debatable, because economic forecasts are softer, and there exists too many risks that could undermine the Fed’s objectives. Inflation waning? One of these objectives, when looking at the Fed’s strict mandate, is inflation targeting, and it appears that fundamental inflation is petering out once again. Market participants have cooled on the idea of that inflation risk is high, primarily due to a downgrade in growth forecasts and the recent dumping in oil prices. The Fed’s chosen inflation measure, the PCE Index, printed overnight, and revealed inflation slipped below the Fed’s target level of 2 per cent by more than forecast. The number came in at 1.8%. It’s not to say the risk of inflation has disappeared: wages growth is on the up in the US, which could conceivably feed into higher prices – not to mention the effect tariffs or (an unlikely) turnaround in oil prices could have on future inflation. However, as the markets understand things for now, inflation isn’t a bug bear, and that gives an assurance that the Fed will stay steady. The G20: In the bigger picture: it’s about this weekend’s G20 Summit. The trade war, Brexit, oil prices and global economic prospects are the big talking points; but underneath those we also have new tensions between Russia and the Ukraine, Italy and its fiscal situation, the Saudi’s and the controversy surrounding the Khashoggi murder, along with a myriad of regional issues faced around the globe. It’s a true tinderbox, that unsurprisingly would have world leaders, and thus market participants, very anxious. The core dynamic appears to be that those with the power to influence the direction of the political-economic world order have no interest in preserving it. Trump’s America is descending into paranoid isolationism, China wishes to reshape the neoliberal system to serve its long term national interest, the Russians are apparently trying to consolidate their regional interests, while the Europeans are busy naval gazing and questioning how to keep a unified Europe together at all. Trade War: Presumably, traders will do their best to ignore the structural power struggles and all the comparatively smaller issues dampening market sentiment and just focus on what will come out of the Trump-Xi dinner date. One would have to be utterly naïve to believe a breakthrough is upon us here. It’s unimaginable – granted, maybe only for those who lack a rich enough imagination – that either side will compromise its strategic interests. President Trump will want concessions from the Chinese before doing a “deal”, the likelihood of which seems very low. China possesses a long-term strategy for its nation and economy – one that extends passed the speedbump that is the Trump Presidency. Compromising the future to appease a bombastic American populist leader in the present is counterproductive. Both sides must know this, and that they are not on the same page right now, whatever the benefits may be. The likely outcome from the weekend will surely be a piecemeal statement committing to ongoing talks, as always seems to emerge from the talk-fests. Price activity overnight: The price action overnight reflecting the underlying market dynamic described so far has been quite subdued. European indices caught up with their North American and (some) Asian counterparts to put in its own post-Powell relief rally. US equities lost steam however, but in late trade look poised to close 0.3 per cent higher for the day. US Treasuries whipsawed on shifting sentiment relating to interest rates, with the yield on the 2 Year Note is currently at 2.81 per cent and the yield on the 10 Year note is 3.03 per cent. In currencies, the US Dollar is effectively flat, the EUR is slightly higher, the Yen has experienced a haven bid along with Gold, the Pound fell on Brexit fears, and the risk off tone sent the A-Dollar below 0.7300. Finally, commodities are slightly up: oil benefitted from news that Russia was prepared to cooperate with Saudi Arabia on production cuts, but copper is slightly lower. ASX today: Promisingly for Australian equity market bulls, SPI futures are indicating a 12-point jump at the open for the ASX200, in line with the late run on Wall Street. The ASX experienced an immediate pop-higher at yesterday’s open, but the price action was dull and middling throughout the day. Overall, volume was strong, breadth was healthy, and the large-cap heavy weights in the materials and financials sectors added 13 and 10 points to the index, respectively. Growth stocks were big higher as expected, while defensive sectors were somewhat ignored. Private Capex figures were released and didn’t rock markets too much: it came in below expectations, but there were signs non-mining investment is turning around. The day ahead from a technical perspective should be assessed on whether the ASX200 can clear the small resistance hurdle at 5780 or so. But given what’s on for the weekend though, one shouldn’t be surprised or disheartened if that doesn’t happen today.

MaxIG

MaxIG

Fed Rate Reveal Promotes Stock Rally - EMEA Brief 29 Nov

Fed hints that future interest rate rises may be lower than anticipated. Whilst Wall Street saw it's 5th biggest daily increase Asian stocks also gained as a result, the Nikkei saw a 0.9% increase whilst SoftBank rose over 3% and Nintendo a further 4%. Trump announced yesterday that he is exploring new auto tariffs with a view to promote domestic production. This comes as part of an ongoing Trump Administration tariff war.  Georgia elects first female president. Salome Zurabishvili won the vote with a 59% majority Mitsubishi Heavy Industries Limited was ordered to pay up to 150 million won to 28 South Koreans who were used as forced labour by the company in World War Two.  Bitcoin gains heading for biggest increase since April. Providing some relief after the 32% loss this month Intu takeover worth £2.8 Billion scraped. The shopping network cuts dividends in attempt to maintain construction investment.  Asian overnight: Equities surged after Jerome Powell made a speech widely viewed as dovish. The S&P 500 posted its best day since March, with tech and consumer discretionary shares leading the way. Asian markets also bounced as investors pinned their hopes on a slowdown in the pace of Fed tightening after one more hike in December. UK, US and Europe: Today’s FOMC minutes are something of an afterthought following the Powell speech, but we do have plenty of German and eurozone data, and investors should also watch out for US existing home sales, after new home sales fell to their lowest level since March 2016. Also watch UK banks, after the release of the BoE’s forecasts on a ‘no deal’ Brexit scenario. Russia-Ukraine frictions result in Ukraine calling on Nato to send ships to the Sea of Azov. This follows Russia opening fire on three Ukrainian ships on Sunday. Nato are yet to respond to this plea, however Chief Jens Stoltenberg on Monday called for Russia to free the Ukrainian ships and captive sailors.  Economic calendar - key events and forecast (times in GMT)  8.55am – German unemployment (November): unemployment rate to hold at 5.1%. Markets to watch: EUR crosses

10am – eurozone business confidence (November): forecast to rise to 1.14 from 1.01. Markets to watch: EUR crosses

1pm – German inflation (November, preliminary): prices to rise 2.4% YoY from 2.5%. Markets to watch: EUR crosses

1.30pm – US personal income & spending (October): income to rise 0.4% MoM and spending to rise 0.4% MoM. Markets to watch: USD crosses

3pm – US pending home sales (October): sales to fall 0.5%. YoY. Markets to watch: USD crosses

7pm – FOMC minutes: no change was made in policy, but the minutes will be key for USD movement this week. Markets to watch: USD crosses

11.30pm – Japan unemployment rate (October): rate to rise to 2.4% from 2.3%. Markets to watch: JPY crosses Source: Daily FX Economic Calendar Corporate News, Upgrades and Downgrades Unilever 10 year CEO Paul Polman to be succeeded by Alan Jope after retirement Phoenix Group reported cash generation of £1.3 billion for 2018, exceeding its target of £1 - £1.2 billion.  Rio Tinto will develop a ‘technologically advanced’ mine in Western Australia, with construction to start next year and production expected in late 2021.  Revolut given permission to expand the fintech firm into Japan and Singapore Adecco upgraded to buy at Goldman
Total upgraded to neutral at JPMorgan
Cobham upgraded to buy at Berenberg
Iliad upgraded to equal-weight at Morgan Stanley BASF downgraded to equal-weight at Barclays
Equinor downgraded to underweight at JPMorgan
ISS downgraded to sell at Goldman
Senior downgraded to neutral at JPMorgan IGTV featured video Information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

MichaelaIG

MichaelaIG

Rate rises slowing - APAC bried 29 Nov

A game of chicken: Did Powell just blink? That’s how last night’s speech from the Fed chair is being interpreted. Debate has raged whether in the face of financial market turmoil, the Fed will be forced to cool its rate-hike rhetoric. Powell’s speech – and this is speculative – may have represented this. Gone was the talk of rates being “a long way” from neutral, and that rates may need to move “past (the) neutral” rate. Instead, it was replaced with the key comment interest rates are “just below” the neutral range, and that future rate hikes, as Fed Vice President Richard Clarida implored yesterday, will be “data dependant”. Perhaps we saw last night, in the tradition of many-a Fed Chair gone before, the latest incarnation of a “Fed-put” – that is, this time around, a “Powell-put”, which will underwrite financial market strength at the first sign of true-trouble. Rates and bonds: The reactions in financial markets have been predictable, but assertive. US Fed fund futures suggest that traders have heard enough to justify pricing in an 80 per cent chance of a Fed-hike next month. But naturally, the shifting of expectations has been seen in the pricing for rate hikes in 2019. The Fed’s last dot-plots implied 3 hikes for next year – and markets got close to pricing the full three at stages only just over a month ago. We are now seeing just the one, and for some very dovish folk, even that’s too bullish. The short end of the US Treasury curve is manifesting the shift in sentiment: the benchmark 10 Year Treasury note is yielding 3.05 per cent currently, but the yield on interest rate sensitive 2 Year note has fallen back to 2.80 per cent, taking the spread between those two assets back to 25 basis points. Currencies: The US Dollar has been ubiquitously dumped by extension of the fall in rate expectations and yields on US Dollar denominated assets. Even despite no sort of counterbalancing good news to prop-up any of the other major world-currencies, the effect of the weaker green back has been spread evenly across the G10 heat-map. The GBP and EUR, which are in as vulnerable a place as ever due to ongoing Brexit drama, are up to the 1.2840 and 1.1380 levels, respectively. The traditionally risk-off Japanese Yen has appreciated slightly, as did gold, which is trading at $US1228 per ounce, and the embattled Chinese Yuan climbed to fetch 6.93. While the highly liquid risk-proxies, the New Zealand Dollar and Australian Dollar, have spiked to 0.7320 and 0.6880, respectively. Equities: The greatest action of course occurred in Wall Street equity markets post-Powell’s speech. The major indices have sky rocketed on the relief that discount rates may be steadying their rise and the tightening of monetary policy conditions may be nearing its zenith. It was the high-multiple, growth and momentum stocks that led the charge, predictably. The NASDAQ – at time of writing, with about an hour left in the US session – has rallied 2.30 per cent. The mega-cap laden Dow Jones is also up over 2 per cent, while the comprehensive S&P500 is up by just under 2 per cent. European indices missed out on the fun, closing well before Powell’s speech. However, futures markets are exhibiting early signs that European markets will join their North American cousins in the relief rally upon their open later today. When bad news is good news: Maybe this a grand statement inspired by the major plot twist markets experienced overnight, courtesy of Fed Chair Powell’s dramatic change of tact, entering the last stanza for financial markets in 2018. But the price action and sentiment shift seen in last night’s trade does appear a microcosm of the perpetual battle faced by central banks for perhaps decades, if not at the very least, since the Global Financial Crisis. Asset markets appear dictated not by fundamental strength in the macro-economy, but by the central bank-controlled credit-cycle that investors have come to rely upon for their investment cues. It’s a contentious debate, and one that hasn’t been resolved. However, last night’s developments hark back to years gone by when bad economic news was judged to be good news for financial markets, and good economic news was judged to be bad. Let the good times roll? Without delving too deeply into the philosophy behind the idea – although suggested reading would include the work of Hyman Minsky – the contradicting information received last night pays heed to this notion. Aside Fed Chairperson Powell’s speech, overnight there was a raft of news that highlighted the world is experiencing slower economic growth, and that the global economy has quite possibly reached peak growth for this cycle. A speech for BOE Governor Mark Carney highlighted the dire economic consequence to the UK economy in the event of a no-deal Brexit. US GDP came in a smidgeon below forecasts and affirmed the view the US economy may gradually slow-down in 2019. And Christine Lagarde, the Managing Director of the IMF, stated last night the global economy may be slowing faster than expected. Nevertheless, Fed policy hogged the limelight, with the prospect of marginally more accommodative monetary policy conditions inspiring risk-on behaviour all the way from, credit, to bonds, to equities, to currencies. The ASX: SPI futures are pointing to an ASX200 that will relish the global relief rally today. The ASX200 ought to jump about 30 points at the open, likely breaking through 5745-resistance in the process, and opening upside to the next key level at about 5780. Volumes have been quite high across the ASX this week, and to the presumed delight of the bulls, the strength is demonstrating signs of running deep. For one, although the ASX200 was down 0.06 per cent for the day yesterday, it was the small and mid-cap stocks demonstrated the most upside. Really, it was the materials space once more, confronting falling iron ore prices, that sucked 6 points from the index yesterday and was responsible for the markets weakness. Overall, a true bullish turnaround is still some way off, but the chance of a true turnaround in the market has increased meaningfully overnight.  

MaxIG

MaxIG

Crude prices gain: are we close to the bottom? - EMEA Brief 28 Nov

Asian equities gained as investors weighed in comments from Federal Reserve officials and a possible breakthrough in US-China trade war. Shares in Hong Kong and China led the gains with the Hang Seng Index climbing 0.5% and the Shanghai Composite gaining 0.7%.  Oil crude was up with WTI gaining 0.9% to $52.02 a barrel after a US industry report signaled shrinking gasoline surplus. Concerns of sanctions to Russia following its sea clash with Ukraine and Saudi’s vow to cut production in December are also pressuring upwards historically low oil prices. Gold fell the most in two weeks and finally found support above $1210. The move was prompted by a stronger USD, and later today Powell’s speech could trigger more swings. The pound slipped 0.1% as UK Prime Minister Theresa May reportedly allowed lawmakers to vote on a series of potential changes in her Brexit plan. More uncertainty is expected ahead of the final MPs vote on the 11th December. US treasuries edged higher as markets await today’s Fed’s Powell speech to the Economic Club of New York. Fed Vice Chairman Clarida committed yesterday to support “some further gradual adjustment” in rates.  Fed watchers took the comment as a sign that the end of the current rate-hiking campaign could be close, but not immediate. Asian overnight: Markets remain unperturbed by warnings from the US government over impending talks with China, as Asian markets close out the session overwhelmingly in the green. The Australian ASX 200 remained as the only major market in the red, with a rebound in crude prices not too little to help drive the index into the green. Chinese markets were the outperformer, with the G20 summit at least providing the possibility of a breakthrough. Should we see another failed attempt to find a resolution, we would simply be back at square one.  UK, US and Europe: UK Prime Minister Theresa May dropped efforts to avoid lawmakers re-writing her Brexit deal. A series of potential changes in the plans could take place, among which a call for another referendum. Moreover, the Treasury will publish today an analysis on the long-term economic impact of Brexit on the UK which could prompt more resistance from the Parliament. As already almost 100 Conservative members of Parliament have publicly committed to not supporting the Brexit deal, May’s Brexit journey looks far from nearly completed. Meanwhile, the pound edged higher amidst hopes of a Brexit deal being ratified.  From the US, expectations are growing ahead of Saturday’s dinner in Buenos Aires between Donald Trump and China’s Xi Jinping. Larry Kudlow, the US president’s top economic adviser, has clarified that Trump is ready to impose more tariffs if talks with China do not progress. As we are approaching a pre-election year, pressure is building on president Trump to yield results from his ongoing trade disputes. The market maintains a positive outlook on the meeting as the dollar held gains and tech shares gathered momentum. Looking ahead, the preliminary US GDP reading for Q3 provides the first revision to the 3.5% figure released last month. With US-China trade talks due to take place at the end of the week, the US goods trade balance due out today certainly comes at an opportune moment, helping shape trade walks with China. Later on, we have US crude inventories and UK bank stress tests to contend with. Economic calendar - key events and forecast (times in GMT) Source: Daily FX Economic Calendar 12pm – German GfK consumer confidence (December): forecast to fall to 10.5 from 10.6. Markets to watch: EUR crosses 1pm – US GDP (Q3, 2nd estimate): growth to drop to 3.5% QoQ from 4.2%. Markets to watch: US indices, USD crosses 3pm – US new home sales (October): forecast to rise 2.2% MoM from a 5.5% drop a month earlier. Markets to watch: US indices, USD crosses 3.30pm – US EIA crude inventories (w/e 23 November): stockpiles to rise by 2.5 million barrels. Markets to watch: Brent, WTI Corporate News, Upgrades and Downgrades On the Beach said that full-year pre-tax profit rose 24% to £26.1 million, while revenue rose 25% to £104.1 million.  RPC saw first-half pre-tax profit fell 5% to £154.4 million, while revenue was up 7% to £1.89 billion.  Senior expects ‘good progress’ for the full year, after trading in the first ten months of the year met expectations.  Frey upgraded to buy at Kepler Cheuvreux
PSI upgraded to buy at DZ Bank
S Immo upgraded to buy at SRC Research AstraZeneca downgraded to hold at New Street Research
Marks & Spencer cut to sector perform at RBC
Nostrum Oil & Gas cut to hold at Panmure Gordo IGTV featured video Information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary. 

IG-Andi

IG-Andi

Trump and the Trade War - APAC bried 28 Nov

Written by Kyle Rodda - IG Australia A loaded menu: If this week in financial markets is a buffet of information, then yesterday’s session tasted like the entrée. The themes that were predicted to define this week’s trade all showed-up in one form or another, hinting at bigger things to come. US President Trump added heat to the trade war, then spiced up the Brexit debate; a speech from US Federal Reserve Vice President Richard Clarida had traders questioning how many Fed hike’s markets have baked-in; another day of plunging  oil prices stirred up fears regarding corporate credit; and overcooked tech-stocks fluctuated, with the key ingredient there the wobbles in Apple Inc.’s share price. The mixture of stories blended through the market is just a sample of what could be in store for the rest of the week, with traders now at the edge of their seat and hungry for more answers. Trump and the Trade War: Okay – enough of the cheesy food metaphors (sorry, last one). What we were delivered in the last 24 hours is very important and establishes the firm possibility of spikes in volatility over the next seven days. US President Trump, for one, hogged the airwaves – and he doesn’t seem like a happy camper. After the close of Monday’s North American session, President Trump fired the first broadside at his Chinese counterparts ahead of this week’s meeting at the G20, stating that he expected that his administration would go ahead with increased tariffs on Chinese goods come January 1 this year. Not only that, but he suggested that iPhones and other high-volume consumer goods could be included in the next round of tariffs, proclaiming consumers would be comfortable paying an extra 10 per cent on such items. Nervous trade: Apple Inc. naturally struggled in overnight trade because of the comments, leading to a choppy session for the NASDAQ and Wall Street as a whole. It must be said that in late trade, US stocks are turning higher, and trading in a much tighter range than what we’ve endured over the past 2 months. Nevertheless, President Trump’s rhetoric is making traders edgy, as they try to take in their stride his inevitable provocations leading into this weekend’s trade negotiations. It has ignited concerns about global growth, resulting in an overall fall in commodity prices last night. Safety has been sought in US Dollar denominated assets consequently, keeping the yield on the benchmark 10 Year Treasury note to 3.05 per cent; and pushing the US Dollar higher, with the US Dollar Index challenging resistance at 97.50 – a dynamic in which has cut gold prices down to $US1213 per ounce. Protectionism: A big part of why the greenback and US assets performed so well is President Trump really fired-up the MAGA rhetoric yesterday. It must have been news that General Motors was planning to close 5 North American factories that really got him going and excited his protectionist impulses. Not only did he take to Twitter to voice his frustrations at GM and its CEO for its decision –  threatening to introduce new auto-tariffs in response –  he also went out of his way to lash-out at Theresa May and her Brexit deal, asserting that it may compromise futures trade deals between the US and UK. The onslaught of commentary from the President drove the Pound back within the 1.27 handle and the EUR below the 1.13 mark; and dragged European equity indices lower across the board. Fed-Watch: Away from the antics of US President Trump now, and the less-headline grabbing (yet arguably more significant) story for the day was a highly anticipated speech from US Federal Reserve Vice President Richard Clarida. If you recall, it was another speech delivered by Mr. Clarida a few weeks ago that kicked-off the “the Fed is becoming dovish” narrative, prompting traders to unwind their bets on future Fed hikes. Last night’s speech was far less impactful than that one, with US rates markets barely budging. But the tone – it’s all about the tone – of the speech has been judged as more “neutral” than the last, emphasizing the “data dependence” explanation for the Fed’s outlook on rates and the US economy, setting the groundwork for a speech Fed Chair Jerome Powell in the next 24 hours, and the Fed’ monetary policy minutes on Friday. Oil, credit and equities: The final major theme dictating overnight trade is oil prices, and its implications for equities and credit markets. Leading into the end of the US session, in line with activity in US stocks, oil has pared its losses to presently be sitting more-or-less flat for the day. A bearish bias remains for the black stuff, as traders seek to anticipate what the G20 meeting plus a meeting between OPEC a week later will mean for global production. The prospect of lower oil prices, while good for consumers, has traders nervous: credit markets have built in wider spreads in corporate bonds on the risk that energy giants will prove less credit worthy if their income is diminished by a lower price of oil. The knock-on effect is weighing on sentiment in US (and global) equities, with fears that high funding costs will put pressure on highly leveraged US corporates and those company’s share prices. Asia and the ASX: With all of this as the back drop for today’s Asian session, futures markets are indicating a mixed start for the region’s shares, following a similarly mixed day of trade yesterday. SPI futures currently have the ASX200 opening flat this morning, off the back of solid Tuesday session, that saw the Australian shares add 1 per cent on higher than average volume. The heavy lifting was performed by the bank stocks, which compensated for the day prior’s weakness in the materials sector, to add 27 points to the index. The gains ran deep however, with every sector in the green, and breadth at 74 per cent. The index’s close at 5728 positions the market just below resistance at 5745: a push beyond that level today, if the S&P500 is any sort of lead, may need to come defensives and non-cyclicals, which lead the gains in US indices last night.  

MaxIG

MaxIG

Brexit- could this threaten a UK-US trade deal? EMEA Brief 27 Nov

Trump reported that Brexit could potentially threaten a UK-US trade deal, leaving Britain unable to negotiate a free-trade agreement with the US OPEC to meet in Vienna next week to discuss levels of oil production. It is expected to be cut down by 1million to 1.5million barrels due to worries of the US-China trade war Trump announced a potential introduction of applying a 10% tariff on iPhones imported from China, which could increase to 25% on January 1st Ukraine to bring martial law for 30 days, following the attack from Russian military, wounding several sailors Asian markets trade higher with Nikkei 225 inclining by 0.8%, Shanghai composite rising 0.42%, Shenzhen up 0.62% and ASX 200 by 0.91% Brent crude oil futures rises by 2.9% to $60.48 a barrel Saudi Aramco to invest $100billion globally in chemicals within the next 10 years, as well as a prediction in the next decade of an increase in production to 23billion standard cubic feet a day from 14billion, attracting $150billion worth of investments  Bitcoin declined by 81% from its last year’s peak in addition to its trading volumes, with its 24-hour volume decreasing by 61% on Monday to $19billion Goldman Sachs believes commodities could rise by 17% in the following months as the G-20 summit could be a ‘potential launchpad for raw materials’  Asian overnight: A mixed affair overnight saw losses in Chinese and Hong Kong markets, as Donald Trump raised the stakes for the upcoming talks at the G20, stating that their tariffs would be ramped up in the case of no-deal. However, Japanese and Australian markets fared much better, with a rebound in oil prices helping the ASX 200 in particular. On the data-front, Japanese BoJ core CPI rose marginally to 0.6% against expectations. UK, US and Europe:  Theresa May continued to face criticism from the opposition and numerous conservative members of Parliament, however, May defends her proposals in relation to the Brexit withdrawal agreement as she believes “there is not a better deal available”, even though she confesses she is not “entirely happy” with the backstop plan to avoid a hard border. It has been confirmed that the final vote will take place around the 11th December. The US president reported that the Brexit withdrawal agreement is a “great deal for the EU”, however suggested that this could potentially threaten a UK-US trade deal, announcing that “right now, if you look at the deal, the UK may not be able to trade with us. And that wouldn’t be a good thing”. Responding to this, a Downing Street spokesman reported that the Brexit agreement would allow the UK to sign bilateral deals with countries including the US. Looking ahead, UK markets will likely have a volatile start to the day, given the number of companies releasing their earnings this morning. In the US, keep an eye out for the latest consumer confidence as the one major data release of the day. Besides that, markets are likely to focus on current themes, with Brexit, US-China relations, and the Italian budget remaining prominent. Economic calendar - key events and forecast (times in GMT) Source: Daily FX Economic Calendar 3pm – US consumer confidence (November): expected to fall to 136.2 from 137.9. Markets to watch: USD crosses Corporate News, Upgrades and Downgrades Thomas Cook said that underlying earnings for the year to September will fall to £250 million, down from £308 million a year earlier. In addition, it will suspend its full-year dividend. Net debt rose to £389 million, due to delayed bookings and non-cash items.  Pennon reported a 2.9% rise in pre-tax profit for the first half, to £133.6 million, while revenue was up 3.1% at £746.7 million.  Greggs upgraded expectations for the full-year, saying that a good October and November meant that full-year pre-tax profit would be at least £86 million, from a previous expectation of £72 million, in-line with last year.  Shaftesbury reported a 14% rise in investment earnings to £51.7 million, while the total dividend rose 5% to 16.8p per share.  General Motors to cut over 14,000 jobs and close 8 plants, reducing productivity levels in factories in the US and Canada Tesla sales in China tumble by 70% in comparison to the previous year, selling only 211 cars in October Line shares increased as much as 17% following the news of joining with Tencent. Altri upgraded to market perform at BBVA
Atea upgraded to neutral at SpareBank
Hikma upgraded to buy at Jefferies
Iberdrola upgraded to outperform at RBC Aurubis downgraded to hold at DZ Bank
NMC Health cut to underperform at Jefferies
Credit Suisse cut to equal-weight at Morgan Stanley IGTV featured video Information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary. 

KatherineIG

KatherineIG

US traders return - APAC brief 27 Nov

Written by Kyle Rodda - IG Australia US traders return: It’s nice to be back to some normal programming. The big-wigs on Wall Street have returned to their desks and volumes across the market are looking far healthier. After last week’s sell-off and volatility, and well before the meaty part of trade this week, traders appear to have had their appetite for risk whetted. Only slightly, of course: there is an acute awareness that the next seven days will hurl up some major events and some significant uncertainty. However, the VIX is off its highs and below 20 once again, and riskier assets are feeling some love. There were patches of underperformance yesterday, naturally – our ASX200 happened to be one of them, along with Chinese indices – but as it applies to most the major indices, a healthy coat of green is covering the screen to kick-off the first 24 hours of the week’s trade. Asian session: The tide turned during the Asian session, with no true impetus behind it. If anything, the fundamentals we received during Asia’s trade made for ugly viewing: Japan’s Flash Manufacturing PMI data was released, and that disappointed markets, adding to fears of slower global growth; while New Zealand Retail Sales figures put-in an abominable showing, printing flat quarter-on-quarter versus expectations of a 1.0 per cent expansion. They were non-stories, though, in the ultimate context of yesterday’s trade, as futures markets pushed-higher on pricing of a solid start to the week for equity markets. Some macro-excuses to buy stocks did arrive in the European session, when reports that Italian policy makers were reviewing their maligned budget filtered through markets, compounding the slight lift in confidence engendered by the weekend’s rubber-stamped Brexit deal. European trade: Across European indices, the DAX jumped 1.45 per cent, the FTSE climbed 1.20 per cent, and the Euro Stoxx 50 1.13 per cent.  Bond yields edged higher across the Continent and throughout North American, while the positive developments in the Italian fiscal crisis narrowed the spread between German Bunds and Italian BTPs. The fall in US Treasuries saw the yield on the 10 Year note easing to 3.06 per cent and the yield on the 2 Year note to 2.83 per cent, narrowing the spread between those two assets to approximately 23 basis points. The higher yields supported the US Dollar, which returned to the 97-level according to the US Dollar Index. The Japanese Yen was the biggest loser of the major currencies, dropping over half-a-per cent to trade within the middle of the 113-handle; however, gold, the Euro and Pound traded relatively stable. Wall Street: At time of writing, US stock indices are on the cusp of registering quite a solid day. Volumes are higher on average too, reflecting that there is some substance behind what is being dubbed as a "relief rally". It's more a bounce to be fair – the kind we've seen before since the global stock market correction took hold. Nevertheless, for the bullish and opportunistic, it's justifiably proven a respectable 24 hours. US tech stocks have lead the market higher, supported by a bounce in oil prices, which have helped narrow corporate credit spreads and spur greater appetite for risk. The troubles for tech-stocks and oil haven't passed yet -- the big picture hasn't changed -- though (just maybe) there are signs that the bearishness driving the downside in those assets is abating. ASX200 yesterday: The action in financial markets in overnight trade has SPI futures indicating a 44-point jump at the open –  a dynamic if realised, will regain yesterday's session's losses from the opening bell. Activity was quite high on the Australian share market yesterday, with volumes approximately 5 per cent above the 100-day moving average. The liveliness in markets was predominantly driven by a dumping of the mining stocks, which were pummelled by the considerable sell-off in iron ore, following the plunge in steel rebar futures over the weekend in response to greater concerns about Chinese economic growth. Overall, the materials sector was responsible for a noteworthy 25 points of the ASX200's losses during the day’s trade, with the likes of BHP and Rio Tinto sliding just over 3.5 per cent. Aussie Dollar: The circumstances also led to a slight pull back in the AUD/USD, which generally has lost some of its lustre. Upside momentum has slowed, as the pop higher brought-about by a squeeze on traders’ short positions looks to have stalled, if not subsided. Macro-fundamentals have eased the pressure on the AUD/USD in November, as traders unwind their bets of an aggressive Fed in 2019: the yield-spread between the interest rate sensitive US 2 Year Treasury note and the 2 Year Australian Commonwealth Bond narrowed to as little as 75 basis points. That has expanded once more, but with heightened volatility in the markets and sentiment interfering with fundamentals, a crude assessment of the Bollinger Band suggests that the myriad of macroeconomic risks in the next month could see the AUD/USD move within a broad range between 0.7020 and 0.7450 into the medium term – with the local unit currently smack-bang in the middle of that range based on the weekly chart. ASX200: Looking ahead: Now that financial markets have returned to a normal state, getting a gauge on sentiment becomes considerably easier. Positioning will begin taking place across asset classes for the series of US Fed related events in the next 4 days, combined with the weekend's major G20 meeting. The implications for the breadth of global markets are seemingly endless, but as it applies to the ASX200, the outcome of both concerns is profound. IG client sentiment is giving generally bearish signals presently – something that will only become further entrenched if the Fed come-out more hawkish this week and US-China trade negotiations deteriorate. Support at 5600 (give or take) will be where the bulls will be hoping for a floor in the event of a worst-case scenario; while a bullish break-out can't be confirmed until at least 5930 is breached.

MaxIG

MaxIG

Sign in to follow this  
×