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Showing content with the highest reputation since 07/12/18 in Blog Entries

  1. 4 points
    What is the EOM indicator? An indicator that highlights the relationship between price and volume and is particularly useful when assessing the strength of a trend. As implied by its name, it is used to measure the ease of movement in price. It is a volume-based oscillator that fluctuates above and below the zero line. In general, when the oscillator is above zero, the price is advancing with relative ease. When the indicator is below zero, the prices are declining with relative ease. A wide range (difference between highs and lows) on low volume implies that price movement was relatively easy, as it did not take much volume to move prices. Alternatively, a small range and large volume indicates that price movement was difficult as there was a relatively small price movement on high volumes. Other important things to remember with EOM The closer the EMV line is to zero, the less ease of movement on that specific period. The bigger the spike in the EMV line, the more ease of price movement, either positive (if above the zero line) or negative (if below the zero line). The ease of movement indicator can also be used as an average, by adding together various single-period ease of movements and dividing them by the number of periods being considered. By smoothing out the indicator over time it can be used to identify trends and areas of convergence/divergence. A graphic example Let’s review the EOM indicator by using it in a real-life example which took place at the beginning of Dec ‘18. Using the Wall Street 30 min chart we can see a correlation between the EOM indicator and subsequent market movements at the opening of the session on Monday. Looking at the chart below you can see there is a positive spike in the EOM line which holds for a few periods before it starts declining. The cause for the spike is likely to have been the bullish (but cautious) reaction to a ceasefire between the US and China on trade tariffs. This could have meant that traders were holding Wall Street pushing the price higher, however maybe not as many people bought into the rally, therefore creating a big range on low volume. To summarise: After the initial positive reaction from the markets, traders could have become more sceptic about the viability of the ceasefire, and therefore a more bearish reaction comes in to play. This increases the range as lower lows appear maintaining the EOM at a high level. As more and more traders become sceptic, highs become lower, decreasing the range, which paired with a stable volume results in a declining EOM line. As you can see from the graph, the EOM line reacts before the actual price does, as a tightening range indicates that investors are becoming more bearish, which can eventually lead to a decline in price if it sustained over a period.
  2. 2 points
    We've released options for the Volatility Index. You can find them on our platform under the options tab> Indices. Options, when buying the call/ put, are a great way to get involved in market movement whilst having limited risk. Dealing hours : 09:00:00 – 21:15:00 GMT Monday-Friday Contracts offered : Currently offer the next two months (November and December) Expiry for monthly options : Every 3rd Wednesday of the month Last trade : 21:15 GMT the day before expiry Settlement : Settled basis the Special Opening Quotation (SOQ) of VIX calculated by the opening prices of the SPX constituents used to calculate the VIX index on settlement date If you need any clarification on how options work, contact me through the community or give our help desk a call.
  3. 2 points
    If you like to change between different intervals on the IG desktop charts (from 1 minute candlesticks to 5 or 10 minute candles, or to hours, days or months) then we've just made it easier with keyboard shortcuts. Whilst on a chart you can type any number from 1 to 5 on your keyboard to bring up a small 'interval' dialogue box, confirm your choice, and hit enter. For example: 1 minute intervals: type 1 then enter 5 minute intervals: type 5 then enter 1 hour intervals: type 1 h then enter 2 hour intervals: type 2 h then enter 1 week intervals: type 1 w then enter See crosshair data on future dates You can now place your cursor/crosshair on a future date and see the level and time/date where you are positioned. Whilst this is a very minor update which could be seen as a trivial feature, it can become quite handy if you're looking at a trend and want to know exact levels and the time they will be reached. Simply position your cursor in the future and you’ll see the corresponding information straight away. If you have any questions or feedback on this, please feel free to share in the Comment section below.
  4. 2 points
    In a similar manner to our position preview feature you can now see your working order shaping up on the charts as you start creating orders from the ticket. Simply input your order direction, size and level and you will be able to see a preview on the chart. You can then decide to drag you Stop and/or Limit from the chart to define their absolute level and see the related Risk/Reward Ratio. Once you are happy with this just place your order from the ticket et voila! If you have any comments, feedback, or questions on this please add your thoughts to the comment section below. Client feedback is a driving force behind platform improvements and all suggestions are forwarded to the appropriate project management and product ownership teams. NB: You will need to make sure 'position preview' is on - you can toggle this by right clicking on the charts and navigating to 'show'.
  5. 2 points
    In the Aftermath of the Fed The baton has been dropped. The Federal Reserve was by far the most aggressive major central bank through this past financial epoch (the last decade) to embrace ‘normalization’ of its monetary policy following its extraordinary infusion of support through rate cuts and quantitative easing (QE). Over the past three years, the central bank has raised its benchmark rate range 225 basis points and slowly began to reverse the tide of its enormous balance sheet. As of the conclusion of this past week’s two-day FOMC policy meeting, we have seen the dual efforts to level out extreme accommodation all but abandoned. A more dovish shifted was heavily expected given the statement in January’s meeting, the rhetoric of individual members as well as the state of the global markets and economic forecasts. Yet, what was realized proved more aggressive than the consensus had accounted for. No change to the benchmark rates was fully assumed, but the median forecast among the members accounted for a faster drop than the market likely thought practical. From the 50 bps of tightening projected in the last update in December, the median dropped to no further increases in 2019 and only one hike over the subsequent two years. Over the past three years, the central bank has raised its benchmark rate range 225 basis points and slowly began to reverse the tide of its enormous balance sheet. The Dollar responded abruptly Wednesday evening with a sharp tumble, but there was notably a lack of follow through where it counted – the DXY Dollar Index wouldn’t go the next step to slip below its 200-day moving average and break a ten-month rising trend channel (a hold that confounded those trading an presumed EURUSD breakout). Why did the Greenback hold – for now – when the move was clearly a dovish shift? Likely because the market is already affording for an even more dovish forecast as Fed Fund futures have set the probability of a 25bps cut from the Fed before the end of the year as high as 45 percent. What’s more, if you intend to trade the Dollar; it is important to recognize that even with a more dovish path ahead, the Dollar and US assets will maintain a hearty advantage over its major counterparts. That would particularly be the case should other groups extend their dovish views to more actively explore deeper trenches of monetary policy. Looking beyond the Dollar’s take, however, there are far more important considerations for the global financial system and sentiment. The Fed was the pioneer of sorts for massive stimulus programs designed to recharge growth and revive battered markets. It was also the first to start pulling back the extreme safety net when its effectiveness was facing deserved scrutiny by even the most ardent disciple of the complacency-backed risk-on run. In other words, its course change carries significantly more weight than any of its peers. The question ‘why is the Fed easing back and so quickly’ is being posed consistently whereas in the past market participants would have just indulged in the speculative benefits. The overwhelming amount of headline fodder – from trade wars to frequency of volatility in the capital markets – makes for a ready list of considerations. Yet, the group’s own economic forecasts brought the reality home far more forcefully. Though we have seen numerous economic participants downgrade the growth outlook (economists, investors through markets, the IMF, etc), to see the median GDP forecast in the SEP (Summary of Economic Projections) lowered from 2.3 percent to 2.1 percent for 2019 made the circumstances explicit. We’ve considered multiple times over previous months what happens if the market’s start to question the capability of the world’s largest central banks to keep the peace and fight off any re-emergences of financial instability. Now it seems this concern is being contemplated by the market-at-large. That doesn’t bode well for our future. A Sudden Fixed Income Interest When ‘Recession’ Warnings Take Hold Except for fixed income traders and economists, the yield curve is rarely mentioned in polite trader conversation or in the mainstream financial media. Its implications are too wonky for most as it can be difficult to draw impact to the average traders’ portfolio and given the considerable time lag between its movements and capital market response. Yet, when it comes to its most popular signal – that of a possible recession signal – the structure of duration risk suddenly becomes as commonplace a talking point as NFPs. On Friday, the headlines were plastered with the news that the US Treasury yield curve had inverted along with a quick take interpretation that such an occasion has accompanied recessions in the past. There have actually been a few parts of the US government debt curve that have inverted at various points over the past months, but this occasion was trumpeted much more loudly as it happened in the comparison to the 10-year and 3-month spread (what has been identified as a recession warning even by some of the Fed branches themselves). First, what is a ‘curve’? It is the comparison of how much investors demand in return (yield) to lend to the government (for Treasuries specifically) for a certain amount of time. Normally, the longer you tie up your money to any investment, the greater the risk that something unfavorable could happen and thereby you expect a greater rate of return. When the markets demand more for a short-term investment than a longer-term one in the same asset, there is something amiss. When the markets demand more return from a three-month loan to the US government than a 10-year loan, it seems something is very wrong. Historically, the inversion of these two maturities has predated a number of us the recessions in the United States – most recently the slumps in 2008, 2001 and 1990. When the markets demand more return from a three-month loan to the US government than a 10-year loan, it seems something is very wrong. First is the lead period the curve reversal has to economic contraction. The signal can precede a downturn in growth by months and even years. Preparation is good, but moving too early can ‘leave money on the table’ for the cautious or accumulate some serious losses for those trying to trade some imminent panic. Further, there are certain distortions that we have altered the course in normal capital market tributaries that could be doing the same for Treasuries and therefore this reading. More recently, the revived threat of the US government shutdown through December and the unresolved debt ceiling debate put pressure on the asset class. At the same time, though, few believe the US would do little more than allow for a short-term financial shock in order to make a political point. Far more complicating for the market and the signal is the activity of the US and global central banks. The Federal Reserve has purchased trillions in medium-dated government debt as part of its QE program. They only started to slowly to reduce holdings and push longer dated yields back up a few years after they began raising short term rates in earnest. Their recent policy reversal only adds to the complication. Now, all of this does not mean that I believe the US and global economies will avoid stalling out or even contracting in the near future. Between the dependence on capital markets and stimulus, the heavy toll of trade wars and nationalistic policies, and the pain for key players in the global web; there is a high probability that we will see an economic retrenchment in the next few years. That said, that wouldn’t make this particular signal a trigger (causation) or even correlated through the main forces that would bring on a recession. Nevertheless, yelling ‘fire’ in an a panicky crowd on foggy day can still yield volatile results. Brexit, Just Winging It Another week and another upheaval in Brexit expectations. Through much of the past year’s anxiety over the withdrawal of the United Kingdom form the European Union, there was at least some comfort to be found in the finality of the Brexit date (March 29th, 2019). While it could end in favorable circumstances for financial markets (a deal that allows considerable access for the UK) or acute uncertainty (a no-deal), at least it would be over. Well, that assurance is as clouded as the expected outcome from the negotiations themselves. Shortly after I wrote the Brexit update last week whereby there was a clear timeline for another meaningful vote on the Prime Minister’s proposals – after Parliament voted for an extension of negotiations – the Speaker to the House of Commons thwarted the effort when he said the scheme would not be reconsidered unless it was materially different. It is likely that see another significant change in this drama any times (and even multiple times) this week. At Prime Minister May’s request, the European Commission agreed to an extension of the discussions beyond the original Article 50 end date for this coming Friday. Yet, where the PM intreated a postponement out to the end of June, the EU agreed only to May 22nd – the day before European Parliamentary elections. Beyond that date, the UK would theoretically remain under the regulations and laws of the EU but would have no say in their direction which wouldn’t appeal to either side. So, now we are faced with another ‘fluid’ two months of critical deadlines. This week, it has been suggested the government will try to put up once again for a meaningful vote – though it is still not clear whether the proposal will be meaningfully different (the EU has offered no further concessions) or there has been a successful challenge against the Commons speaker. When this could be put up to vote is unclear, but it has been suggested between Monday and Wednesday. If the proposal is approved, the timeline to May 22nd will remain and we will start to see a genuine path form. If it is not, then the following week Parliament will have to indicate that “they have a way forward”. If they do not, an extension or no deal will likely be considered for April 12th – out to the previously mentioned May 22nd date. If we pass April 12th without a clear plan, the probabilities of a ‘no deal’ or ‘no Brexit’ will rise significantly. Those two scenarios are extreme and on the opposite end of the spectrum. From a Pound trader or global investor considering UK exposure, you can imagine what a situation where the probability of diametrically-opposed, market-moving outcomes are considered balanced would do to the markets. It will curb market liquidity and leverage uncertainty. That would translate into divestment, difficulty establishing trends and serious volatility. If that isn’t your cup of tea, it is best to seek opportunities elsewhere for the next few months until this is sorted.
  6. 2 points
    Market action proves it again: this market hinges on the Fed: The US Fed has proven itself as the most important game in town for traders. The FOMC met this morning, and lo-and-behold: the dovish Fed has proven more dovish than previously thought; the patient Fed has proven more patient that previously thought. Interest rates have remained on hold, but everyone knew that was to be the case today. It was about the dot-plots, the neutral-rate, the economic projections, and the balance sheet run-off. On all accounts, the Fed has downgraded their views on the outlook. And boy, have markets responded. The S&P500 has proven its major-sensitivity to FOMC policy and whipsawed alongside a fall in US Treasury yields, as traders price-in rate cuts from the Fed in the future. The US Dollar sends some asset classes into a tizz: The US Dollar has tumbled across the board consequently, pushing gold prices higher. The Australian Dollar, even for all its current unattractiveness, has burst higher, to be trading back toward the 0.7150 mark. Commodity prices, especially those of thriving industrial metals, have also rallied courtesy of the weaker greenback. Emerging market currencies are collectively stronger, too. This is all coming because traders are more-or-less betting that the Fed is at the end of its hiking cycle, and financial conditions will not be constricted by policy-maker intervention. Relatively cheap money will continue to flow, as yields remain depressed, and allow for the (sometimes wonton) risk-taking conditions that markets have grown used to in the past decade. Some risk being taken again, though somewhat nervously: The play into risk-assets makes everything sound quite rosy. There are caveats to this, however. And that relates to what’s been inferred about global growth from the Fed’s meeting this morning. Implicitly, at the very least, the Fed has acknowledged that growth in the US and world economy is all but certain to slow-down. It wasn’t said outright – a central banker would never want to be anything less than cautiously optimistic – but the tone of Fed Chair Powell at his presser suggests a Fed that is sufficiently concerned about the global economy that they will definitively reverse its policy “normalization” course. Positivity was maintained by the Fed about US economic conditions, outrightly. However, the market has read between the lines, and it doesn’t like what it sees. Interest rates are now expected to be on hold for this cycle: So: although swung around post release, the more important bond market is telling a clearer story. The yield on the US 10 Year Treasuries have tumbled nearly 8 points to 2.53 percent, and the yield on US 2 Year Treasuries has fallen 7 points to 2.39 per cent. More remarkably, the yield on Treasuries with 3, 5- and 7-year maturities have dropped over nine points, creating a yield curve with a very flat belly. Of most concern here is that all of these securities are trading just at, or well below, the Fed’s current effective overnight-cash-rate of 2.40 per cent. Traders are now pricing in a greater than 50 per cent chance the Fed will cut rates by early next year, on the basis of deteriorating economic conditions. It’s getting harder for the Fed to get the right balance: The tight rope is getting narrower. For market participants, as always: on one side of it sits the need for accommodative financial conditions, on the other the need for robust growth conditions. It’s the rudimentary in principle, though complicated in practice, interplay between the credit cycle and the business cycle. Out of this Fed meeting, the proverbial tight rope walker is nervously shifting her gaze down towards the economic growth outlook. Powell and his team have apparently not struck the necessary equilibrium in its approach to its policy and communications to the market. Yes (again), risk assets have rallied, but right now, not in such a way that suggests the bulls are significantly more confident in the investment environment being planted before them. Other stories also important, though not as much as the Fed: Some of this could be attributed to the overhang coming from some of the other significant economic stories yesterday. Sentiment has been dented by news that key EU figure Donald Tusk may demand that no Brexit extension is granted for the UK; it has also been liver-punched by a story suggesting US President Trump does not necessarily see a lifting of tariffs on China occurring in any US-Sino trade deal. Once more: it does appear that markets have seen the greatest gravitas in the Fed meeting, though. And traders’ nervousness is being betrayed by this: despite a dovish tact, corporate credit spreads have rallied, the VIX is off its multi-year lows, and US Break-evens are revealing greater inflation risk in the US economy. Australian markets to be defined by Fed and employment numbers: Fittingly, SPI Futures are suggesting the ASX200 will open somewhere between 5-and-10 points lower this morning. Speaking of markets and the growth outlook, not only will Australian trade be impacted by the fall-out from the Fed’s nervously dovish tilt, we also get some highly anticipated employment figures out this morning. The currency and rates markets will be what to watch for: the themes driving the ASX200 this week is the renewed push in iron ore prices, along with the rotation into yield-driven defensive sectors as Australian ACGB yields tumble. The RBA have hitched their hopes for the Australian economy on a tightening labour market and subsequent lift in wages growth and inflation. Watch therefore today for any major downside miss in employment numbers. Written by Kyle Rodda - IG Australia
  7. 2 points
    The IG web trading platform has several alert functions which can be used to notify you of potential trading opportunities and market volatility. We have different alerts for all types of traders, from the technical analyst to the long-term investor. Before we get into the different alert types it’s worth making sure your Notification Preferences on MyIG are set up correctly and notifications are turned on within your mobile settings area. The blog article on the right may be of help if you would like a walk through of turning on notifications. Setting up Price Change alerts A Price Change alert will notify you of either a percentage move or a points-based movement over a set time frame. These alerts are great for applying to assets in your open positions window, as well as markets you are looking to trade on. Percentage or points-based movement Variable time frame of 5 minutes, 1 hour or 1 day Add a message if you wish These will continually trigger until you remove them from the ‘Alerts’ fly out on the left-hand side. Therefore, if you set up an alert to be notified if Spot Gold moves by 1% in a day, and there are three days’ worth of 1% movements back to back, you’ll be alerted for each of these moves. Price Change alert ideas Set up a Price Change alert for a 2% move in a day for a major index such as the S&P or Wall Street. This sort of move in a single day would probably suggest a key market event has happened. Set up a Price Change alert for an x% move in a stock you have on your watch list. Maybe a significant move would present a swing trade opportunity. Setting up Price Level alerts A Price Level alert will notify you when a specific price point has been breached by the market. You can be notified if either the buy or sell price passes your desired threshold. Be alerted to a specific price movement, e.g. If the buy price of gold reaches 1290 Add a short message if you wish These are only triggered once Price Level alert ideas Set a Price Level alert on the VIX Volatility Index if the price reaches 17, 20, and 25. A VIX movement above 20 generally suggests market volatility and potentially opportunity to trade. Historically the median of the VIX is around 17, and anything below this suggests markets are likely to be a little flat. Setting up support and resistance levels but want to re-evaluate the markets when those price points are reached? Use a Price Level alert. Setting up Indicator alerts You can set up indicator alerts from the dealing platform under the alerts tab. You need to pick a resolution and price for the alert to look at, and then you can start adding indicators. Use indicator alerts to be notified of your criteria being hit from your technical analysis Choose to be alerted once, or multiple times Add up to 4 indicators from a choice of 11 to the same alert Add indicators on the charts by right clicking to get a rough idea of when/if your alert will trigger. Indicator alert ideas These alerts can be as simple or as complicated as you like. You can find a lot of information on technical analysis on IG.com, YouTube, or by searching for strategies related to ‘x’ indicator. For example; A crossover strategy: when two moving averages cross, for example the short term 50 MA moving above the 200 MA, it may indicate an upward price trend. Setting up macroeconomic alerts from the Economic Calendar You can access IGs Economic Calendar from within the dealing platform down the left hand fly out. Once the calendar has opened in a new tab select the date and use the ‘check’ tick column if you want to be notified about an event. Clicking the cog at the top of the column allows you to set the specific notification preferences for these alerts (for example, notify before or after the event, and how you want to be notified). Try it out by searching for the next Non-Farm Payroll (NFP) figure and set the alert to be notified 15 minutes before the event, as well as on the event. You should receive a notification with expectations, along with the actual results afterwards.
  8. 1 point
    Trade ByteDance (TikTok) ahead of its IPO, with the IG grey market By taking a position on a grey market, you’re taking a position on a company’s potential market cap ahead of its initial public offering (IPO). The price of a grey market is a prediction of what the company’s total market capitalisation will be at the end of its first trading day. If you think the estimated value of the company is over- or under-priced, a grey market enables you to take advantage of this disparity before the shares are released publicly on the stock exchange. Why are traders interested in grey market stocks? Traders are interested in grey market stocks because it can be a way of taking advantage of movements in the company’s share price before it has actually listed. Also, any activity is usually taken as an indicator for the direction the stock price will take once it has listed. The pre-market price can be used to gauge the demand for the shares. How to trade grey market stocks. Grey market stocks are traded over-the-counter (OTC), which means that they are not offered by a stock exchange, but only by brokers and trading providers. By taking a position on a grey market stock, you’re taking a position on a company’s potential market capitalisation ahead of its IPO. If you think that the company will be worth more than the price indicated, you can buy the market. If you think that the price is an overvaluation, you can sell. When it comes to settling your trade, this can only be done once official trading of the share has begun. IG calculates the settlement price based on the official closing price of stock on after first day of trading, as reported by Bloomberg. Where to find the grey market on the platform You can find this grey market on the platform by selecting Popular Markets> ByteDance (TikTok) IPO Market Cap (US$Bn) Let me know if you have any questions about this!
  9. 1 point
    During the US Thanksgiving holiday, we will be making some changes to our usual trading hours. These adjustments will take place between Wednesday 27 November and Friday 29 November 2019, after which we’ll go back to normal trading hours. (All times below are GMT). Wednesday 27 November Usual closing times on US markets, US equities post-market open as normal. Thursday 28 November US equity markets will be closed. US index futures close early at 6pm. We will make an out-of-hours price on Wall Street, US 500 and US Tech 100 until futures re-open at 11pm. The Volatility Index closes early at 4.30pm. US Crude closes at 6pm, Brent Crude closes at 6.30pm. The US 30-Day Fed Funds Rate and the US Dollar Basket close at 6pm. Metals, including Gold and Silver, close at 6pm. US soft commodities will be closed. London Sugar No.5 closes early at 5pm. Friday 29 November US equity markets will close early at 6pm. There will be no pre or post-market trading. US index futures and the Volatility Index will close early at 6.15pm. We will make an out-of-hours price on Wall Street, US 500 and US Tech 100 until 9pm. US Crude closes at 6.45pm, Brent Crude closes at 7pm. The US 30-Day Fed Funds Rate and the US Dollar Basket close at 6.15pm. Metals, including Gold and Silver, close at 6.45pm. Cotton opens late at 1pm. Chicago Wheat opens late at 2.30pm. US soft commodities (except New York No.11 Sugar) will close early at 6pm. Lumber trades 3-6pm, Live Cattle trades 2-6.15pm. The futures desk and all 24-hour indices close at 9pm, FX closes at 10pm. Let me know if you need clarification on this.
  10. 1 point
    Do you have an interest in building long-term wealth through investing? Have you always wanted the chance to ask an expert a specific question about portfolio management, or find out more about IG's and BlackRock's trading strategy for our Smart Portfolios? We are giving you the opportunity to ask your questions directly to our Portfolio Managers here at IG. You can be part of a new article series here at IG called 'Ask the Portfolio Manager' by simply commenting your question below. What is this article all about? We are creating a new article series where the content is driven solely by your questions. Once we have collected your questions we will get them answered by one of our Portfolio Managers. We will then post the article on the IG Investments site and here on the IG Community also. You can ask us anything, but to give you some inspiration questions can be on: IG Smart Portfolios Investing strategies Macroeconomic events/news Product questions Questions on understanding a certain topic/strategy More general questions on IG or the Portfolio manager's themselves So, to get involved just post your question below - even if you don't have an account with IG you can create an account on the community and post a question! Who are IG's Portfolio Managers? Sam Dickens, Portfolio Manager, IG Smart Portfolios: Sam joined IG in 2014 and has worked as a portfolio manager for IG Smart Portfolios, our online wealth management platform, since its launch in February 2017. He has a degree in Economics and has previously worked at Capital Economics - a leading independent macroeconomic research company. He also holds the Investment Management Certificate qualification (IMC) and has passed CFA Level 1. George Bear, Assistant Portfolio Manager, IG Smart Portfolios: George joined IG on the graduate scheme in 2018 and has just recently joined the Smart Portfolio team as an Assistant Portfolio Manager. Prior to his recent move, George worked on the trading floor at IG, as a Sales Trader, and on our premium accounts relationship management team. He is a CFA Level 1 candidate and has a degree in Business with Economics.
  11. 1 point
    Market Conditions in Data Overload Markets often struggle for traction when there is a lack of a clear motivator such as meaningful event risk or an evolving systemically important theme. On the other hand, there are times when a surfeit of important events, indicators and headlines overwhelm the clear speculative picture, leaving us with an abundance of volatility without the benefit of a reliable course. We have dallied with this latter scenario these past weeks, but the constant redirection of our attention will be in special form in the week ahead. There is a near constant run of high-importance events scheduled for release moving through the next five days of active trade. What’s more, many of these various measures will tap into the top level themes that have stood as the undercurrent for economic and financial conditions for months, if not years. For trade wars, much of the critical development rests in the hands of a few officials who are weighing policy decisions that could significantly alter the course of the global economy. Washington and Beijing continue to negotiate after verbally agreeing to a ‘phase one’ deal back on October 11th but the details and sign off are still vague. The EU meanwhile is weighing whether to retaliate against the United States for the Trump Administration using the WTO ruling of a $7.5 billion ‘allowance’ for tariffs to recoup losses owing to unfair Airbus subsidies with a 25 percent tax on imported European agricultural goods. Meanwhile, data like the US trade balance and Chinese industrial profits figures on Monday will build upon trade-dependent earnings from the likes of AMD, United Steel and Alibaba. More tracked out for the timing of its updates is the wave of monetary policy updates we are due over a particular 48 hours period. There are a number of supportive updates such as the October US NFPs due Friday, but five central bank decisions between Wednesday and Thursday will make for a far more incisive view of our financial system. In chronological order, we are due the Bank of Canada; Federal Reserve; Brazilian Central Bank; Bank of Japan and Hong Kong Central Bank. Stacking these events so closely together will cater to the relative comparison of the currencies and their assets, but it may also stir further collective discussion of the distortion and costs associated to the extreme easing. The fundamental theme that will pack the most obvious punch in my view is the run of official (government-derived) GDP updates on tap. The United States is the world’s largest economy, so its Wednesday release will draw particular scrutiny. The Eurozone, French and Italian figures will be similarly important - particularly given the chatter about recession risks and the added pressure of external pressures like Brexit and the US tariffs. Two additional updates that are worthy of reflection for the big picture is the health reports for Mexico and Hong Kong. These are two large economies that stand on the cusp of the developed/emerging market designation with particular exposure to trade wars. This data can potential thaw fears of recession that have hardened over the past year behind data and increasingly complicated diplomatic situations, but the potential definitely skews the opposite direction. If this run of data reinforces the reality of economic struggle, it will serve as another cut to a speculative reach that seems divorced from fundamentals that are traditionally assumed to reflect value. In general, all of the thematic risk represents a greater role of risk rather than relief. Redressing the Limitations and Costs of Extreme Monetary Policy as Fed Arrives With the world’s largest central bank and its most dovish both on tap for this week, it is important to consider what is driving these groups to loosen navigate into uncharted dovish waters rather than just go along for the ride by trading relative yield advantages in FX or capitalizing on a familiar speculative equation that suggests more external support buys more lift from favorite capital market benchmarks. There is little denying the years of connection between the amount of accommodation (low interest rates, negative interest rates and quantitative easing programs) and the enthusiasm from the investing masses. This is a relationship forged originally in ‘monetary policy in capital markets’ textbooks, but the connections have grown more than skewed in the latter years of this extended cycle of easing. First and foremost, the overriding intent of monetary policy to foster economic health have been proven to be lacking. It could be argued that the dovish shift after the 2008 Great Financial Crisis / Great Recession stemmed the bleeding. Yet, the exceptional support has only grown over the years and we find ourselves on the cusp of another economic stall. This is a feature of the landscape for most of the major groups, but it is perhaps a lesson that should have been learned earlier through the Bank of Japan’s own experiences. The central bank has failed to return inflation to its target for any period of consistency for decades – not just years. So, though it is not considered one of the most prescient groups for a global overview, there is much to learn here. Though an inability to reach their principal economic objectives is a significant problem in itself, it may not be the straw that ultimately breaks the camel’s back. That is more likely to be the consequences to come out of the financial market influences from these extraordinary measures. Though it may not be their intent, the central banks’ easing has inflated capital markets substantially. The pressure is not even, but we have seen risky assets hit record highs at various points with different levels of excessive price to value. Few places is the extravagance more evident than with the US equity indices. At record highs, we should consider that the equity market is pricing in perfection for growth, earnings and returns. It is not very controversial to say that is not the case now. Far from it. Stimulus and low rates has not improved circumstances that remarkably rather the lack of significant return and a tepid economic environment has left investors starved for opportunities that can provide substantial growth at a reasonable risk. And so, they accept greater and greater risk to make ‘ends meat’. Propping capital markets higher may seem a net benefit in the absence of genuine growth, but there are serious risks associated to this state. Expectations for more support will grow exponentially with time. Capital distribution outside of the healthy business cycle will encourage funds to underperforming or zombie businesses that will further weaken economies. And, the growing disparity will inevitably lead to a point at which recognition of risks will force an acceleration of deleveraging which will manifest as a financial crisis that more readily turns into an economic crisis. This troubled state is growing increasingly apparent to investors and business owners, but now the concern seems to be permeating the central banks themselves. Outgoing ECB President Draghi admitted concern late in his tenure, though not as loudly and directly as some of the more hawkish members of his board who will remain with Lagarde at the helm. Some of the Fed officials have stated concern along these lines as well, but the group is not yet as overextended as most of its counterparts. In previous years, the US group’s tightening was viewed as a sign of optimism around the potential of self-generated growth. That perspective may hold as the circumstances change. If the Fed seems forced to loosen the reigns to match the ECB or BOJ, it may not be interpreted as a uniform source of speculative liquidity but rather admission that all economic traction has been lost. It is not wise to cheer negative rates and QE. A Brexit Solution Seemed So Close Less than two weeks ago, a breakthrough between the UK and EU teams in their negotiations for a quickly approaching Brexit cutoff date seemed to have changed the dynamic of an impending crisis. With Prime Minister Boris Johnson repeatedly stating the Article 50 extension date of October 31st would be held to ‘one way or the other’, there has been an understandable intensity by all those involved to find a compromise to avoid an economically-painful ‘no deal’ outcome. As such, the concessions found between the UK government and European representatives to form a Withdrawal Agreement Bill seemed the most important hurdle to overcome and sentiment understandably swelled after the developments. Yet, that optimism has significantly deflated this past week. First, it was the previous weekend’s extraordinary Saturday Parliamentary session which delayed the Government’s implementation of the deal which started the decline in ambitious optimism. Tuesday’s ‘second reading’ further delivered PM Johnson a blow when he was outright rejected on pushing forward to meet the short time frame. What was more remarkable to me than the familiar trouble to find an agreement exit from such disconnected parties was the Sterling’s ability to hold onto the gains of the previous weeks – prompting GBPUSD to an incredible 6.5 percent rally in in just a few weeks. Trading not far from multi-decade lows, it may not seem that difficult for the Cable to hold some of its recent buoyancy even if progress seems to have dangerously stalled. Yet, the real fair value question is to be found in the array of possible outcomes and their market influence. A divorce with no terms is still a serious probability and its economic and financial impact is not likely priced in even after the slide of the past three years. An extension is nevertheless a greater probability than a cliff on Thursday evening. That said, we are inviting more complication and additional cutoff dates while maintaining the same mix of impasses. Prime Minister Johnson, frustrated by the lack of progress, called for a snap election for December 12th this past week. That request will be considered in Parliament Monday. Presently, polls suggest conservatives could gain support but it is not clear if he will be granted his wish. Further a complication is the EU’s allowance for an extension. The PM sent a request for an extension to January 31st according to the Benn Act back on October 19th , and to this point no reply has been given. France is reportedly skeptical of giving the disgruntled country so much additional time without clarity on what they will actually do with it. Uncertainty is having tangible economic impact, and the discount is increasingly permanent even if the next steps are still fluid. So, this week, we will have to find out what Parliament will agree to concerning the election on Monday and the EU will have to grant an extension before the deadline on Thursday night. Mind your UK/Sterling exposure.
  12. 1 point
    We're happy to announce that both Bollinger %B and Bollinger Bandwidth are now available to use on the web platform and mobile app. Bollinger %B Bollinger %B indicator helps you work out where price is in relation to the upper and lower Bollinger Bands. This shows a reading of 1 if the price is trading at the upper band, or 0 if it's at the lower band. Bollinger %B allows you to take readings of divergences that often precede market reversals: A bearish divergence occurs when there are lower highs in %B during an uptrend in price (higher highs) A bullish divergence occurs when there are higher lows in %B during a downtrend in price (lower lows) Bollinger Bandwidth The Bollinger Bandwidth gives a reading on the distance between the upper and lower Bollinger Bands: A low reading could be a sign that volatility is about to rise. Low volatility is often seen as a precursor to a spike in price. You can use the tool in a highly trending market. A fall in volatility is often seen when markets are consolidating, or momentum is building for the next move. A reversal in the direction of the bandwidth can be a sign of a market reversal, as it could mean a recent surge or slump in price is losing momentum
  13. 1 point
    Heikin-Ashi candles are now available on the IG trading platform for both desktop and mobile. This feature has been one of the more highly requested additions to charts as these types of candles are commonly used by traders looking at identifying trends visually without the need of complex analysis. How can I see Heikin-Ashi candles on the IG dealing platform? Turning on Heikin-Ashi candles is simple. If you want to see these candles; Simply open the main menu by right clicking on the charts Navigate to “Types” and bring up the second menu list Select “Heikin-Ashi” - the candles will appear straight away How are Heikin-Ashi candles different from regular HLOC candles? You can read more about what Heikin-Ashi candlestick are on IG.com, but to see a simple visual on the difference and how these could be used for identifying possible trends, just check out the charts below. Both charts are the same time fame on the same asset, one with regular candles and the other with Heikin-Ashi candles. Pic 1: regular candles (and the visual of how to turn H-A candles on) Pic 2: Heikin-Ashi candles
  14. 1 point
    ECB Didn’t Live Up to Lofty Speculation, Will the Fed? There is a span of high-level rate decisions this coming week, but only one of these updates carries serious potential to not only move its domestic assets but further potential to generate reaction from the entire financial system: the FOMC. This past week, the European Central Bank offered us a look into how far the dovish reach of the largest central banks is currently stretching. Against heavy speculation that the group was going to clearly lay out the runway to further rate cuts and escalation of unorthodox policy, they instead offered a more reserved view of their plans. Fending off an approximate 40 percent probability of another 10 basis point rate cut, the ECB held rates and offered up language that said they expect to keep rates at their current level “or lower” through the first half of 2020. On a full swing back into stimulus – versus the half measure of the TLTRO – President Draghi said they were looking into options. There is complication in the ECB pushing ahead with further accommodation as new leadership is coming in a couple months. This seems to concern them more than the risks that their increasingly extreme measures risk degrading the efficacy of monetary policy all together, particularly risky in the event that we face another global slowdown or financial crisis. The swell in European investor fears about the prospects for the future may be soothed by an outside wind if it proves timely and fully supportive. According to the market, the Federal Reserve is certain to hike rates at its meeting on Wednesday. Fed Funds futures are forecasting a 100 percent change of a 25 basis point (bp) cut and is reaching further to an approximate 25 percent probability of a 50 bp move. That is unlikely. Under scrutiny from the President and the markets, the Fed is attempting to signal its consistency as it works to reinsure its credibility. In the June Summary of Economic Projections (SEP), the median forecast on yields was for no change to the benchmark this year. A 25 bp cut at this meeting would not deviate too far from their assessment as the dot plot showed at least 8 members expected at least one 25bp cut (1 anticipated two), so it was a close sway in majority. That said, 50 bp against a backdrop of data that has performed well and equity markets are records would send the wrong signal: either one of hostage to fear of volatility or a sense of panic that they are not sharing about the future. How much is the markets banking on the Fed to converge with its much lower yielding counterparts? That answer will likely spell how much volatility we should expect. Donald Trump Throws a Curve Ball on Trade Wars Fear over trade wars had receded recently as confusion seemed to replace the tangible pain of tactical threats. Between the US and China, headlines were more about the next round of talks that were being conducted at a high level in China while trouble over the status of Huawei and the retaliation that could bring was fading out of the news cycle. We almost cleared the week with a ‘no news is good news’ perspective when President Trump decided to weigh in on something the market had long suspected was a strategy but presumed would never be made certain by officials. In offhand remarks that suggest he does not appreciate the fear that can be easily sparked in speculative markets, Trump said China may not agree to any trade deal until after the Presidential elections in November 2020. That may very well be China’s strategy: wait it out until a more amenable administration potentially takes over. That said, the Chinese economy has already taken a significant blow from the standoff thus far. It is unlikely they would want to keep it up that long on the chance of turnover. This may also reflect a Trump administration tactic: refuse to compromise out to the election and use it as a campaign point that no other government would be able to close the deal. Either way, this is a concerning musing. And, in the meantime, don’t forget that there is pressure building up on other fronts. For the United States, the question of open trade war with Europe seems to be graining tangibility with the theorizing of explicit moves from both sides for a variety of perceived infringements including the Airbus-Boeing spat. The most costly threat though remains the potential that the US is considering a blanket 25 percent tariff on all autos and auto parts which could encompass many countries but carry the most pain for Germany, Japan and South Korea. Speaking of those latter two, there is an Asia-specific trade war burgeoning between Japan and South Korea with the former threatening the supply materials necessary for the latter to produce computer chips. And, though it isn’t often considered a ‘trade war’ front, the UK-EU divorce carries with it clear trade disruption implications that will compound a global figure in collective trade. Another Verse in Milestone Towards Currency Wars Most business leaders and financiers publicly project a confidence that the world faces little or no risk that a currency war could erupt between the largest economies in the world. Privately, they are very likely worrying over the pressure building up behind active measures to devalue currencies and setting off a chain reaction of financial instability. It isn’t a stretch to suggest certain major currencies are artificially deflated, but most instances are not this way intentionally (for the purpose of economic advantage over global counterparts) or have been implemented recently. The ECB deflated the Euro with direct threats of monetary policy back in 2014 when EURUSD was pressuring 1.4000. Japanese officials slipped up before that when they suggested they are pursuing their open-ended QE program in an effort to drive their currency lower to afford a trade advantage. They later back-tracked and now simply say their ceaseless JGB purchases are a bid to restart inflation, which has floundered for three decades. The Swiss Franc is faced with constant intervention threat by the SNB, but their efforts are tied to the Euro and ECB’s overwhelming stimulus drive. In most instances around the world, policy officials are attempting to account for missing their stated policy goals (such as inflation) or offset external pressures that are themselves the results of a collective unorthodox policy epoch. However, in this desperation, there is increasingly an assumption of malicious intent from trade partners. President Trump is certainly suspicious of global counterparts. He reiterated his concerns this past week in something of a different light. Seemingly facing pressure by advisers for his frequent lamenting of the strong Dollar being interpreted as a ‘weak Dollar’ policy, the President said the Greenback is still the currency of choice – which he supports – while the Euro wasn’t doing well and the Yuan was ‘very weak’. That still looks like intent. What is troubling were the reports that trade adviser – and noted extreme China hawk – Peter Navarro had presented a range of ideas to possibly devalue the Dollar to the administration. They rejected the ideas, but the fact that this is taking place at all certainly raises the threat level of a currency war extremely high.
  15. 1 point
    There is Way Too Much for the G20 to Cover Typically, the G-20 summits that brings together leaders for some of the world’s largest developed economies cover matters that are important but not especially urgent. For the meeting in Osaka, Japan this coming Thursday and Friday (June 28-29), the members will officially and unofficially have to cover topics of exceeding importance. That would seem unusual considering we are still in the longest bull market on record and the closest state to general peace that we’ve seen in some time. On the official agenda are: global economy; trade and investment; innovation; environment and energy; employment; women’s empowerment; development; and health. As you can imagine, there will be certain themes that are more loaded than others and likely to generate more friction in group discussion as well as sideline talks than others. Since negotiations last broke down and the US raised its tariff rate on $200 billion in Chinese imports – to which China moved to match the tax on $60 billion in US goods. Trade wars will be the most frustrating topic to discuss for most of the members. In particular, the US and China have used this gathering as a timeline for the next stage of an ongoing trade war between the two economic giants. Since negotiations last broke down and the US raised its tariff rate on $200 billion in Chinese imports – to which China moved to match the tax on $60 billion in US goods – the rhetoric between the two has ranged between mild encouragement to outright threats. If President Trump’s timeline holds, the stakes are high for a breakthrough between the two. After the last move to raise the stakes, the White House said it would expand its onerous levy against its trade partner to encompass all of its goods coming into the US (another $300 billion or more) in ‘three or four weeks’. That time frame has come and gone which prompted negotiators to move out the deadline to a natural conversation between Trump and Xi at the summit. If these two fail to come to an understanding in order to de-escalate their economic conflict, it will represent the biggest notional curb on growth thus far. It would also almost certainly usher in the next stage of unorthodox measures as the options for retaliation have expended standard arsenal. China cannot meet the US like-for-like with straightforward taxes and will therefore need to consider actions on rare earth materials, blacklisting US entities, US asset exposure levels, exchange rate manipulation and other as-yet unmentioned options. The circumstances between these two giants is enormous but it is even more desperate for the other countries around the world who are caught in the middle as collateral damage. Further, depending on how President Trump views the benefits-risk balance of the affair with China – and conversely Mexico and Canada – there is the persistent risk that the Trump administration could expand its trade vigilantism against host Japan, the Eurozone and many of the other G-20 members. One thing is clear from previous gatherings of state leaders, President Trump does not respond well to multiple countries ganging up on him whether through aggression or frustrated pleas for reason. While trade will likely take up a disproportionate amount of the mental focus, there are further matters of flagging economic growth and geopolitical tensions to discuss. Trade is compounding a general cooling of economic activity and there is an unmistakable awareness as to the limitations of over-extended monetary policy. Further, protectionism is casting plans to offer more through burdened central banks and even plans for fiscal policy as provocative means to compete to the detriment of global peers. As for global relationships, there are many points of fray, but the only area where a military war seems a genuine risk at the moment is between the US and Iran. The downing of a US drone by Iran followed by reports that a retaliation was green lit then forestalled has raised the threat level enormously. Perhaps after these ‘manufactured’ issues are thoroughly covered, we will see a serious discussion on ingrained concerns like the environment and gender equality. The Market Prefers Its Own Interpretation of the Fed’s Options Sentiment in the global markets is a force of nature. It can readily overpower subtlety which is what happened this past week following the FOMC rate decision. At its ‘quarterly’ gathering, the world’s largest central bank held its policy mix unchanged with a benchmark rate at a range of 2.25 to 2.50 percent while its balance sheet efforts held trajectory. While the market had afforded an approximate 25 percent probability of a cut, there was little actual surprise and repositioning to be registered by the market. When it came to forecasts, however, there seemed to be outright disbelief; and the markets were willing to run with their own interpretations of what the future held. Looking to the group’s own Summary of Economic Projections (SEP), there was an official forecasts for no change to the current rate spread through the remainder of this year, one 25-basis point cut projected in 2020 and a subsequent rebound to our present altitude in 2021. That strayed dramatically from the market’s own debate over two or three cuts this year and further easing at a similar pace into 2020. Given the nature of speculation, we will be left with a state of hyper vigilance around data and rhetoric from Fed officials that reinforces the market’s skepticism or contradicts it. After the Fed’s attempt to throttle expectations, the markets only solidified its forecast with Fed Fund futures and overnight swaps showing the probability of three quarter-percent cuts this year rising to near certainty. Now, to be fair, the breakdown of the SEP’s rate forecasts shows an optimistic outlook for growth while the ‘blue dots’ indicated beyond the median vote that 8 members expected cuts and 7 of those assumed two 25bp moves. It would not be difficult to tip that balance should the economy start to flag more seriously. While capital markets are holding relatively steady through this disparity (and the Dollar has finally started to show the risk of lower returns and the economic state that would necessitate the response some deference), the divergent paths these forecasts represent are extreme and necessitate a convergence. That merging of views will come with significant market response whether it is speculative enthusiasm closing the gap to the central bank’s forecasts or vice versa. Given the nature of speculation, we will be left with a state of hypervigilance around data and rhetoric from Fed officials that reinforces the market’s skepticism or contradicts it. There are many prepared speeches among various members scheduled this week. That is likely on purpose as members make an effort to reinforce forward guidance. The members more on the extremes of the policy curve will be important to watch but the centrists and Chairman Powell’s scheduled speech are arguably the most important. On the data side, the Fed’s favorite inflation indicator, the PCE deflator, is due. Keep tabs on forecasts for Fed intent, because the record high from the S&P 500 that encouraged other risk assets higher, has drawn much of its lift from favorable US monetary policy. My Greatest Concerns: Recognizing Monetary Policy’s Bark is Bigger than Its Bite and Trade Wars Turn Into Currency Wars While my greatest fears for the future are ultimately a global recession, financial crisis or the beginning of a global war (much less all three); there are certain intermediary events that are more probable and could more readily usher in those systemically disruptive states. And, as it happens, they relate to both the aforementioned concerns. As chaotic as trade wars seem to be through their development and potential risk to the norm, they are at least conducted in measured and definable steps. The Trump administration has signaled its intent and indicated the criteria for which would trigger further escalation or a walk back of existing burdens. The other countries engaging the US or other global players have done the same. It is true that the decisions to intensify or cool the fight have been flippant at times, but it seems to always followed a clear lines of tactics and escalation. This is not the same pace that is employed when the fight shifts to exchange rates. The world’s largest central banks had to cut their rates to near zero and inject the system with extraordinary amounts of stimulus in order to make [an unprecedented climb in capital markets] happen Currency wars are inherently messy. They can confer significant economic benefit to those employing the tactics and detriment to all others. There is significant disagreement as to what constitutes a country pursuing this unfair line of policy which leads to fights out of sheer misunderstanding. And, ultimately, there is tendency for a retaliatory policy to escalate rapidly. We haven’t seen many genuine claims of currency manipulation over the past few decades, but the Japanese authorities were forced to quickly backtrack on a ‘misstatement’ and the Chinese Yuan has a permanent question mark next to it. That said, with trade wars underway and the US President not shy of labeling China’s and Europe’s currencies unfairly devalued, it seems risks now are far higher than they’ve been in generations. It is difficult to pull up from a currency war, and evidence shows these are not the leaders that are likely to let cool heads prevail. The other escalation that plagues my fears is: what happens should the markets develop an unshakable sense of skepticism around central banks’ ability to maintain control? The past 10 years has enjoyed an unprecedented climb in capital markets and underwhelming average pace of expansion. The world’s largest central banks had to cut their rates to near zero and inject the system with extraordinary amounts of stimulus in order to make that happen. While we have long ago restored record highs for the likes of the Dow and seen GDP stabilize in expansionary territory, most of the banks kept going. The reasoning was that either the extreme support was needed to keep the peace or it was worth it to leverage just a little more growth. Regardless of the justification, it meant that there was very little effort to re-stockpile policy ammunition for any future troubles. Now, as pressure seems to be building up once again, the markets are clearly looking to the Fed, ECB, BOJ and others to head off crises. If we were to reasonably evaluate what happens in the scenario where we face another slump, there should be little confidence that monetary policy could truly hold back the tide. That said, limitations for future troubles will start to trace back to an assessment of the current structure’s ability to keep the stability we currently enjoy. If central bank credibility were to truly falter, the fallout would be severe -all the more for the fact that it would commence from record high prices (with arguably a record gap to value).
  16. 1 point
    Overnight action: Wall Street equities closed effectively flat, while bond yields climbed, commodities generally lifted, and currency markets shuffled into place, as markets continue to position for this week’s massive G20 meeting in Osaka. Market activity was relatively high, and sentiment does seem to be balancing on a knife’s edge: US President Trump flippantly suggested his “Plan B” from this weekend’s trade-talks is to slap on China “billions and billions” of more tariffs. Meanwhile, bond markets continued unwind bets of a double-rate-cut from the Fed next month, after some sobering commentary from several Fed-speakers this week, driving US Treasury yields up around 6-points across the curve. FICCC: Fixed-Income, Currencies, Commodities and Crypto: The price action in bond markets could also be attributable a swift-rally in oil prices last night, consequent to the release of US Crude Oil inventory data, which showed a much bigger than expected drawdown last week. That dynamic has sustained the retracement in gold prices, as inflation and central-bank-easing worries diminish. For all the shuffling in bonds and stocks, in currencies: growth currencies like the CAD, NZD and AUD are higher, mostly at the expense of the JPY and CHF. And Bitcoin is going on a tear, breaking through $US13,000 overnight – though tumbling in early trade this morning as choppiness sets into that market. ASX200 consolidates: The ASX200 continued to trade sideways during yesterday’s session, as the market shows signs of slowing upside momentum, and a touch of consolidation. It was a high activity day, which saw the ASX200 shed -0.26 per cent, again due primarily to a dip in bank shares, which lopped 9-points from the index. Much like the position it was in last week, price action points to a market not yet ready to retrace its recent gains. Instead, it’s trading more or less side-ways, if not with a slight bearish bias, as traders position for the many unknowns awaiting them at this weekend’s G20 meeting. RBNZ keeps rates on hold: The Reserve Bank of New Zealand met yesterday, and kept interest rates on hold at 1.50%, as was generally tipped. Naturally, the focus shifted to the RBNZ’s accompanying statement, following the publishing of the decision. And what was revealed cast the central bank’s decision in a light that could be described as a “dovish-hold”. The communication to the market was plain and simple: “The Official Cash Rate (OCR) remains at 1.5 percent. Given the weaker global economic outlook and the risk of ongoing subdued domestic growth, a lower OCR may be needed over time to continue to meet our objectives.” RBNZ to play it by ear: Despite the tone struck by the RBNZ, the Kiwi Dollar lifted somewhat, and rate-cut expectations were slightly unwound, following yesterday’s rates-decision. It would seem the market read what was stated by the bank as being a trifle ambiguous: yes, interest rate cuts are likely needed to support the New Zealand economy in the near-enough future, but when that happens precisely remains uncertain. An August rate cut from the RBNZ is still considered likely, it must be said. But the probabilities have been diminished, with future employment and inflation figures – the indicators the RBNZ flagged as facing downside risks – now taking on greater significance. US GDP data: The economic calendar today will be highlighted by the Final US GDP print for the quarter. It’s the last revision to the US growth data for the quarter, so already, in the market there is a fairly good feel for what the numbers may reveal. It’s expected to come-in at what is quite a robust 3.1 per cent – above trend, in line with the preliminary estimate, and only down 0.1 per cent from last quarter. Naturally, the minutiae is what market participants will be perusing, to get a feel on the trends evolving in the US economy – especially given its assumed slow down. The Fed is treading carefully: The implications for markets from tonight’s US growth figures will, of course, begin with what it says about the US Federal Reserve’s monetary policy considerations. Right now, interest rate markets are implying a relatively high chance that the Fed will pull-out a big 50-point rate cut at that central banks July 31st meeting. The consequences of that have been huge: it’s pushed financial capital into stock markets, tighten credit spreads, and whacked the US Dollar down. And that’s seemingly captured the Fed’s attention, too, with several Fed-speakers this week moving to deftly temper these expectations, given their impact on financial markets. Written by Kyle Rodda-IG Australia
  17. 1 point
    Other central bankers throw their weight around: After the US Fed exited the ring yesterday, some of the world’s other heavyweight central-bankers weighed-in on the global race-to-the-bottom for global interest rates. The BOJ met yesterday, and though they kept their policy entirely untouched, it Governor Haruhiko Kuroda affirmed his commitment to monetary stimulus if necessary. RBA Governor Philip Lowe also delivered a speech, in which he was explicit in his belief that lower interest rates were necessary to absorb “spare capacity” in the labour market”. And the Bank of England met last night, left interest rates on hold, but downgraded its forward-outlook, prompting increased bets of a rate-cut from the BOE this year. Notable price action: Risk assets rallied, while sovereign bond yields fell, the USD tumbled, and gold spiked as a result of the dynamic. The S&P500 touched all-time highs, and the ASX200 registered its own 11-year highs, as the prospect of easy-money the world-over whet investors risk-appetite – though SPI futures this morning a suggesting that enthusiasm will cool on the ASX, with ASX200 looking at a flat open. It wasn’t all smooth sailing it must be said. Nerves were rattled on news that Iran had shot down a US drone over the Straight Hormuz, causing a spike in oil prices on fears of conflict in the region. Rio saps some of the positivity from the market: The materials sector failed to capitalize fully on yesterday’s Fed induced bullishness. The responsibility for this laid at the feet of Rio Tinto, after the heavily-weighted mining-giant announced a paring-back of its iron ore output forecasts, owing to “mine operational challenges” being experienced by the company at a key mine in the Pilbara region. The news sent Rio shares down by over 4 per cent at stages yesterday; and, perhaps ironically, gave a little lift to iron ore prices, which had been showing signs of potential weakness, following the announcement by miner Vale that it would be re-opening one of its largest Brazilian mines. Australian rates keep falling: The increasing prospect of looser global monetary conditions, as well the dovish commentary from our own central bank Governor, worked its way into Australian rates markets yesterday. Bets for rate cuts from the RBA lifted modestly, with the implied probability of rate cuts for next month jumping to around 70 per cent, with 2-full cuts from the RBA before year-end priced in their entirety, right now. This sparked significant moves at the front end of the AGB yield curve: the rate-sensitive three-year note fell by another 4 basis points, to clock a fresh all-time low of 0.91 per cent. AUD pops courtesy of weaker USD: Despite this, the AUD tested life above the 0.6900-handle yesterday, as an even hastier fall in US Treasury yields enervated the US Dollar. An ominous milestone: the yield on the benchmark US 10 Year note fell below 2 per cent for the first time in more than two-and-a-half years, while the yield on the US 2 Year note dipped to around 1.73 percent. The fall in US yields at the front end of the curve narrowed the spread between US Treasuries and it Australian equivalent to around 78-basis points (briefly), and has underpinned the little rally witnessed in the Aussie Dollar in the last 24 hours. Gold hits new highs: Arguably, the greatest beneficiary of this week’s concertedly dovish stance from global central bankers has been gold. The price of the yellow-metal hit a 5-and-a-half year high yesterday, as the USD tipped-over, and global interest rates fell. Importantly, too, from a technical basis, the gold price punctured resistance around $US1360, and came close to hitting the key psychological level of $US1400.00. Though the broader narrative is supportive for gold, the price action is looking somewhat exuberant now: the daily RSI is giving an overbought signal, and the price is divorcing itself from fixed-income markets slightly, suggesting that speculative flow has seized control of the price. The latest readings on global growth: Attention will turn back to the global growth outlook today, ahead of tonight’s release of European Manufacturing PMI data. Markets are expecting another contractionary print in the key German and Europe-wide readings of the data, as the US-China trade-war, along with the continents ongoing structural issues, weigh on Europe’s economic activity. The Euro will be in focus around tonight’s data: markets are warming towards the prospect of rate-cuts from the ECB. A deteriorating outlook for the German and European economies could increase these bets, and sap the shared currency; while a better than expected print would likely fuel its recent pop higher. Written by Kyle Rodda - IG Australia
  18. 1 point
    Aussie growth underwhelms: Australian GDP data was the highlight of the economic calendar yesterday. All-in-all, the data was of minimal impact, though it did for make big headlines: the growth rate came-in at 1.8 per cent on an annualized basis, as expected – the slowest rate of economic growth since the GFC. A poor print undoubtedly, but one that had been priced into the market well in advance. Hence, markets were little moved upon the release. The ASX200 hardly budged. The Australian Dollar lifted very slightly, and temporarily tussled with the 0.7000 handle. And interest rate markets increased very marginally the probabilities of more RBA cuts by year-end. Where the weakness is: The data was more of interest for economists and other pedants. And there were some interesting takeaways from the release. As is well known, one of the major headwinds for domestic growth is private consumption, which continued to show signs of slowing. The savings ratio also lifted, as consumers seemingly opted to defer spending and pocket their modest pay rises. More than just demand side concerns, there was also a noteworthy drag on growth from the supply side. Dwelling investment also contracted in the last year, in line with what has been a well-publicised slowdown in construction activity, and sustained falls in the property market. Where growth is coming from: The GDP data wasn’t without its silver linings, of course. A series of factors leapt-out as the primary drivers of growth in the Australian economy in the past 12 months. It was largely improvements in the nation’s terms of trade, courtesy of the major multi-month rally in iron ore, followed by big government spending measures, mostly in form of the NDIS and other health services, that proved the greatest contributors to growth. Though welcomed, to be sure, the areas of Australia’s economy sustaining growth speaks of a country currently working below its capacity, and in need of some sort of a boost. Why the RBA is cutting rates: It’s this dynamic that explains, and perhaps even vindicates, the RBA’s decision to lower interest rates on Tuesday. Domestic economic conditions are weak (and likely softening), and requires a little policy support, from central bankers and government alike, to stimulate ongoing employment and GDP growth. Based on such a logic, the pricing-in of interest rate cuts into the back end of the year appear highly rational. And this seems especially so when considering that (as was alluded to by the RBA on Tuesday afternoon), international economic growth is likely to slow, if not falter, due to the pernicious consequences of an escalating global trade-war. Risk-appetite lifts overnight: Which leads to the overnight price action in North America, and to a somewhat lesser extent, Europe. Risk appetite has been piqued by news that US President Donald Trump stated his belief that Mexico wants a trade-deal to happen, as well as comments from Trump trade-advisor Peter Navarro that the tariffs on Mexico may not have to go ahead. The headlines (and really, for now that’s all they are) stoked a rally in US equity indices; catalysed a fall in the VIX; lead to a narrowing of corporate credit spreads; and provided room for a bounce in the US Dollar, Sentiment improves, fundamentals haven’t: The question becomes now whether we’ve put-in a new low in global equities, or whether this is just a little fake-out. There is lingering suspicion that it may be closer to the latter, given the fact that although friendly words are being passed between the Americans and Mexicans, nothing has truly changed yet. Even more to the point, the Americans and Chinese have in no way thawed their present animosity towards one another. It suggests that although market sentiment has clearly improved in the last few days, the fundamentals haven’t changed. They could, by all means: but signs of that aren’t here yet. The better measures of fundamentals: Probably the more pertinent facts here, too, is US stocks’ rally is very “defensive” in nature, and has been ignited mostly by an ostensibly dovish pivot from the Fed. Despite all the confidence that markets have reached a fresh turning point, US Treasuries are still rallying, especially at the front end of the curve. It suggests that the market is assuming the Fed will cut aggressively, and soon, to try to engineer a “soft-landing” for the US economy. The sectors in the S&P500 that have outperformed overnight are safe, yield-generating stocks – not those typically tied to greatest optimism about fundamental economic growth. Written by Kyle Rodda - IG Australia
  19. 1 point
    The tariffs get hiked: The latest round of trade talks didn’t have the desired outcome. But nevertheless, the always forward-looking equity market closed last week on something of a high-note. It was a choppy day’s trade in Asia as the news filtered through that an agreement between the US and China in Washington wouldn’t be reached. Ultimately though, and just like the last time tariffs were hiked, financial markets handled the news with aplomb. The simplest explanation for why there wasn’t a huge reaction financial markets is roughly this: it “was buy the news and sell the fact” with markets having already discounted a trade-war escalation. Markets (probably) saw it coming: It’s an unhelpful cliché, that one. However, market-moves, ex-post or not, are often chalked up to such a dynamic. It’s one of those helpful mental models to make sense of the madness of financial markets day-to-day. Regardless, it’s ostensibly what financial markets have done in this instance; giving solace to the bulls and bolstering risk-appetite. Fundamentally, the global equity map was a rich-shade of green after the end of Friday’s trade. The S&P500, for one, closed 0.37 per cent higher, CSI300 lifted a remarkable 3.63 per cent, and SPI Futures are indicating a 29 point jump this morning. The future feels more uncertain: The question moves today to: where to from here? From a pure fundamentalists point of view, those folks probably just wait to see how new trade-barriers show up in the hard-data. That one is probably going to be a slow-burn. Recall, after the last round of tariffs were implemented, it took the better part of a quarter for them to show in the data, and vaguely reflect in market fundamentals. For the short-term sentiment watchers, an answer to that overriding question will be more immediate, however perhaps more gradual in its unfolding. Afterall, this is a headline driven market, and those headlines are still being produced. Trade will remain “headline-driven”: Hence, on the headline front, what was received over the weekend – after the market had closed – was probably not all that favourable for risk-sentiment. While Friday’s trade was buoyed by news that trade-talks were continuing and were “constructive”; trade at the very early stages of this week is being stifled by the harsh rhetoric from the Trump administration, towards the Chinese, over the weekend. Upping his binary “winner-and-losers” language, news has filtered through the wires that the US has delivered China an ultimatum: make-a-deal, or tariffs get applied to all Chinese goods going into the US in a month’s time. Higher trade-barriers to stifle global growth: The reliability of this story is somewhat questionable. Regardless, if tariffs are applied to all goods going into the US from China, and retaliatory tariffs are proportionately applied to all goods going into China from the US, then the global economy will almost certainly suffer. Speculation now in financial markets will probably centre in a big-way on trying to quantify the impact of this dynamic. This will take some time to actually materialize. But you can bet the quants and other data crunchers of the world will be adjusting their models to try and predict their impact now. US-China conflict possibly the “new-normal”: For traders not-so resource rich, the matter becomes less about predicting the numbers, and more about getting a rational grasp on whether the trade-war will continue to escalate. Given the current circumstances, a bitter spoonful of pessimism may well be the conclusion. That’s because the trade-war, as has been repeated ad nauseum in the punditry, is not an economic issue, but a strategic one. To borrow from the classics, it’s a case of Thucydides-trap. China does not wish to compromise its inexorable rise; while the US is trying to force China to rise within the restrictive confines of the world-order it, itself created. The consequences of this new order: The intractability of such an issue means that, at the very least intellectually, a true resolution to the trade-war in the short-term in unlikely. Tariffs may come and go, but financial markets will have to deal with a world in the future where its two biggest economies are “at each other’s throats”. This new reality will probably be internalized by markets, which will move-on over time, and trade according to the market-fundamentals, determined by economic and corporate strength. However, as the economic cycle continues towards its end, the interest will be in how weaker global-trade steepens its descent, and compromises the markets’ fundamentals. Written by Kyle Rodda - IG Australia
  20. 1 point
    Turning on FX swap bid/offer When trading currency pairs, if a position is held through 10pm GMT, it will incur an overnight funding charge. This charge is based on the interest rate differential between the two currencies in the pair, where you receive interest in the currency you buy and pay interest on the currency you sell. Swap rates also apply to cryptocurrencies and spot gold, silver, platinum or palladium. Based on client feedback we have now added these overnight funding charges to the platform. Please keep in mind that they are indicative figures. These swap rates are viewed from a watchlist. Once you have an FX pair on the watchlist, by clicking on the three lines that are positioned on the left-hand corner next to the word 'market', a drop down of columns will appear. Click on the swap bid and swap offer buttons to activate them. What does this mean for me? If GBPUSD was quoted as 0.22 / -0.85 then the 0.22 would be what you receive if you are short, and the 0.85 would be what you pay if you are long. You then need to do the trade size times this value. For example a spread bet of £3/pt on the short trade would result in a credit to your account of 66p (which comes from 0.22 x £3). If you have a CFD account and you're holding a single $10 contract long, you would pay $8.50 per night (which comes from 1 contract x $10 x 0.85). Where does this figure come from? The figure is shown in points and depending on the currency you hold and the direction of your trade you can either earn or pay a premium, keeping in mind that there is an IG charge included in the calculation. Currently this is 0.3% (or 0.8% for mini contracts and spread bets) however as this is subject to change please check IG.com for the latest fees. If you are long on a currency pair, you will need to focus on the swap offer, and if you are short you will focus on the swap bid. If the swap is a positive number, you will be credited, because the interest rate on the currency you are buying is higher than the interest rate on the currency you are selling. If the rate is a negative number you will be charged, because the interest rate on the currency you are buying is lower than the interest rate on the currency you are selling. If the interest rate on the euro is 0.25% and the interest rate on the USD is 2.75% and you buy EURUSD, you will be receiving 0.25% but paying 2.75%, and will be left with an interest rate differential of 2.5 points (excluding the IG change). Example: Let us take EURUSD as a worked example. We will need two figures for our calculation, the underlying market swap rate (known as the Tom/Next rate, which is provided by the banks), as well as the current spot rate of the currency pair at 10pm. The below figures are indicative for this calculation. An example of the underlying 'Tom/Next' rate for EURUSD: 0.34 / 0.39 An example of today's Spot FX rate for EURUSD at 10pm UK time: 1.0650 An example IG admin fee of 0.3% which is subject to change (please find the most up to date admin fees on IG.com) Once we have the Tom/Next rate, we take the 10pm EURUSD spot rate (in points) and multiply by IG's charge of 0.3% (or 0.8% for CFD mini or Spread Betting deal), which is then divided by 360 days to get an overnight value. = (10650 x 0.3%) / 360 = 31.95 / 360 = 0.08875 This is then applied to the underlying market quote of 0.34 / 0.39 Bid = 0.34 - 0.08875 = 0.25125 = 0.25 Offer = 0.39 + 0.08875 = 0.47875 = 0.48 This then gives us our overnight funding rate, inclusive of IG charge, of 0.25 / - 0.48. The '˜Offer' is negative, because currently there is a higher interest rate on USD than there is on EUR. Therefore, buying the pair would leave you paying a larger USD interest vs receiving a smaller EUR interest. E.g. If you were long one main lot, you would do 'Number of Contracts x Contract Size x Tom Next Rate'. Using the information above, if you were long one main lot, your 'Daily FX Interest' would be: 1 x $10 x - 0.48 = $4.80 charge per night. (Conversely if you were short, you would receive $2.50 per night). Important factors to note FX settlement of T+2 means that if you hold your trade through 10pm Wednesday (UK Time) then you'll need to incorporate the weekend into the calculation, and therefore you'll have an 'FX Interest Charge' of 3 days. This is because currency can't settle at the weekend, and the new spot rate would therefore fall on a Monday. It also follows that if you hold through 10pm on a Friday, you only receive a 1 day charge (even though you have to hold through three days before you can close the position). Settlement of FX can't take place on public holidays. Therefore, over periods such as Christmas or Easter, or public holidays such as Martin Luther King Day or Thanksgiving, you may see interest charges for a variable number of days. Some currencies trade on a T+1 basis, most notably USDCAD, USDTRY and USDRUB.
  21. 1 point
    A Return to Extreme Volatility and Realization It Won’t Stay This Quiet for Long Any way you cut it, the markets are experiencing extreme levels of inactivity. And, for those that are satisfied with the superficial and textbook interpretations of the mainstream measures, this seems like a cue to leverage exposure and commit to the decade-long bull trend which blossomed under the controlled conditions. Previously, traders would have been readily satisfied by the readings and thrown in with the assumptions. However, there is an unmistakable air of skepticism surrounding activity measures with indicators of exposure and uneven performance for ‘risk’ assets drawing focus back to the extreme bouts of volatility this past year. While market participants have shown a penchant for overlooking troubling fundamental backdrop and conveniently forgetting previous lurches in the financial system, the proximity and severity between the February-March and October-December storms were too prominent to simply slip quietly into afterthought. With that said, the question then must be raised as to what could trigger another wave of concern. While the best motivations for trend development in my opinion are systemic fundamental themes that can draw the largest swaths of market participants; during these periods of speculative interlude complacency can raise disputes over the urgency of otherwise serious themes. When we get into these self-sustaining periods of complacency, one of the best sparks to break clear of speculative opportunism borne of quiet is to see a uncomplicated slump across the capital markets. In other words, price-determined risk aversion. While the strongest indication that the markets are succumbing to their own fears is an intense deleveraging across all or most assets with a heavy dependency on speculative appetite, there can be fairly reliable precursors before we get to that undisputed scale. At present, one of my favorite leading indicators is the S&P 500. Representing the most ubiquitous asset class in the capital markets and in the largest economy, it is well placed at the center of focus. Further, its outperformance in this role has once again afforded it a position of carrying a heavy mantle of keeping the fires stoked in other assets and regions due to its approximate return to record highs over the past quarter. Most other preferred assets for the trading rank are significantly behind in their recovery efforts – rest of world equities measured by the VEU index is only now passing the midpoint of its 2018 losses. This attention isn’t just a benefit to the markets though. If the US indices were to falter in an overt and troubling way, it can spell disaster for other areas of the financial system that were considered far less resilient. A stall for the S&P 500 and Dow before overtaking a record high could certainly achieve this throttling for global sentiment, but a more complete obliteration of future efforts to recharge confidence would likely come from a scenario whereby the benchmarks overtake their respective highs, struggle briefly to mark new progress and then collapse. Currently, we find measures of volatility like the VIX back at lows last seen in October which is appropriate comparison. Yet, in other asset classes we find more incredible readings like FX implied volatility at levels that are only comparable to a few points in history (like the Summer of 2014). In historical terms, the Dollar’s range (an equally-weighted index) over the past 200-days is the smallest on records back to when the Euro started trading two decades ago. This misplaced association of confidence and lack of preparation sets up the market to be extremely exposed to a mere slump escalating into something more catastrophic. Trade with caution and diligence. China GDP Next Week’s Top Event – Could the World Survive Its Stall? In a holiday-shortened week with speculative focus blurred, the top event risk is unmistakable. The Chinese 1Q GDP reading will come along with a run of monthly readings for March that are influential in their own right. While the employment, retail sales, industrial production and other monthly data are worth taking stock of to establish direction for specific nodes of the broader economy – important for projecting where problems or resurgent growth could arise in the future – it is all superseded by the comprehensive growth report in the short term. The world’s second largest economy is expected to slow even further from a 6.4 percent annual pace to a fresh multi-decade low 6.3 percent. That will still sit comfortably within the growth target lowered from 6.5 percent to a range of 6.0 to 6.5 percent the last National Peoples’ Congress. Nevertheless, the international market’s more critical eye towards growth and unorthodox threats will disproportionately raise the risk for impact form a negative outcome. The implications for China and its markets are relative straightforward when it comes to the forecast for the soft landing that officials are trying to engineer against the backdrop of struggling global growth and amid a trade war. Though rhetoric around negotiations with the United States has improved, a year’s worth of economic pain has built up. The March trade balance offered a timely mixed picture this past week with a significant surplus for the month resulting from a distinct drop in imports (a poor reflection of domestic economic health). For the global economy, this particular economic update holds significant weight over assumptions for the future. As the world’s second largest economy and the stalwart through the Great Financial Crisis, a slide that seems to be picking up momentum outside the central authorities’ control will leverage serious concern about what the smaller economies with significant less control are facing. For countries that supply China with the many raw materials that it consumes for its unmatched manufacturing machine (Australia, New Zealand, etc), the restriction in export demand and likely drop in foreign investment flows will expose an unbalanced economy. For the rest of the world, the buffer China has maintained will mean the country’s demand for trade partners’ goods will not pose the greatest risk, but rather its carefully-controlled financial connections will represent the true destabilizing influence. Potential delay in impending efforts like the Belt and Road initiative and the tentative vow to ramp up purchase of US goods are tepid relative to the cascading exposure we would see if the country was forced to repatriate in order to shore up its own system which is heavily built upon leveraged and low-quality lending initiatives. The question I would pose is whether the world could survive a stall in Chinese growth – which would occur well above 0.0 percent GDP – given how troubled the globe’s future currently looks? I doubt it. Should China tip into a market-defined economic stagnation or contraction, it would infer one of the key players in the world’s stage has lost control over its reliable ability to plan and direct activity. The environment that would force that loss of control would be a serious threat to the rest of the world as the shock would eventually hit other shores like a financial tsunami. Brexit Delayed Six Months and Pound Range Trading Reinforced A sense of relief washed over the Pound this past week – though not that kind that can readily supply buoyancy to the battered currency. In an increasingly familiar story line in Europe, we have found the Brexit situation has resorted to the comfortable solution of punting an unsavory decision to a time significantly into the future. This is the same path we have seen taken when it comes to Europe’s monetary policy (ECB), political standoffs and external diplomatic issues. This is not to say everyone is simply defaulting to this delay. This results from serious impasse between parties that believe strongly in their solutions as well as the folly in crossing their red lines. At the direction of Parliament, UK Prime Minister Theresa May requested an extension from the European Union, with an initial suggestion of a hold out until June 30th. After a long summit, the EU-27 agreed to a six month delay that would move the cutoff date to October 31st. In the interim period, the UK is expected to participate in the EU Parliamentary elections which will take place starting May 23rd and for which some in May’s party and her own government are piqued. The question on most peoples’ minds are whether the additional time will offer the opportunity to overcome the impasse or whether it will just draw out the misery. According to the IMF, uncertainty will only accumulate greater economic deterioration over time – and given the state of data over the past year in particular, that is not difficult to understand. In terms of how that translates into the competitive position of the Sterling and UK-based assets, many would see this as a window for a speculative influx on discounted markets. In previous years when complacency was de rigueur, that is almost certainly what would have transpired. An appetite for even marginally underpriced assets would have triggered an avalanche of speculative influx which would have quickly sent GBPUSD above 1.3500 and the FTSE 100 rushing towards 7,900. However, as discussed above, there is a deeper sense of skepticism built into the system. As such, the sudden drop in implied volatility measured by currency options or the CME’s index is as likely to short circuit momentum as it is to prompt it. Whether you agree or not as to the potential in the Sterling moving forward, think it through to establish a bias and set criteria for when that view shifts. Having thought the situation through beforehand will better set your expectations for an event like the GBPUSD’s inevitable break from a wedge this past month with boundaries currently stationed at 1.3125 and 1.3050. If you think a more robust recovery is possible then you may see more intent on a bullish break – and be confounded by a move lower.
  22. 1 point
    Earnings optimism tempers the markets’ mood: Financial market participants curbed their enthusiasm yesterday. Friday’s brief excitement on Wall Street relating to a handful of earnings beats from some of the US’s big banks failed to translate into meaningful momentum to begin the new trading week. Such a dynamic was also evident throughout the Asian session. The ASX200 closed flat for the day, and Chinese stocks rallied and retraced all in the space of a few hours. The Nikkei was higher for the day; however, that was largely due to a markedly weaker Japanese Yen, with that currency unable to reclaim its losses after Friday’s risk-on move. Sluggish trade on Wall Street: The activity on Wall Street overnight was very much of the “let’s-now-wait-and-see” variety. The behaviour is sensible and based on a sound enough logic. Earnings seasons are a long-slog, with the possible arduousness of this reporting period even greater given the prevailing global economic backdrop. The return of thinner trade conditions, which of course were attributable in part to a level of Monday-itis, betrayed this cautiousness during the North American session. Volumes were below average, and market-breadth was meagre: 38.8 per cent of stocks were higher across Wall Street, with only 4 out of 11 sectors registering gains for the session. The next bullish impulse being sort out: If traders are unwilling to carry-through with their bullish bias, it bears questioning what presently stands in their way. The obvious answer is a general uncertainty as to whether US stocks will outperform their lowly Q1 earnings estimates; and whether an improvement in forward guidance is delivered by US corporates. But where might the substance of this answer be discovered? If last night’s trade is any indicator, it won’t be US bank stocks. After JP Morgan’s surprise beat on Friday night, the numbers released by the likes of Citi and Goldman Sachs, though solid, didn’t engender quite the same excitement. Markets wait for bellwether earnings: Instead, the meatier part of earnings season will come when market participants receive updates from the major tech-giants and big industrial companies. The rationale for this view is simple enough: the two key sticking points for the market at-the-moment pertains broadly to risk appetite and macroeconomic growth. As last year’s record run and violent correction will attest to, the US tech sector is the bellwether for what desire there is to punt big on growth-stocks. While the powerhouse American industrial companies will provide the ultimate read on what impact the slow-down in China and Europe is having on corporate profits. ASX likely to keep doing its own thing: The problem is market participants must wait a few days-to-weeks to receive clarity on these matters. For now, traders turn to the Asian session, and that of the ASX in particular, with few chunky leads to determine this region’s early fortunes. SPI Futures for one are pointing to a negative start for Australian equities, with that contract predicting a 16-point drop at the open. It backs up another day where the ASX traded seemingly according to its own will: a lift North American banks perhaps support our own somewhat, however the ASX200 experienced a meandering day, trading in a narrow 20-point range. RBA Minutes the key risk event today: Event risk during Asian trade today is relatively light from a global perspective. But for those with an interest in the Australian-macro landscape, RBA Minutes will be one to watch. Since the RBA’s monetary-policy-decision a fortnight ago, traders have moved gradually to temper their bets on the extent of rate cuts from the central bank in the year ahead. By way of virtue of diminishing fears about the state of health of the global economy, traders have reduced the number of implied interest rate cuts by the RBA from about 1-and-a-half to just over 1 before the end of 2019. Australian Dollar feeling the love: The restored confidence in the global macro-economic outlook has manifested in the Australian Dollar. Though its begun the week listless, the AUD has held onto its short-term trend, to be currently trading just below a few significant resistance level at the prices 200-day moving-average. Despite the yield story apparently unsupportive of the move in the currency, the climb in iron ore prices combined with speculation of further improvements in the global economic outlook is apparently underpinning Aussie Dollar strength. A break over the currency’s 200 day moving-average may well indicate a further run higher for it is afoot. Written by Kyle Rodda IG Australia
  23. 1 point
    US-China trade talks have restarted in Beijing as U.S. Treasury Secretary Steven Mnuchin said on Friday that he had a "productive working dinner" the previous night. Investors are hopeful that progress will be made to resolve the bitter trade dispute between the two largest global economies, amid growing concern of a slowing economy as the bond market signals a possible incoming recession. Theresa May is set to make a third attempt to pass a Brexit deal today, as the MPs are asked to vote for a "blindfold Brexit" on the day that Britain was originally due to exit the EU. The format for today's vote has been crucially changed to comply with Speaker John Bercow's recent ruling, so that MPs will vote only to approve the withdrawal treaty and not the 26-page political declaration that accompanies it. Huawei's revenue and profits soar, despite recent major political headwinds. The Chinese tech giant reported revenue of over $100 billion in 2018, a 19.5% year-on-year rise. Net profit also rose 25% compared to 2017. The Dow Jones rose 91.87 points to 25,717.46, whilst the S&P gained 0.4% and the Nasdaq advanced 0.3% to close at 7,669.17. Asian equities followed suit as the Shanghai Composite rose more than 3.1% and Japan's Nikkei climbed 0.8% on Friday. In the currency market, the pound regained 0.3% to $1.3077 after losing more than 1% the previous day. The euro stands steady at $1.1232 and the Turkish lira dropped 1%, after it had plunged 4% the day before. U.S. crude futures traded up 0.4% at $59.55 a barrel, recovering from Thursday's low of $58.20. Palladium dropped 0.4% after seeing declines of 6.6% yesterday. The precious metal has fallen from last week's peak on concerns that demand could be affected by an economic slowdown. Asian overnight: Chinese markets were the big outperformer in a widely bullish session, with the Shenzhen composite trading 3.7% higher amid hopes for a breakthrough in US-China trade talks. Yesterday’s comments out of the US point towards widespread progress for these talks, raising the prospect of an eventual deal. Overnight data all focused in on Japan, where a slightly weaker retail sales number marked the one blot on an otherwise impressive set of data. Improved housing starts, industrial production, and unemployment helped boost confidence in the economy. UK, US and Europe: Looking ahead, Theresa May gets a third bite of the cherry, with another meaningful vote taking place today. The failure to secure support from the DUP should consign this attempt to another loss, yet some believe that the decision to split the withdrawal agreement from the political declaration could help secure some extra votes. It is a busy morning otherwise for the pound, with final GDP, current account, net lending, mortgage approvals, and the Nationwide HPI all released at 9.30am. In the afternoon, keep an eye out for Canadian monthly GDP, alongside the US core PCE price index, personal spending, and Chicago PMI. Economic calendar - key events and forecast (times in GMT) Source: Daily FX Economic Calendar 8.55am – German unemployment (March): rate to hold at 5%. Markets to watch: EUR crosses 9.30am – UK GDP (Q4, final): growth expected to be 1.3% YoY and 0.2% QoQ. Markets to watch: GBP crosses 12.30pm – US personal income (February): forecast to grow 0.2% MoM. Markets to watch: US indices, USD crosses 1.45pm – Chicago PMI (March): expected to fall to 57 from 64.7. Markets to watch: US indices, USD crosses 2pm – US pending home sales (February): expected to rise 1.6% MoM. Markets to watch: USD crosses TBD - Parliament Brexit Vote Corporate News, Upgrades and Downgrades Renewi has cut 2020 guidance, and will also cut its dividend, after it was hit by new regulations in the Netherlands for soil treatment. Operating earnings for the year to March 2020 are expected to fall by €25 million. Travis Perkins said that its CEO John Carter would stand down in August. He will be replaced by Atkins CEO Nick Roberts. Bowleven has reported a drop in pre-tax losses for 2018, to $1.4 million, from $2.8 million a year earlier. Efforts to cut spending have borne fruit, helping to cut administration expenditure to $2.1 million from $3.6 million in the previous year. Wells Fargo shares jumped 2.6% in after hours trading on Thursday, following an announcement that CEO Tim Sloan will be retiring. AstraZeneza has struck a $6.9bn deal with Japan's Daiichi Sankyo to develop and sell a new cancer drug that is expected to treat breast and gastric cancers. Partners Group raised to overweight at Morgan Stanley Boskalis downgraded to add at AlphaValue Evraz downgraded to neutral at Citi Tele2 downgraded to hold at Berenberg Maersk 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.
  24. 1 point
    On the back of client feedback and to make the platform easier to navigate, we have now made the ‘show’ button easier to find by adding the toggle to the top of the charts. By clicking this button, you will be able to customize the information that appears on your charts. These functionalities were previously available by right clicking on the graph, however due to significant and continued client use they’re now only one click away. Graph features you can add: HLOC: By enabling HLOC data you will be able to see the high, low, open and close prices by hovering over a candlestick on your chart. Drawings: The drawings button will enable you to see or hide any drawing you may have set up. This button will make it easier to work with drawings, as you can hide them all at the same time without having to discard each drawing individually. Indicators: As like with drawings, this button will make it easier to hide all indicators that are selected, without having to delete each indicator individually. Open positions: By enabling open positions on your chart, you will see a line displaying your open position(s) and the level at which it was open. Working orders: Enabling working orders will allow you to see any working orders you may have set up for that market as a line along its trigger price. Position preview: Enabling position preview will allow you to see a visual representation of your trade on the graph as you fill in the deal ticket. You can visit this link to find out more about deal position preview. Timeline: Enabling the timeline will allow you to see, at the bottom of the graph, the range of dates selected to appear on the graph. Price changes: Enabling price changes will show the absolute change, the percentage change, the high, the low and the time frame to which it applies; all shown at the bottom of the graph. Price line: Enabling price line will show a line across the graph where the current price is.
  25. 1 point
    Samsung announced the Galaxy Fold the first consumer available phone to feature a folding display. The new phone also comes with a $1,980 price tag. Barclays report full-year net profit of £1.4 billion for 2018, pulling back from 2017's significant losses. Theresa May reports positively about Brussels talks but is it too little too late after three Tory MPs quit the party to join an independent group yesterday. Google have stated that the omission of the Nest Guard home alarm featured microphone on tech spec was merely an "error", and that the microphone was not meant to be kept secret. Both Asian and U.S. stocks rose after reported stated that the negotiators have begun to outline a deal to end the ongoing trade war. Nike Inc have come under fire on twitter after a star U.S. college basketball player's shoe split mid-game. Despite positive jobs report AUD/USD tumbled 0.9% after report that China's Dalian port banned Australian coal imports to levels not exceeding 12m tons this year. Crude prices rose more than 1% on Wednesday to 2019 high, aided by U.S. sanctions on the Organization of the Petroleum Exporting Countries (OPEC) members Iran and Venezuela. Asian overnight: Asian markets enjoyed a pick-up in bullish sentiment, with today’s resumption of the US-China trade talks helping boost sentiment. The renminbi hit a seven-month high at one point, reflecting this optimism over the potential for a positive outcome. The Australian dollar saw a volatile session, with a positive employment change figure (39.1k from 16.9k) being counteracted by news that Dalian has started turning away Australian coal imports. Elsewhere, the Japanese flash manufacturing PMI number fell sharply, dropping well into contraction territory at 48.5 (from 50.3). UK, US and Europe: Looking ahead, today marks the pinnacle of the week from an economic calendar perspective. The morning sees a focus on the eurozone, with PMI surveys spanning across both services and manufacturing for France, Germany, and finally the eurozone as a whole. UK public sector net borrowing should help the pound play a role, yet the euro is certain to take the main focus. In the US, durable goods, Philly Fed manufacturing survey, manufacturing and services PMI surveys will ensure volumes and volatility is elevated for the dollar. Also keep a close eye on the latest US crude inventories amid a recent bullish breakout for crude. South Africa: Global equity markets are trading flat to marginally firmer this morning as easing US China trade tensions combine with a dovish interpretation of the US Federal Reserve's minutes from the last meeting. Gold trades flat this morning while platinum trades lower and base metals trade mostly higher in early trade. The rand has managed to claw back most of its losses which accrued leading into yesterdays Budget Speech by Tito Mboweni. Gains on our local bourse are being led this morning by Financial and Resource counters, while Industrial counters are the current underperformers of the day. Economic calendar - key events and forecast (times in GMT) 8.15am – 9am – French, German, eurozone services & mfg PMI (February, flash): fears of a eurozone recession are rising, and further weakness in these PMIs would suggest that the eurozone is heading further towards a period of negative growth. Markets to watch: EUR crosses 1.30pm – US durable goods orders (December): forecast to grow 1.8% MoM. Markets to watch: US indices, USD crosses 2.45pm – US services & mfg PMI (February, flash): services to fall to 53 from 54.2 while mfg drops to 53 from 54.9. Markets to watch: US indices, USD crosses 4pm – US EIA crude inventories (w/e 15 Feb): stockpiles rose by 3.6 million barrels in the preceding week. Markets to watch: Brent, WTI Source: Daily FX Economic Calendar Corporate News, Upgrades and Downgrades Barclays reported attributable profit of £3.5 billion for 2018, below forecasts, while it has taken a £150 million provision against Brexit losses. Pre-tax profits were flat on the year, but total income rose to £21.136 billion, and operating costs fell 2% to £13.9 billion. Standard Chartered continues discussions with US authorities relating to sanctions violations, and Q4 results will include a $900 million provision for potential penalties. Purplebricks now believes that revenue for the current financial year will be in the £130-140 million range, from a previous £165-175 million forecast. Slow progress in the US has hit performance, while the Australian division has also seen some headwinds. ElringKlinger upgraded to neutral at Oddo BHF Apetit downgraded to reduce at Inderes Sainsbury downgraded to equal-weight at Barclays BBGI SICAV downgraded to hold at Jefferies Intertek downgraded to hold at Berenber 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.
  26. 1 point
    New headlines to chase: The discourse in markets shifted early this week to where the next upside catalyst would come from. It needn't be substantial; just enough to fuel sentiment and attract buyers back into the market. In the last 24 hours, market participants received what they'd be yearning for: the combination of an in-principle deal in US Congress for border-security funding, along with the announcement that the US-China trade-truce deadline could be extended, has stoked bullish sentiment. These stories are more headlines than substance, however one thing traders ought to have heard ad nauseum recently is that, indeed, this is a headline driven market. So: for the last 12-18 hours in the financial world, markets have shown all the trappings of a renewed risk-on impulse. Short-term bullishness depends on Trump: It can be for some an uncomfortable thought: the key variable for both the US government funding and trade-was issues is the mercurial US President Donald Trump. The US President, it must be said, has outwardly advocated for a resolution to each concern. The worry for markets may be though whether Trump maintains his balanced temperament on the matters, and that there isn't an ulterior motive held by the President on either issue that could subvert the market's positivity. There isn't a clear timeline, other than those which have been imposed upon the President, to arrive at a decision regarding border funding or the trade-truce extension. Traders are taking bullish positions, but while doing so must surely be in a heightened state of vigilance, at least until firm validation for the rally arrives. Global growth concerns deferred: The activity at the margins driving price activity in financial markets overnight speaks of slightly diminished fears relating to the global growth slow down. It has to be said that the weakening growth outlook for the world economy is still hurtling like a freight train towards markets; the news last night simply increased hopes that perhaps there may be some tapping of the brakes when it comes to this phenomenon. Growth sensitive currencies were the major beneficiaries of last night's trade-headlines: the Australian Dollar, for one, is edging back to the 0.7100 handle. The US Dollar took a breather from its recent rally, as global bond yields climbed, and credit spreads narrowed – for the first time in several sessions. The confluence factors naturally gave a boost to stocks. Fear is falling, thanks to a friendlier Fed: Considering the balance of evidence, and the irrational, momentum chasing that pushed Wall Street to all-time highs in September 2018 may not be present right now. Fear is diminishing too: the VIX has fallen into the low 15s as of last night – a level also not seen since September 2018. If one were to infer a crude message from current market behaviour, it might be that maybe the Fed-engineered panic in Q4 2018 has been full remedied now. Of course, it was ultimately the Fed which fed to markets the medicine they were craving – the prospect of higher global rates and tighter financial conditions has evaporated. The strength in fundamentals is indeed waning, but appropriate conditions are in place for traders to take greater risks. US stocks recovery possesses substance: Wall Street is registering its best performance in several days on the back of the risk-on dynamic, though it's worth remarking volume has been below average and doesn't do much to validate the market's strength, just on an intraday basis. Market breadth conversely is portraying a broad willingness to jump into equities, with over 80 per cent of stocks higher for the S&P500 on the session -- at time of writing -- led by cyclical sectors and the high multiple tech stocks. What has been encouraging recently about US equities' recovery in 2019 is the substance behind it: the Russell 2000 (a deeper index made up of relatively smaller-cap stocks) is outperforming, and the SMART Money index suggests a market supported by buying from large institutional investors. ASX to be guided by global growth: As a trickle-down effect, the circumstances are favourable for Australian equities too, especially as our central bank joins the chorus of policymakers backing away from rate-hikes. Given the power of the RBA pales in comparison to that of the Fed, supportive monetary policy is eclipsed by the global growth outlook as the major determinant of the ASX’s direction. It does help in a meaningful way that market participants are receiving soothing words from central bankers, especially as our economy shows signs of slowing, as evidenced by yesterday’ weak home loan figures. The proof of what market participants see as the main risk to the Australian economy is in the price action, however: since the “Trump-trade-war-truce” news overnight, implied probability of an RBA rate cut in 2019 is once again back below 50%. ASX200 demonstrates will to power-on: The overnight lead has SPI futures pricing in a 27-point jump at the open for the ASX200. If realized, the index ought to challenge and likely break in early trade the resistance level at around 6100/05. From here, on a technical basis, the market meets a cluster of resistance, established during the period in September 2018 when the ASX traded range bound for the better part of a month. It’s been repeated frequently by the punditry that the market is overbought at these levels. Technically that appears true. But momentum is still in favour of the bulls, so for those with further upside in their sights, perhaps a break and close above 6100 this week could be the signal for some short-term consolidation, before the ASX200 builds strength for its next move higher. Written by Kyle Rodda - IG Australia
  27. 1 point
    Not with a bang, but with a whimper? Without all the fire and fury that we saw in December, markets are pricing in once again a slow down in global economic growth. It could be strongly argued this is evidence of how important US Fed support is to equity market strength – but that’s a drum to beaten (over-and-over-again) for another day. Fundamentally, traders are quietly re-pricing for a world where economic growth will be weaker than once thought. Such behaviour has been long evident in Chinese markets, so there’s nothing new about pessimism in the Asian region. The point of focus now is in Europe, and to a lesser extent North America, which is increasingly demonstrating signs that market participants believe those economies are briskly approaching a period of (even) lower rates, growth and inflation. The many facets of the global growth story: There’s no shortage of causes for this looming slowdown – and in the financial media, each one is getting a good exercising. The trade-war remains the popular one, which is providing a convenient explanation for the confluence of confusing and complex causes for China’s recent economic malaise. This thread gets pulled-on to describe why Europe is feeling the pinch too, being the geography wedged in the middle of the trade-war’s heavyweight combatants. Throw in a sprinkling of Brexit anxiety and internal political unrest in the continent and that’s the story driving Europe’s economic outlook. The US economy is still humming, and the data coming out of the states is still showing a robust economy. Nevertheless, price action says that’s being somewhat ignored, with yields betraying an underling anxiety about economic health. What the bond market is saying: Essentially, it’s all written in yields at present. A few unwanted milestones were achieved in bond markets on the weekend. The most significant was in German Bunds, which saw the yield on its 10-year fall to 0.08 per cent – its lowest point since 2016 – even though rates markets leaving unchanged the implied probabilities for ECB decision making in 2019. 10 Year Japanese Government Bonds are back below 0 per cent, as markets stay resigned to the fact that the Japanese economy will see no signs of inflation for the foreseeable future. And despite there being an absence of data impetus to cause this – other than a general “risk-off” tone for Friday’s trade – US Treasuries climbed as traders priced in the increased chance the Fed will cut rates this year. The RBA adds its 2 cents worth: The market’s central premise that interest rates will need to fall the world-over manifested just as clearly in domestic trade on Friday. The RBA’s Statement of Monetary Policy, released on Friday morning, delivered to markets the material to price in further downside risks for local rates. Following the central bank’s meeting on Tuesday last week, and RBA Governor Philip Lowe’s influential speech on the Wednesday, it’s perhaps a surprise that anymore dovishness from the RBA could be priced into the forward curve. Lo-and-behold, there was, with the immediate reaction from markets towards the RBA’s SOMP to increase rate-cut bets in 2019 to over 60 per cent, bid higher Australian Commonwealth Government Bonds, and to sell-out of the Australian Dollar – pushing the local unit below the 0.7100 handle, subsequently. The RBA’s take on economic growth: It was another softening of the RBA’s economic growth outlook that spurred the flurry of activity. The SOMP was far from a manifesto of doom-and-gloom. However, what markets have for a while been predicting came clearly in the RBA’s opening lines of the document: “GDP growth slowed unexpectedly in the September quarter… The Bank’s growth forecasts have been revised down in light of recent data, particularly for consumption. GDP growth is expected to be around 3 per cent over this year and 2¾ per cent over 2020.” There was plenty of good news contained within the SOMP, it must be stated, especially as it relates to the outlook for the labour market. Sentiment clung to the growth outlook nevertheless, as traders assessed how a global economic slowdown will manifest down-under. The ASX followed global equities lower: The fall in yields on ACGBs and the Australian Dollar proved once again supportive of the ASX200, but the effect was fleeting. It was a bearish day for the ASX on Friday, no matter which way you spin-it. It was simply one of those days for risk assets, as the bulls took themselves to the sidelines for a breather, at the end of a week which was -balance very good for stocks in Australia. Equity market strength throughout last week was perhaps lacking in other parts of the world: Wall Street finished its week higher by a very slim margin, equity markets in continental Europe shed over 1 per cent across the board, the Nikkei dropped over -2.00 per cent, while a weaker Pound kept the FTSE in the green. Price action for the ASX200: The last traded price in SPI Futures is pointing to a 4-point drop at the open for the ASX200 this morning. The market demonstrated some signs of short-term exhaustion on Friday, after its face-ripping rally earlier in the week, as higher than average volumes propelled the index higher. Resistance at ASX200’s September low at around 6100/05 was dutifully respected as the week’s high. The daily-RSI is still in overbought territory, though not flashing a sell-signal nor a major change in momentum yet. The week’s break of the 200-day EMA is seeing that moving average slowly turn higher, which bodes well for the bulls. In the immediate future: the long-awaited pullback could be upon us here, with the November high at 5950 the next logical support level to watch. Written by Kyle Rodda - IG Australia
  28. 1 point
    Coffee giant Starbucks announced that same-stores sales grew by 4% in its home US market, with overall revenue also beating expectations. Speaking about the results, CEO Kevin Johnson said that "Our streamline efforts over the past six quarters are paying off by allowing us to bring more focus and discipline to our three strategic priorities". Talks are continuing in the US as the Senate tries to reach an agreement to end the government shutdown, which is now in its 34th day. The White house is pushing for "large down payments" for Trump's wall, however the Senate has already rejected two proposals as a deal including wall money "is not a reasonable agreement between senators". CEO of Goldman Sachs, David Solomon, has warned that investment into the UK could take a hit due to a hard Brexit as he told the BBC that Goldman has stopped hiring in the UK over the last two years. Westminster is due to vote on the withdrawal agreement from the EU again next week. Asian equities rose due to a rally in the technology sector, despite the continued uncertainty over US-China trade talks. The Hang Seng increased by 1.3%, followed by a 1% rise in both the MSCI Asia Pacific Index and Japan's Topix. Brent crude futures jumped 1.2% to $61.80 followed by WTI crude which rose by 1.3% to $53.82 per barrel, as the US indicates that they may impose sanctions on Venezuela's oil exports due to the continued political turmoil within the country. Gold remained steady at $1,282.08 per ounce. UK, US and Europe: Airbus issued a warning yesterday over Brexit, the company indicated that they may shift future wing-building out of the Britain if the UK end up in a no-deal scenario. As stated above, Goldman Sachs support the view of Airbus both of whom employ a considerable number of people in the UK, with the aerospace group employing around 14,000 people alone. Despite the doom and gloom the pound is up around 1.8% since Monday, due to investors speculating that the UK will likely avoid a hard Brexit. Despite the doom and gloom the pound is up around 1.8% since Monday US markets continue to flounder, having essentially gone nowhere all week, as trade concerns remain at the forefront of investors' minds. One bright spot was the semiconductor index, which rose 5.7%, enjoying its best day since 26 December. Markets are still unable to establish a clear direction, although the lack of any renewed sell-off similar to what we saw in December is helping to calm nerves. The German IFO index is the one event of note today, with the week otherwise set to end on a quiet note. There seems no end in sight to the US government shutdown, with Monday's scheduled barrage of US data unlikely to take place unless a resolution is found over the weekend. South Africa: We expect a positive start to equity markets this morning as US Index Futures trade firmer, led by the Nasdaq, while Asian markets trade firmer led by the tech sector as well. Comments that US President Donald Trump is optimistic about the current trade negotiations have helped lift sentiment in the near term. However the US secretary of Commerce is less optimistic and has commented that US and China remain far away from reaching a trade deal. The US dollar has since weakened against a broad basket of currencies. In turn we see the rand gaining ground to trade at its best levels of the week. Tencent Holdings is up 3.27% in Asia suggestive of a strong start for major holding company Naspers. BHP Group is up 1.3% higher in Australia suggestive of a positive start for local resource counters. Economic calendar - key events and forecast (times in GMT) Source: Daily FX Economic Calendar 9am – German Ifo business climate index (January): expected to rise to 101.5, from 101. Market to watch: EUR crosses Corporate News, Upgrades and Downgrades Vodafone reported a 6.8% drop in revenue for the final three months of 2018, to €11 billion, but annual underlying organic adjusted earnings growth is still expected to be around 3%. AG Barr said that it expected full-year revenue to be up 5% over the year, thanks to strong performance across all brands. Indivior said that a US court had granted a temporary restraining order to prevent rival Alvogen from launching copycat drugs for its opioid addiction treatments. Deutsche Boerse Upgraded to Hold at Bankhaus Lampe Iberdrola Upgraded to Buy at HSBC NCC Upgraded to Buy at Citi AstraZeneca Upgraded to Buy at Shore Capita Swiss Life Downgraded to Neutral at MainFirst Intu Downgraded to Sell at Goldman Adecco Downgraded to Reduce at Oddo Fevertree Drinks Cut to Hold at Jefferie 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.
  29. 1 point
    The pull-back is here: The pull-back markets were waiting for – the one we inevitably had to have – has arrived. It’s risk-off across financial markets and the optimism that drove global stocks off their December lows has subsided. Relatively speaking, it’s been a day of significant downside, but nothing yet to warrant tremendous fear. It should be common knowledge, but it bears repeating: proper validation that global equities have truly established a recovery ought to be judged not by the latest high, but by where markets form their next low. The retracement which is apparently upon market participants now hands a golden opportunity to judge this market for what it truly is – have the bulls reclaimed their dominance, or have the bears lulled them into a trap, and now stand poised to assert further downside? The market’s rationale: A greater look at this subject and Wall Street’s price action later. In relation to the overnight sell-off, the rationale was as feeble as the one that got stocks to their recent peaks in the first place. It’s been chalked up to reduced positivity towards the trade-war, and renewed concerns about global growth. To begin with, very little data throughout the past week has provided a clear and substantial picture on economic growth. The boost in sentiment has come from geopolitical or monetary policy developments that was assumed to be supportive of the growth outlook – at some point in the future. Some nice-noises made between the US and China in trade negotiations here, and a few dovish comments from a handful of US Fed speaker there, is what ignited the latest part of the risk-on rally. Awaiting confirmation: Hence, it was naturally the inverse of this situation that’s prompted the leg lower in global stocks. US Fed speakers have quietened down as markets prepare for the central bank’s next meeting at the end of the month. And a story-or-three about storm clouds looming on the horizon for the global economy has quashed the naïve hope that incremental improvements in the trade-war will lead to a renewal of the global growth story. Now, bullishness may yet return to markets, and quite soon at that: US reporting season hands the opportunity to be able to assess meatier, fundamental data, rather than shallow headlines. The issue now may prove the uncertainty in the lead-up to such information: we are a fortnight away from getting a complete picture on US corporate earnings. The overnight headlines: Sifting through the stories that mattered to markets in the last 24 hours, and one can understand why bullish sentiment has reached a lull. The downgrading by the IMF of its global growth forecasts established the context, but it was fresh fears of a major Chinese economic slowdown that really got traders edgy. They were piqued first by news that the US is sticking with its pursuit to have Huawei’s CFO extradited to the US; and then exacerbated by a speech delivered by Chinese President Xi Jinping about the deteriorating state of his country’s economy. The latter was especially unsettling: President Xi warned of potential social instability if China failed to regain control of its economy and deliver the growth required to keep satisfied the nation’s people. Brexit and UK data: Not that it registered as highly on trader’s macro-agenda last night, but the UK economy did share in the focus. Of course, the Brexit drama continues to unfold: Opposition leader Jeremy Corbyn made his play in the House, tabling a series of votes designed to avoid a no-deal Brexit. The news ought to be friendly to markets, and perhaps the Bremainer cause, but it didn’t do much to move UK markets. What did however, was the release of UK labour market figures overnight, which showed an increase in wages and a fall in the unemployment rate. The data, in the face of Brexit-uncertainty, pushed the Cable toward the 1.2980 mark, and lifted the implied probability that the Bank of England would lift interest rates at some point in 2019. A risk-off day: Looking forward to the day ahead and the economic calendar is fuller, but little jumps out as possessing the weight to turn the tide in sentiment. The Bank of Japan meet this afternoon, New Zealand’s CPI numbers are released this morning, and stories from the World Economic Forum in Davos will filter through throughout the day. Safe-havens will maintain their bid, one assumes: equities are being sold-off, the JPY is higher, gold has climbed, oil is retracing, and US Treasuries have rallied 4-to-5 basis points across the curve. The Australian Dollar, as its wont to do in these situations, has dipped, and looking as though its latest run higher is done-with. The local unit is presently just above 0.7100, as it eyes support at 0.7040. ASX test ahead: SPI Futures are suggesting a 31-point fall for the ASX200 at time of writing, in sympathy with Wall Street's sell-off. The ASX200 closed the day 0.5% lower yesterday, at 5858, led by a noteworthy enough tumble in the bank stocks. The short-term uptrend has now been broken, with support at 5800, 5700 then 5630 now in view. The RSI confirms a meaningful slowdown in momentum for the market, however unlike US markets, volume is well below the 100-day average still. The daily chart has established an apparent reversal pattern now and indicates a new high has been made. Just like its global counterparts, the market's essential strength will be tested, with the capacity to form another higher-low crucial to confirming a true bullish trend in the market. Written by Kyle Rodda - IG Australia
  30. 1 point
    Theresa May's government holds onto power, winning a no-confidence vote in parliament last night by 325 votes to 306. The Prime Minister has now set out to reach a cross-party solution for Brexit, although this will be extremely difficult as the PM was snubbed by the leader of the opposition last night saying that she is in charge of a "zombie government". Sterling remained steady as the currency traded around the 1.2875 mark against the dollar after, as expected, Mrs May's government won the vote of no-confidence. US equities closed higher on Wednesday after strong quarterly earnings by Bank of America and Goldman. The S&P 500 rose by 0.2% whilst the Dow increased by 140 points, both driven by the financial sector. The Nasdaq followed and increased by 0.15%. Stock markets in Asia were mixed as concerns continue over rising tensions between the US and China. Japan's Topix gained 0.4% at the close, followed by the MSCI Asia Pacific Index which added 0.1%. On the other side of this, the Shanghai Composite and the Hang Seng both slid by 0.1%. Oil slipped 0.5% down to near $52 per barrel as the US reach record output levels, counter-acting the signs of shrinking supply by OPEC+. Gold traded slightly lower at $1,291.65 per ounce. UK, US and Europe: Calls from the opposition and some leading Brexiteers for the Prime Minister to resign seems to have fallen on deaf ears. Last night, Theresa May's government survived a vote of no confidence tabled by Jeremy Corbyn, winning the vote by 325 to 306. It's unclear what is going to happen next in these extraordinary circumstances. Mrs May will seek further concessions from the EU in an attempt to get her 'Plan B' deal through the House of Commons, which the PM must layout to parliament next week. Looking ahead, earnings season continues with Netflix, Morgan Stanley and Taiwan Semiconductor posting results later today. It's unclear what is going to happen next in these extraordinary circumstances... South Africa: Last night saw US markets trading in positive territory led by gains within the banking sector after The Bank Of America reported better than expected earnings. Asian markets and US Index futures are however trading lower this morning tempering the previous days gains somewhat. Last night saw British Prime Minister Theresa May surviving a vote of no confidence in parliament, helping restore some stability in the British Pound. Oil and precious metal prices are trading modestly lower this morning, while base metals are trading positive on the day. Tencent Holdings is up 0.8% in Australia, suggestive of a similar start for major holding company Naspers. BHP Billiton is down 0.2% in Australia suggestive of a slightly weaker start for locally listed diversified resource counters. The South African Reserve Bank (SARB) concludes its monetary policy meeting today where no change in lending rates is the expected outcome. Economic calendar - key events and forecast (times in GMT) Source: Daily FX Economic Calendar Corporate News, Upgrades and Downgrades Primark announce this morning that like-for-like sales fell in the 16 weeks to the 5th of January caused by reduced footfall during November, according to the retailer. Fiserv is set to acquire payment processor First Data in a deal worth $22 billion in one of the largest deals we have seen in the financial technology industry. Bank of America shares soared by 7% yesterday after quarterly profit reached a record level of $7.3 billion. Goldman Sachs also beat expectations yesterday as earnings per share reached $6.05, beating estimates of $4.53, and posting revenue of $8.08 billion for the quarter. In a statement, CEO David Solomon said "We are pleased with our performance for the year, achieving strong top and bottom line results despite a challenging backdrop for our market-making businesses in the second half". Asset manager firm BlackRock profits fell short of expectations as the company's assets under management has fallen 5% over the last 12 months down to $5.98 trillion. 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.
  31. 1 point
    Asian stocks fell as China's export data indicated a shock contraction, declining by 7.6% since July 2016. This points to deepening cracks in the world's second largest economy and increased fears of a significant slowdown in global growth and businesses. The CSI 300 was down 0.8%, falling from a 3 week high reached on Friday. The Hang Seng slipped 1.4% as both the financial and technology sectors took a hit. US equities ended Friday with marginal losses, however the S&P 500 maintained a weekly gain of 2.5%. The US Dollar Index was 0.1% lower after reaching a 3 month low last week, whilst the safe-haven Yen was 0.4% stronger at 108.09 to the dollar. The Australian dollar, sometimes viewed as a proxy for China's economic outlook, was down 0.4%. Oil prices also took a hit following disappointing China trade figures - one of the largest global importers of oil. Both Brent Crude and WTI was down 1.1%, at $59.83 and $51.03 a barrel respectively. Gold edged 0.3% higher to reach $1,290. With tomorrow’s UK parliamentary Brexit vote looming large, there is also likely to be some positioning ahead of that momentous occasion. Asian overnight: A bearish overnight session saw losses across China, Hong Kong and Australia, while the Japanese markets were closed to observe a bank holiday. Today is all about the Chinese trade data, with both imports and exports deteriorating sharply in December. However, with imports falling -7.6%, while exports hit -4.4%, the overall balance actually shifted further into surplus despite the disappointing figures. Interestingly, despite the imposition of tariffs on Chinese goods, the Chinese surplus has grown significantly, hitting the highest level since records began in 2006. UK, US and Europe: Theresa May is set to warn Eurosceptic MPs today that Brexit could be blocked by parliament if they fail to give their backing in tomorrow's historic "meaningful vote" on the withdrawal agreement. The agreement is strongly opposed by certain Conservative MPs due to the plan for a backstop to avoid a hard Irish border that involves the UK being in a customs union with the EU. Looking ahead, keep an eye out for eurozone industrial production in the morning, with precious few notable releases other than that. With tomorrow’s UK parliamentary Brexit vote looming large, there is also likely to be some positioning ahead of that momentous occasion. South Africa: Global markets are trading mostly weaker this morning with US Index futures down 0.81% and the Shanghai Composite down 0.78% today so far. Markets are trading cautiously ahead of US bank earnings releases this week as well as the all important parlimentary Brexit vote on Wednesday. Gold is trading 0.4% higher this morning while brent crude is 1.1% lower today. The rand has managed to maintain some short term strength having stabilised below the R14/$ mark. Tencent Holdings is down 2.9% in Asia, suggestive of a similar star for major holding company Naspers. BHP Billiton is down 0.25% in Australia, suggestive of a flat to softer start for local diversified resource counters. Economic calendar - key events and forecast (times in GMT) Source: Daily FX Economic Calendar 1.30pm – US trade balance (November): deficit to narrow to $54 billion. Market to watch: USD crosses 3pm – US new home sales (November): forecast to rise 2.9% MoM from an 8.9% fall a month earlier. Markets to watch: US indices, USD crosses Corporate News, Upgrades and Downgrades PageGroup expects annual performance to be in line with forecasts, as gross profit for the final three months of the year rose 15.4%, allowing gross profit for the full-year to rise 15.9% to £815 million. Restore said that it forecasts annual results to be in line with expectations, as strong trading in the records management division offsets weakness in the shredding unit. JD Sports expects profits to be at the upper end of forecasts, as weak growth in the UK is offset by a better performance by its international division. Like-for-like sales rose 5% for the cumulative 48 week period to 5 January. Michelmersh Brick said that it expects annual underlying revenue and profit to meet market expectations. Year-end debt will also be below forecasts due to strong cash generation. Brooks Macdonald upgraded to buy at Shore Capital Safilo upgraded to neutral at Mediobanca SpA Engie upgraded to buy at Berenberg Mowi upgraded to buy at Fearnley 3i Infra downgraded to hold at Jefferies Countryside cut to underweight at JPMorgan Heineken cut to underweight at Morgan Stanley Next downgraded to underperform at Credit Suisse 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.
  32. 1 point
    Expected index adjustments Please see the expected dividend adjustment figures for a number of our major indices for the week commencing 07 Jan 2019. 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 UKX BHP LN 10.01.19 Special Div 1.02 UKX IHG LN 14.01.19 Special Div 2.621 AS51 BHP AU 10.01.19 Special Div 145.7143 TOP40 BHP SJ 09.01.19 Special Div 102 RTY GBCI US 07.01.19 Special Div 30 RTY ETH US 09.01.19 Special Div 100 RTY BKE US 10.01.19 Special Div 100 RTY AJX US 14.01.19 Special Div 5 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.
  33. 1 point
    Written by Kyle Rodda - IG Australia A pull-back amid interesting activity: Markets received their slingshot higher and continue to swing about in both directions. That’s the key takeaway from last night’s trade; of course, that’s all too general, though – akin to explaining a rally in the market to their being more buyers-than-sellers. Yes, it’s self-evidently true, however it does little to answer the question of “why?”. Overall, market activity in the last 24-hours has provided a much greater and more nuance picture than what we got from the one-way rally in US markets on Boxing Day. There are now burgeoning answers to some of the questions traders have been asking; like any complex phenomenon though, the answers only lead to more questions. As a trader, this is daunting, but reason for excitement: risk is everywhere, so volatility is higher – but opportunities abound. The real versus paper economy: It could be a far too grand a notion: the push and pull in financial markets at present is being driven by confusion regarding the current relationship between the “paper (or financial) economy”, and the “real economy”. The fact that such a distinction exists feels absurd. Shouldn’t proper functioning financial markets be the vessel to allocate capital efficiently throughout a (“real”) economy? In principle, that ought to be so. In this world, that axiom seems far from true. The battle being waged within markets at present – and this unfolded in a significant way overnight – is between economic policy makers (a la the US Federal Reserve) on one hand, and financial market participants on the other: the former says things are alright, while the latter is indicating everywhere that things are not okay. End of the cycle? It’s an obscure and distorted world, when it comes to the global economy and how it interacts with financial markets. It’s not necessarily the prevailing view, nor is it absolutely the truth, but times like these when there is such utter confusion in the financial world, it lends itself to the idea that markets have become dislocated from the economies they supposedly serve. Financial cycles (the concept goes) aren’t being driven by economic fundamentals. Instead, they are fuelled via credit cycles that drag real economic growth along with asset bubbles. (Ray Dalio recently discussed the matter in an article certainly worth “Googling”). In such a world, economic relations don’t dictate financial market behaviour, but the other way around – and, unfortunately, as an aside: to the benefit of a very few. The Fed’s part to play: Who to blame for that? It’s systemic, and structural and probably founded on some false-ideology. One big part of this system of thought however goes back to this “paper economy” and “real economy” binary. Analysing the rise of the term “real economy” and its usage over time, a spike in the phrase occurred around the early-1980s, around about the time the neo-liberal revolution and subsequent global financialization process began. Since then, policy makers (again, a la the US Federal Reserve) have rationalized away the emergence of massive, credit fuelled asset bubbles, seemingly exacerbating the already unstable underpinnings of the boom-and-bust cycle. That is: the booms and busts have become bigger as the response to each necessitates even more aggressive policy (i.e. monetary policy intervention) to keep the process going. Risk-off, anti-growth: This is all very abstract, to be sure. However, it is relevant in the context of last night and today’s trade because of the price action we’ve been handed. First-off, of course, the sell-off on Wall Street continued after the day prior’s historic rally. In saying this, the major Wall Street indices have rallied into the close, on lifted volumes, to add weight to the notion US equities have met their bottom. The real fascination ought to be directed to what has again happened in interest rate and bond markets overnight. Rates and yields have tumbled once more: interest rate traders have reduced their expectations of hikes from the US Fed to a measly 5 points in 2019 (at time of writing), while the yield on the US 2 and 10 Year notes has fallen by 4 basis points each. Soft US data: It reeks of the trouble markets find themselves in. The pull back in stocks had been on the cards all day, with US futures pricing that in throughout mixed Asian and European trade. The major driver of sentiment overnight though was the US consumer confidence print, which revealed consumer sentiment plunged last month. It piques concerns that the engine of the US economy – the almighty consumer – is sensing tough times ahead. Forget that the labour market is strong, and consumption has been hitherto solid, the everyday US punter thinks next year will provide them with less than what they have received in the recent past. It’s given the perma-bears the vindication they sought, who’ve once again wagged their finger at the Fed for being so naïve as to think the US economy could prosper without accommodative monetary policy. Australia macro and day ahead: Fortunately for Australian markets, we’ve not been forced to deal with such a struggle between markets and policy makers. We’ve yet to resort to extreme monetary policy measures to support our economy, and we’ve a simpler economic structure: at its core, if global (read: Chinese) growth prospers, so do we. There are risks there that may mean our economy will face headwinds in 2019, mostly in the form of the trade war. Tighter financial conditions will filter through to our markets, as well. Given the weightiness of the banks and miners in the ASX200, these variables pose reasonable downside risk for our market next year. So: today will be risk-off, in line with the lead passed to us from bearish traders in Europe and North America. Hence, SPI futures are indicating a 73-point drop at the open for the ASX200, on the back of a volume-light, but broad-based 1.88 per cent rally on the index yesterday. The market closed just below the significant 5600 level during yesterday’s trade – above which a cluster of resistance levels exists up towards 5630. The anti-risk, anti-growth feel to overnight trade has also harmed the Australian Dollar, which despite a sell-off in the USD, is testing support at around 0.7020, and eyes a break below the key psychological barrier at 0.7000.
  34. 1 point
    Written by Kyle Rodda - IG Australia 2018 reaches a climax this week: It’s effectively the last serious trading week of the year, and the economic calendar reflects that. Indeed, there’ll be a handful of days between Christmas and New Years to keep across, but with little news and thin trade, it’s tough to imagine anything coming out of them. The markets are still ailing, with the bears firmly in control of price action. There’s so many risk-events coming up this week, traders with a bearish bias are surely salivating. They did well to knock-off US equities in the final round of last week: the S&P500’s 1.9 per cent loss on Friday ensured another down-week for Wall Street. How this year is remembered and how next year will begin will in no small way be revealed in the next 5 days: if you’re a financial markets buff, it’s exciting stuff. Economic data: Concerns about future global economic growth tightened its grip on market participants last week. A slew of fundamental data was released across numerous geographies on Friday, and most of it was quite underwhelming. European PMIs undershot expectations, probably attributable in a big way to the impact of being caught in the middle of several domestic political crises and the US-China trade war. US Retail Sales data printed very slightly above expectations, to the relief of many, showing that the almighty US consumer is holding up well – at least for the time being. But it was a very soft set of Chinese numbers that had the pessimists tattling: the spate of economic indicators released out of China on Friday afternoon proved once more it’s an economy that is slowing down – and hardly in a negligible way. Recession chatter: Market commentary is continually focused on what prospect exists of a looming US recession. Financial markets, as distorted as they have become, do not necessarily possess strong predictive power of economic slow-downs. Nevertheless, your pundits and punters have taken a significant preoccupation with whether 2019 will contain a global recession. The signs are there, at least in some intuitive way. A google trends search on the term recession has spiked to its highest point 5 years, for one. Bond markets are still flashing amber signals: the yield curve is inverting, and US break evens are predicting lower inflation. Equities are still moving into correction mode, demonstrating early signs of a possible bear market. Credit spreads are trending wider, especially in junk bonds, as traders fret about the US corporate debt load. And commodities prices are falling overall, with even oil still suffering, on the belief that we are entering a period of lower global demand. Economic data: Concerns about future global economic growth tightened its grip on market participants last week. A slew of fundamental data was released across numerous geographies on Friday, and most of it was quite underwhelming. European PMIs undershot expectations, probably attributable in a big way to the impact of being caught in the middle of several domestic political crises and the US-China trade war. US Retail Sales data printed very slightly above expectations, to the relief of many, showing that the almighty US consumer is holding up well – at least for the time being. But it was a very soft set of Chinese numbers that had the pessimists tattling: the spate of economic indicators released out of China on Friday afternoon proved once more it’s an economy that is slowing down – and hardly in a negligible way. Recession chatter: Market commentary is continually focused on what prospect exists of a looming US recession. Financial markets, as distorted as they have become, do not necessarily possess strong predictive power of economic slow-downs. Nevertheless, your pundits and punters have taken a significant preoccupation with whether 2019 will contain a global recession. The signs are there, at least in some intuitive way. A google trends search on the term recession has spiked to its highest point 5 years, for one. Bond markets are still flashing amber signals: the yield curve is inverting, and US break evens are predicting lower inflation. Equities are still moving into correction mode, demonstrating early signs of a possible bear market. Credit spreads are trending wider, especially in junk bonds, as traders fret about the US corporate debt load. And commodities prices are falling overall, with even oil still suffering, on the belief that we are entering a period of lower global demand. ASX in the day ahead: There are signs a general risk aversion is clouding the ASX to begin the week. SPI futures are pricing a 32-point drop for the Australian market this morning, which if realized will take ASX200 index through last Tuesday’s closing price at 5576. There has been the tendency for the market to overshoot what’s been implied on the futures contract of late, as fear and volatility galvanizes the sellers in the market. This being so, a new test of last week’s low of 5549 could emerge today, opening-up the possibility for the market to register a fresh two-year low. On balance, the day ahead looks as though it may belong to the bears, with perhaps the best way to judge the session’s trade by assessing the conviction behind the selling. Although it appears the less likely outcome, a bounce today and hold above 5600 would signify demonstrable resilience in the market.
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