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Showing content with the highest reputation since 15/06/18 in Blog Entries

  1. 5 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. 4 points
    This blog post is to update everyone of the themes that DailyFX expects to focus on in the week ahead. Given the focus of previous weeks, the backdrop market conditions and the event risk ahead; the three topics below will be particularly important in our coverage. Risk trends amid trade wars If you somehow were in doubt that trade wars were already underway, the enactment of reciprocal $34 billion tariffs by the United States and China on each other this past week should banish that disbelief. For much of the world, the score is one whereby the US has triggered an opening import tax on the world’s second largest economy for what it perceives as intellectual property theft, and China has retaliated in kind. From the Trump administration’s perspective, the actions are a long overdue move to balance decades of unfair trade practices. Both feel they are reacting rather than instigating which gives both sides a sense of righteousness that can sustain escalating reprisals. Yet, as discussed previously, this is not the first move in the economic engagement. The United States’ metals tariffs was the first outright move that came without the pretense of operating through WTO channels. And, in a speculative market where the future is factored into current market price; the unilateral and extraordinary threats should be considered the actual start. The anticipation of a curb on global growth and capital flow very likely was a contributing factor to the stalled speculative reach and increased volatility over the past three months. Yet, markets have not collapsed under the fear of an economic stall with values pushing unreasonable heights. Perhaps this market simply needs to see the actual evidence of fallout before it starts moving to protect itself. This past week, the midnight cue for the tariffs notably didn’t send capital markets stumbling. In fact, the major US indices all advanced through Friday’s session. Blissful ignorance can last for ‘a little longer’, but blatant disregard for overt risks on a further reach for yield is hoping for too much. A Brexit breakthrough…to the next obstacle Heading into a full cabinet meeting this past Friday, headlines leveraged serious worries that UK Prime Minister Theresa May would find herself moving further into a corner on a split Brexit view from which she would no longer be able to escape a confidence vote checkmate. Yet, the reported rebel ministers that were pushing for a more stringent position on trade and market access in the divorce procedures seemingly relented. May was free to pursue a ‘free trade area for goods’ with close customs ties (though bank access would be restricted somewhat). From the market’s perspective, this is a tangible improvement in the general situation as it removes at least one level of ambiguity in a very complicated web. The foundation of ‘risk’ – as I’m fond to reiterate – is the uncertainty of future returns. If your investment is 95% likely to yield a given return, there is little risk involved. On the other hand, if that return is only 10% (regardless of how large it may be) there is a high risk associated. The same evaluation of this amorphous event applies. With the UK government on the same page in its return to the negotiation table, there is measurably less uncertainty. That said, this was only an agreement from one side of the discussion; and the EU has little incentive to give particularly favorable terms which would encourage other members to start their own withdrawal procedures. Furthermore, there is still a considerable range of issues for which the government and parliament are still at odds. If you are interested in the Pound, consider what is feasible for any bullish exposure with the cloud cover of uncertainty edging down from 100% to 90%. Fed monetary policy can only disappoint from here We don’t have a FOMC meeting scheduled for this coming week; but in some ways, what is on the docket may have greater sway over monetary policy speculation. The US central bank has maintained a policy of extreme transparency, going so far as to nourish speculation for rate hikes through their own forecasts and falling just short of pre-committing. They cannot pre-commit to a definitive path for policy because they must maintain the ability to respond to sudden changes in the economic and financial backdrop. And, making a sudden change from a vowed move will trigger the exact volatility the policy authority is committed to avoiding. Yet, how significant is the difference between an explicit vow on future monetary policy and a very heavy allusion in an effort at ‘transparency’. The markets adapt to the availability of evidence for our course and fill in with whatever gaps there are with speculation. This level of openness by the Fed sets a dangerous level of certainty in the markets. With that said, what is the course that we could feasibly take from here? Is it probable that the rate forecast continues to rise from here – further broadening the gap between the Fed and other central banks? That is what is likely necessary to earn the Dollar or US equities greater relative value given its current favorable standing isn’t earning further gains. More likely, the outlook for the Fed will cool whether that be due to the US closing in on its perceived neutral rate, economic conditions cooling amid trade wars or the increasing volatility of the financial markets jeopardizing onerous yields. Where the Dollar may have underperformed given the Fed’s policy drive in 2017, it still carries a premium which can deflate as their outlook fades. This puts the upcoming June US CPI reading and the Fed’s monetary policy update for Congress in a different light. All of this said, this is not the only fundamental theme at play when it comes to the Dollar. There is trade wars, reserve diversification and general risk trends. Interestingly enough, all of those carry the same skew when it comes to the potential for impact. Any questions, just ask. John Kicklighter
  3. 2 points
    I just wanted to update all Community members to let them know that we have recently reduced the minimum bet sizes on some key indices, commodities, and FX markets. This has been done for both UK spread betting accounts and European CFD accounts. What are the minimum bet sizes for indices, commodities and FX on IG? Correct as of 6th September 2018 but subject to change Continued feedback A key aim of Community is to keep a two way dialogue open between our client base and those on our trading services support team, core dealing and developer teams. The decision to reduce minimum bet sizes across these markets has in part been due to feedback received from a number of our clients and those on Community. A big thank you to those who have shared their thoughts on this over the last few weeks. Please feel free to continue to add feedback and suggestions on Community at any point. If you have any feedback on this specific change please feel free to add it below. All the best IG Community moderator team
  4. 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.
  5. 2 points
    Hong Kong’s Hang Seng index pulled back last night with gambling shares having a bad time after falling revenues in Macau's casino region. US-Sino tensions rise as a US ship enters Chinese territory. Stay on top of currency markets as trade war tensions rise with #IGForexChat. The financial and healthcare sectors pushed the ASX lower whilst China remained closed for another public holiday. Bank of Australia holds cash rate at 1.5%. Japan’s Nikkei was the lone star in the Asian overnight session with a positive reading. USD/JPY climbs to 11 month high as speculators increase their short position on the yen. Euro looks to rebound following the Italian budget movement. Analysts suggest it may return to its previous trend, albeit a bearish one. Continued speculation for the conservative conference today with Theresa May expected to announce some concessions in her Brexit deal. Boris Johnson to speak later today. Yesterday saw a volatility spike in GBP/USD which we could see again today on the right type of news. Aston Martin has cut its maximum share price for its IPO from £22.50 down to £20 flat. The valuation toward the higher end of this downgrade should see the car manufacturer still slip into the FTSE 100 at £5bn, with the lowest constituent currently £4.7 in the existing index. Niche demand for high end luxury manufacturing by fund managers was the culprit. Expectations are still there for an IPO this week. Asian overnight: Japanese markets remained the one area of strength yet again overnight, as the ASX 200 and Hang Seng traded in the red once more. China remains on holiday and will be so for the rest of the week. The big overnight data point came in the form of the RBA rate decision, with the bank retaining rates at 1.5% as expected. The bank continues to see issues in the form of low household income growth, risks to consumption, and inflationary pressure from rising oil prices, pointing towards continued low rates for some time yet. LNG could be an interesting market to follow over winter... As public sentiment on pollution changes in China many are speculating on a repeat of last years movements in the liquefied natural gas market going into the colder months. Last year LNG imports were nearly 50% higher than the previous year. The key uncertainties for the market will be weather conditions (the colder the better for bullish traders), and whether or not the Chinese government has managed to maintain and hold onto its inventories and reserves (in which case the lower the better). LNG could be an interesting market to follow over winter as public sentiment on pollution hasn’t changed much from 12 months previous, and strong demand in Europe continues to buoy the price. You can blame that on an increase in carbon emission credit cost (boosting demand for cleaner fuels) and a colder start to the year. UK, US and Europe: Looking ahead, the UK construction PMI provides the centre point of European trade, with markets likely to continue looking towards any statements or rumours around Brexit for further GBP volatility. Keep an eye out for appearances from Fed member Quarles and Powell in the afternoon. South Africa: Equity markets are under pressure once again this morning, led by declines in European Futures. Markets are drawing concern from Italy's budget proposal, which the EU have said could invoke a Greek styled financial crisis. US Futures are trading mixed. In turn, we expect the Jse AllShare index to open up marginally lower this morning. Metal prices are trading slightly firmer this morning while oil prices continue to post significant gains in the wake of looming Iran sanctions and OPEC's suggested capacity constraints. Tencent Holdings is down 2.2% in Asia, suggestive of a weaker start for major holding company Naspers. BHP Billiton is trading 0.25% higher in Australia, suggestive of a marginally positive start for local diversified resource counters. Economic calendar - key events and forecast (times in BST) Source: Daily FX Economic Calendar 9.30am – UK construction PMI (September): expected to rise to 55 from 52.9. Market to watch: GBP crosses Corporate News, Upgrades and Downgrades Ferguson reported pre-tax profit for the year rose 16.6% to $1.19 billion, while revenue was up 7.6% to $20.75 billion. The dividend was raised by 21% to 189.3 cents per share. Ryanair said that volume rose 11% in September, though strike action caused the cancellation of 400 flights in the month. Revolution Bars said that pre-tax losses were £3.6 million, from a profit of £5.2 million a year earlier. Datatec has released a trading statement for 1H19 guiding that headline earnings per share is expected to be between 0.5 and 1 US cents (1H18 Reported: loss per share of 5.8 US cents). Group Five Ltd FY18 results showed a loss per share of 1334c which compares with a loss per share of 829c in the previous year. Credit Agricole raised to overweight at Morgan Stanley Metso upgraded to overweight at JPMorgan Atlas Mara downgraded to hold at Renaissance Capital Danske Bank cut to equal-weight at Morgan Stanley Royal Mail downgraded to underweight at JPMorgan Learning Technologies Group downgraded to add at Peel Hunt 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.
  6. 2 points
    MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.3 percent, while Japan's Nikkei dropped 0.5. Global bond sell-off triggers the biggest decline in US equities in nearly four months. As 10-year treasury yields surge to the highest level since 2011, fears that current rates could restrain growth has hit stocks across the US, Europe and Asia. FTSE 100 posting its biggest drop since August yesterday. The Dow Jones drops more than 250 points as treasury yield rates surge, while the S&P 500 lost 0.82 percent and the Nasdaq Composite dropped 1.81 percent. In EM the Indian rupee has strengthened going into the RBI interest rate decision. After significant devaluation of the Turkish lira recently, it looks like the re-balancing of its economy is under way as the trade ministry report an increase in exports. This has been faster and stronger than expected. US non-farm payroll release today. US Labour department forecasts an increase of 185,000 in non-farm payrolls last month and the unemployment rate is expected to fall by 0.1% to 3.8% - an 18 year low. Asian overnight: Once again it is the Australian ASX 200 which provides the one outlier to a wider bearish story within Asia, where China remains the notable absence for the duration of the week. Data-wise, the Australian economy received a boost in the form of a stronger retail sales number, coming in at 0.3% as expected. Emerging market currencies have been under pressure this week, and the Indian Rupee is in focus today, the RBI expected to raise rates later in the morning. As always any USD cross will likely experience significant volatility around NFP UK, US and Europe: The US Treasury yield is making headlines and often seen as a ‘safe haven’ or risk free investment over periods of potential uncertainty. A rising curve is generally seen as negative across other asset types. Wall Street also took a hit as FANG stock drew blood as investors and speculators begin to price in a potential acceleration in inflation. Continued positives in jobless claims and factory orders out yesterday all painted a good picture for the US economy, nicely lining up the non farm payrolls figure due at 1.30pm BST. As always any USD cross will likely experience significant volatility around this time, along with most assets quoted in USD. Bond markets, oil, and inelastic soft commodities may also see fallout. A relatively quiet European session today sees very little in the way of major market moving events, where the German factory orders has already been released before the bell (up to 2% vs 0.7% expected). Following yesterday’s relative lull in data, today sees all eyes turn towards the US once more, with the jobs report due out alongside the Canadian version. The rise in yields off the back of strong US data on Wednesday is likely to come back into play for traders. Those following this trade should keep an eye on the jobs numbers, as a similar outperformance is expected to bring another surge. Meanwhile, coming off the back of the US-Canada trade deal, the Canadian dollar could receive another boost with markets expecting an improved employment change and unemployment rate today. Economic calendar - key events and forecast (times in BST) Source: Daily FX Economic Calendar 1.30pm – US non-farm payrolls (September), balance of trade (August): forecast to see 185K jobs created from a reading of 201K a month earlier. The unemployment rate is expected to fall to 3.8% from 3.9%, while average hourly earnings rise 0.2% MoM from 0.4%. Trade deficit to narrow to $50 billion from $50.1 billion. Markets to watch: US indices, USD crosses 1.30pm – Canada employment (September): 11,400 jobs expected from a drop of 51,600 a month earlier. Market to watch: CAD crosses Corporate News, Upgrades and Downgrades Lenovo shares drop 20% following report over alleged Chinese spy chips. Unilever withdraws proposal to simplify dual structure. Danske Bank confirmed yesterday that the US DoJ is investigating potential money laundering activity and that they’re received a ‘request for information’. Danish regulators have said they want the bank to increase their capital reserves, whilst Danske themselves recently confirmed they’re going to stop a share buy back program. Shares are down nearly 40% from the beginning of the year. Intu Properties faces a takeover by its largest investor, Peel Group, in a multi-billion pound deal. Toyota recalling over 2.4 million hybrid vehicles over battery faults. Centamin has lowered gold production guidance for the year, with output now expected to be around 480,000 ounces, below the 505-515K oz. However, Q3 production was up 27%. Intertek Upgraded to Buy at Berenberg Eutelsat Upgraded to Buy at Goldman Proximus Upgraded to Overweight at JPMorgan Helvetia Downgraded to Hold at Baader Helvea Antofagasta Downgraded to Sell at Goldman 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.
  7. 2 points
    China trade war escalates as new tariffs kick in: U.S. economy set to slow from here on, damaged by trade war EM ASIA FX soften as dollar recovers after falling for six straight sessions Wall Street sets record for longest bull run in history; Key S&P 500 index passes landmark as it goes 3,453 days without major correction Brexit contingency plan papers released; Brexit could be good news for Britain's farmers Australian dollar drops as three government ministers quit Crude oil sees it's largest gains in two months on varying signs of ebbing supply Asian overnight: Another indecisive session overnight has seen weakness in Hong Kong and Australian stocks counteract the already unimpressive gains seen in Japan and China. The Australian dollar came under pressure after three main cabinet members resigned to switch allegiance to Peter Dutton, who aims to become the next Liberal leader and ultimately the next Prime Minister. The dollar also strengthened overnight following an optimistic outlook from the Fed, with yesterday’s minutes pointing towards a rate hike at the next meeting despite concerns over trade tensions. Trade talks in China continue into their second day today, yet with neither side likely to cede much ground, it seems likely we will see a positive resolution. UK, US and Europe: A very busy economic calendar sees the day kick off with a host of eurozone PMI readings from the likes of the French, German, and eurozone services and manufacturing sectors. This does carry into the afternoon, with the US manufacturing and services PMI surveys due for release. Also keep an eye out for the eurozone minutes, alongside consumer confidence data, which will both bring expectations of heightened volatility for the euro. Economic calendar - key events and forecast (times in BST) Source: Daily FX Economic Calendar 8am – 9am – French, German, eurozone mfg & services PMI (August, flash): German mfg PMI to fall to 55.5 from 56.9, while eurozone mfg PMI to fall to 54.6 from 55.1. Markets to watch: eurozone indices, EUR crosses 12.30pm – ECB meeting minutes: these could provide some support to a flagging euro if they reinforce the image of a bank moving towards tightening policy in the longer term. Markets to watch: eurozone indices, EUR crosses 1.30pm – US initial jobless claims (w/e 18 August): claims expected to rise to 217K from 212K. Markets to watch: US indices, USD crosses 2.45pm – US mfg & services PMI (August, flash): mfg PMI to fall to 55.2 from 55.3, while services PMI to fall to 54 from 56. Markets to watch: US indices, USD crosses 3pm – US new home sales (July): forecast to rise 0.6% MoM from -5.3%. Markets to watch: US indices, USD crosses 3pm – eurozone consumer confidence (August, flash): forecast to fall to -0.7 from -0.6. Markets to watch: eurozone indices, EUR crosses Corporate News, Upgrades and Downgrades CRH said that first-half profits rose 4.6% to €497 million, while sales were 1% higher at €11.9 billion. Performance was affected by weather disruption in Europe and North America, and currency headwinds. The dividend was raised by 2.1% to 19.6 cents per share. Premier Oil reported pre-tax profit of $98.4 million for the first half, up from $40.7 a year earlier, while cash flow fell to $276.6 million from $282.7 million. Net debt was cut to $2.65 billion from $2.72 billion a year earlier. OneSavings Bank has upgraded tis growth forecast thanks to a good start to 2018. Pre-tax profit in the first half rose 17% to £91.8 million, with the loan book up 11% to £8.1 billion. Growth is now expected to be in the ‘high teens’, from a previous ‘mid-teens’ forecast. BNP Paribas upgraded to buy at Bankhaus Lampe Masmovil upgraded to overweight at Barclays Sunrise upgraded to overweight at Barclays Zooplus upgraded to hold at Kepler Cheuvreux Deutsche Euroshop cut to hold at Berenberg Terveystalo cut to underweight at Morgan Stanley IGTV featured video Information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
  8. 2 points
    Turkey: Financial markets regained their cool overnight, returning to some semblance of normal trading conditions. Traders appear a little more comfortable with the Turkey situation, apparently reassured by the idea that developed economies and financial markets are shielded from the direr consequences of a Turkish borne financial crisis. The core issue is unlikely to disappear entirely, given hostilities between the US and Turkey have only escalated in recent days. Moreover, global fundamentals will continue to work against broader emerging markets, who look ever-vulnerable to rising global interest rates and a strengthening US Dollar. However, at least when it comes to developed capital markets, it looks like the attitude has shifted to “play on”. Wall Street: Wall Street will cap off the global recovery in equities over the last 24 hours, providing a stable lead for Asian trading today. The benchmark S&P500 ended its four-day losing streak – its longest in several months – to add 0.65 per cent for the session. Earning’s season is practically done and dusted now, with investors now allowed to mull over what it all meant – and how it will affect the future. As it stands currently, the overriding belief is that there are indeed good times still to come. Assuming risks in emerging markets and geopolitical tensions remain to one side – a very big assumption, of course – the S&P seems poised to restart its journey to the all-time high at 2875 achieved earlier this year. ASX: SPI futures are indicating a softer open for the ASX200 this morning, presently pointing a modest 5-point dip at the open. Investors in Australian shares leapt at the opportunity of jumping back in to equities as the Turkey-contagion fears subsided, quickly regaining (in effect) all the territory abandoned during the day prior. It was the financial stocks, following-on from their successful week last week, that led the charge, supported admirably by the index’s relative minnow-sector, information technology. The diminution of macroeconomic themes provided investors with the scope to turn to more fundamental matters in the market, such as the local reporting season. Local earnings: Reporting season news focused primarily on two noteworthy misses yesterday: first from Cochlear, the second from Domino’s Pizza. For Cochlear, the full-year results were quite respectable, revealing that net income expanded 10 per cent and that the company’s dividend pay-out would increase by 11 per cent. However, the share fell by 3.52 per cent, unwinding a portion of the 16 per cent gain achieved by the stock year-to-date, after profit guidance missed expectations and analyst’s consensus changed the stock to “hold”. The story was far more-stark for Domino’s Pizza, with that company missing even the lowest analyst estimate for full year net income, driving its share price down 6.52 per cent. China: Macroeconomic watchers had an eye-on Chinese fundamental data midday yesterday, as China’s National Bureau of Statistics released one of its big monthly data dumps. The monthly release of Retail Sales, Unemployment, Industrial Production and Fixed Asset Investment data has taken on graver significance in recent months, with trader’s combing through any piece of information that could glean an insight into the fundamental strength of a slowing Chinese economy. Yesterday’s release was on balance a poor one, adding to concerns that tariffs and cyclical factors are dragging on the Chinese economy. Despite this, traders largely ignored the news, swept up in the relief of ostensibly lower credit risk from the Turkey debacle – although the Yuan did maintain its affection towards the 6.90 mark. Aussie data: Australian fundamental data will centre on the household sector over the next 24-48 hours. It begins with the release of the Westpac Consumer Sentiment reading at 10.00AM, continues with Wage Price Index data later this morning, and concludes with Employment Data tomorrow. The wage growth figures will be the most pertinent for markets, given the RBA’s imploration that inflation and therefore interest rates will not increase until there are signs that Australian workers are getting a pay rise. Though it was missed by many in the thick of the Turkey panic at the end of last week, cash futures markets more-or-less priced out any more than a 50/50 chance of an interest rate hike from the RBA, following the release of the bank’s quarterly Monetary Policy Statement on Friday. While this market-dynamic remains, watch for an increasingly stifled AUD/USD, particuarly now that we’ve plunged below the 0.7300 handle. UK and the Pound: Better than expected labour market data was released out of the UK last night, ahead of the release of CPI figures tonight. The UK economy is one of the more curious situations for market participants presently, particularly as it relates to future interest rate settings amid ongoing Brexit drama. The implications appear to be weighing on sentiment and economic fundamentals, effectively forcing the BOE to admit recently that strong fundamentals will take a back-seat while an outcome to Brexit is decided. Activity in the pound has hence become of high interest in markets, especially this week, considering scheduled Brexit negotiations on Thursday: the GBP/USD has lost over 3 cents in less than a fortnight, presenting signs of being oversold, but apparently possessing little impetus to reverse this trend. Please note: 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.
  9. 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).
  10. 1 point
    Why your feedback matters Here at IG we want to make sure your suggestions help shape our direction and future. We appreciate that the best businesses are built around two-way communication with clients. That's why we provide a number of different ways for clients to quickly and easily talk to us. There is nothing worse than submitting feedback and feeling like your comments and suggestions have been jettisoned into the void of some unread inbox. We want to take this opportunity to lay out how you can easily submit feedback, a few things we do on a daily basis with those communications, and finally a few recent instances of how we're reacted to things our clients have told us. How to submit feedback to IG Dealing Platform: If you're logged into the platform you'll notice a 'quick feedback' option in the top right hand corner under 'Help'. When you submit your comments our systems will automatically book that against your account and file it in a report which we periodically collate and send to the relevant parties. Community: One of the easiest ways to submit feedback is via the IG Community. If you head over to the forums page you'll notice a 'Suggestions' section where you can have a search to see if your idea has been submitted before. If it hasn't you can simply start a new topic, pop in your request, and post it publically on Community. The best thing about this being public is that if other clients are also looking for the same thing, they can up vote your suggestion or add a comment. The more clients that want something, the higher the likelihood of it happening. Reports will be collated and passed to the relevant teams. Direct Message: While the methods described above are generally easier, you may sometimes want to send us a direct message. You can check out our Contact Us page to send a message via a browser contact form. A few things we do with your feedback Daily feedback reports: When a feedback item comes into our client facing trading services team we first see if any immediate action is required (e.g. if there is an easy resolution or different way to get the same desired result). We then tag the contact with a 'feedback' tag. All items tagged in this way are collated daily and sent to the appropriate business owners. Staff with various specialisms, from those who deal with user experience to our charting developers and data scientists, receive these reports. Steering committees: Client feedback is also fed directly back to the appropriate areas within the business via meetings set up to decide the rollout roadmap for specific products. We also regularly meet with third party vendors such as Pro Real Time or Signal providers to discuss feedback points and figure out how to resolve any client pain points. Client communication meetings: Every couple of weeks our communication teams meet with client-facing managers. Both trading services and our dealing desk give an update regarding inbound contacts and the wider market movements, and any client feedback (direct or implied) is discussed. Examples of recent changes due to client feedback All-sessions chart data: A pain point for clients was the bad spikes on all session pre-market data for big stocks like Apple, Amazon etc. A working group including representatives from the shares desk, our trading services technical support team, and pricing, implemented some solutions to filter the bad data, and correct historical data. Almost all chart updates on the new platform: The charts roadmap is strongly influenced by client feedback. Things like customisable colours, new drawings, extra Fibonacci levels, and features like the dark theme, have all been implemented thanks to feedback from our clients. PRT Wizards: We get a lot of clients telling us that using Pro Real Time for the first time can be quite difficult because of the flexibility, complexity, and customisation options of the charts. Pro Real Time has now implemented walkthrough wizards to guide clients through using PRT for the first time (and for specific features like customising deal templates). Keep an eye out for product updates Not every suggestion we receive can be implemented as we need to balance the business roadmap with client feedback and requests, but every feedback item will be documented and reviewed by the appropriate team. We also have a brand new 'Products Update' blog on Community where we will be updating all clients on recent rollouts and additions to the IG platform. Some of these changes will be implemented as a direct result of your feedback, so please make sure you keep your comments coming using the above methods. All the best IG Community Moderator Team
  11. 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.
  12. 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
  13. 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.
  14. 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.
  15. 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.
  16. 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.
  17. 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.
  18. 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.
  19. 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.
  20. 1 point
    Written by Kyle Rodda - IG Australia Overnight bounce: A bounce in equities has finally arrived, unwinding some of the week’s heavy losses. As it currently stands, the NASDAQ – ground zero for much of the recent market correction – is leading the pack, up 1-and-a-half per cent for the day, followed by the S&P, which is up 0.8 per cent, and the Dow Jones, which is up 0.65 per cent. Volumes are down generally speaking, so the recovery today lacks bite – though the Thanksgiving holiday in the US may somewhat be behind this, meaning an apparent lack of conviction in this relief rally could be explained away. Meaningful price action in other areas of the market that gives a solid read on the current psychology of traders is absent: US Treasuries have been comparatively inactive, with yields remaining contained across the curve, and the US Dollar is slightly lower, without demonstrating remarkable activity itself. Risk assets: Certain assets have benefitted from the lull in panic-selling. To preface: the VIX has receded to a reading of 20, from highs around 23 yesterday. In currency land, the Australian Dollar and New Zealand Dollar, as risk proxies, have ticked higher to 0.7265 and 0.6795. Obviously, the reduced anxiety amongst traders has meant the converse is true for haven currencies like the Japanese Yen, which is trading above 113 today. The Euro and Pound remain in the 1.13 and 1.27 handle respectively, most unmoved by the day’s sentiment. While credit spreads, which have blown out recently as risk-sentiment evaporated, have finally come-in. To counter the notion of complete risk-off: Gold has caught a bid, to trade at $US1227, or thereabouts, with its rally attributable largely to a modestly weaker greenback. Global indices: But overall, risk appetite has been ever so slightly whetted, even if it is only temporary. European equity indices were well into the green, aided by a skerrick of positivity generated by good news relating to the Italian budget crisis. The DAX was up 1.61 per cent and the FTSE added1.47 per cent, shaking-off the mixed lead from Asia, which saw the Hang Seng up 0.51 per cent and the CSI300 up 0.25 per cent, but the Nikkei down 0.35 per cent and the ASX200 down 0.51 per cent. A bounce in commodity prices has fed into and supported the solid sentiment in equities, especially as it relates to oil, which rallied off its lows to trade just below $US54 in WTI terms and hold within the mid-$US63 handle in Brent Crude terms. Slow news day: If this all sounds dry, it’s because that in the context of the volatility experienced in the past week – if not almost 2-months – it very much is. Little has catalysed the overnight bounce. The major themes are still hovering about, and the questions implied by them have barely been answered. The big data release overnight – in fact, it’s probably the biggest for the week – was US Core Durable Goods numbers, and they disappointed. That release, very marginally, added to the chorus of pundits suggesting that the US Federal Reserve’s hiking path may be a little flatter than recently thought. As far as what can be inferred from the data, the US economy is cooling off, implying the “data dependent” Fed will lack the reason to aggressively hike interest rates. Fed-watch: A lot of these matters relating to the Fed will be clarified when a slew of board members speak next week. The markets attitude though is simpler to read: Fed Funds futures have reduced their bets on the number of rate hikes from that central bank to 2 and a bit from here. December’s telegraphed hike is being priced again at a 75 per cent chance, but after, if traders are a good barometer, rates in 2019 are looking very flat. A more dovish Fed, in the absence of developments in other issues like the Trade War or Brexit, is what is aiding the staunching of risk-off sentiment. It opens the risk now that markets could be all too wrong, and a spike in volatility will arrive if traders were to once again adjust expectations. A softer outlook: But with the volatility we’ve seen in markets, corporate earnings petering out, and economic growth cooling, the assumption of a more reserved Fed isn’t outlandish. It perhaps reflects the broader risks in the markets and economy too: the Trade War is ongoing, Brexit is falling apart, China is slowing, oil is tumbling, and Italy’s fiscal situation could blow up any day. Given such a landscape, an inevitable pull back by the Fed, timed with lower activity in financial markets, is very understandable – the game of chicken being played by markets and the Fed may have been won by the former. It could all turn on a dime very quickly of course, but as it stands now, the current environment is leading market participants to the conclusion that a period of soft growth, lower earnings growth and a more neutral Fed is upon us. ASX200: So: as it all related to the Australian share market in the here and now: our bounce today, according to SPI futures, will begin with an approximately 25 point jump at the open. Yesterday’s performance was naturally poor, but some solace can be taken in the fact the market bounced off the 5600-support level. The edging higher throughout the day’s trade was helped by a solid run from CSL, which rallied after Morningstar upgraded that company’s stock to “buy”. The banks also experienced some buying; however, breadth was very low, revealing the lack of conviction in yesterday’s modest upward swing. Today ought to see a broad pick-up, in sympathy with Wall Street’s trade: meaningful technical levels within reach on the daily chart are hard to find, but maybe the barometer is how closely a track towards the 5700 can be established.
  21. 1 point
    Continuing our #IGCommodityChat and following our previous chat on gold, join us on Thursday the 29 November at 1pm (UK time) to discuss the future of the oil market with industry advisor Malcolm Graham-Wood and Spencer Welch, director of oil markets at IHS Markit. Submit your questions now or during the live show Use the comments section at the bottom of the blog (even if you're not an IG client or not logged in) and we'll put them to the panel. If there are any questions which we don't get to in the live show our senior sales traders will look to get you an answer and continue the discussion. We'll also look to answer questions posted here. UPDATE at 13.01: minor technical issues will cause a delay with the start of the stream. I will update when we're live. UPDATE at 13.07: This is now live on the platform only. We'll push to Community afterwards. UPDATE at 14.10: The live show is now accessible above. With so much uncertainty surrounding the future of the oil market, we’ll be taking a look at how the industry changes might influence the price of oil. You can watch the live stream at 1pm (UK time) via the trading platform.
  22. 1 point
    Theresa May´s cabinet is set to meet today in order to try and find a solution to the Irish border crisis, the main headache for Brexit talks in the last few months. As a result of the uncertainty regarding a Brexit deal, the GBP weakened against its major pairs, falling by almost 1% against the US dollar and 0.2%against the Euro. The Dow Jones lost 2.32% on Monday falling by 602 points to close at 25,387.18, after Apple suffer another hit and worries over global trade continue. The Nasdaq re-enters correction territory as it lost 2.8% to close at 7,200.87. Goldman Sachs shares suffered their biggest loss in 7 years, leading the S&P 500 to drop 2% to close at 2,726.22. The fall comes after the Malaysian finance minister demands a full refund of the $600million fees they paid To GS in order to help set up the fraudulent state investment fund 1MDB. Cigarette shares dip on Monday as the US Food and Drug Administration (FDA) consider banning menthol cigarettes. The fall was led by British American Tobacco that lost almost 11% closing at 2.962,50 as investors fear over the future of the newly acquired US menthol brand Newport. A smaller than expected demand for vaping products has also led to the company´s revenues to miss targets for the year so far. Italy has reached its deadline to submit a revised budget draft to the EU but, despite pressure from Brussels, Italy shows little signs of altering its budget as it targets to boost government spending. Because of this, Italian bond years rose again on Monday, increasing between 1.3% and 3.5% across the curve. Asian markets start the day in the negative territory but seem to recover into the afternoon. The Hang Seng dipped to 25,092 at the open but has recovered in the afternoon trading above Monday's closing price. The Nikkei 225 has been trading at a 2% loss from the previous close whilst the ASX 200 is ending the day 1.8% lower. Airline stocks have been hurt after the OPEC cartel announce they are looking to stabilise oil prices by reducing supply after prices have fallen around 20% in the last month. International Consolidated Airlines (IAG) closed 0,9% lower on Monday at 637,60. Asian overnight: Asian markets followed their US counterparts lower overnight, with a sharp deterioration in Apple shares sending tech stocks lower in markets such as the Topix, ASX 200, and South Korean Kospi composite. This came after two of Apple’s suppliers cut their earnings forecasts, causing markets to worry whether iPhone sales had peaked UK, US and Europe: The Pound has had a tough start to the week as the markets start to factor in the possibility of a “no deal” Brexit. As it is becoming increasingly possible that Theresa May is not going to be able to pass a deal in Parliament before the deadline on March 29th, the pound is starting to come under pressure against major currencies such as the Euro and the US Dollar. We can expect the Pound to trade with increased volatility this week as key meetings will shape whether there is a possibility of a Brexit deal to fit all. The Brexit negotiations have come under heat as Theresa May has tried to create a UK customs union in order to avoid a hard border on the Island of Ireland. But the EU has rejected this idea by enforcing the backstop plans which lock in the UK in a relationship with the EU which cannot be ended without the EU´s permission. We can expect the Pound to trade with increased volatility this week as key meetings will shape whether there is a possibility of a Brexit deal to fit all. After the recovery from the 2008 financial crisis, the stock markets have been performing seemingly well keeping a consistent uptrend throughout the years but the trading activity of the last month have left investors worried over the health of the financial systems. As earnings have been consistently increasing and companies are performing well, there have been talks about how long this sustained growth can last, questioning if the markets have reached their boiling point. After October became one of the worst trading months in years, the month of November had seemed to bring some relief to stock markets, but after Monday's sharp decline it shows that the markets remain volatile. All it took was bad production figure for Apple and possible regulatory action against Goldman Sachs to send the stock market into a downfall. As the potential for a slow down in economic growth and earnings is starting to take place amid ongoing trade wars and rising interest rates, investors are advising clients to remain cautious and reduce the amount of risk by diversifying their portfolios in order to be prepared for the months to come. Looking ahead, UK jobs data provides a focus on the pound, with average earnings expected to rise sharply to a three-year high of 3%. Also keep an eye out for the German ZEW economic sentiment survey, coming in a week that is expected to see the German Q3 GDP reading hit negative territory. Economic calendar - key events and forecast (times in GMT) Source: Daily FX Economic Calendar 9.30am – UK employment data: claimant count to rise by 3200 from 18,500 in October, while unemployment rate holds at 4%, and average hourly earnings rise 2.6% in September. Market to watch: GBP crosses 10am – German ZEW (November): economic sentiment to rise to -12 from -24.7. Market to watch: EUR crosses 11.30pm – Australia Westpac consumer confidence (November): index to rise to 103 from 101.5. Market to watch: AUD crosses 11.50pm – Japan GDP (Q3, preliminary): forecast to be -0.3% QoQ from 0.7%. Market to watch: JPY crosses Corporate News, Upgrades and Downgrades Taylor Wimpey said that sales rates grew in the second half, up to 0.77 from 0.71 a year earlier. The current order book was up 9% over the year, to £2.4 billion. Vodafone suffered a loss of €7.83 billion for the first half, arising from the disposal of Vodafone India, higher financing costs and de-recognition of a deferred tax asset in Spain. Experian suffered a 5% drop in pre-tax profit to $470 million for the first half, while revenue rose 7% to $2.36 billion. Allied Minds upgraded to buy at Jefferies Anglo American raised to hold at Global Mining Research Zurich Airport upgraded to hold at Santander Total upgraded to buy at AlphaValue IP Group downgraded to hold at Jefferies ThyssenKrupp downgraded to hold at Bankhaus Lampe Orpea downgraded to neutral at Credit Suisse Sophos downgraded to hold at Shore Capital 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.
  23. 1 point
    Written by Kyle Rodda - IG Australia The fallout: The US mid-terms have passed, and while there were signs throughout yesterday's trade that the vote would throw up a few curly situations, the outcome fell broadly in line with market expectations. The VIX has dropped and US equities, paced by the NASDAQ, have subsequently rallied, primarily on the knowledge that everything went according to plan -- proving the notion that the biggest drag in markets all-in-all is uncertainty. There are enumerable possibilities, all with various implications for traders, opened-up by yesterday's result, and one assumes that they'll be digested calmly by market participants in the times ahead. Ultimately, however, one major risk has been navigated through without much bloodshed, allowing traders to return their attention to arguably the more significant, fundamental issues at hand. Gridlock: The term that perhaps has been hurled around most since it was confirmed that the Republicans would hold the US Senate and the Democrats would nick the House of Representatives is "gridlock". In the so-called "age of bipartisanship", a split in power within congress all but assures the adversarial tone of the late-Obama era returns. In a representative democracy, in principle, that need not be cause for concern, but it does imply greater inertia in legislative action. That means Tax Cuts 2.0 (as they've been dubbed) are all but dead, buried and cremated, and that a push for fiscal restraint by the Democrats could complicate issues around budget policy and the national debt ceiling in the future. US bond markets: The possible dynamic has shown up in prices already. An analysis of the US Treasury yield curve reveals this. The fact yesterday's results ensure a possibly stagnant congress has been interpreted as a continuation of the status quo in the short term. The yield on interest rate sensitive US 2 Year Treasuries has ticked higher to 2.94 per cent over night on expectations that the current growth formula will go unchanged – and lead to a continuation of the US Federal Reserve's rate-tightening regime. Conversely, the yield on fiscal policy (read: debt and deficit) sensitive US 10 Treasuries has dipped slightly to 3.19 per cent, on the belief that a debt blow-out from Trump's planned tax cuts and infrastructure spending program will not go ahead. Currency markets: The consequence of this shift in expectations regarding US fiscal policy is the US Dollar has sold-off overnight. It appears the interplay of forces is the ideal recipe for a slower rise in the greenback: global growth remains supported in the short-term, benefitting riskier currencies, but lower long-term yields are making the USD relatively less attractive. The knock-on effect has seen the EUR and Pound rally above 1.1450 and 1.3140, supported by strong German industrial output figures last night; and commodity-bloc currencies such as our own Australian Dollar has definitively broken its downward trend to trade at 0.7280. The balance between a weaker greenback but greater risk appetite has kept the USD/JPY flat at 1.1340, while gold has also remained steady at $US1226 per ounce. What for the trade-war? The implications for the other major global macro-risk from yesterday's vote, the US-China trade war, has thus proven a touch unclear. China's equity markets closed lower for the day, the Yuan whipsawed, and prices in growth proxy commodities -- such as copper --fell, seemingly on the uncertainty of what a greater representation of Democrats in Congress means for US foreign policy. In principle, the philosophically liberal-internationalist Democrat party could lobby for greater multilateral engagement with China and other world powers, but in this new age of populism, old assumptions may no longer prove reliable. Futures markets are projecting a better day for the Asian region, however a flicker of greater volatility in Asian markets should be expected leading into the highly anticipated G20 summit at the end of the month. ASX200: SPI futures are indicating a 28-point jump at the open for the ASX200 this morning, as the local market looks to extend its solid gains this week. The day yesterday ended in a 0.4 per cent gain for Australian shares, on reasonably solid breadth of 64 per cent. Volume was below average owing to the major event risk of US mid-term elections once again, however a rotation away from defensive sectors and into growth stocks and cyclicals supported the narrative that the outcome of yesterday’s vote is positive for the equity bull market. The ASX200 now sits on the cusp of technically reversing the short-term trend brought about by October’s massive stock market correction, with a meaningful hold of around 5930 today the level to watch. Today’s major events: Amid all the news and analysis around US mid-terms, a quick refocusing on the week’s other risk-events will emerge in markets today. Of significance today: the RBNZ met this morning – in what is probably the key event for the Asian region – and kept interest rates on hold as expected. The tone struck by the RBNZ has thus far been judged as rather dovish, legging the Kiwi Dollar’s run higher above the 0.6800 handle. Turning attention to more pressing global event-risk, it comes no bigger than tonight’s meeting of the US Federal Reserve. The Fed won’t move rates, that much is known. The attention will be directed instead towards the Fed’s commentary about its flagged December interest rate hike, plus its views on further rate hikes into 2019.
  24. 1 point
    Global stocks rebound after worst month since 2012. Corporate earnings in the US and Europe have helped ease lingering worries over rising interest rates, trade tensions and a slowing global economy. The S&P 500 rose 1.1% and the Nasdaq Composite gained 2%. The Dow is currently trading flat after jumping more than 350 points at yesterday’s open. Asia-Pacific Indices mostly started November on a stronger footing. The Hang Seng was 1.8% higher and Taiwan’s Taiex gained 0.4%, however, Topix was down 0.5% whilst the ASX was roughly flat. The pound sterling rose by almost 0.7% following a report that Theresa May had negotiated an agreement for British financial services companies to maintain continued access to European markets after Brexit. Dominic Raab also predicts a Brexit deal to be made by November 21st. A series of UK economic releases are due today, including: the Manufacturing PMI, a summary of Monetary Policy, and the all important BOE Inflation Report, providing a projection of inflation and economic growth over the next 2 years. The AUD rose 0.95% against the USD after a better than expected trade surplus in September as exports rose and imports fell. AUD/USD currently at 0.714. Turkish Lira drops as the country’s finance minister announced tax cuts that led to doubts over the government’s pledge to take a more disciplined fiscal approach. Brent crude continues its decline, down 0.44% and currently trading at $74.74 a barrel, . Gold is up 0.71% at around $1224 an ounce. Asian overnight: Chinese stocks rose on Thursday on the back of a signalling of a new round of economic stimulus measures by Chinese Communist leaders, in hopes to shore up confidence as the country faces slower growth and the US-China trade war. This comes as an official gauge of Chinese factory output (PMI) weakened to its lowest level in more than two years in October, indicating pressure on the economy. BOE inflation report is set to provide an insight into the bank’s view of economic conditions and inflation... Japanese markets provided the one outlier to an overwhelmingly positive session in China, Hong Kong and Australia. Tax cuts and other stimulus from the Chinese helped boost confidence, while the bullish theme from US and European markets also helped. Rumours of a deal between the UK and EU that would see services firms throughout the UK retain access to European markets has helped provide a boost for the pound. Meanwhile, data-wise we have seen a massive jump in the Australian trade balance, which posted the largest surplus in 18-months. A sharp rise in commodity prices also helped boost Australian stocks and the Australian dollar. UK, US and Europe: There are a few key UK monetary and economic releases to watch out for today. The BOE inflation report is set to provide an insight into the bank’s view of economic conditions and inflation, an outlook for the country’s economic growth which will shape future monetary policy. Mark Carney is due to speak at a press conference at 1:30pm GMT regarding the report – expect volatility around this time. The BOE interest rate will also be released, with a forecast of 0.75%, unchanged from last month’s figure. In the afternoon, keep an eye out for the manufacturing PMI readings from both the US and Canada. On the corporate front, keep an eye out for earnings from Apple as the tech sector comes into focus once again. Economic calendar - key events and forecast (times in BST) Source: Daily FX Economic Calendar 9.30am – UK mfg PMI (October): activity expected to increase in the sector, with the inde rising to 54.6 from 53.8. Markets to watch: GBP crosses 12pm – BoE meeting & inflation report: no change on policy expected, but the inflation report may provide some clues and thus result in some GBP volatility. Markets to watch: GBP crosses 2pm – US ISM mfg PMI (October): index to fall to 59.6 from 59.8. Markets to watch: US indices, USD crosses Corporate News, Upgrades and Downgrades Just Eat has issued a profit warning, saying that earnings will be towards the bottom end of the £165 - £185 million range, due to investments in Latin America, although revenues will be towards the top end of the £740 – 770 million range. Carpetright reported ‘negative’ like-for-like sales for the half year to 31 October, hit by store closures and disruption arising from restructuring. Credit Suisse’s net income for Q3 comes in at 424 million CHF, vs. 449 million expected. Royal Dutch Shell reported an almost 40% rise in Q3 profits, making four-year highs but still short of forecasts. Japanese electronics giant Panasonic saw its share prices drop more than 8% after a report of a 4% fall in half yearly profit. HSBC upgraded to hold at DZ Bank Paradox Interactive raised to buy at SEB Equities Sanofi upgraded to equal-weight at Barclays Securitas upgraded to add at AlphaValue BNP Paribas cut to hold at Independent Research; GBL downgraded to hold at SocGen IMA downgraded to hold at Kepler Cheuvreux Outokumpu downgraded to neutral at Citi 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.
  25. 1 point
    Cryptocurrencies have been going through a period of relative stability, which is almost unheard of for the asset class that gained notoriety for its volatile price movements. ...the support and resistance lines are expected to congregate by early November but a breakout can occur at any time... The stock market selloff that punished the tech sector in the first half of October coincided with Bitcoin losing 7.5% of its value in a single day. Does this correlation in market movements suggest that as Bitcoin and other cryptos have become more mainstream, and adoption by centralised financial institutions has risen, the price is now at the mercy of the same institutions and financial markets it was seeking to circumvent? Or could the selloff be more indicative of general investor sentiment at that time when confidence in the markets was low? One interpretation of the current market movement suggests that the correlation between the crypto class to the major indices are largely unrelated. This interpretation may be supported by the fact that as the more traditional markets have continued to fall through October (with tech having its worst month in a decade) bitcoin’s price action has remained stable, whilst simultaneously seeing a 17-month low volatility rate, even with yesterday’s 2% fall. Technical analysis of the price of Bitcoin shows that the coin was hitting its resistance line and the markets were already likely to turn bearish. The below chart illustrates a falling wedge formation with an almost horizontal support of $6000 that has developed since the February market sell off which shows bitcoins price consolidate and volatility reduce. The wedge shows that the support and resistance lines are expected to congregate by early November but it’s important to remember that a breakout can occur at any time as the price boundaries tighten as investors may take any breach of these lines as an indication of the future price of Bitcoin over the medium to long term. The fake-out of Monday the 10th suggests that investors are poised for any news that can drive price action. Coinciding with this November timeline is a deadline set by the SEC to allow the public to submit opinions on whether to allow Bitcoin ETF’s in the United States. The deadline, which has been moved from October 26th to November 5th follows the SEC’s original decision to reject the ETF’s citing a lack of compliance to prevent market manipulation. ...impending large technical and fundamental focal points implies we may be on the brink of a spike in volatility... This decision by the securities authority could fundamentally define how investors perceive the currency as a further integration into financial markets is either halted again or finally given the green light. The ability for this type of announcement to move prices should not be underestimated as bitcoin hit its all-time high just six days after the first Bitcoin futures contract was announced by the CBOE. Granted this happened during an upwards trending bull market, but it undeniably added to that movement. The announcement to review the initial decision just one day after rejecting the first application, as well as a published statement of official dissent by commissioner Pierce of the SEC, could indicate a potential swing in judgement from the SEC. However, this may not represent a full shift of opinion by the commission as it only takes one commissioner to open a review. Following the deadline, an official decision will not come from the SEC until they have had a chance to review the public submissions, but investors will be listening intently for any early indication of how the decision might go. More recently, reports that some of the concerns that the SEC have over introducing the ETF have been mitigated by the organisations producing the ETF’s have saw speculators expectations heighten for a prospect that at one point seemed rather unlikely. The concerns of the SEC include market liquidity, volatility, pricing and market manipulation. However, proponents have argued that the SEC’s demand for a ‘significant’ futures market allowed them to be non-committal as they have not defined what they classify as significant. The imminence of impending large technical and fundamental focal points implies we may be on the brink of a spike in volatility but what price can investors reasonably expect the currency to move to if the market were to shift? The previous decision by the SEC preceded a $400 dip in the price of the coin in one day and fell back down almost $2000 in the following two weeks to the previously mentioned support level of $6000. Speculators may be hoping a reversal in the decision could see Bitcoin return to $8000 or higher. It’s hard to predict how low the price could go as these prices haven’t been seen since before the all-time high but proponents of the technology wishing for continued stability will be hoping that the lack of a bitcoin ETF is already priced into the market.
  26. 1 point
    Written by Kyle Rodda - IG Australia More information, greater confidence: Markets have been awash with data over the last 24 hours – and traders love it. It’s a behavioural quirk in financial markets: whether good, bad, or otherwise, an inundation of information paints a full and colourful picture of the world and satisfies that innate human desire for (an illusion) of control and certainty. The phenomenon echoes lessons that were reinforced upon the world all the way back in 2008 by one of that years’ seminal cultural events. No, not the zenith of the Global Financial Crisis, but Christopher Nolan’s The Dark Knight and Heath Ledger’s inimitable portrayal of The Joker. In a scene that epitomizes the philosophy of the uber-anarchist Joker, the character ruminates during a monologue: “Nobody panics when things go according to plan. Even when the plan is horrifying… nobody panics. Because it’s all part of the plan.” Fundamentals unchanged: Why bring this up? Outside taking pause to remember a time before the ills of the GFC ailed the global economy, it sums-up quite well the attitude of market participants in times of turmoil. Yesterday saw the release of a swathe of economic and financial data, which assessed on balance, delivered unremarkable and mixed results. None of it fundamentally changed the outlook for the financial world, but the fact that it filled in some blanks and confirmed a few existing biases meant that everything, overall was judged to be ok. Herein lies the problem for now: the issues that ignited October’s sell-off have yet to disappear, meaning that markets remain just as liable to the extreme bouts of panic and volatility that last month delivered us. Adjustments still underway: The biggest problem here is that when assessing the balance of buyers and sellers, and their overall behaviour, not much has changed. The market was led higher yesterday by a drive into tech-stocks and other growth/momentum sectors – apparently based on a so-so earnings update from Facebook, and an anticipation for upcoming Apple results. If there is one thing that can be taken away from the market commentary in the last 2 weeks, the financial market pros out there – the big money managers, the institutional players, the stock brokers, and the like – believe it’s time to shift away from growth investing into value investing. Assuming they are to be trusted, the players controlling the ultimate fortunes of the market are shifting funds away from areas that have propped markets up this week. Same behaviour driving week’s recovery: Thus: here comes the fissure at the centre of it all: if traders are still chasing momentum flow in growth sectors, and the fundamental outlook for broader financial markets hasn’t changed yet, then October’s shake-out probably has further to run. Now, several factors will surely insulate punters from such extreme bouts of volatility. Oft-cited share buy backs will kick-off in a significant way now, plus seasonality suggests markets are entering a fruitful time of year. Moreover, earnings are still strong even if the medium-term outlook has changed, and economic growth (in the US, but to a lesser extent other geographies) is powering along. However, these factors paper over the cracks – and the truly structural factors – which means while financial calamity isn’t expected any time soon, greater adjustments (that is: more corrective action) in financial markets may well loom. Risk one: higher rates: The two biggest factors remain the prospect of higher global interest rates, and the possibility that markets have already reached peak growth. Regarding the former, it is conspicuous and questionable that traders have reduced their bets of a rate hike from the US Federal Reserve in December and lowered their expectations of the number of hikes in 2019. It appears a classic conflation by market participants that weakness on Wall Street necessitates weakness on main street. Though fortunes can quickly change, economic data continues to affirm that the US economy is in a strong position and price pressures are building – which will require a firmer hand and tighter policy from the US Federal reserve. US bond yields have fallen, and the USD has rallied of late, inviting investors back into equity markets. Last night’s trading session saw bond yields tick higher again, implying that the risks of rising rates haven’t been fully discounted, and sustained volatility on this basis persists. Risk two: slower growth: Secondary to tightening global monetary conditions, the other factor that precipitated October’s market rout remains – and was, in fact, reinforced yesterday. The prospect of weaker growth ex-US economy, due to the trade-war as much as any other cyclical causes, looms large on the horizon. Chinese PMI data yesterday undershot forecasts once more, with the Manufacturing component to that release inching closer to a sub-50 “contractionary” print, pushing the off-shore Yuan ever closer to 7.00; while the BOJ during its meeting yesterday downgraded it growth and inflation forecasts. The fears across Asia added to the nervousness catalysed by this week’s soft European growth numbers – although it must be said that the perception of European growth did receive a boost last night when it was reported that a Brexit deal may arrive as soon as November 21. Nevertheless, if the market correction October was in a big way foundered upon shakier global growth prospects, little revealed this week so far should be interpreted as diminishing that risk in the short-term. Today for the ASX200: SPI futures are indicating that, to start the new month, the ASX200 will participate in the relief rally sweeping markets and add 26 points at the open. Despite sluggishness throughout the day, the Australian market jumped just before the end of yesterday's session, courtesy of a buy-up in bank stocks following ANZ's better than expected results. A full turn around isn't yet underway for the ASX200, but the seeds are there to potentially break the corrective pattern hobbling the index -- with a break and hold above 5930 a definitive sign of this. Just like the rest of global equities, the risks and challenges remain, but yesterday's weak CPI print at least affirms that RBA policy will probably remain supportive of asset markets. The next two days of trade will be significant for the Australian market's nascent recovery, as NAB reports today, and macro watchers eye local retail sales figures tomorrow, and the more significant US Non-Farm Payrolls release on Friday night.
  27. 1 point
    We are hosting our third live IG Forex Chat on Thursday 1 November at 6.30pm (UK time), where we will be exploring what the year ahead could hold for emerging market (EM) currencies. You can watch the discussion live in the IGTV player within the web trading platform, or using the YouTube link below. The whole purpose of these talks is to give you direct access to our panel and provide a platform for you to ask any question you wish about the subject in hand. Submit your questions below now! With emerging market currencies having been exceptionally volatile in 2018, we take a look at what the next 12 months could hold for related forex markets. Our discussion will cover a broad range of topics, including: The emerging market currencies to watch over the next 12 months How the dollar’s valuation will affect EM currencies The effects of changing commodity prices How the value of the US dollar, Chinese renminbi and Russian ruble will change Who are the experts? Paul Bratby is a self-employed trader who specialises in Elliott wave analysis. As well as trading via his personal account, he runs My Trading Buddy (MTB) and Wave5trade (W5T), which provide a wealth of trading tools and information about the forex markets. Raj Dhall is a market analyst, whose content has appeared on TradingView, FX Daily, the Society of Technical Analysts, London South East, Interactive Investor and Zero Hedge. His writing focuses on the influence of macroeconomic and political events on the markets.
  28. 1 point
    Written by Kyle Rodda - IG Australia ASX200 yesterday: It was a tale of two halves for the ASX200 yesterday, dipping at the open before roaring back to close the day’s trade 1.3 per cent higher. The dour beginnings came on the back of reports from Bloomberg – now well known – that the Trump Administration would be seeking to slap tariffs on (in effect) all Chinese imports into the US, if a deal couldn’t be achieved between US President Donald Trump and Chinese President Xi Jinping at next month’s G20 Summit. In a testament to the jumpiness of financial markets the world over currently, the tone changed in global markets upon the release of news that, in an interview with Fox News, US President Trump believed there was a “great deal” in the works between the US and China. Sentiment in Asian trade: A highly ambiguous statement. Nevertheless, market participants – clinging onto every shred of hope – took the comments, bound them to their sense of optimism, and ran Asian equity indices generally higher. Breadth on the ASX200 was at a noteworthy 75 per cent, though on volumes slightly below last week’s average, with the major momentum/growth sectors topping the sectoral map. The financials, as is always required, did most of the heavy lifting, adding 30 points to the index, in part in preparation for upcoming company reports from the Big 4. The Australian market has now pulled itself out of oversold levels, to break-trend on the RSI, and in doing so, establishing the foundations for a challenge of a cluster of resistance levels between 5780 and 5880. Corrective bias remains: No doubt, it was a praise-worthy performance from the ASX200, but Australian investors are far from out of the woods yet. Putting aside the major global drivers dictating the fate of equity markets the world over, the simple price action on the ASX200 index doesn’t yet indicate an end to the recent bearish streak. If anything, at least as it currently presents, the technical indicators play into it. The push into oversold levels necessitates a recovery in the ASX, as bargain hunting buyers galvanize a bounce higher. There’s some way to go before a reversal in the recent short-term trend lower can be definitively considered finished. A clean break through 5930 and a solid hold above 5780 would be the categorical sign required before this can be stated. Until then, abandoning a bearish perception of the ASX may well be premature. ASX200 drivers: As if often stated, the overall activity in the ASX200 is determined by an oligopoly of banks, a slew of mining companies, a couple of supermarkets and a much-loved biotechnology firm. The banks have received a leg-up thus far this week, as investors ignore regulatory risk and a property to slowdown to buy in ahead of a series of bank earning’s reports. The miners are being slayed by increased concerns about the impacts of tariffs on global growth, though increased fiscal stimulus from the Chinese and its knock-on effects to iron ore prices could be their salvation. Woolworths and Wesfarmers are performing solidly, though not well enough to carry the entire market higher. While a diminishing appetite for growth/momentum stocks has led to losses of over 5 per cent for market darling CSL over the past 3 months. Global macro and share market trends: Reviewing the fundamental macro forces required to stimulate the market perhaps reinforces the notion that the ASX200 still has some correcting to do. Although equity markets have experienced a relatively strong start to the week, the risks that catalysed the recent correction in segments of the market have not disappeared. Much of the reversal can be attributed to a belief amongst investors that the recent share market volatility will force the US Federal Reserve to soften its hawkishness and increase US interest rates at a slower pace. US Treasury markets reflect this, with the yield on the rate-sensitive US Treasury note falling from +2.90 per cent to as low as 2.81 per cent this week, as traders decrease their bets on December Fed-hike to 70 per cent. Indeed, it remains a possibility that a “Powell-put” under the US (and therefore global) share market may emerge, but the remarkably strong fundamentals in the US economy still imply a need for the Fed to hike interest rates – a dynamic that, if it materialized, will sustain volatility and further equity market adjustment. Overnight in Europe and America: To lower the eyes and turn focus to the day ahead, SPI futures are presently indicating a 9-point drop at the open for the ASX200. Futures markets have pared losses late in US trade, following a late session run on Wall Street that has seen the Dow Jones climb an impressive 1.86 per cent, the S&P500 rally 1.26 per cent, and the NASDAQ jump 1.56 per cent – though the latter may find itself legged in afterhours trade as investors digest Facebook results. The rally in the North American session followed-on from a soft day in European shares, which were mired by news of a potential ratings downgrade of UK debt by S&P, along with mixed economic data releases across the Eurozone. The USD climbed because of this imbalance between European and American sentiment, pushing the EUR below 1.1350, the Pound into the 1.27 handle, and gold prices to US$1223 per ounce. Australian CPI data: The trading week hots-up from today onwards, in preparation for several important fundamental data releases. Domestically, none will come more significant than today’s Australian CPI print, from which market participants are forecasting a quarterly price growth figure of 0.5 per cent. That number, if realized, won’t be enough to crack the bottom of the RBA’s inflation target band of 2-3 per cent, and will, in effect, affirm the central bank’s soft inflation outlook and dovish rate bias. As always, a figure of extreme variance to either side of market consensus could shift the Australian Dollar and interest rate markets. Traders remained wedded to the idea that the RBA won’t hike interest rates until early 2020: an extreme upside surprise in today’s CPI could see this adjust and spark a run higher in the AUD/USD towards trend channels resistance at 0.7200 – though this outcome is highly unlikely.
  29. 1 point
    Chinese stock have rallied with the Shanghai Composite Index gaining more than 4% as officials attempt to support the market as GDP figures last week fell short of the 6.6% growth target by 0.1% The rest of the APAC region followed suit with all major indices apart from Australia's ASX 200 making gains. Dominic Raab has stated there may be some flexibility on the Irish border issue. The Brexit Secretary made the comment in an interview which may allow negotiations continue for a soft Brexit. Uncertainty over oil remains as the investigation over the Saudi journalist Jamal Khashoggi continues. Turkey have stated they will announce their findings tomorrow which could cause further volatility with oil if the announcements result in further international condemnation for Saudi Arabia. Italian bond yields have lowered as ratings agency Moody's has kept their outlook 'Stable' RyanAir profits fall 7% as their Chief Exec blames air traffic control disruptions. Asian overnight: This rally is likely to calm investor fears that China was heading towards an economic disaster with stock-backed loans as China’s Shanghai index was down 30% this year. Chinese markets have drawn attention recently with missed GDP estimates and the ever-present trade war uncertainty. Confidence is also weak in the yuan as it looms ever closer to the $7 level. Major concerns are beginning to emerge that this fall in Chinese share prices is causing a further sell off due to stock-backed loans. Many Chinese corporations have these loans secured on their shares which they must liquidate as part of the agreement to ensure they can fulfill their obligations. Following the major market sell off seen earlier this month which mainly hit tech, an important sector for China, it’s likely that further market drops could cause more firms to have to sell their shares which would cause their price to drop further. This recent rally is likely to placate investors temporarily but as 11% of the country’s market capitalisation is being held as collateral for loans investors will still fear that another market downturn could cause a landslide for Chinese share prices. ...11% of the country’s market capitalisation is being held as collateral... UK, US and Europe: The comment from Secretary Raab comes just a day after London saw a protest of approximately 700,000 people who were voicing their concerns over the final deal that the UK will ultimately make with the EU. Markets are likely to react positively to any news that furthers the negotiations between the UK and Brussels as it potentially avoids the possibility of a hard Brexit. The west has remained sceptical as Saudia Arabia have changed their story regarding the reported death of journalist Jamal Khashoggi. As a growing number of leaders from some of the worlds largest corporations are pulling out of the investment conference 'Davos in the Desert', Saudia Arabia appear to be in damage control mode. The investment conference is an important part of the Saudi Prince Bin Salman's vision for the future of Saudi Arabia in which they intend to reduce their economic dependence on oil. The conference was set to garner investment support to develop other areas of the economy, something the Gulf state also intends to finance through the IPO of the state owned oil corporation Saudi Aramco. South Africa: The dollar has softened to assist gains in commodity prices which has an effect on the South African bourse. The rand is firmer this morning as well. Tencent Holdings is trading 2.91% higher in Asia, suggestive of a positive start for major holding company Naspers. BHP Billiton is up 0.2% in Australia, suggestive of a flat to marginally higher start for local resource counters. Today's economic calendar is light with no high impact data scheduled for today. Economic calendar - key events and forecast (times in BST) Source: Daily FX Economic Calendar 1.30pm – US Chicago Fed index (September): expected to fall to 0.15 from 0.18. Markets to watch: US indices, USD crosses Corporate News, Upgrades and Downgrades NMC Health has upgraded its annual revenue and earnings guidance. A stronger second half means that revenue is expected to rise 24%, from a previous 22% guidance, and EBITDA will now be $480 million instead of $465 million. Ryanair has suffered a 9% fall in pre-tax profit for the first half, while average fares were down 3%. Ryanair will close or downsize three bases and shrink its winter capacity, and it does not rule out further capacity cuts. Fiat Chrysler are set to announce the sale of their component maker to rival Calsonic Kansei for $7.1 billion Debenhams has announced it will continue with its store closures as well as unveiling a £100m savings plan Bankia upgraded to neutral at BPI Hunting upgraded to outperform at Macquarie Ophir Energy upgraded to buy at Jefferies Tullow upgraded to buy at Jefferies Cairn Energy cut to underperform at Jefferies Intu downgraded to hold at Berenberg Novartis downgraded to hold at Baader Helvea Publicis downgraded to hold at Liberum 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.
  30. 1 point
    Trump announces that the Fed is his biggest threat as they are increasing rates ‘too quickly’ Theresa May is to visit Brussels for an EU summit today to agree on the terms of the UK-EU agreement, in order for a final decision to be made in November Netflix quarterly results show yet another rise in new subscribers, signing up 6.96 million customers in this quarter, totaling a global amount of 137.1 million Canada becomes the second country to legalise the use of Cannabis and Marijuana Spot Gold market trend starts to incline, breaking out of its previous month’s bearish position above $1210 to $1219. IMF had arranged to attend a conference in the Middle East for October 23rd to 25th, however has now postponed the trip with no further explanation given China’s holdings of US Treasury securities declined yet again for a third month, plummeting its holdings by around $6billion to $1.165trillion in comparison to last years at $1.2trillion US stocks rise rapidly as some of the largest US companies announced strong quarterly results, helping regain the downward fall shown last week. This includes the Dow Jones, which surged around 550 points/2.2% and the S&P increasing by over 1.9% Asian overnight: Asia Pacific markets managed to follow the US and European lead overnight, with Japanese and Australian markets in particular leading the way higher. Interestingly, Chinese and Hong Kong markets were relatively muted, highlighting the continued fears surrounding growth in the region after Trump threatened yet another round of tariffs on Sunday. The level of debt to GDP in China has hit ‘alarming levels’, as a great difference is seen between reported investments and actual off-balance sheet debt. It is reported at estimates of highs of 30 trillion to 40 trillion Yuan ($4.34trillion to $5.78 trillion). According to analysts, this is mainly caused due to local Chinese governments investing deeply in infrastructure and funding in order to encourage economic growth UK, US and Europe: The UK is back in focus today, with inflation data likely to build upon yesterday’s jobs numbers to build a picture of the pressures on the BoE. With average earnings on the rise, the predicted fall in inflation could actually provide a positive differential between wages and the cost of living, thus raising real wages. UK wages grow at their quickest pace in nearly 10 years. The level of pay rose by 3.1% from the three months prior to August and a fall of 47,000 to 1.36million in unemployment levels.The EU summit will shift the market mindset back to Brexit, with the EU having allowed Theresa May the opportunity to find a solution to break the deadlock. In the US, keep an eye out for housing data, with building permits and housing starts being released. However, the big release comes later on, with the Fed due to release their latest monetary policy minutes. Crude traders will also be keeping a keen eye on the Crude inventories data following substantial build-ups over the past two weeks. The Fed to release their latest monetary policy minutes later today Results from further investigation, in regards to the Saudi journalist Jamal Khashoggi, may show greater strain on how the US and Saudi Arabian relationship will be effected. This has caused three large banks including HSBC, Credit Suisse and Standard Chartered to pull out of Saudi’s Future Investment Initiative event in Riyadh. Among these, Google’s cloud division, Mastercard, JP Morgan and many others have also decided that they are not attending the event. South Africa: Upbeat US corporate earnings is seeing the tech sector leading gains in the worlds largest economy (the US). The dollar has however firmed up a bit, putting some pressure on commodity prices and the rand. BHP Billiton is down 0.7% in Australia, suggestive of a softer start for local diversified resource counters. Naspers, which has roughly a 20% weighting in the Top40 Index, is expected to open higher this morning in lieu of the improved sentiment surrounding tech sector stocks. Our local market will look to Retail Sales data at 1pm today for for guidance as to the health of South Africa's retail sector. Economic calendar - key events and forecast (times in BST) Source: Daily FX Economic Calendar 9.30am - UK CPI (September): CPI to rise 2.4% YoY and 0.5% MoM, from 2.7% and 0.7%, while core CPI rises 1.8% YoY and 2.1%. Market to watch: GBP crosses 10am – eurozone CPI (September): forecast to rise 0.2% MoM. Market to watch: EUR crosses 1.30pm – US housing starts & building permits (September): starts expected to fall by 3.5% YoY, and permits to rise 1.2%. Market to watch: USD crosses 3.30pm – US EIA crude inventories (w/e 12 October): forecast to see a 1 million barrel rise in inventories. Markets to watch: Brent, WTI 7pm – US FOMC minutes: the committee’s decision to raise rates will be revealed in more detail, providing volatility for the US dollar and equities. Markets to watch: US indices, USD crosses Corporate News, Upgrades and Downgrades Afrimat expects earnings per share and headline earnings per share, for the interim period to be between 92 cents and 97 cents per share (2017: EPS of 102.4 cents per share and HEPS of 102.2 cents per share), reflecting a decrease of between 5% and 11% on the previous period. Pearson said revenue was flat for the first nine months of the year, and the firm has reiterated its annual profit guidance. Barratt Developments has made a strong start to the year, with a 12.4% rise in forward sales, to £3.15 billion compared to £2.8 billion a year earlier. Mediclinic said that first-half revenue fell 1% to £1.4 billion, while adjusted EBITDA was down 8% to £21 million. Lyft has hired JP Morgan to lead its IPO for 2019, potentially increasing its value to over $15billion BlackRock’s stock falls by over 5% due to their third-quarter revenue results falling below expected results, totalling at $3.576billion in comparison to $3.648billion. Nevertheless, BlackRock published earnings per share at $7.52, in comparison to an expectation of $6.84 Audi to be fined £700million/$800million as an investigation occurred in relation to a diesel emission scandal Morgan Stanley increased more than 5% after the announcement of improved results in earnings. This led to earnings per share at $1.17 rather than the forecasted results of $1.01 Goldman Sachs had reached a higher level than estimates in profitability levels, resulting in $8.65billion of revenue from an estimated $8.4billion. This results in levels of $6.28 per share in earnings, from its estimates of $5.38. Volvo shares decline by 5% due to an announcement explaining potential emissions failure, with vehicles emitting illegal levels of nitrogen oxide Dollar Tree’s stock increased to highs of 7.1% after investor Carl Icahn had taken a stake in the company Uber targeting $120billion valuation for next year, as Wall Street banks advise that its worth more than three times the automaker Ford IBM revenue decline to $18.8billion in the third quarter, falling by 2.1% against expected results Shares of Tencent faces an extreme decline of 40% from January, eliminating more than $230billion in market value BillerudKorsnas upgraded to buy at SEB Equities Coca-Cola HBC raised to hold at Wood & Company Hellenic Petroleum raised to overweight at Pantelakis KPN upgraded to overweight at Barclays ConvaTec cut to underperform at Credit Suisse Handelsbanken downgraded to sell at DNB Markets Michelin downgraded to neutral at Goldman Safran downgraded to underperform at Jefferies IGTV featured video Information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
  31. 1 point
    Wall Street: It's still early days, but investors appear to have regained their nerve overnight. The Asian session was tepid, to be sure, however a rally in European and US equities reveal a market that has found its appetite for equities again. As the existing narrative would imply, much of this was underpinned by a fresh appetite for rate-sensitive US big tech stocks, which according to the NASDAQ, rallied almost 3 per cent overnight, leading both the Dow Jones and S&P in the realms of 2 per cent higher. Implied volatility fell, but remains relatively high at around 18, so of course it would be foolish to claim the recent sell-off is authoritatively through. In stating this, commentary has shifted away somewhat from risks from rates and tariffs, to anticipating the fruits of what is expected to be a bumper reporting season – particularly after the likes of Goldman Sachs and Morgan Stanley posted impressive results early this morning. Europe: Likely owing to being largely oversold to begin with, the strong activity in European equities come despite a mixed-news day for the region. Like much of the global-share-market following last week’s equity rout, valuations and dividend yields within European indices have become more attractive this week, apparently enough to attract buyers into European share markets, even against doubts regarding the strength of the region’s upcoming reporting season. UK data provided some impetus for the bulls last night, after labour market figures showed that the unemployment rate held at 4.0 per cent and average earning climbed by an above forecast 2.7 per cent. The GBP/USD pushed-up just below the 1.32 handle on the news, however rate markets were more-or-less steady, as traders ostensibly tie their BOE rate-hike bets to the outcome of souring Brexit negotiations. Macro-backdrop: The boost to investor sentiment has infused equity traders with glimmers of confidence, though the greater appetite for risk hasn’t necessarily flowed through to other asset classes. Yields on US Treasuries were flat the last 24 hours, and despite climbing back above the 112-handle against the Yen, the US Dollar has failed to catch a major bid. Risk proxies like the AUD and NZD are a skerrick higher, with the Aussie Dollar floating about 0.7140, but gold is still finding haven buying, holding above a support line at $US1224. Moreover, proving that last night’s rally isn’t on the firm basis of greater confidence in global growth prospects, the Bloomberg Commodity Index edged 0.1 per cent lower, even considering a sustained increase in oil prices amid fears of lower supply because of a potential rift between the US and Saudi Arabia. ASX: The strong overnight lead has SPI futures pointing a 28-point jump for the ASX200 at this morning's open, following a day in which the Australian share market popped modestly higher from its oversold levels. The pop was reflected primarily in the activity in bank stocks, which rallied-off its own oversold reading, to collectively climb 0.55 per cent for the session. It was the materials space though that led the index higher, courtesy of a 1.4 per cent rally, despite the limited price gains in commodity prices yesterday. The day's trade establishes an interesting dynamic for the ASX200 today: the index fought unsuccessfully throughout trade to re-enter last week's broken trend channel. Futures markets has this transpiring at the open - a positive sign for the Aussie market. Regional data: Despite leading to limited price action across the region, Asia was littered with fundamental data yesterday. It was kicked-off early morning our time, upon the release of key New Zealand CPI data, which revealed stronger than expected consumer price growth of 1.9 per cent annualized for that economy. The algo-traders seemed to kick-in post the event, pushing the NZD/USD to the significant 0.6600 handle, before human rationality took over the pair lower, primarily on the knowledge that the data wouldn’t change materially the RBNZ’s interest rate views. Chinese CPI data was also printed yesterday, revealing an-expectation figure of 2.5 per cent – up from the previous 2.3 per cent. Once again however, although inflation is proving to be running a little hotter in China, trader’s judged that the news wouldn’t shift the dial for policymakers and promptly moved on. RBA’s Minutes: Of domestic significance, the RBA released the minutes from their recent meeting, with very little novel information to glean: “members continued to agree that the next move in the cash rate was more likely to be an increase than a decrease. However, since progress on unemployment and inflation was likely to be gradual, they also agreed there was no strong case for a near-term adjustment in monetary policy”. The reaction in market was one of the more muted from an RBA release, registering barely a reaction across financial markets. There were some interesting points discussed from a purely academic perspective in the document – some substance for the economics-nerds – especially relating to hot global asset prices, but nothing in the way of potential policy approaches from the central bank. FOMC Minutes and Reporting Season: Approaching the half-way mark for the trading-week, investors prepare for its pointier end. The major event will transpire tomorrow morning local time, in the form of the FOMC Minutes from the US Federal Reserve’s last monetary policy meeting. Of course, most of panic and volatility in global markets has come because of the Fed’s hawkishness in recent times, so market participants will peruse the details of tomorrow’s minutes for insights that confirm or deny fears about higher global rates. The broader market will also engross itself further in US reporting season, with Netflix (for one) posting what is being considered currently a better than forecast set of numbers, by way of virtue of a smashing of subscription growth estimates.
  32. 1 point
    Rout over? There are tentative signs that the global equity rout witnessed last week has subsided, at least for now. The tone shifted during Asian trade on Friday, and despite a weak day for European markets, Wall Street ended the week on a positive note, led by a bounce in the major tech stocks. It’s not to say that there isn’t the risk that this sell-off may not continue at some stage this week: in fact, futures markets are indicating a sluggish start for Asia today. More to the point, the fundamentals haven’t changed and the concerns that precipitated the tumble in share markets are still there. True, bond yields are now 10 points down off their highs and some positive news about the trade war and Chinese growth boosted sentiment on Friday. But neither of these issues have disappeared and will almost certainly rear their head again. Fundamentals haven’t changed: The crux of the matter is that, as has been repeated ad nauseum, interest rates in the US are going higher and that seems very unlikely to change. The growth story in the US is so strong that the Fed feels compelled to keep telling us so, as it apparently prepares markets for the inevitable end of the easy money era. If this is the case, then maybe the kind of wild bursts of volatility above 20-25% (if assessed against the VIX) sporadically is the new norm. Markets have seen two bouts of it this year already, largely due to the same structural factors, though it must be said that provided we’ve arrived at the end of this sell-off, the impacts were much smaller than February’s. Nevertheless, assuming continued strength in the fundamentals, a more turbulent journey on this bull-run could become the status quo. A sell-off, not a correction (yet): Once again: this assessment is entirely predicated on the belief that this pull-back has come to an end, which with a high-impact week ahead of market participants, is less than guaranteed. There may be an element of being at a cross-road now, though it’s almost always impossible to tell whilst moment whether this is so. Despite the opacity of the current market conditions, defining what’s so far been seen is appropriate, especially to provide perspective regarding the panic some have felt toward the notion of a “correction” in the market. Different geographies and individual indices must be judged differently, but if Australian and US markets are the yardsticks, neither are at a technical correction phase yet. A true correction is a sell-off of over 10 per cent from highs, something the major US indices nor the ASX has experienced yet. ASX: SPI futures are pointing to a soft start for the week for the ASX. The last price on that contract is indicating a 51-point drop at the open, furthering last week’s rather heavy losses. First glance suggests that the drop-in financials stocks on Wall Street, which fell by way of virtue of the pullback in US Treasury yields, and despite strong earnings updates from JP Morgan Chase & Co. and Citigroup Inc, will follow through to the Australian share market today. The boost to US tech stocks may bode well for the pockets of growth stocks in information technology and healthcare within our market, as too may the slight lift in industrial metals prices and oil over the weekend. However, even considering these modestly improved fundamentals and a solid lead from Wall Street, perhaps the break of a technical medium-term uptrend on Friday has tipped the balance of activity in favour of the sellers. China and greater Asia: Being a Monday, the Asian region is at risk of witnessing a lack of volume on the markets today, on the back of a US session Friday that experienced a 30 per cent lift in its average volume. That could make markets sputter a little, however several events and a general positioning for the week could turn that around. An impetus will need to come out of China to see noteworthy shift in sentiment, be that bullish or bearish, as traders attempt reform their views on the Chinese growth story. That narrative received a much-needed boost during last week’s final trading session, after the release of much better than expected Chinese Trade Balance data assayed some concerns relating to the impact the trade war is having on Chinese growth – a belief that will be tested throughout the week by a slew of Chinese fundamental data releases. Fundamental economic data: Fundamental data will be abundant in the week ahead for market participants, both domestically and abroad. Interest rate traders will be treated to insights from the RBA in tomorrow’s RBA Monetary Policy Minutes on Tuesday, FOMC Minutes on Thursday morning (AEDT), along with several speeches from central bankers throughout the week. Volatility in currency, money and credit markets was nowhere near the levels registered on share markets last week, although a safe-haven plays into US Treasuries, the Yen and Gold has emerged. Given the primary cause of Thursday’s major sell-off can be tied back to interest rate expectations and activity in US Treasuries, the FOMC’s minutes will probably be the most watched event. The yield on the benchmark US 10 Year Treasury note is down to 3.16 per cent currently, 10 points below the highs that ignited the stock market sell-off: an overly hawkish tone in the Fed’s minutes a risk of bringing a return to this dynamic. Political economy: Geopolitical risk will lurk in the background to the week’s trade, threatening to dull risk appetite above and beyond the uncertain fundamental outlook for markets. A Brexit deal could eventuate this week, in what could amount to the final round of talks between the UK Government and European bureaucrats. An eye on China and particularly its handling of the Yuan could be a hot-point, after the US Treasury department opted not to label the Chinese policymakers as currency manipulators, catalysing a rally in the Yuan, before the PBOC intervened and enacted another controlled devaluation on Friday. Finally, fears of disruption in the middle-east and therefore oil markets could flare-up, as relations deteriorate between Saudi Arabia and the global community on the increasing possibility that the Saudi’s brutally murdered a anti-establishment journalist within the Saudi Arabian embassy in Istanbul. 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
    The Dow Jones continues its tumble, losing more than 1,300 in two days, as worries over interest rates and trade barriers continue. The S&P dropped 2%, bringing its October losses to 6% The sell off in the US also saw sell offs in Europe, with FTSE down 1.9%, DAX 1.3%, CAC 1.8% and EU STOXX 1.95%. The VIX rose almost 9%, reaching it’s highest levels since February this year Despite rising interest rates and a booming economy, bank stocks are trading lower, reaching bear market, ahead of earnings reports. XRP and Etherum lead the cryptocurrency downfall which has lost $6 billion in a day. Gold hits its highest price in two months on Thursday after a rough 6 months. As a typical safe haven asset, people have turned to gold in the last few days as world stocks tanked. Despite the ongoing trade wars with the US, China has reported a trade surplus of $34.13 billion in September, which economists believe is due to increase orders before the tariffs are enforced, which is likely to have an impact on the months to come. Asian overnight: A degree of recovery has been seen in Asian markets, with a general rebound in risk appetite. US markets were more mixed, but futures have begun ticking higher ahead of bank earnings later today. Oil prices also recovered, after suffering sharp losses earlier in the week. Regarding the downfall in cryptocurrencies, although the direct cause is unknown, the recent negative sentiment towards cryptocurrencies from important financial institutions could have led to the downfall. Alternatively, it could be a market triggered sell-off, where people are looking to move cash into safer assets. Meanwhile, BitFinex has suspended fiat deposits and stopped accepting bank transfers despite initial denials. The suspension raises fundemental questions about its operations. "JP Morgan is expected to post a 30 per cent increase in third-quarter profits year-on-year, according to analysts polled by Bloomberg" UK, US and Europe: Dow dropped a further 545 points on Thursday, bringing its 2 day loss to 1300. The S&P dropped 2%, bringing its October losses to 6%. Tech sector is worst performer, losing 4.5%, while financial sector is 2nd worse. Global equity markets are today rebounding from the selloff we have seen this week, rebounding to around 25500 from the market low of around 25000 at the close yesterday. With the underlying global risk catalysts remaining in play, markets will be assessing whether todays move is one which is sustainable or not. Metal prices are modestly lower this morning after staging a rebound yesterday which gained significant traction into the afternoon. The dollar is softer, while the Euro and British Pound are the better performers amongst the majors today as Brexit discussions show signs of progression. Bank Earnings season kicks off today with three big players standing out: JPMorgan, Wells Fargo and Citigroup. Analysts are forecasting that banks will post their highest profits since the financial crisis as they are said to enter a “golden age”, fuelled by rising interest rates. According to the FT, "JP Morgan is expected to post a 30 per cent increase in third-quarter profits year-on-year, according to analysts polled by Bloomberg". Across the broad sector, earning are expected to rise 17.7% and revenue increasing by over 7%. When interest rates increase, banks should have more room to increase the rates they charge on loans, relative to the rates they pay out on deposits; this would allow banks to increase their interest margins. But if the increase in rates is deterring customers and businesses from borrowing, then that would hinder bank profits. This means that, despite the general positive outlook regarding the US economy, there are some investors that are becoming sceptical about how long this continued earnings growth can be sustained. They believed that the reason why banks’ profits have been strong throughout the year has more to do with corporate tax cuts than with rising profitability. One of the biggest worries is a weak loan growth, being led mostly by mortgages. South Africa: The rand has continued to claw back strength. Tencent Holdings is up nearly 7% this morning suggestive of a strong start for major holding company Naspers. BHP Billiton is up 1.3% in Australia, suggestive of a positive start for local diversified resource counters. Economic calendar - key events and forecast (times in BST) Source: Daily FX Economic Calendar 3pm – US Michigan consumer sentiment (October, preliminary): expected to fall to 98.5 from 100.1. Market to watch: USD crosses Corporate News, Upgrades and Downgrades Man Group reported a small rise in assets under management for Q3, to $114.1 billion from $113.7 billion. The firm will establish a new holding company in Jersey in order to help deal with growth in the US. Ashmore saw a 3% rise in assets under management for the three months to 30 September, to $76.4 billion, as clients responded to increased volatility across emerging markets Tiger Brands: the Ekurhuleni Department of Health issued a Certificate of Acceptability to the Company for the Germiston processing facility. This endorses the factory’s standards and operating procedures for the safe production of food products. Production of ready-to-cook products, comprising bacon and frozen sausages, is expected to commence on 12 October 2018. Salami production will also commence on this date. Kvaerner Upgraded to Buy at SEB Equities Siltronic Upgraded to Hold at Berenberg Covivio Upgraded to Add at AlphaValue Paddy Power Upgraded to Hold at Berenberg Magnolia Bostad Downgraded to Sell at SEB Equities 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.
  34. 1 point
    What happened? The sell-off continues, and despite a brief pause during Wall Street trade that opened hopes of an end to this rout, it was quickly dashed as investors went back to dumping stocks. The chaos that has ensued in the last 24 hours raised myriad of questions. But the first one is inevitably this: why did that happen? In short: there’s not a clear answer. That isn’t to say that there isn’t reasoning behind the sell-off; on the contrary, there’s plenty to explain it. Rather, it’s a matter of “why now?” – an explanation that has proven elusive for market participants. From some sort of academic perspective, it’s a matter that begs to be resolved, but for those with skin in the game and money on the line, it’s secondary to the fact that this is happening, and a rapid-response has been required. Higher rates: This being so, it warrants an examination on the state of play. US equities – the shining beacon atop the dimming global financial landscape – became hobbled about a fortnight ago after a slew of US Federal Reserve speakers came-out to implore that growth was so “extra-ordinary” that interest rates may not yet be near the “neutral rate”. Not only that, the US economy could run so hot that a move in rates above the “neutral rate” may be required, to lean on a booming US economy. Bond markets responded violently to the new information – as is well known – with traders demanding higher yields on US Treasuries, sending the US Dollar higher, stretching US stock valuations in certain segments of the markets to unattractive levels, and generally denting risk appetite. Slower growth? Though such structural challenges reared their head, the initial reactions from investors were on-balance positive: the Fed needs to raise rates because the US economy is just that strong. This is a positive thing, it was rationalized: fundamentals are good, so the bull-market should continue. This idea became challenge this week for US investors, as dark clouds started to brew on the eastern horizon: China looks as though it could be slowing, and the trade war could make this worse. A world of slower Chinese growth is a world without a strong economy; and that means, for the many US corporates exposed to the slings and arrows of China’s outrageous economic fortunes, lower profits and lower returns for their shareholders. Panic-stations: With this as the very simple fundamentals, momentum in the US equity market slowed-down, probably as flow-chasers exited the market, robbing equities of their bid and beginning the cascade in prices that we’ve witnessed the last 48 hours. Frenzy has of course ensued, as investors bank profits where they can and take advantage of the gains the mighty bull-run on Wall Street has delivered. The panic has naturally spread to equity markets throughout Asia and to Europe, sparking calls that the divergence in US markets and the rest of world – that has characterized months of trade – is coming to an end: the last bastion of strength in the post-GFC, easy-money-era bull run is falling. Trend reversals and new lows: Trend lines and support levels are being broken everywhere you look. The global recovery (good since March) following February’s massive correction has ended. Chinese and Hong Kong markets have hit new lows, on some indices ones not seen since 2014, even despite very attractive valuations. Japan’s Nikkei has tumbled from 27-year highs to wallow back around the low-22,000-mark. European shares are on the precipice of breaking-levels that would open downside to near-12-month lows. And the ASX is hugging an upward trendline resistance level established in early-2016, when the global growth story was barely a twinkle in the global economy’s eye. Here, the bears have begun to circle, waiting to profit from a massive, long term trend reversal that vindicates the widely held view that markets can’t possibly prosper without central bank support. Market psychology: Here, it’s time for a moment of pause. The whirlwind of panic-selling and confusion that has stripped market participants of their rational faculties has laid the fertile soil for the described narrative to flourish. It’s not that individual traders aren’t aware of this either – the hysteria is easy to see, and more importantly see through. But when your money is on the line, and precious profits are being eroded, why hold your position when you can’t be sure that everyone else isn’t crazy? Or even more appropriately: why hold your position when you can’t be sure that everyone else isn’t thinking that you are crazy, and that they aren’t about to dump their positions in anticipation of you dumping yours in some hysterical haste? Either way, as a rational, self-interest investor, it’s best not to risk it – sell now and take profit before the herd wipes it all away. Waiting for calm: So now markets get stuck in a death spiral, and though plenty of contrarians try to pick a bottom, most generally get swept aside by the wave of selling. The weekend couldn’t come sooner for markets now because a break from the madness is needed to regain some equanimity. A focus on the fundamentals is required, to assess where true value lies in the current market milieu. Price action on Wall Street last night indicated signs that perhaps this is beginning to manifest: the session saw another close in the realms of 1-2 per cent lower, but the extent of losses vacillated throughout the day. US tech, which with its high concentration of rate-sensitive stocks, demonstrated that investors still have appetite for growth stocks, with the NASDAQ registering the smallest losses of the major US indices. Day ahead: Risk appetite won’t be whetted by what happened on Wall Street (or Europe too, after credit spreads blew out again courtesy of new animosity between Rome and Brussels) overnight. Futures markets are pointing to another ugly Asian session, characterized by some rather aggressive selling. Buying into equities anyway (no-less in riskier Asian markets) at this time would be considered especially imprudent. Safe-havens will be in vogue today: the growth-versus-risk proxy, the AUD/JPY, remains wedded to the 79.00 handled, US Treasuries have climbed, with the yield on bench mark 10 Year note falling to 3.13 per cent (perhaps supported by last night’s soft US CPI print), while the US Dollar is being punished, driving funds into gold, which has torn above the $US1220 price. Australia: SPI futures point to a 47-point drop at the open for the ASX200, with IG pricing suggesting the market should land just above support at 5810. If this proves to be so, and a close below 5860 is registered, a 2-and-a-half-year trend will come to an end. Health care stocks may see some staunching of their falls, if the activity in US tech is anything to go by; but the energy sector and materials space will likely struggle, given the drop-in oil prices to $US80.00 last night, coupled with the general dip in commodity prices. The Australian Dollar is experiencing strength, but only because of a weaker USD, with the strength of our currency possibly hinging on how well the contained slide in the Yuan can be managed by the PBOC. All in all, the day shapes up as another challenging one, as Australian investors enter the final trading session of a week, that for many, couldn’t end sooner. 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.
  35. 1 point
    The U.S. and Canada agreed to a trade deal that would preserve a three-way bloc with Mexico, setting the stage for their leaders to sign the accord by the end of November. The new deal will be called the U.S.-Mexico-Canada Agreement, or USMCA. Mexican peso and Canadian dollar gains as uncertainty is lifted and greater stability takes hold of the Americas. The euro was hit by worries about a rise in Italy's fiscal deficit after the Italian government agreed to set a higher than expected budget deficit target that could put Rome on a collision course with Brussels. In the UK this week the Conservative party is holding its annual conference. Brexit talks are bound to be high on the agenda and could cause some volatility as the narrative continues to play out. Hammond could also add flavour to this years budget which could hint at trading opportunities to come. Tuesday sees a speech by Jay Powel. After the Feds interest rate rise last week speculators will be looking at any hints they have on monetary policy. Asian overnight: A somewhat mixed session overnight has seen the Japanese markets push into the green, while the Australian ASX 200 provided the opposite move in the absence of Chinese and Hong Kong markets due to national holidays. Weekend data from China did little to raise confidence for Australian stocks, with the manufacturing PMI and Caixin manufacturing PMI both declining. The non-manufacturing PMI survey did rise, yet Australian concerns are certainly focused on the manufacturing sector as a lead to how their exports markets will fare going forward. Finally, the Japanese Yen declined on the news of weaker figures for the Tankan manufacturing index, non-manufacturing index, and manufacturing PMI. ...we have a host of economic PMI releases from Europe, although for the most part they are final readings. UK, US and Europe: The euro was hit by worries about a rise in Italy's fiscal deficit after the Italian government agreed to set a higher than expected budget deficit target that could put Rome on a collision course with Brussels. Italian Finance Minister Giovanni Tria is certain to face questions about the nation’s 2019 spending plan even though it’s not on Monday’s Eurogroup agenda in Luxembourg. Theresa May faces the battle of her political life to retain control of the governing Conservative Party as top Tory politicians undermined her leadership. After arch rival Boris Johnson went for the jugular, Chancellor Philip Hammond swept in to defend her in an increasingly chaotic political scene. Looking ahead, we have a host of economic PMI releases from Europe, although for the most part they are final readings. That being said, the UK manufacturing PMI is one of the few figures that represents the first release for the month, with markets looking for a marginal decline. That PMI theme carries into the US session, with manufacturing figures from both Canada and the US. Given the breakthrough in NAFTA negotiations, expect to see continued volatility for the Canadian dollar and Mexican Peso. South Africa: The Jse Allshare Index is expected to open firmer amidst today's positive global equity market sentiment. Commodity prices are trading marginally lower and the rand slightly weaker as the dollar finds some short term strength. BHP Billiton is down 0.1% in Australia, suggestive of a flat to slightly lower start for local diversified resource counters. Today's economic calendar is light in terms of scheduled data releases, with UK and US manufacturing data perhaps the most relevant catalysts to look out for today. Economic calendar - key events and forecast (times in BST) Source: Daily FX Economic Calendar 9.30am – UK mfg PMI (September): survey forecast to rise to 53.8 from 52.8. Market to watch: GBP crosses 3pm – US ISM mfg PMI (September): forecast to fall to 60.5 from 61.3. Markets to watch: US indices, USD crosses Corporate News, Upgrades and Downgrades Tesla likely to dominate headlines today as the SEC ruling that Elon Musk should stand down as chairman (but maintain his CEO position). Nielsen Interim CEO of Danske as Borgenfor relieved following money laundering scandal. Assura continued to grow during the first half of the year to 30 September 2018, completing the acquisition of 39 medical centres and two developments at a combined cost of £108.2 million. HNA Group Co. shrinks debt by $8.3 Billion. More needed to regain trust of investors. TMX Group earnings release above expectations. Barclays upgraded to buy at Berenberg Castings upgraded to buy at Peel Hunt Thomas Cook upgraded to hold at Berenberg Kaufman & Broad raised to hold at Kepler Cheuvreux AB InBev downgraded to hold at Jefferies EasyJet downgraded to underperform at Bernstein Sampo downgraded to neutral at JPMorgan Telecom Italia cut to underweight at Barclays 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.
  36. 1 point
    Markets welcomed back the Chinese from holiday and all the bad news came together at once. That’s not to say the world’s problems, at least as it applies to global markets, can be rooted in China. Frankly, it was a hapless start for the week, by any measure. The build-up of trader fears simply over flowed during yesterday’s Asian session, as China’s markets attempted to digest a whole week of news all at once. Most of these issues sit beyond Chinese borders, with the fundamental issue remaining the prospect of higher global rates. But a truth that is taking come sifting to exhume is to what extent is the activity in China a reflection of a slow-down in the Middle Kingdom’s economy. Chinese policy: That issue was raised on the back of China’s policy makers’ announcement of a cut to the Reserve Requirement Ratio for Chinese banks over the weekend. The measure reduces the capital some major banks in China need to hold in reserve – an attempt to boost credit creation within the economy. This tactic runs counter to a broader strategy of deleveraging the Chinese economy, tipping the priorities of policy makers ostensibly from one focusing-on financial stability, to one focusing instead on stimulating growth. Again, stripping back the arguably more significant story of trade-wars and higher global rates, investors seemed to interpret the latest policy intervention as a small admission: the Chinese economy is cooling, and needs a little boost. China’s fundamentals: The risk in this situation is to catastrophize: “China is heading for a hard-landing!”. While a firm grasp on the likelihood of such an outcome is difficult to ascertain, owing to the notoriously opaque nature of the Chinese economy, a catastrophic collapse in China’s economy is probably quite remote. The data (assuming it’s veracity, here) coming out of China is still rather strong: growth is set to remain around 6.5 per cent, employment is solid, and prices are stable. The worries centre around some weak trends in some supply side and consumption data, which though not dire, portends some future slack in the economy. PMI figures are the most conspicuous in this regard presently, trending down for the best part of 6 months, but cracks are also beginning to show in data-points of the likes of retail sales and industrial production. Chinese indices: The uncertainty hurled up by a possibly softer Chinese economy introduced the level of mystery to the very tangible macroeconomic risks of higher global tariffs and spiking global rates. With so much information to consume, investors hit the sell button en masse and smashed Chinese equity indices yesterday. Using the benchmark Shanghai Composite as a barometer, Chinese markets lost 3.72 per cent in value throughout yesterday’s Asian session, driving that index just above support at 2700. The bloodletting may well prove challenging to staunch here, and futures markets are pricing another – albeit less severe – day of losses. The general flight of capital is stinging the off-shore Yuan, sending the USD/CNH through support of 6.90, as the PBOC struggles to wrestle control of the currency from a market that clearly thinks it should be lower. ASX: Given this as the regional macro-economic backdrop, it’s easy to comprehend why the ASX200 gave up the ghost yesterday. SPI futures aren’t indicating a let up for our market either, indicating another dip at today’s open. Australian shares were squeezed by the numerous pressures compressing equity markets more broadly: investors are backing away from riskier assets, especially high-growth stocks, preferring safer yields in fixed income markets; while worries about tariffs and Chinese growth enervated investor sentiment regarding the future strength of the Australian economy. As such, the materials and energy sectors sank the overall ASX200, courtesy of a sell-off in commodities prices, resulting in a day where market-breadth was just over 12 percent, and the index closed right on support at 6100. Italy and the EU: Europe threw at investors its own challenges yesterday, in the form of another flare-up in tensions between the “populist” Italian government and bureaucrats in Brussels. The story revolves this time around comments made by Italian Deputy Prime Minister, Matteo Salvini, in response to criticism from the European Union about Italy’s budget deficit. In short: Salvini put his country’s woes back on the EU and its policymaking, blaming “the politics of austerity”. The fresh barbs pushed the spread on Italian government bonds and German Bunds back around 304bps, and the EUR/USD below the 1.15 handle to shed 0.3 per cent, adding to a day that was already mired in the global bond rout and equity-market sell-off. Wall Street: The North American session has closed shortly before penning this paragraph, and to the credit of US markets, the Dow Jones and S&P500 have pared the day’s early losses to finish very modestly higher. The dynamic was no doubt aided by the Columbus Day holiday, which meant US Treasury markets were out of action. Nevertheless, considering the overwhelming dour sentiment established by Asian and European markets, plus the multi-year lows registered by broader emerging markets, a more-or-less steady day for US shares is no mean feat. The gains were led by a clear rotation into defensive, dividend-yielding stocks: consumer staples and communications stocks topped the Dow Jones’ sectoral map, supported in part by another rally in financials stocks from the prospect of higher global rates. US Tech: The takeaway from the US trade is once again how big-tech performed, with the NASDAQ stripping 0.67 per cent for the day. The famous FANGs stocks registered a third straight day of losses, driven by a 1.34 per cent fall in Amazon shares, and a 1 per cent loss for Google parent-company Alphabet. The rotation out of high growth stocks – the kind that have pushed US markets to record highs this year – is apparently taking hold, as discount rates increase, and safer-yields are sought-after in the face of higher global bond yields. Although earnings growth is projected to remain strong into the immediate-future for US shares, the lack of appetite for high-growth stocks gives-off the smell of a market that is looking a trifle toppy. 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.
  37. 1 point
    Macro-drivers: Global markets endured a night of mixed trading, sandwiched between several risk factors, and the waning optimism of the USMCA. US indices were generally lower, although the large-cap Dow Jones managed to register new all-time highs. European markets were held back by grief surrounding Italian fiscal sustainability, coupled with lingering concerns about the outcome of Brexit. The general sense of risk aversion led to an appreciating USD and climb in US Treasuries, pushing yields on the benchmark 10 Year Treasury note to 3.05 per cent. Oil cooled its run somewhat as commodity traders took a breather, as WTI and Brent Crude clocked gains above $US75.00 and $US85.00 per barrel, respectively. The overnight session establishes an uninspiring lead for the Asian markets in general, auguring a mixed day ahead. ASX: SPI futures are pointing to a slight uplift in the ASX200 this morning, backing up a day which saw the Australian share market shed 0.75 per cent. There were really no winners on the day, with the only sector coming-out in the green being the energy sector. The financials couldn’t halt their sell-off, declining another 1.12 per cent yesterday, while the losses were compounded by a reversal in the price of CSL, which led the health care sector 1.36 per cent lower on the day. The breadth of gainers for the session were low again at 23.5 per cent, and volume was robust, indicating the (on balance) bearishness of this market. Momentum hasn’t shifted dramatically to the downside yet, but yesterday’s break of support at 6160, and close just above support at 6120, suggests some sluggish times ahead for Aussie shares. RBA: The local session yesterday was bereft of truly impactful news, but of course attention was duly allocated to the afternoon’s meeting of the RBA. No surprises were what was expected, and no surprises is what traders got: there was a tip of the hat to the accuracy of the central bank’s growth forecasts of +3 per cent, a reiteration of only a gradual return of full employment and at-target inflation, and a very soft warning of how low wage growth and high private debt levels may hinder household consumption. The reaction in interest rate markets was dull, but slightly to the downside: bets of a hike from the RBA got pushed back to March 2020 as opposed to February 2020, according the ASX 30 Day Cash Futures markets. Aussie Dollar: The Australian Dollar came-off shortly after the meeting however, slipping from about 0.7230 to plunge beneath support at 0.7200. To the naked eye it would appear a reaction to what was (perhaps) a dovish RBA, but close inspection suggests the impetus lay somewhere else. Risk currencies sold-off in tandem at around 3.00PM (AEST), as news broke out of Europe about Euro-policy makers concerns about Italian fiscal policy and the possibility of an Italian default. The spread on Italian and German 10 Year bonds widened once more (to currently trade around 300 basis points) sending the EUR to 1.1540 as funds flowed into the safe-haven USD. Naturally, the AUD suffered as a result, to presently just shy of 0.7190. Italy and Europe: The Italian fiscal situation in looming as a major risk for the European economy. It is not getting quite as much local press as it deserves, though this is in a sense justifiable given the preoccupation with the grave implications of the US-China trade war. The crux of the issue in Europe relates to the ruling “populist” government in Italy, and its reluctance (or even refusal) to comply strictly with the Eurozone’s rules regarding sovereign budget deficits. The recent Italian budget has tested European bureaucrats’ patience, leading to a rebuke yesterday from European Commission President Jean-Claude Juncker, igniting a counter-response by key Italian “League” politician Claudio Borghi, who stated Italy could solve its problems if it controlled its own currency. The hostility swept through European bond markets, spurred a sell-off in equities and pushed the EUR well into the 1.15 handle. Greenback: The US Dollar was the inevitable beneficiary of Europe’s woes, climbing to a 6-week high, in DXY terms, to 95.50. The trading activity is a reminder of the two-pronged benefit of long USD positions at-the-moment: the US Fed’s determination to hike interest rates is attracting yield chasers, supporting the greenback, while the litany of global risks is pushing traders intermittently into safe havens, also supporting the greenback. The upward trend has cooled for the USD of late, leading to calls that the currency could be creeping towards a top. But with US Fed Chairperson overnight talking up the “extra-ordinary” times experienced by the US economy, as well as talking down the prospect of out of control inflation caused by tight labour markets and increases in global tariffs, the underlying bullish-trade remains well justified for the greenback. US Indices: A question raised by such bullishness from market participants and policy makers alike is, how much further can the US equity bull run last? It’s foolish to ever call tops on any market, especially one that is apparently founded on such strong fundamentals. The benchmark S&P500 and NASDAQ traded lower overnight, though both indices sit within reach of new all-time highs. The far narrower Dow Jones index, however, registered a new intraday high during the US session, climbing 0.46 per cent to close at 26773.94. A word of warning must be disclaimed with the Dow Jones as relatively high as it: though one wouldn’t want to call a marked sell-off, rallies for the Dow Jones that extend this far above the more comprehensive S&P500 often result in a pull back for the Dow Jones, as traders buy into the index in an attempt to enter-and-exit the market on the basis of rosy-sentiment. 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.
  38. 1 point
    ASX: SPI futures are indicating a 23-point drop at the open for the ASX200 this morning, effectively wiping Friday's solid gains. It comes as no surprise, really, with the lion's share of activity centring around the embattled financial sector. Bank stocks underpinned the rally on the ASX on Friday, led by CBA, in signs that the market believed the sector's recent trend lower was overdone. It may be a case of jumping the gun for traders on that one, as sentiment appears sour once more following the weekend's release of the Financial Services Royal Commission interim report. The materials and energy sector did its bit on Friday to carry the ASX higher, courtesy of a broad-based, though modest, uptick in commodity prices; while the health care sector continued to erode its market leading YTD gains, led by a near 2 per cent fall in the CSL shares, creating drag on the overall index. ASX technicals: The price action on the ASX200 was much livelier on Friday as compared to previous days last week, perhaps a sign of increased bullishness following days of anxiety leading into the Fed. An overarching theme is lacking for the ASX now, leading to a mixed sentiment across different sections of the market. Volume was high during Friday's session, especially as the index toyed with the 6230-mark, an important level of support/resistance in recent months. Considerable profit taking emerged at that level, pushing the market well in line with its recent (more-or-less sideways) trend. The pattern appears set to continue today, in the absence of a fundamental impetus or a strong external lead. China update: The strong possibility of thin liquidity may hinder the market today, and perhaps the rest of the week, thanks to the week-long Golden Week public holiday in China. The relationship has diminished somewhat of late, but Australian markets have taken the lead of its Chinese counterparts in recent months, as fears around China's economic activity feed through to Australia. Despite not being out of the woods yet, signs are looking more promising in Chinese equity indices now, which have managed to stick fat to key technical support levels in the past week. The interesting story for those invested in Chinese assets this week will be how the USD/CNH fares with Chinese traders out of action, with the Yuan looking vulnerable to the downside towards the very important level of 6.90, following the release of weaker Caixin PMI figures over the weekend. PMI data: Speaking of PMI data, one of the significant themes this week will be the release of a spate of PMI figures across several geographies. As a great leading indicator of economic strength, particularly considering the escalating trade war, PMI numbers have softened in recent months, presumably because of tighter trade conditions. The poor Chinese PMI print sets up the release of corresponding figures in Japan, the UK, and the US today, with traders of the industrial laden Dow Jones, Nikkei and DAX surely paying attention. Given a leitmotif in markets last week was the Fed's optimistic view on global growth into the next 12 months, the data dump of global PMI data provides the first opportunity to test this proposition, and subsequently form a position on this state of markets leading into the final calendar-quarter for the year. US indices: Wall Street (for one) will be entering into a curious and frenetic period as the new month rolls around, as traders prepare for what is typically the hottest period for US equity markets. The results for North American equities were lukewarm on Friday, with major US indices holding flat for the day. The so-so performance for US shares throughout last week was still enough to ensure the strongest quarter for US equities in 5 years and place those markets well in touch of all-time highs. The element of the present trade dynamic that may make-or-break the market this quarter is how it weathers upcoming US mid-terms: US shares typically stall in the month leading into such an event, notwithstanding that this round of elections appears a vote on the confidence, support and legitimacy of US President Trump. Europe and the DAX: European markets look to remain stuck in the middle of several local and international themes. Concerns lingered over the weekend regarding Italian fiscal policy, along with ongoing fears about a no-deal Brexit and the effects the US-China trade war will have on Europe’s fledgling economic recovery. The DAX has demonstrated the sentiment-sapping effects of these confluence of factors, remaining trapped in a downtrend since mid-June, even despite rallies higher in indices with comparable trading behaviour, like the Nikkei. The downward trendline currently at 12,430 will be a formidable barrier for traders, with a solid hold above support at 12,100 required to set the foundations of a swing in momentum and a trend reversal in the near-term. Oil: A status check of activity in the oil market should be undertaken to start the new week. The price of the black stuff continues to rise, on the back of greater concerns around production and supply on global markets. The US sanctions on Iran seem to be more impactful than first believed, exacerbated by the view that OPEC+ won’t be bullied nor cajoled by US President Trump to fill the gap in supply. The US President reportedly reached out personally to Saudi Arabia’s King Salman on the weekend to discuss the matter, highlighting the risks higher prices will have on global growth and market stability. No firm outcome was reported out of the interaction, as some more bullish commentators grow louder in their calls that no change to the present trade dynamic will see oil fly to $100USD in Brent Crude terms. 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.
  39. 1 point
    Trade Wars Update: It No Longer Matters? Seemingly a routine occurrence for the global financial markets, we saw the state of global trade deteriorate yet again through the past week. As expected, the United States went forward with tariffs on an additional $200 billion in Chinese goods. The terms are for a 10 percent rate on a range of imports that will increase to 25 percent by the end of the year. The standard, immediate response from China was quickly implemented, but only on $60 billion in US goods. It is not clear the strategy from China as they vowed a ****-for-tat response to what they have deemed unprovoked trade wars, but the country does not have much more room to tax imports from its major counterpart – and certainly not $200 billion worth of goods. This alone moves us into a new phase of a standoff of escalating cost for the US, China and the world. The S&P 500 is at a record high while the EEM Emerging Market ETF is only modestly off its multi-year low Will China ease off the pressure? Are they simply plotting an alternative course? Could this be an attempt to prevent President Trump from pursuing his threat to trigger the $267 billion in further duties in the event of a reprisal to the $200 billion? It isn’t clear. With the situation clearly under greater tension, the news over the weekend that plans for further talks had broken down ensures greater financial threat from this already-enormous burden. What is even more remarkable than the state of trade from these two economic leaders is the apparent state of obliviousness from the speculative markets. While certain assets show greater disregard to the threat than others (the S&P 500 is at a record high while the EEM Emerging Market ETF is only modestly off its multi-year low), they have all displayed a measure of neglect these past weeks as the tab has grown exponentially. To suggest that this situation simply doesn’t matter would be recklessly negligent. It isn’t impossible that speculators accustomed to complacency and FOMO, but it would nevertheless increase the scope of risk to stability through the future. Ignoring the dangerous wobble in a tire as you steadily accelerate down the freeway is not a reasonable state even if we can sustain it for the time being. If we continue to build up exposure until a severe economic or financial crisis arises, it will only amplify the eventual collapse. What is Eating the Dollar and How Long Does it Dine? The Dollar marked an important technical tumble this past week. Already under pressure over the past months, the DXY’s drop below 94.35 and EURUSD charge above 1.1700 represents the break of ‘necklines’ on head-and-shoulders patterns (the latter inverted). This is pressure not isolated to the trade-weighted aggregate or its heavily represented most liquid pairing. We can see the currency’s unique struggle intensifying distinctly across the spectrum over these past few weeks. But with this evidence of broad struggle, we should attempt to identify its source if we intend to establish the intent of follow through – whether persistent or near its conclusion. Reverting to an old textbook relationship, some are connecting the currency’s traditional safe haven role to the recent rebound in risk assets – including record highs for certain benchmark US indices. The Fed is expected to hike rates another 25 basis points to a range of 2.00-2.25 percent. That would be a tidy explanation, but is suspicious for its timing considering this haven function hasn’t played a significant role for months. Further reason to question this relationship is the explicit status for the Greenback as the highest yielding major currency. That advantage will likely increase this week as the Fed is expected to hike rates another 25 basis points to a range of 2.00-2.25 percent. It could be the case that the currency’s premium could be deflating under expectation that the central bank is planning to downgrade its pace of tightening at this meeting through the Summary of Economic Projections (SEP) and Chairman Powell’s press conference. Yet, we don’t see that anticipation in assets that more directly relate to such forecasts - overnight swaps and Fed Funds futures. Political risk will prove an increasingly prominent risk through media headlines in particular over the coming weeks, but there is little direct threat to economy or financial markets just yet. This slow reversal of a six-month old bull trend may also have developed in response to the longer-term concerns. Over enough time, the accumulated cost of engaging in a multi-front trade war while increasing the budget deficit during a healthy economic phase will erode the appeal of the United States’ currency’s principal status. It is possible that this long-term pressure is starting to set in; but if that is the motivation, it can readily be sidetracked by more intense short-term concerns (like next week’s FOMC decision). Political Risk Increasing as US Election Cycle Heats Ups Political risk is an abstract fundamental influence on the financial system. Certainly each trade has their political beliefs on policies ranging from economy to social causes; but more often than not, these views only cloud our assessment of the markets. It is generally-accepted market wisdom to remove emotions from our trading; and there are few things in life that more readily trigger emotion than politics. Practically-speaking, however, there is little in the way of policy that can readily translate into significant market movement in the short-term. That said, one of the few outlets with a direct link to financial health and stability is the state of international relations. And, on that front, the danger has grown visibly and exponentially. Perhaps one of the most obvious instances of this pressure on net global growth and capital rotations through trade comes from the United States. Poland and Hungary pose a threat to core EU beliefs – and have drawn criticism for such – owing to their nationalist governments’ policies. The Trump Administration has driven forward with hefty tariffs and economic sanctions on some of the largest economies in the world. Whether we personally view the policies as good or bad / right or wrong, the economic impact is straightforward. As time marches on, attention on politics will intensify with the mid-term elections approaching. While much of the high drama related to the balance of the Legislative branch, threats of Presidential impeachment and the Supreme Court pick has little to do with the kind of direct market implications that we should keep in the forefront; it can nevertheless bolster the appreciation of economic and financial connection by virtue of its mere presence in the headlines. What’s more, this is not a uniquely US concern. There is political pressure rising across the world. Reports of a possible election call in the United Kingdom have followed the failure of progress in the Brexit negotiations at the EU leaders summit in Salzburg. Mainland Europe is not immune to systemic risk via political pressures. Italy is still a massive concern to stability between its enormous debt and populist government. Poland and Hungary pose a threat to core EU beliefs – and have drawn criticism for such – owing to their nationalist governments’ policies. In Asia, financial pressure is starting to show subtle cracks in social contentedness while US sanctions have spilled over from Russia restrictions. Japanese Prime Minister Abe managed to keep his position this past week, but the economic and international diplomatic position or the country has not improved materially. The question investors should ask themselves is whether these relationships improve for compromise or rapidly intensify should economic or financial crisis start to emerge.
  40. 1 point
    Asian stocks were mixed yesterday with no lead from US session and continued concerns over trade tensions. Argentina announces new fiscal policy, while Turkey's central bank hints towards a rate hike. WTI trades higher as two rigs off the Gulf of Mexico are evacuated ahead of hurricane. Brent loses ground as India allows state refiners to import Iranian oil. RBA holds rates steady at 1.5%. Asian overnight: A mixed session overnight has seen substantial gains in China and Hong Kong counteracted by weakness in Japanese and Australian markets. With a lack of US influence given the Labor day holidays, the one big event of note came from Australia, with the RBA keeping rates steady as expected. UK, US and Europe: Looking ahead, the pound will remain in focus, with the construction PMI following up on yesterday’s weak manufacturing figure. Also keep an eye out for the inflation report hearings in the afternoon. Yesterday’s closures in the US and Canada has shifted the release of PMI readings to this afternoon, with the Canadian manufacturing PMI preceding the US ISM manufacturing PMI survey. Economic calendar - key events and forecast (times in BST) Source: Daily FX Economic Calendar 9.30am – UK construction PMI (August): forecast to fall to 52.8 from 55.8. Market to watch: GBP crosses 3pm – US ISM mfg PMI (August): expected to fall to 57.7 from 58.1. Markets to watch: US indices, USD crosses Corporate News, Upgrades and Downgrades DS Smith said that it had seen ‘good’ like-for-like volume growth in the financial year so far, with ingoing margin improvement. So far, trading remained in line with expectations. Redrow reported a 21% rise in full-year pre-tax profit, to £380 million, adding that demand remained ‘robust’ despite Brexit. WPP reported a 7% fall in headline pre-tax profit, to £821 million for the first half, while overall diluted EPS were up 14.6% to 53.4p per share. The firm said that it intends to update shareholders on strategy before the end of the year. CaixaBank Upgraded to Outperform at RBC Lloyds Banking Group Upgraded to Hold at Berenberg Bpost Rated New Buy at Berenberg Inmarsat Downgraded to Sector Perform at RBC Stef Downgraded to Neutral at Oddo BHF 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.
  41. 1 point
    Trump back introduction of tariffs on $200 billion worth of Chinese goods in ongoing trade dispute with China US president also threatens to withdraw the United States from the World Trade Organisation "if they don't shape up", claiming unfair treatment US & Canadian leaders optimistic in reaching revised NAFTA agreement by today's deadline Panasonic are set to move their European base outside of London to mitigate risk going into Brexit Argentinian government raises interest rates to 60% after slump in Peso Gold enters fifth straight month of decline; longest losing streak since 2013 Asian overnight: Yet again we have seen Donald Trump force the agenda on global markets, with his statement that the US could leave the WTO dampening sentiment throughout the overnight session. Losses throughout China, Hong Kong, and Australia were accompanied by marginal gains on the Nikkei and a flat Topix in Japan. The developing focus of late has shifted to Argentina following recent developments in Turkey and Venezuela. Despite the Argentine central bank ramping up rates to 60%, we still saw developing markets suffer, with the Turkish lira, Indonesian rupiah, and Indian rupee all losing ground overnight. Data-wise, the Chinese PMI surveys saw a stronger than expected reading for both the manufacturing and non-manufacturing sectors. However, with a potential $200 billion of US tariffs looming, Chinese traders has little to celebrate. UK, US and Europe: Looking ahead, the eurozone comes into view, with the release of unemployment and inflation data bringing expectations of a rise in euro volatility. The rise in eurozone CPI has seen the reading hit 2.1% last month; the highest level since 2012. Any further upside would no doubt put further pressure on the ECB. In the US, traders will be looking out for the Chicago PMI and Michigan consumer sentiment surveys. Economic calendar - key events and forecast (times in BST) 10am – eurozone unemployment rate (July), inflation (August): unemployment rate forecast to rise to 8.4% from 8.3%, while inflation forecast to be 2% YoY from 2.1%, and core inflation to be 1.2% from 1.1%. Market to watch: EUR crosses 2.45pm – Chicago PMI (August): forecast to fall to 63 from 65.5. Markets to watch: US indices, USD crosses Source: Daily FX Economic Calendar Corporate News, Upgrades and Downgrades John Laing Fund saw a rise in Net asset value to 130p, from 124p in the first six months of 2018. The total return of the fund now stands at 75%; 7.5% on an annualised compound basis. Profit before tax for the six-month period stands came in at £89.0 million compared with £34.7 million the same time last year. The 3.57p per share dividend announced in May 2018 is now joined by a 3.57p per share for the six months to 30 June 2018. Whitbread has agreed to sell Costa Coffee to The Coca-Cola company, in a deal worth £3.9 billion. That price represents 16.4 times the operating earnings of Costa in the 2018 financial year. IAG reinstated as Buy at Citi EasyJet rated new Buy at Citi Ryanair rated new Buy at Citi Lufthansa reinitiated as Sell with Citi 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.
  42. 1 point
    Global markets: Global equities retreated overnight as investors turned their attention to the several risk factors affecting markets at present. The Dow Jones, S&P500 and NASDAQ are all lower for the day, backing-up the modest losses sustained in European shares. The risk aversion is justifiable and reflects the general confusion of investors in a week bereft of powerful good news stories. The focus instead has been on the several distractions bemusing markets, including the unfolding President Trump legal drama, the fledgling trade negotiations between the US and China, as well as the grave situation in some emerging markets. At this stage, global equities still appear to possess enough steam to power ahead, but an increased wariness suggests that further advances will proceed with caution. ASX: SPI futures markets are indicating a stronger open for the ASX200 today, which at time of writing stands at a 22-point jump. The ASX has given up 130 points from the 10-and-a-half year highs achieved last week, taking the market at close of trade yesterday to a familiar support level just above 6240. On the charts, trade around this mark is significant, representing a levee for the index that has contained losses when sentiment in the market has shifted to the downside. Stripping back the noise that has periodically knocked Aussie shares, on balance there is still a stronger argument that the ASX can continue climb. However, given the market’s sensitivity to global factors and the looming clouds in the macro economy, if the rain starts falling then perhaps that levee may soon break. Reporting Season: In the day ahead, investors will have their attention directed to earnings reports from the likes of Medibank Private and Brambles. The debacle of yet another leadership crisis in Canberra has diverted attention away from reporting season, right when markets are in the thick of its arguably busiest week. The earnings and guidance given by companies that have already reported have generally been received well, providing investors with hope that investment conditions are still ripe. Of the company’s reporting yesterday, QANTAS was perhaps the headline grabber, with that company’s share price falling after its net income figures missed estimates and it flagged a higher cost base in the future due to increasing fuel prices. In a positive news story, Santos shares climbed after that company announced it would pay out its first dividend in two years and plans a major acquisition of Quadrant Energy. Canberra Chaos: How trade will unfold today in Australian markets will be a point of curiosity given it appears the government’s leadership crisis will come to a climax today. The fact futures markets are pointing to a positive open today does not accurately reflect investor’s attitudes to Canberra’s crisis. On numerous occasions this week, out of hours markets have suggested a jump at the open for the ASX, an outcome that hasn’t been attained come the opening bell. Ostensibly, this is because of the nervousness that the chaos in Canberra has caused. There is every chance this could materialize again today, particularly if investors start to internalize the uncertainty of this idea: that a leadership spill today will see Prime Minister Malcolm Turnbull walk from Parliament, creating a minority government vulnerable to a no-confidence motion from the opposition, which if passed could result in a snap election. Jackson Hole: The week’s most highly anticipated event will transpire in the 24 hours, when US Federal Reserve Chair Jerome Powell delivers a speech at the Jackson Hole symposium. Market participants have begun to question the nerve and conviction of the Fed in recent weeks, as risks mount to global economic growth and emerging financial markets. Fears around these risks are beginning to manifest in interest rate markets, which has seen bets that the Fed will hike two more times this year decrease, as well as in bond markets, with the spread on 2-year and 10-year treasuries narrowing to 21 basis points. It all portends greater risk for financial markets and global economic activity in the medium term, with commentary on the subject by Chairperson Powell to be closely watched. The dynamic is sure to support the US Dollar, which regained its ascendency overnight and seems poised to renew its bullish run. Trade Wars: International financial markets are keeping cognizant of the quiet and creeping developments in the US-Sino trade war. Without as much a whimper yesterday, market participants greeted the latest round of tariffs slapped by the US and China on one another’s economies. The implementation of these tariffs has long been known, and only amounts to an additional $US16bn worth of goods but comes at the higher rate of 25 per cent – announced only a few weeks ago. This latest lurch forward in this trade war appears to be shaking Chinese markets, with the Chinese Yuan slipping back towards the significant 6.90 mark, and China’s equity markets abandoning the mild recovery they staged at the beginning of the week. Regarding the Yuan, watch for how close the currency can approach the 6.98 mark – it may reveal a lot about the policy intentions and attitude of the PBOC and Chinese policymakers. Next week: Turning briefly to what lays in store for next week, the calendar looks a little sparse, characteristic of the last week of a calendar month. The major things to keep abreast of will be US GDP numbers, while locally the big release will be Private Capital Expenditure data. Reporting season on the ASX will settle down somewhat, however earnings out of the likes of Blackmores will be given some interest. The risk is with such a quiet week looming, markets will have more reason to pay attention to some of the pressing risks in global markets. As trade negotiations between the US and China fizzle and while President Trump vows to press on with his protectionist agenda, the lack of a positive counterbalance in markets may see global equities struggle and riskier assets like the AUD drift. 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.
  43. 1 point
    Global equities: Global share-markets experienced a lift overnight as European and US investors jumped online to begin the week. The overall mentality now can be characterized as one of cautious optimism ahead of low-level US-China trade talks, mixed with a touch of relief that crises in Turkey and other emerging markets are currently quarantined. Chinese markets picked up steam in late trade because of this point of view, while the Dow Jones represented this broad attitude during the North American session – adding 0.35 per cent, largely thanks to a pick-up in the industrial sector. The best performer of the major indices though was the DAX, which managed to turn around the weakness reflected in futures markets earlier in the day, to clock gains just shy of 1 per cent at that market’s close. ASX: The general positivity during overnight trade establishes a positive lead for the ASX200, with SPI futures presently indicating a 3-point jump at the open. Trade was very subdued in Australian shares for the best part of the day yesterday, as traders stepped back from the market after the ASX’s early morning leap proved fleeting. It was likely a profit-taking opportunity for punters, who lacked the impetus for further buying following a handful of soft company reports prior to market open. Coming into the day a level to note was around 6360, which signified the extension of an upward sloping line of resistance, dating back to 2016. True to form, the ASX high for the day was just below this mark, perhaps providing insight into where the next major barrier exists for the index. Reporting Season: Carrying-over from what was generally considered to be better than expected results from the reporting company’s last week, hope sprang leading into yesterday’s trade that the outperformance from Australian corporates would continue. In isolation, the earnings figures from the company’s reporting yesterday were relatively underwhelming, with none of the handful of major reporting company’s exceeding estimates. Woolworths was the headliner yesterday, and despite reporting respectable profit growth and a bonus dividend, the company’s stock fell by over 1 per cent after sales growth and net income printed weaker than expected. The day ahead will see interest turned to results out of BHP and Seven West Media this morning. ASX and Trade Wars: One interesting take away from the day’s reporting might be the small cracks appearing in some segments of corporate Australia because of the developing global trade war. For one, Fortescue Metals reported yesterday and disclosed lower revenues and a forecast period of slower growth as demand for iron ore falls. But perhaps the more interesting trade-war related takeaway came from Ansell’s earnings call, which revealed that along with softer earnings in the last year, the company expects to grow at a slower rate than previously expected due to the higher input costs related to the trade-war. The Ansell example shows how insidious the impacts of higher costs associated with protectionism can be, and how acutely these impacts can be felt by investors. Trump’s cherished Dollar: The US Dollar took a tumble last night, ending in effect its week long bullish tear. The fall came on the back of a news release that US President Donald Trump (has once again) openly chastised US Federal Reserve Chair Jerome Powell – this time while delivering a speech at a charity event. The US President stated he thought Chairperson Powell would be a “cheap money” Fed-Chair and lamented the increase in US interest rates. The US Dollar Index fell 0.2 per cent as the news trickled through the newswires, pushing the EUR/USD back towards the 1.15-mark and the AUD/USD through resistance at 0.7310 to trade 0.7340 when last looked. The US Dollar is now sitting around 40-points above quite a significant support level at 95.40, the collapse of which would take the greenback back to the levels it was trading at prior to the Turkish Lira crisis. RBA and local interest rates: The day ahead will be one focused on RBA policy and Australian interest rates, as traders prepare for a speech to be delivered by RBA Governor Philip Lowe early this morning, followed by the release of the RBA’s Monetary Policy Minutes at 11.30AM. While broader macroeconomic insights will be analysed closely by market participants, the content out of both today’s events will likely prove solely academic. Subjects like trade wars, inflation, private debt and the property market will capture interest, but what can be inferred from the discussion on these topics probably won’t move markets. The RBA has fallen in line with interest rate markets, particularly in recent months, strongly implying that Australian rates will not be shifting until early 2020. As such, what information received today out of Governor Lowe and the RBA will have already been priced-in to rates and currency markets. Global interest rates: The area of global financial markets that has been – and will continue to be – of greatest interest this week is US interest rates. The annual Jackson Hole Symposium is scheduled this week and will be prefaced by the release of FOMC Monetary Policy Minutes for the Fed’s most recent meeting on Thursday. The theme dominating trading leading into these events is the stubbornness of long term US bond yields, and the market’s apparent reluctance to push yields higher in tandem with short-term rates. The situation has some pundits worried, given the myriad of risks in markets currently, and the fact an inverted bond yield often portends recession (see 2Y and 10Y spread below). However, for equity markets, lower long-term funding costs would support valuations and attract yield chasers into stocks, so it may pay to be privy for stock traders to keep track of monetary policy news as the week develops. 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.
  44. 1 point
    Positioning Extremes Grow More Extreme There are a few undisputable and universal forces when it comes to the financial markets. One of those all-powerful winds is the concept of risk trends which is referred to by many names such as ‘risk on, risk off’ or referenced unknowingly when we blindly attribute market wide movement to animal spirits through technical cues, smart versus dumb money, panic to greed. Another of these truisms is the allocation of capital. While total wealth does grow and contract, it is apportioned to some market whether that is emerging market equities to US Treasuries to home mattresses. In a global market, there is also distribution to different regions according to what country or collective economy presents the best opportunities. And, from this parsing of investment preference; we can learn a lot about the market; but one of the most elemental solutions is the global market’s general bearing for sentiment (the risk trends referenced before). There are no easy, definitive measures for allocations across such a wide universe of markets, but there are various measures for specific areas and key ports for which to apply measure such that we come to a good understanding of the markets’ health. One of the most basic measures of preference on a regional basis is exchange rates. We have seen the USDCNH surge the past few months showing capital leave China and enter the US. That is likely a bi-product of trade wars and can signal deeper problems for China if they risk signaling to the world that there is capital flight that can disrupt their efforts to promote stability between economy and market. Given that there is certain control that Chinese authorities have over their systems, we could get more complicated in the evaluations by comparing the USDCNH to the USDHKD, look to derivatives or wait for the lagging economic data like the TICs from the US. Another good equivalence is the performance of ETFs. These derivatives are quickly becoming favorite products for global investors due to their supposed risk reduction through diversification (we heard the same thing with AAA rated subprime housing MBS 11 years ago) and the wide range of coverage they offer. There are measures of capital flowing into and out of specific, liquid ETFs (ie SPY, TLT, FXI) as well as general groups (all equity versus all bond). Another measure of positioning is the use of leverage. We may not know what people are doing with their cash in many instances, but the use of borrowed funds is often better tracked as the ‘investors’ (or lenders) want to know their exposure. As it happens, in the US, there is record use of leverage by investors, consumers, corporations and the government. Further measures of positioning are the sample readings like that on the DailyFX Sentiment page which shows retail traders (who have a very short time frame and primarily fight existing trends) and the CFTC’s COT report of speculative futures. From the latter, this past week has shown a dramatic swing in Dollar interest from the biggest short in 5 years to the heaviest long in nearly 2 (all in a few months), Treasury net short has hit a dramatic record low, and gold flipping to net short for the first time since 2002 among other surprises. There is a lot to learn once you know what to look for and how to put it into context. A Lesson from the 2013 Taper Tantrum Applied to a Global Scale Back on June 19, 2013, then-Fed Governor Ben Bernanke announced that the US central bank would begin to ‘taper’ its theoretically open-ended bond buying stimulus program (known as QE3). By the time he stated their intention, the market had already suspected this was going to take place owing to the language of the group and the performance of data coming out of the economy. However, the announcement had a significant impact nonetheless. What resulted was termed the ‘taper tantrum’. In response to this news, US Treasury yields shot higher as the markets largest sovereign debt buyer at the time announced their intention to reduce purchases moving forward. And that had a material economic effect as the cost of US Dollar-based loans – particularly for foreign buyers who had exchange rate risks – started to shoot higher. It therefore comes as little surprise that emerging market corporations that borrowed funds in Dollars shuddered at the news, and the EEM Emerging Market ETF showed the discontent. However, after some months of fear, conditions stabilized and borrowers and investors acclimated to the notion of higher costs. Even if they were exiting the active rate-depression game, they would still be low for a long period of time. What’s more other central banks like the ECB, BoJ and others were still at or near record lows with some pursuing equally massive stimulus programs. As such, complacency returned for some years after. Yet, where are we today? We still have that telltale complacency – as mentioned above – but the foundation of confidence has continued to erode as global central banks have reached the end of the road. Either they are willfully plotting their own exit from their extraordinary accommodative states (like the ECB, BoE, BoC) or they are floundering as the market realizes they have essentially reached the extent of their influence (BoJ, SNB, RBNZ). Financial markets from equities to real estate have performed remarkably well in the interim, but economic activity and inflation plateaued long ago. That has produced an elevated risk exposure without the economics to fund the exposure. So, with exceptional risk, moderate economic potential, external pressures increasing (trade wars) and central banks either easing back or losing tractions; it is worth evaluating that 2013 ‘taper tantrum’ and consider what the possible implications would be if we raised the stakes from one country to the world. Jackson Hole Symposium and US-China Trade Top Event Risk The coming week carries one of the most deflated expectations for seasonal activity for the financial markets. The Labor Day holiday for the US (September 3 this year) traditional signals a change in ‘Summer Lull’ activity to a more active and liquid Fall trading. These activity levels are as much self-fulfilling prophecy as actual liquidity phenomena, but it occurs nevertheless. However, a footnote here before we analyze further. There are some dramatic examples in our recent past where volatility as exploded in August despite the conventions. The 2015 market-wide tumble triggered by Chinese exposure fears began in August and the same month in 2011 led to global losses for shares and other risk assets as the Eurozone debt crisis unfolded. We should never rely on market parables when we are employing our capital – especially when so many global risks are so plain, such as a possible Chinese crisis arising from the US-China trade war or Italy threatening Euro-area stability to register as echoes of history. This said, the standard global economic docket is particularly thin over the next five days of active trade. It would be fitting to assume the markets are just going to drift down a lazy river if we did not appreciate the broader context. While the biggest risks to our immediate future are likely unknown fundamental waves, there are two themes that are scheduled and we can follow as they unfold. The first is the US-China trade war. The US Trade Representative’s office is expected to hold a public but off-camera hearing on Chinese tariffs throughout the week. It is worth reminding that the Treasury has left public feedback open until early September until they decide on whether or not to proceed with the $200 billion in new tariffs President Trump threated some weeks ago. More promising, US and Chinese officials are due to restart trade talks on Thursday and Friday. It was reported that this meeting will start to build a map that can take the countries back to more favorable terms such that the countries’ two Presidents can agree at the highest level when they meet in November. The other high-level event to watch over the coming week is the Jackson Hole Symposium. The annual meeting of central bankers, business leaders and key financial lawmakers hosted by the Fed can cover crucial developments in global markets and the economy. The official theme of this conference is ‘Changing Market Structure and Implications for Monetary Policy’, but expect the conversation to touch many of the key themes mentioned above: global retreat from extreme easing, the failing effectiveness of stimulus, global pressures via trade wars and the extremely inflated levels of global capital markets.
  45. 1 point
    Sentiment boost: The unpredictable ebbs and flows of volatile global markets delivered a positive outcome overnight, as equity markets recovered lost ground courtesy of a healthy boost of positive sentiment. The increased investor optimism came following news that US and Chinese officials are in talks to renew trade negotiations. This comes only days from the next round of tariffs due for imposition on Chinese imports into the US from the White House, which will rise to the value of $US50b worth of goods. The favourable developments managed to distract from the uncertainty surrounding the Turkey crisis, that at this time continues unabated. North America: Wall Street bounced off the canvas in response to the slither of good news, regaining some of the day prior’s lost ground. The S&P500 was up 0.9 per cent in late trade and the trade sensitive Dow Jones was up a remarkable 1.6 per cent, while the NASDAQ lagged due to the lingering effects of the day prior’s minor tech sell-off. In what can be extrapolated to be a very good news story for the US economy, market giant Walmart rallied in the session, buoyed by news that it posted its best sales growth in a decade. The news affirms the strong US Retail Sales data released on Wednesday and supports the notion that the US consumer is underpinning strong economic growth. ASX: The ASX200 had another day worthy of a sprinkling of pride, managing to shake-off a steep fall in early trade caused by a weak lead from overseas markets, to close the day only 0.01% lower. In another day that vouched for the Australian share market’s underlying strength, the ASX proved to be one of the few shining lights in the region, with Asian equities experiencing a dumping throughout the day’s trade. Given that 6300 has been broken and the trading day ahead is expected to be characterized by a boost in confidence, the question becomes whether the ASX can again clock a decade long high, and close above 6330. Reporting season: The ASX’s success rests on whether a so far solid reporting season can continue today, with few Blue Chip and large-cap company’s reporting as compared to the last few days. In terms of interesting stories, Kogan reports this morning, but will unlikely shift market fundamentals or sentiment, while a handful of real estate and mining companies report. Yesterday witnesses some remarkably strong activity from some of the ASX’s larger reporting stocks, the most noteworthy being Treasury Wine Estates and QBE Insurance, with both clocking in over 5 per cent gains yesterday. Telstra also reported and experienced a modest relief rally, while Origin energy disappointed, selling-off after the company again stated it would not be paying a dividend. Employment Data: Australian economic data was also being watched by the macro-buffs yesterday, as the ABS released monthly employment data for the month of July. Coming into the event, the figures weren’t expected to rattle in the slightest financial markets, particularly that of the currency and interest rate markets, with investors writing off the prospect of RBA action for the next 18 months. The figures released yesterday were mixed, but on balance could be considered a net-positive: the Australian economy lost just shy of 4k jobs last month, but the month prior’s figures were revised upwards enough to push the headline unemployment rate down to 5.3 per cent. Interest will turn today to RBA Governor Philip Lowe’s assessment on the situation, as he testifies before the House of Representatives. China: Chinese markets will be under the microscope today, especially considering the sanguine view adopted by investors last night following revelations that the US and China may be returning to the negotiating table. Chinese equities will be watched closely given their troubles recently, but its most definitely the Yuan that will experience the most scrutiny today, after the USD/CNH plunged to almost 6.96 yesterday. The pair has since recovered its losses in the overnight session on the back of last night’s trade-war developments; however, knowing that the more positive trade war stories have often end up no more than fluff, the curious point will be whether the PBOC will allow its currency to depreciate all the way to the 7.00 mark if things do turn dire. Brexit: The major global news story today will surround the latest round of Brexit negotiations, with activity in the currency markets the area to watch around this. We are creeping closer to a no-deal outcome from Brexit as a deadlock between both parties fails to break. The situation isn’t helped by the political disfunction within the ruling Conservative, which appears unable to establish a single and cogent position on the matter. The Pound has taken a belting consequent to the disorder, a dynamic compounded by the roaring greenback, to trade at 12 month lows this week. The fortunes for the pound don’t appear good, but if there is a surprisingly strong outcome to the Brexit negotiations, perhaps a bounce in the GBP/USD is overdue. Please note: 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.
  46. 1 point
    Sentiment: Global risk appetite diminished once again overnight, sparking sell-offs across equity markets. The concerns about the fragile state of the Turkish financial system and what that might mean for markets was behind the fall, as traders sought out safe havens to park their money. The US Dollar held its advance consequently, but it was the JPY that saw the most activity, with the USD/JPY falling as low as 110.43. Following Tuesday’s relief rally, it would appear investors aren’t quite prepared to let go of the risk associated with Turkey’s financial crisis, which is compounding fears about trade wars and slower global economic growth. The risk-off play may find itself fuelled today, as investors become wary of the next round of Brexit negotiations, due for kick-off in the next 24 hours. Commodities: Commodities markets experienced some of the most volatility in the overnight session, slammed by fears of global financial risk and economic slowdown. Copper entered a technical bear market, as it tore through the $US60.00 mark and several lines of resistance to trade at $US57.92. Oil slipped too, owing to fears of lower demand due to slower global growth, and after crude oil inventories printed higher than forecast. Gold’s aggressive sell off continued, plunging through support at $US1180 an ounce, and seriously opening-up further falls towards $US1120. Of relevance to Australia, iron prices were one of the worst performers for the day, pin dropping 3.5 per cent, portending a tough day for mining stocks. Overnight session: Stocks in Europe and on Wall Street took a plunge courtesy of the weak sentiment last night, with the FTSE and DAX giving up around 1.5 per cent, and the US benchmark S&P shedding 0.76 per cent. The shift lower was led by global tech stocks, which were rattled by news that Chinese tech giant Tencent Holdings reported its first profit drop in a decade. The NASDAQ fell 1.2 per cent throughout trade on the back of weak sentiment and the sell-off in tech shares, weighing on the rest of US shares. The poor return for US comes even though US CPI figures overnight strongly exceeded expectations, revealing that despite the risks and interferences, the US economy is fundamentally strong. ASX: SPI futures are presently pointing to an ASX200 that will be caught in the fray of last night’s equity sell-off, indicating an open around 50 points lower. The dip will follow a day in which the local market closed at 10-year highs, as traders finally managed to push the ASX above the significant psychological barrier around 6300. Remarkably, the milestone was achieved without the collective might of the materials and financial sectors, which each fell 0.91 per cent and 0.21 per cent respectively. The hope will be now that, despite what appears to be a tough day ahead, the close above 6300 yesterday sets a precedent for the markets and can elevate to such levels with much greater ease. Reporting season: Earnings season provided the strong fundamentals for investor activity during the local session, with several stories leaping out of the day’s trade. Shooting star CSL climbed after it beat average analyst estimates, rallying to a record high above $210 per share. Wesfarmers also posted results which, although on the surface appeared incredibly poor, showed that when stripped of one off costs associated with losses and write-downs, the net income of the company was stronger than generally expected, pushing the company’s share over 3 per cent higher. The laggard for the day was IAG, which fell over 6 per cent after the company’s net income missed even the lowest analyst estimate. The earnings season will now turn likely be dominated by the release of several of the ASX’s big hitters, including Telstra, QBE and Treasury Wine Estates. Australian Dollar: The Australian Dollar remained one of the worst performers across currency markets overnight, falling precariously close to the 0.7200-flat mark. The Aussie currency has taken the form of the preferred global risk-off proxy this week, amid concerns first in China and now in other emerging markets. With risk unlikely to abate, Chinese economic growth faltering, a falling yield advantage and a roaring USD, it’s hard to imagine a situation in which the AUD will find support. Local wage growth data yesterday – which came in at expectations but revealed that the Australian economy is experiencing flat real wage growth presently – sets up the release of employment data today, with both data points likely to enervate the local currency. AUD & ASX: The silver lining to the Australian Dollar’s fall has been its support for the local equity market. In what is a rather strong correlation, the over 4 cent falls in the value of the AUD/USD since the middle of June has driven funds into the local share-market, delivering a tacit endorsement from investors to our market, corporate health and economy. The reason that the weaker currency is supportive of the ASX is twofold: on one hand, Australian stocks have become relatively cheaper when compared to their global counterparts; and on the other, revenue denominated in foreign currencies can be converted at a lower exchange rate, boosting businesses earnings. Please note: 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.
  47. 1 point
    ASX yesterday: SPI futures have the ASX200 edging slightly higher this morning, following a day in which the Australian market challenged the significant 6300-handle once more. The strong activity perhaps came as somewhat of a shock to traders, given the humdrum session on Wall Street the night before, combined with the floating of several geopolitical risks. Some solid earnings reports set the foundations for the yesterday’s run, namely from financials stocks Suncorp and Magellan; but the real catalyst for the stronger ASX was a general boost to sentiment from a rally in Chinese equities, which added 2 per cent according to the blue chip CSI300 index. ASX prospects: In what was a slightly disappointing climax to the day, the ASX200 failed to close about 6300, indicating some reservations amongst investors about yesterday’s move. It isn’t the first time that the local market has failed to hold above that level, raising questions about the substance beneath these sorts of moves higher. So far, reporting season has delivered some respectable results, which — assuming if it continues — will give impetus for pushes higher. However, considering the vulnerability in bank stocks owing to tightening funding costs and slow credit growth, coupled with flatness in the materials space due to softer commodity prices and trade war fears, a sustainable move higher in the index must questioned and approached carefully. Aussie Dollar: The low implied volatility markets, which is at 7-month lows based by some measures, has boosted risk sentiment and supported riskier assets in the past several days. This dynamic was well demonstrated by the Australian Dollar, which saw a flow of speculative trading push the local unit to the very top of its range. The AUD/USD edged close to the top of its range during the Asian session, hovering around the 0.7440-mark for much of the day, and reaching highs above 0.7450. Although the move higher in the Aussie Dollar was slightly counterintuitive given global risks and the matter of unattractive yields, the price action was well within the currency’s recent range. Profit taking from speculative traders has presumably overnight irrespective of this, with the AUD/USD trading around 0.7375 at time of writing. North America: Wall Street dipped at the North American session’s close, receding for the second day and putting on hold its resolute climb towards record highs. US shares seems to be a little more sensitive to global risks at the minute, pushing traders into safe havens like US government debt, and driving benchmark 10 Year Treasury yields to 2.92%. Furthermore, it was industrial stocks and the US financials lead the market lower – a state of fairs manifesting most in the Dow Jones. In a silver lining to the night’s trade, the ever-strong NASDAQ held its line, coming within around 15 points of it all time highs, galvanized by renewed enthusiasm towards tech stocks. US CPI: Some of the bearishness in US markets last night may be attributable to positioning for the release of the week’s major economic announcement tonight: the release of US CPI data. Following on from the overnight release of US PPI figures, which revealed a below forecast number, traders will be digging into tonight’s inflation numbers for signs that the red-hot US economy is showing signs of significant price growth. Although the official CPI print isn’t the US Fed’s preferred inflation gauge, signs of an overheating economy in the form of rapid price growth will weigh on policy maker’s minds, particularly amid only gradual rises in US wages growth. Greenback: The US Dollar this morning is displaying considerable strength. According to the US Dollar Index, the greenback has wrestled through resistance at 95.40, to trade at 95.60 at time of writing. Currency markets have been awaiting this sort of move for several months, and though it’s too early to say if it will consolidate itself, conventional wisdom suggests it’s a matter of time before higher yields will drive the greenback higher across the board. Tonight’s CPI figures could be the spark that lights the fire, with a break of this resistance at 95.60 opening-up ~96.70 as the next stop. Data today: In other relevant economic data, both locally and abroad, global traders will be preparing for the monthly release of UK GDP data this evening, while locals will be keeping an eye on the RBA’s quarterly Monetary Policy Statement. The UK’s GDP data will be particularly interesting as it relates to the GBP, particularly the cable, which has come under heavy selling pressure following the BOE’s recent dovishness and heightened risks relating to a Brexit “no-deal”. The GBP/USD has burrowed below a rather firm trend channel overnight, and is flashing signs of being a little oversold: although the trend is irrefutably lower for the Pound, perhaps a bounce in the sterling is on the cards following tonight’s GDP release in a classic “buy the rumour sell the fact” scenario. Please note: 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.
  48. 1 point
    US-China Trade War Moving Beyond Boundaries As expected, the relief from trade wars didn’t last long. Not a week after US President Trump and EU President Juncker announced an armistice on tariffs between the two dominant economies, the former revived pressure on its favorite target: China. Trump had issued threats of escalating tariffs against its trade-dependent counterpart over previous weeks, but the impact of the warning seemed to come with shorter half-lives than what we had experienced through previous iterations. With a strategy that seems to center upon keeping steady pressure on China, the administration seems to have adopted two new means of pushing its efforts. The first drive follows the familiar policy approach of escalating the stakes, just at a faster pace. This past week, the President advised his trade officials to explore raising the tax rate on the previously threatened $200 billion in tariffs against China from the initially stated 10 percent to a far more onerous 25 percent. Following its vow to match the United States’ efforts in kind, China said it was looking into a further $60 billion tariff on US goods. This is notably smaller, which reflects the reality that the country is reaching the limits of this ‘conventional’ economic ordinance as China only imported $130 billion in US goods the previous year. That said, the escalation is unlikely to stop there. The targets and methods will evolve - and the US may have be ushering in the next stage of the trade war engagements. Late last week, the President’s Chief Economic Adviser Larry Kudlow essentially took to trash talking the Chinese economy and financial system. In remarks he suggested data is suggesting the Chinese economy was slowing and suggested the slide in the Yuan may be evidence that capital was fleeing its financial system. Though seemingly modest compared to the political Molotov cocktails tossed so frequently nowadays, attempting to incite panic among a competitor’s investors is dangerous and diplomatically belligerent. Above all else, China is concerned with stability: economically, financially and socially. Threatening this calm is likely to provoke a more aggressive – and now unconventional – way. And, lest we forget how connected the world is today, if a crisis erupts for either economy, it will spread to the other – and the rest of the world. The Next Major Leg of a Broader Dollar Trend? There has been a notable increase in forecasts projecting the forthcoming next leg of a larger dollar bull trend. That is certainly possible, but given the larger themes guiding the benchmark currency, it is far less probable than ensuing slide. I approach evaluating any currency or market with the belief that it can ultimately rise or fall. To assume certainty in a directional view is to delude yourself and make you less capable of adapting on the fly – cutting losses or taking advantage of the unexpected – when circumstances don’t go to plan. For the Greenback, I can certainly think of conditions that would foster further advance. That said, they are less likely to occur, less capable of sustaining influence or more likely to be overpowered by more commanding influences. The most favorable alignment would come through the combination of the Fed maintaining its hawkish bearing, risk trends holding buoyant (favoring its yield forecast), major counterpart currencies torpedoed by their own troubles and trade wars somehow encouraging capital to flow into the economy. That said, these are broadly unlikely conditions. Growth forecasts are starting to fade and volatility is materializing in the financial system more frequently. That undermines conviction in the ‘risk on’ bearing and the Fed’s divergent monetary policy bearing is likely to capsize in turbulent market conditions. Trade wars render no winners whether initiator or target, and the United States’ indiscriminate pressure on so many major trade patterns dramatically increases the risk of painful blow-back. The most promising fundamental spark moving forward would the broad collapse of the Dollar’s major counterparts. That is possible in systemic risk aversion where the market takes time to evaluate the eroded capacity of central banks to fight fires through diminished monetary policy. However, fleeing to the US for safety amid trade wars is a particularly thin fundamental scenario. Yes, it is possible that the DXY overtakes 96 and EURUSD slips 1.1500 to reconstitute the reversal in April and May. However probabilities don’t favor that outcome. Apple Passes $1 Trillion Valuation and Calls Attention to Where Value is Being Assigned Investor sentiment has proven impervious to various fundamental and speculative hits over the past years. This strength has been formed through a mix of genuine economic recovery, exceptional monetary policy and raw speculative appetite. Yet, over time – and speculative reach – we have seen some of these pillars of support fall away. Economic growth has leveled out and is now at risk owing to populist pressures and extreme accommodation at central banks has plateaued. This leaves investor appetite itself an anchor of enthusiasm. And so, the focus turns to the correlation between assets along the lines of investor sentiment with leading exemplars of speculation carrying much of the market’s weight. As far as ideals for risk trends, there are few more concentrated reflections than the FAANG group. Registering out-performance across liquid, global asset classes; US equities have registered one of the strongest runs since 2008. Within US stocks, the tech sector has proven a leader. And, further at the core of that sector are the market cap dominant members comprising the FANG. The previous week we notched the split between relative impressive reports by Google and Amazon compared to the objective pain suffered by Facebook and Netflix. That left the unofficial ‘A’ (Apple) to break the tie. And, break the tie it would with a robust earnings that catapulted shares to a record high and beyond the historic milestone that marked this firm as the first publicly-traded company to surpass a $1 trillion valuation marker. This is a significant milestone in financial history, however, it will not alter the course of our immediate future. There was a time in past market cycles where surpassing a major ‘psychological’ level – like 10,000 for the Dow Jones Industrial Average – was treated as a turning point whereby markets would seemingly never sink below the same baselines ever again. Of course, looking back, that seems ludicrous to suggest; but it is easy for market participants to be swept up in the mania just as completely as it does with panic. Beyond the headlines, Apple’s performance was impressive but it didn’t produce a particularly extreme charge to reach this new milestone. Further, its ability to carry broader sentiment to a further bull trend has already proven lacking. Ultimately, Apple’s performance serves to remind us how extraordinarily rich markets currently are and the shift in dependency from traditional (‘tangible’) value to more speculative means. I asked in a poll this past week what would be worse: if Apple earnings missed and its shares sank or if they beat and markets sank anyways. Clearly AAPL and markets at large advanced, but if it were to turn lower this coming week, it would carry the same sentiment as the latter scenario. And that scenario is the one I am more worried about.
  49. 1 point
    Poor EoY results helped pushed the FTSE lower yesterday as miners sold off, whilst the White House threat for further Chinese tariffs had a negative impact on the S&P energy and industrial sector which also suffered. In the US the Fed decided to hold rates ahead of a likely September hike. Range remains in the 1.75 to 2 per cent channel. According to a US trade representative, the refusal of China to meet US demands, along with implementation of retaliatory tariffs on US goods, spurred the decision to increase the 10% tariff to 25% on $200bn worth of Chinese imports. After consecutive losses for the previous couple of days, oil prices rose over the last session as speculators look for a bounce. BoE widely expected to raise interest rates today. If a hike is confirmed from Threadneedle Street later today, this would only be the second this decade. Video from IGTV talking about the banks interest rate rises is below. Asian overnight: Trade war concerns have come back into focus to see Asian markets on the decline once again. Losses in Asian equity markets are substantial with China's Shanghai Composite down over 2% on the day. Chinese and Hong Kong stocks were the big losers amid a sea of red overnight, as markets reacted to the potential of the US to raise a 25% tariff on $200 billion worth of Chinese imports. Recent tones of dissatisfaction from the Chinese over US blackmail seem to have a basis in this threat, and with the Chinese importing nowhere near $200 billion worth of US goods, this raises questions over what their response will be. The main data point overnight came from Australia, where a sharp rise in the trade balance surplus highlighted the sharp deterioration in imports (-1% from 3%) rather than anything major on the exports side (3% from 4%). UK, US and Europe: Looking ahead, the UK PMI focus continues, with the construction sector under the microscope in the morning. That UK theme continues at midday, with the Bank of England widely expected to raise rates for the first time this year. A relatively quiet US session means that there will be a greater focus on wider economic issues and corporate earnings reports. With Caterpillar, Apple, and Tesla all out of the way, today sees reports from the likes of GoPro, Kellogg, and AIG. South Africa: US Index futures are also lower but to a lesser extent, and in turn we are expecting a soft start on the Jse Top40 Index today. The dollar has firmed and precious metals remain at depressed prices. Base metals trade mixed this morning. BHP Billiton is down 3.3% in Australia suggestive of a weak start for local diversified resources. Tencent Holdings is down 3% in Asia suggestive of a soft start for major holding company Naspers. Economic calendar - key events and forecast (times in BST) 9.30am – UK construction PMI (July): expected to fall to 52.5 from 53.1. Market to watch: GBP crosses 12pm – BoE rate decision: an increase in interest rates to 0.75% is possible, and would be expected, but given recent weakness in UK data the bank may yet demur once again. Markets to watch: FTSE 100/250, GBP crosses 1.30pm – US initial jobless claims: expected to rise to 220k from 217k. Market to watch: USD crosses Source: Daily FX Economic Calendar Corporate News, Upgrades and Downgrades Barclays saw their H1 profits whittled away amid huge litigation costs and settlements eroded what would have been a 20% rise in pre-tax profits for the firm. Instead, pre-tax profits fell to £1.6 billion, from £2.3 billion after a circa £2 billion pay-out, which includes a £1.4 billion settlement with the US DoJ. Looking behind those charges, the company saw a strong performance, with the UK arm raising pre-tax profits by 30%. Aviva reported a 2% fall in operating profits compared with last year, with the firm citing the impact of disposals, tough market conditions in Canada and higher weather related claims for the fall. Despite this, they expect to see these trends to reverse in H2, with the firm remaining on track to hit their 5% growth target for the year. Their EPS number came in above market estimates, with an operating EPS of 26.8p (vs 25.1p expected). The dividend was increased by 10% to 9.25p per share. Rolls-Royce expects their 2018 earnings results to come in towards the upper end of its guidance range, following a stronger than expected showing from their civil aerospace and power systems businesses. This comes despite a £554 million charge for issues relating to their Trent 1000 engine, which has been shrouded by issues over their durability. That figure will cover the Trent 1000 issues up until 2022. On the earnings side, the firm saw underlying revenues jump 14%, with underlying profits rising by £205 million, to £141 million. Liberty Holdings (SA) Interim results showed normalised headline earnings per share to have increased by 6% Elementis upgraded to overweight at JPMorgan Asos rated new outperform at Wells Fargo Gamma Communications rated new buy at Citi Norma upgraded to buy at HSBC Macquarie upgrades AECI to outperform with a target price of 12800c Renaissance Capital upgrade African Rainbow Mineralsto buy with a target price of 15000c Shell cut to equal-weight at Morgan Stanley Sodexo downgraded to market perform at Bernstein Subsea 7 downgraded to underperform at Macquarie WDP downgraded to neutral at Kempen & Co Featured Video Please note: 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.
  50. 1 point
    Trade war worries offset the gains seen in Wall Street with the Asian equity market struggling overnight. The trillion dollar valuation race between Apple and Amazon continues with Amazon tipping the $900bn valuation yesterday. GBP continues to take a beating against major world currencies as CPI data yesterday remained unchanged, reducing the likelihood of a rate hike in August. US banking shares continue to do good in earning season as Morgan Stanley profit jump. Oil prices remain volatile but fall amid record U.S. output and stockpiling continues to build. Have your say on which new cryptocurrency IG offer in our community poll. Asian overnight: Asian markets traded largely lower, as a breakdown in talks between the US and China highlighted the potential longevity of this recent trade war. However, despite the lack of any developments in trade negotiations, markets have largely taken the news in their stride, with losses proving relatively minimal. The Australian ASX 200 index was the one gainer overnight, despite a simultaneous rise in the AUD thanks to a batch of jobs data. A sharp rise in the employment change figure saw it rise to the highest level of 2018 thus far. UK, US and Europe: Global equity markets are trading mostly lower this morning although losses are marginal. While there appears to be no immediate and new economic catalysts to drive market movements this morning, US earnings remain a primary driver of equity markets right now. The dollar is slightly firmer and commodity prices modestly weaker this morning. Looking ahead, yet another important UK economic reading comes out in the form of the retail sales figure. With underwhelming jobs and inflation data, the expectations of an August rate rise are gradually easing, driving the pound lower. With the retail sales number expected to tumble from 1.3% to 0.1%, we could see yet another warning sign for the BoE today. In the US session, keep an eye out for the Philly Fed manufacturing survey, alongside the latest unemployment claims figure. South Africa: BHP Billiton is trading flat in Australia suggestive of a similar start for the South African listing of the company. Tencent Holdings is trading 0.6% lower in Asia, suggestive of a soft start for major holding company Naspers. A weak trading statement is expectant of a soft open for Woolworths, following on from a negative reaction yesterday to Shoprites trading update. Economic calendar - key events and forecast (times in BST) 9.30am – UK retail sales (June): forecast to rise 2.4% YoY from 3.9% and 0.4% from 1.3% MoM. Markets to watch: GBP crosses 1.30pm – US initial jobless claims (w/e 14 July), Philadelphia Fed mfg index (July): claims to rise to 217K from 214K, while the Philadelphia Fed index rises to 21.5 from 19.9. Markets to watch: US indices, USD crosses Source: Daily FX Economic Calendar Corporate News, Upgrades and Downgrades AO World said that Q1 revenue rose 8%, reflecting a strong start to the year in April and May, although demand was weaker in June. It remains on track to hit full-year expectations. Unilever sales rose 1.9% in Q2, below the forecast 2.2%. A Brazilian transport strike and weak performance hit pricing. Babcock expects low single digit underlying growth for the full year, versus a previous forecast of low mid-single digit growth. This was due to a slowdown in defence and marine work. Sports Direct said that full-year core earnings rose 12.2% to £306.1 million, ahead of forecasts of £296 million. Core earnings are expected to rise 5-15% in the next financial year. Buffet has won more power for share buy backs for Berkshire Hathaway if he feels the stock is undervalued. BRK gains 5.27% on the news. Lloyd’s loses market share in the uk mortgage space last year to RBS and HSBC. Although companies usually want to remain dominant in all forms of market share, reducing exposure, and therefore risk, to this particular market going into rising interest rates and Brexit may not be the worst thing. Adler Modemaerkte Upgraded to Buy at Oddo Salzgitter Upgraded to Buy at Goldman Ericsson Upgraded to Reduce at AlphaValue HelloFresh Upgraded to Buy at Bankhaus Lampe Alstria Office Cut to Underweight at JPMorgan BioMerieux Downgraded to Hold at HSBC Hypoport Downgraded to Hold at Berenberg Continental Downgraded to Hold at Bankhaus Lampe Featured Video from IGTV Please note: This information has been prpared 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.
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