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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. 5 points
    I'm happy to announce that you can now add drawings to the indicator study area both on desktop and mobile of the IG charts. This new functionality has been developed on the back of client feedback submitted to Community, from within the dealing platform, and directly with our Trading Services and client facing teams. If you have any other requests, please add them in the comment section below and we'll make sure the charting dev team and product owners see them. You can now draw on indicators For instance, get more insight from your RSI indicator by drawing a trendline directly on the study area. The ability to draw on these indicators, such as MACD and volume, opens up a number of new options for technical analysis. Trends, for example, can add granular insight into market dynamics and can help improve the accuracy of your TA and strategy. But that's not all... We also; added the measure tool to the mobile charts and made it persistent on your screen so that it does not disappear when you tap or click away. improved the usability of the charts so that you cannot move your drawings by mistake when moving your charts sideways. To move a drawing, you would need to explicitly select it first. improved the general rendering performance of these drawings. Coming very soon! we've added the option to activate or deactivate the snapping on the candles. This should be rolled out around mid October. All the best and happy trading IG Community Moderator Team
  3. 4 points
    Trade War Relief, But How Much? Finally, some trade war respite. Or at least, what looks like relief. Following week after week of steadily escalating threats and a few decisive actions (and retaliations) along the way, there was finally a joint statement of agreement between key global leaders. Following their meeting in Washington DC, US President Donald Trump and European Union President Jean Claude-Juncker issued a statement of success this past Wednesday. Any pause in this quickly ballooning threat to the global economic and financial order is welcome, but that doesn’t mean we should accept the event at face value. Did this summit result in a legitimate course correction for the growing destructive force was the press conference a political event designed to allow both leaders to claim a victory for their constituents? To evaluate that, we need to consider the terms. There was a commitment made by the EU to purchase more US-produced soybeans and natural gas. That seems encouraging at first blush, but pressing individual members to increase consumption is not reasonable. Vows to continue working towards solutions to the metals tariffs and avoiding tax on autos along with the suggestion that they would work together towards ‘zero tariffs’ is likely more enthusiasm than a plan of action. Not everything was a means to score political point. The agreement not to introduce new tariffs so long as they were negotiating is material as it curbs fear of an impending 20 percent tariff on European autos by the US and the $300 billion retaliation threatened by the EU. This glad-handing may be lacking for tangible action, but it can help curb fears of imminent escalation. That said, general capital market benchmarks – such as US equity indices – seemed little perturbed by actual progress in the economic fight these past few months. Let’s hope that aloofness and the fresh optimism holds moving forward, because this theme has not likely hit its crest. The largest threats have been made by the US against China. The Trump administration is likely putting tension on other fronts besides China as a means to amplify the leverage on this economic powerhouse. When the US eases back against developed world counterparts like EU, perhaps they expect those countries to ingratiate themselves to the US and head off critique for their handling of relationships with China. Don’t expect trade wars to truly be on the decline – much less resolved – with last week’s developments. Fed, BoE and BoJ Rate Decisions for Individual and Collective Influence The ECB rate decision this past week didn’t earn the Euro much in the way of productive volatility. Compare that to the speculation it drove – much to the central bank’s chagrin – throughout 2017. For many traders, that makes it an event to disregard. However, market participants would be wise to keep tabs on these fundamental themes for both their longer term influence on the target currency over the coming weeks and months; but it is arguably even more important to account for such events collective sway over more systemic matters like the inextricable link between global monetary policy and risk trends. It would be wise to consider these larger concerns through the week ahead as we wade into a run of central bank decisions. On tap, we have five large central bank rate decision, but only three of them are ‘majors’. The greatest weight will be hefted by the Federal Reserve. In monetary policy terms, everything about this meeting will be well fleshed out by speculators. Through exceptionally transparent forward guidance, we know the group expects to hike four times this year and that they have operated ‘on the quarters’. This meeting is out of sync for that trend. The real interest is the language used to either maintain path to a September rate hike or to start pulling back from it. Furthermore, there will be some degree of interest to see if the Fed replies to the President’s critique of policy and the currency – though that may be more appropriate for individual members’ reflections. Meanwhile, the Bank of England’s (BoE) Super Thursday meeting is expected to deliver a hike (77% chance according to swaps) and the Quarterly Inflation report. This is the most action-oriented event, but it will compete with Brexit for Sterling momentum and scaling up to global risk trends is not something this group’s policies have been capable of in this cycle. Finally, the Bank of Japan will no doubt keep its rates in place and the size of its stimulus program untouched. However, last week, reports surfaced that the group was discussing changing its stimulus approach to make it more ‘sustainable’. It is unclear exactly what that would entail, but given they are already at an extreme, it was read as a ‘hawkish’ shift. While these events can generate movement in their own currencies and local capital markets, do not underestimate the malleability of global risk trends under monetary policy. Years of excessive (extended well beyond the needs to stabilize growth and past the point of proving it would not readily translate into desired inflation) monetary policy has inflated market levels. It won’t be the wholesale withdrawal of stimulus across the board that will prompt sentiment rebalance but rather the anticipation normally associated to risk trends. FANG Has Set Up Apple as a More Important Capital Market Driver Earnings season has been mixed in the US thus far, but more important than the report of corporate numbers each trading session is the shift in bias surrounding these updates. There is considerable amount of ‘fudge’ room in reporting quarterly figures due to the dubious accounting allowances in GAAP (I obviously am not a fan). Yet, the details in questionable figures can be played up or played down depending on what the audience is willing to tolerate – or is actively seeking. With benchmark US indices struggling to regain the remarkably progress of 2017, sentiment has notably shifted towards earnings. No longer are the impressive elements of comprehensive reports amplified and the disappointing downplayed. The shortcomings are starting to be interpreted more readily in the general shortcomings that are more apparent in other areas of the economy. It is against this backdrop that we have had a troubled quarter from the concentrated speculative leader in the FANG. For those not familiar, it is an acronym of Facebook, Amazon, Netflix and Google – some of the largest and fasting growing market cap stocks in the world. The fact that they are also tech, which is the sector that has outperformed in US markets; and US equities which have outpaced most other liquid ‘risk’ benchmarks speaks to the concentration. As important as this group is, there support is starting to turn to borderline burden. Where Google and Amazon’s figures were positive (though they came with very clear caveats in fines and income), the Netflix and Facebook reporting were outright pained. The former dropped while the latter collapsed from record high to official bear market in a day. Given what the FANG represents, the market has paid closer attention to the state of earnings and perhaps the bias that has been applied here so consistently. How to settle a 50/50 split in the FANG updates and the plateau established in the group’s price indexing? Add an ‘A’. Due Tuesday after the bell, Apple’s earnings will tap into key US tech firms and it has its own innate amplitude as the world’s largest market cap stock. It will be important whether it beats or misses, but even more crucial is how the market treats a better or worse outcome than expected. This event can carry far more weight than just the immediate reaction for AAPL shares.
  4. 4 points
    So Much Risk, Status Quo is an Improvement In individual trading sessions or entire weeks where there is an overwhelming amount of important, scheduled event risk; we often find the market frozen with concern of imminent volatility. Even as a remarkable surprise prints on the docket early in the week, the impact it generates is often truncated by the concern that the subsequent release can generate just as much shock value but in the opposite direction. Many opportunities have been spoiled by such situations. Yet, what happens if we face the same situation on a grander scale? What if the threats are thematic, global and frequently lacking a specific time frame? We are facing just such a scenario now. The most troublesome subject is the unpredictable winds from the global trade wars. For influence, this is a systemic threat as the economic pain will inevitably come to a head. If we had an end date to work with, there would be a more decisive risk aversion, but it is the uncertainty of pacing that leaves the markets to drift with anxiety. Most critical updates in this ‘war’ have come out of the blue in the form of a tweet from US President Donald Trump. Add to this fully capable theme conflicting – though less capricious – matters, and there is just enough sense of opportunity in short-term efforts to keep bulls clinging to hope. Monetary policy, new and failing economic relationships, corporate earnings and more can fill in between shocks of new tariff threats. Though, if we came to a scenario of a universal dovish shift in central banks (or any other theme for that matter), would it be enough to offset the blight to global growth from trade wars? Not likely. Any Whiff of Fed Worry and a Dollar with Everything to Lose I weighed out my theory last week that Fed policy can only disappoint moving forward. That is not to say it can maintain a sense of status quo – it certainly can. However, the genuine opportunities for this central bank to ‘surprise in favor of the bulls’ is so improbable as to be impractical. It has already established a pace remarkably aggressive relative to counterparts. If conditions continue to support growth and optimism, it would lead other central banks onto a path to close the gap with the Fed. If economic and financial health floundered, the Fed would in turn have to ease its pace. This past week, the CPI data gave quantitative support for the status quo – though not any material Dollar lift. The Fed’s monetary policy update to Congress on the other hand laced its confidence on the economic outlook with modest concern over the fallout from trade wars while a separate report suggested the tax cuts would have less positive effect on the economy than previously anticipated. You can bet Fed Chairman Jerome Powell will have to address questions on both fronts when he testifies before the Senate Wednesday in the semi-annual Humphrey-Hawkins testimony. There are many Congressmen and –women from both parties who have called out the President’s aggressive position on trade as self-defeating. Powell will want to avoid triggering market fears (avoiding volatility is a third, unspoken mandate of the central bank), but the lawmakers will push the topic whether to illustrate the damage they fear or to earn political points. If he admits growth is at risk from the advance of trade wars, it would signal to the market that the pacing already baked in is less stable than what is presumed, and the passive premium behind the dollar may start to bleed off. China Data Run and Data Questions China is in a very difficult position. It is attempting to transition itself from methods of growth that are impossible to maintain over the long term without inadvertently causing disastrous instability. To successfully make this ‘evolution’ to an economy primarily supported by domestic consumption, stable capital markets and a wealthier population (rather than leveraged financing and questionable export policies), the government requires a remarkable amount of stability. The healthy risk appetite and moderate growth registered for the global economy over the past five years was the perfect environment upon which to pursue this effort. That is especially true because the Chinese data that already draws a fair amount of skepticism from the rest of the world would look like an unlikely idyllic steering for the economy – a pace that could be dubiously attributed to the general environment. Now, however, that gentle landing has been disrupted by the aggression from the United States. The drive to escalate trade wars threatens not just the important trade between to two countries, it risks pushing disbelief over China’s statistics to the breaking point. Though they would not likely show serious pressure in any area of the economy or financial system that they control, markets have grown adept at reading between the official lines when it comes to China. Spurring fears of a ‘hard landing’ for the world’s second largest economy could spur capital flight as foreign investors look to repatriate and nationals attempt to slip through controls to diversify their exposure. It should be said that if there is a crisis in China, it will spread to the rest of the world; but some may be happy if China were permanently put off the path to securing its position as the antipodean super power to the US. It is this big picture landscape that we must keep in mind as the important data of the coming week – China 2Q GDP, fixed investment, surveyed jobless rate, retail sales and foreign direct investment – crosses the wires with unsurprisingly little impact on the controlled USDCNH exchange rate. Any questions, just ask.John Kicklighter
  5. 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
  6. 4 points
    A trading forum and help and support network for IG clients Over the last few months we have been working on a new layout for your Community, as well as adding greater functionality and new content areas. Today is the 'go live' date and we hope you like what you see. Have a browse, and if you have any feedback or suggestions please add a comment below. Maybe take this opportunity to make your first Community post if you haven't already? This purpose of this forum is for like-minded clients to share trade ideas and discuss market opportunities, ask questions, and provide help and support to others. Learn strategies and trade ideas from experienced traders Give tips to the Community and share your market knowledge Perfect your trading by discussing ideas with others Get the most out of IG and ask the Community anything regarding trading or IG Anyone can browse the trading forum, but you will need a live IG account to post or interact on Community. If you're new to Community and looking for a first step maybe check out the forum, or have a once over of our Community tutorials. We're also curious for any feedback you may have, so add a comment below to have your voice heard. We're always looking to improve our offering based on what traders want - so let us know! We migrated the old forum (and added some new features) We have migrated over all the posts, likes, 'kudos' and private messages from the previous version of the forum, as well as integrated the Community login with the wider IG eco system so you can enjoy a seamless digital experience between the platform and forum. You should be able to see all your previously posted content under the same Community username as you currently use. New content areas... Blogs: We have three blogs which we will be updated periodically. Market News - Daily morning briefings, index dividend adjustments, and one off articles IG Product Updates - A place to let you know about all the things we roll out IG Community Blog - Competitions, 'Ask the Expert' series, and Community updates Calendar: A way for discussion to be relevant and anchored to a specific date / time / macro event Our Picks: A hand picked showcase of the best IG Community has to offer. If individual client forum posts or comments get a significant number of upvotes then they may also be featured More to be rolled out shortly! ...and a few new features. Activity streams: If you're logged in you'll notice you can easily browse things such as 'unread' or 'followed' content. You can save individual search streams so they're available for the next time you log in Advanced search: An updated and intuitive search functionality Leaderboard: The Leaderboard keeps track of the hottest content and best users each day based on reputation received. You'll increase your chances of getting on here if you post more, receive more likes, and help others Community Profile: Your space in Community. Check yours out by clicking on your username in the top right hand corner Access IG Community - anytime, anywhere IG Community will be up 24 hours a day, 7 days a week. The easiest way to access IG Community is using the top right hand 'Help' drop down in the dealing platform, but you can also access via our mobile apps (look under the help and support section - try it now), or by simply going to community.ig.com This initial rollout is only phase one of 'the big Community plan', and we'd love to hear your feedback. What do you like? What would you change if you had the chance? What new areas would you like to see? Let us know using the comments section below. Happy chatting IG Community Moderator Team
  7. 2 points
    We've released options for the Volatility Index. You can find them on our platform under the options tab> Indices. Options, when buying the call/ put, are a great way to get involved in market movement whilst having limited risk. Dealing hours : 09:00:00 – 21:15:00 GMT Monday-Friday Contracts offered : Currently offer the next two months (November and December) Expiry for monthly options : Every 3rd Wednesday of the month Last trade : 21:15 GMT the day before expiry Settlement : Settled basis the Special Opening Quotation (SOQ) of VIX calculated by the opening prices of the SPX constituents used to calculate the VIX index on settlement date If you need any clarification on how options work, contact me through the community or give our help desk a call.
  8. 2 points
    A trading forum and help and support network for IG clients The new IG Community has been live for a few weeks now and I just wanted to update all Community members on a couple of things, including a showcase of a brand new promotional video. This should be useful for those who haven't used Community before but what to know more - it's well worth a watch. If you have any comments or questions regarding the new forum please let us know in the Comments section below. We're always looking to improve our offering based on what traders want - so give us a shout! New features this month Guests can now post without necessarily needing to be logged into Community. We want to make sure that all content is still relevant and interesting, so all guest posts will have to be approved by a moderator before being publicly visible. We want to make sure that quality over quantity remains, however the recent trial seems to have gone well and the Community is getting more relevant posts to add to discussion. If anyone has any opinion on this we'd love to hear from you so please feel free to add a comment below. We recently had a trial of the new 'poll' feature on a post relating to new cryptocurrencies. You can read that article on which crypto your most interested in here. Currently only moderators can post polls, however if you as a client would like to have this function, let us know! We're interested in who would use it. We're now in the top navigation bar on IG.com - it may not sound like a big change, but it allows you to get to the forum very quickly from anywhere on the IG.com environment (look for the global black navigation bar at the top). We're also looking at inclusion in MyIG - that should be live shortly. Finally, we have some stats for you which you may find interesting. What is IG Community? This purpose of this forum is for like-minded clients to share trade ideas and discuss market opportunities, ask questions, and provide help and support to others. Learn strategies and trade ideas from experienced traders Give tips to the Community and share your market knowledge Perfect your trading by discussing ideas with others Get the most out of IG and ask the Community anything regarding trading or IG Anyone can browse the trading forum, but you will need to have an IG account to post or interact on Community and have your content published immediately. If you're new to the forumand looking for a first step maybe check out the forum, or have a once over of our Community tutorials. We migrated the old forum (and added some new features) We have migrated over all the posts, likes, 'kudos' and private messages from the previous version of the forum, as well as integrated the Community login with the wider IG eco system so you can enjoy a seamless digital experience between the trading platform and forum. You should be able to see all your previously posted content under the same Community username as you originally had on the previous iteration. New content areas... Blogs: We have three blogs which we will be updated periodically. Market News - Daily morning briefings, index dividend adjustments, and one off articles IG Product Updates - A place to let you know about all the things we roll out IG Community Blog - Competitions, 'Ask the Expert' series, and Community updates ...and a few new features. Activity streams: If you're logged in you'll notice you can easily browse things such as 'unread' or 'followed' content. You can save individual search streams so they're available for the next time you log in Advanced search: An updated and intuitive search functionality Leaderboard: The Leaderboard keeps track of the hottest content and best users each day based on reputation received. You'll increase your chances of getting on here if you post more, receive more likes, and help others Community Profile: Your space in Community. Check yours out by clicking on your username in the top right hand corner (logged in users only). Access IG Community - anytime, anywhere IG Community will be up 24 hours a day, 7 days a week. The easiest way to access IG Community is using the top right hand 'Help' drop down in the dealing platform, but you can also access via our mobile apps (look under the help and support section - try it now), or by simply going to community.ig.com. What do you like? What would you change if you had the chance? What new areas would you like to see? Let us know using the comments section below. Happy chatting IG Community Moderator Team
  9. 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
  10. 2 points
    If you like to change between different intervals on the IG desktop charts (from 1 minute candlesticks to 5 or 10 minute candles, or to hours, days or months) then we've just made it easier with keyboard shortcuts. Whilst on a chart you can type any number from 1 to 5 on your keyboard to bring up a small 'interval' dialogue box, confirm your choice, and hit enter. For example: 1 minute intervals: type 1 then enter 5 minute intervals: type 5 then enter 1 hour intervals: type 1 h then enter 2 hour intervals: type 2 h then enter 1 week intervals: type 1 w then enter See crosshair data on future dates You can now place your cursor/crosshair on a future date and see the level and time/date where you are positioned. Whilst this is a very minor update which could be seen as a trivial feature, it can become quite handy if you're looking at a trend and want to know exact levels and the time they will be reached. Simply position your cursor in the future and you’ll see the corresponding information straight away. If you have any questions or feedback on this, please feel free to share in the Comment section below.
  11. 2 points
    In a similar manner to our position preview feature you can now see your working order shaping up on the charts as you start creating orders from the ticket. Simply input your order direction, size and level and you will be able to see a preview on the chart. You can then decide to drag you Stop and/or Limit from the chart to define their absolute level and see the related Risk/Reward Ratio. Once you are happy with this just place your order from the ticket et voila! If you have any comments, feedback, or questions on this please add your thoughts to the comment section below. Client feedback is a driving force behind platform improvements and all suggestions are forwarded to the appropriate project management and product ownership teams. NB: You will need to make sure 'position preview' is on - you can toggle this by right clicking on the charts and navigating to 'show'.
  12. 2 points
    Turning on FX swap bid/offer When trading currency pairs, if a position is held through 10pm GMT, it will incur an overnight funding charge. This charge is based on the interest rate differential between the two currencies in the pair, where you receive interest in the currency you buy and pay interest on the currency you sell. Swap rates also apply to cryptocurrencies and spot gold, silver, platinum or palladium. Based on client feedback we have now added these overnight funding charges to the platform. Please keep in mind that they are indicative figures. These swap rates are viewed from a watchlist. Once you have an FX pair on the watchlist, by clicking on the three lines that are positioned on the left-hand corner next to the word 'market', a drop down of columns will appear. Click on the swap bid and swap offer buttons to activate them. What does this mean for me? If GBPUSD was quoted as 0.22 / -0.85 then the 0.22 would be what you receive if you are short, and the 0.85 would be what you pay if you are long. You then need to do the trade size times this value. For example a spread bet of £3/pt on the short trade would result in a credit to your account of 66p (which comes from 0.22 x £3). If you have a CFD account and you're holding a single $10 contract long, you would pay $8.50 per night (which comes from 1 contract x $10 x 0.85). Where does this figure come from? The figure is shown in points and depending on the currency you hold and the direction of your trade you can either earn or pay a premium, keeping in mind that there is an IG charge included in the calculation. Currently this is 0.3% (or 0.8% for mini contracts and spread bets) however as this is subject to change please check IG.com for the latest fees. If you are long on a currency pair, you will need to focus on the swap offer, and if you are short you will focus on the swap bid. If the swap is a positive number, you will be credited, because the interest rate on the currency you are buying is higher than the interest rate on the currency you are selling. If the rate is a negative number you will be charged, because the interest rate on the currency you are buying is lower than the interest rate on the currency you are selling. If the interest rate on the euro is 0.25% and the interest rate on the USD is 2.75% and you buy EURUSD, you will be receiving 0.25% but paying 2.75%, and will be left with an interest rate differential of 2.5 points (excluding the IG change). Example: Let us take EURUSD as a worked example. We will need two figures for our calculation, the underlying market swap rate (known as the Tom/Next rate, which is provided by the banks), as well as the current spot rate of the currency pair at 10pm. The below figures are indicative for this calculation. An example of the underlying 'Tom/Next' rate for EURUSD: 0.34 / 0.39 An example of today's Spot FX rate for EURUSD at 10pm UK time: 1.0650 An example IG admin fee of 0.3% which is subject to change (please find the most up to date admin fees on IG.com) Once we have the Tom/Next rate, we take the 10pm EURUSD spot rate (in points) and multiply by IG's charge of 0.3% (or 0.8% for CFD mini or Spread Betting deal), which is then divided by 360 days to get an overnight value. = (10650 x 0.3%) / 360 = 31.95 / 360 = 0.08875 This is then applied to the underlying market quote of 0.34 / 0.39 Bid = 0.34 - 0.08875 = 0.25125 = 0.25 Offer = 0.39 + 0.08875 = 0.47875 = 0.48 This then gives us our overnight funding rate, inclusive of IG charge, of 0.25 / - 0.48. The '˜Offer' is negative, because currently there is a higher interest rate on USD than there is on EUR. Therefore, buying the pair would leave you paying a larger USD interest vs receiving a smaller EUR interest. E.g. If you were long one main lot, you would do 'Number of Contracts x Contract Size x Tom Next Rate'. Using the information above, if you were long one main lot, your 'Daily FX Interest' would be: 1 x $10 x - 0.48 = $4.80 charge per night. (Conversely if you were short, you would receive $2.50 per night). Important factors to note FX settlement of T+2 means that if you hold your trade through 10pm Wednesday (UK Time) then you'll need to incorporate the weekend into the calculation, and therefore you'll have an 'FX Interest Charge' of 3 days. This is because currency can't settle at the weekend, and the new spot rate would therefore fall on a Monday. It also follows that if you hold through 10pm on a Friday, you only receive a 1 day charge (even though you have to hold through three days before you can close the position). Settlement of FX can't take place on public holidays. Therefore, over periods such as Christmas or Easter, or public holidays such as Martin Luther King Day or Thanksgiving, you may see interest charges for a variable number of days. Some currencies trade on a T+1 basis, most notably USDCAD, USDTRY and USDRUB.
  13. 2 points
    In the Aftermath of the Fed The baton has been dropped. The Federal Reserve was by far the most aggressive major central bank through this past financial epoch (the last decade) to embrace ‘normalization’ of its monetary policy following its extraordinary infusion of support through rate cuts and quantitative easing (QE). Over the past three years, the central bank has raised its benchmark rate range 225 basis points and slowly began to reverse the tide of its enormous balance sheet. As of the conclusion of this past week’s two-day FOMC policy meeting, we have seen the dual efforts to level out extreme accommodation all but abandoned. A more dovish shifted was heavily expected given the statement in January’s meeting, the rhetoric of individual members as well as the state of the global markets and economic forecasts. Yet, what was realized proved more aggressive than the consensus had accounted for. No change to the benchmark rates was fully assumed, but the median forecast among the members accounted for a faster drop than the market likely thought practical. From the 50 bps of tightening projected in the last update in December, the median dropped to no further increases in 2019 and only one hike over the subsequent two years. Over the past three years, the central bank has raised its benchmark rate range 225 basis points and slowly began to reverse the tide of its enormous balance sheet. The Dollar responded abruptly Wednesday evening with a sharp tumble, but there was notably a lack of follow through where it counted – the DXY Dollar Index wouldn’t go the next step to slip below its 200-day moving average and break a ten-month rising trend channel (a hold that confounded those trading an presumed EURUSD breakout). Why did the Greenback hold – for now – when the move was clearly a dovish shift? Likely because the market is already affording for an even more dovish forecast as Fed Fund futures have set the probability of a 25bps cut from the Fed before the end of the year as high as 45 percent. What’s more, if you intend to trade the Dollar; it is important to recognize that even with a more dovish path ahead, the Dollar and US assets will maintain a hearty advantage over its major counterparts. That would particularly be the case should other groups extend their dovish views to more actively explore deeper trenches of monetary policy. Looking beyond the Dollar’s take, however, there are far more important considerations for the global financial system and sentiment. The Fed was the pioneer of sorts for massive stimulus programs designed to recharge growth and revive battered markets. It was also the first to start pulling back the extreme safety net when its effectiveness was facing deserved scrutiny by even the most ardent disciple of the complacency-backed risk-on run. In other words, its course change carries significantly more weight than any of its peers. The question ‘why is the Fed easing back and so quickly’ is being posed consistently whereas in the past market participants would have just indulged in the speculative benefits. The overwhelming amount of headline fodder – from trade wars to frequency of volatility in the capital markets – makes for a ready list of considerations. Yet, the group’s own economic forecasts brought the reality home far more forcefully. Though we have seen numerous economic participants downgrade the growth outlook (economists, investors through markets, the IMF, etc), to see the median GDP forecast in the SEP (Summary of Economic Projections) lowered from 2.3 percent to 2.1 percent for 2019 made the circumstances explicit. We’ve considered multiple times over previous months what happens if the market’s start to question the capability of the world’s largest central banks to keep the peace and fight off any re-emergences of financial instability. Now it seems this concern is being contemplated by the market-at-large. That doesn’t bode well for our future. A Sudden Fixed Income Interest When ‘Recession’ Warnings Take Hold Except for fixed income traders and economists, the yield curve is rarely mentioned in polite trader conversation or in the mainstream financial media. Its implications are too wonky for most as it can be difficult to draw impact to the average traders’ portfolio and given the considerable time lag between its movements and capital market response. Yet, when it comes to its most popular signal – that of a possible recession signal – the structure of duration risk suddenly becomes as commonplace a talking point as NFPs. On Friday, the headlines were plastered with the news that the US Treasury yield curve had inverted along with a quick take interpretation that such an occasion has accompanied recessions in the past. There have actually been a few parts of the US government debt curve that have inverted at various points over the past months, but this occasion was trumpeted much more loudly as it happened in the comparison to the 10-year and 3-month spread (what has been identified as a recession warning even by some of the Fed branches themselves). First, what is a ‘curve’? It is the comparison of how much investors demand in return (yield) to lend to the government (for Treasuries specifically) for a certain amount of time. Normally, the longer you tie up your money to any investment, the greater the risk that something unfavorable could happen and thereby you expect a greater rate of return. When the markets demand more for a short-term investment than a longer-term one in the same asset, there is something amiss. When the markets demand more return from a three-month loan to the US government than a 10-year loan, it seems something is very wrong. Historically, the inversion of these two maturities has predated a number of us the recessions in the United States – most recently the slumps in 2008, 2001 and 1990. When the markets demand more return from a three-month loan to the US government than a 10-year loan, it seems something is very wrong. First is the lead period the curve reversal has to economic contraction. The signal can precede a downturn in growth by months and even years. Preparation is good, but moving too early can ‘leave money on the table’ for the cautious or accumulate some serious losses for those trying to trade some imminent panic. Further, there are certain distortions that we have altered the course in normal capital market tributaries that could be doing the same for Treasuries and therefore this reading. More recently, the revived threat of the US government shutdown through December and the unresolved debt ceiling debate put pressure on the asset class. At the same time, though, few believe the US would do little more than allow for a short-term financial shock in order to make a political point. Far more complicating for the market and the signal is the activity of the US and global central banks. The Federal Reserve has purchased trillions in medium-dated government debt as part of its QE program. They only started to slowly to reduce holdings and push longer dated yields back up a few years after they began raising short term rates in earnest. Their recent policy reversal only adds to the complication. Now, all of this does not mean that I believe the US and global economies will avoid stalling out or even contracting in the near future. Between the dependence on capital markets and stimulus, the heavy toll of trade wars and nationalistic policies, and the pain for key players in the global web; there is a high probability that we will see an economic retrenchment in the next few years. That said, that wouldn’t make this particular signal a trigger (causation) or even correlated through the main forces that would bring on a recession. Nevertheless, yelling ‘fire’ in an a panicky crowd on foggy day can still yield volatile results. Brexit, Just Winging It Another week and another upheaval in Brexit expectations. Through much of the past year’s anxiety over the withdrawal of the United Kingdom form the European Union, there was at least some comfort to be found in the finality of the Brexit date (March 29th, 2019). While it could end in favorable circumstances for financial markets (a deal that allows considerable access for the UK) or acute uncertainty (a no-deal), at least it would be over. Well, that assurance is as clouded as the expected outcome from the negotiations themselves. Shortly after I wrote the Brexit update last week whereby there was a clear timeline for another meaningful vote on the Prime Minister’s proposals – after Parliament voted for an extension of negotiations – the Speaker to the House of Commons thwarted the effort when he said the scheme would not be reconsidered unless it was materially different. It is likely that see another significant change in this drama any times (and even multiple times) this week. At Prime Minister May’s request, the European Commission agreed to an extension of the discussions beyond the original Article 50 end date for this coming Friday. Yet, where the PM intreated a postponement out to the end of June, the EU agreed only to May 22nd – the day before European Parliamentary elections. Beyond that date, the UK would theoretically remain under the regulations and laws of the EU but would have no say in their direction which wouldn’t appeal to either side. So, now we are faced with another ‘fluid’ two months of critical deadlines. This week, it has been suggested the government will try to put up once again for a meaningful vote – though it is still not clear whether the proposal will be meaningfully different (the EU has offered no further concessions) or there has been a successful challenge against the Commons speaker. When this could be put up to vote is unclear, but it has been suggested between Monday and Wednesday. If the proposal is approved, the timeline to May 22nd will remain and we will start to see a genuine path form. If it is not, then the following week Parliament will have to indicate that “they have a way forward”. If they do not, an extension or no deal will likely be considered for April 12th – out to the previously mentioned May 22nd date. If we pass April 12th without a clear plan, the probabilities of a ‘no deal’ or ‘no Brexit’ will rise significantly. Those two scenarios are extreme and on the opposite end of the spectrum. From a Pound trader or global investor considering UK exposure, you can imagine what a situation where the probability of diametrically-opposed, market-moving outcomes are considered balanced would do to the markets. It will curb market liquidity and leverage uncertainty. That would translate into divestment, difficulty establishing trends and serious volatility. If that isn’t your cup of tea, it is best to seek opportunities elsewhere for the next few months until this is sorted.
  14. 2 points
    Market action proves it again: this market hinges on the Fed: The US Fed has proven itself as the most important game in town for traders. The FOMC met this morning, and lo-and-behold: the dovish Fed has proven more dovish than previously thought; the patient Fed has proven more patient that previously thought. Interest rates have remained on hold, but everyone knew that was to be the case today. It was about the dot-plots, the neutral-rate, the economic projections, and the balance sheet run-off. On all accounts, the Fed has downgraded their views on the outlook. And boy, have markets responded. The S&P500 has proven its major-sensitivity to FOMC policy and whipsawed alongside a fall in US Treasury yields, as traders price-in rate cuts from the Fed in the future. The US Dollar sends some asset classes into a tizz: The US Dollar has tumbled across the board consequently, pushing gold prices higher. The Australian Dollar, even for all its current unattractiveness, has burst higher, to be trading back toward the 0.7150 mark. Commodity prices, especially those of thriving industrial metals, have also rallied courtesy of the weaker greenback. Emerging market currencies are collectively stronger, too. This is all coming because traders are more-or-less betting that the Fed is at the end of its hiking cycle, and financial conditions will not be constricted by policy-maker intervention. Relatively cheap money will continue to flow, as yields remain depressed, and allow for the (sometimes wonton) risk-taking conditions that markets have grown used to in the past decade. Some risk being taken again, though somewhat nervously: The play into risk-assets makes everything sound quite rosy. There are caveats to this, however. And that relates to what’s been inferred about global growth from the Fed’s meeting this morning. Implicitly, at the very least, the Fed has acknowledged that growth in the US and world economy is all but certain to slow-down. It wasn’t said outright – a central banker would never want to be anything less than cautiously optimistic – but the tone of Fed Chair Powell at his presser suggests a Fed that is sufficiently concerned about the global economy that they will definitively reverse its policy “normalization” course. Positivity was maintained by the Fed about US economic conditions, outrightly. However, the market has read between the lines, and it doesn’t like what it sees. Interest rates are now expected to be on hold for this cycle: So: although swung around post release, the more important bond market is telling a clearer story. The yield on the US 10 Year Treasuries have tumbled nearly 8 points to 2.53 percent, and the yield on US 2 Year Treasuries has fallen 7 points to 2.39 per cent. More remarkably, the yield on Treasuries with 3, 5- and 7-year maturities have dropped over nine points, creating a yield curve with a very flat belly. Of most concern here is that all of these securities are trading just at, or well below, the Fed’s current effective overnight-cash-rate of 2.40 per cent. Traders are now pricing in a greater than 50 per cent chance the Fed will cut rates by early next year, on the basis of deteriorating economic conditions. It’s getting harder for the Fed to get the right balance: The tight rope is getting narrower. For market participants, as always: on one side of it sits the need for accommodative financial conditions, on the other the need for robust growth conditions. It’s the rudimentary in principle, though complicated in practice, interplay between the credit cycle and the business cycle. Out of this Fed meeting, the proverbial tight rope walker is nervously shifting her gaze down towards the economic growth outlook. Powell and his team have apparently not struck the necessary equilibrium in its approach to its policy and communications to the market. Yes (again), risk assets have rallied, but right now, not in such a way that suggests the bulls are significantly more confident in the investment environment being planted before them. Other stories also important, though not as much as the Fed: Some of this could be attributed to the overhang coming from some of the other significant economic stories yesterday. Sentiment has been dented by news that key EU figure Donald Tusk may demand that no Brexit extension is granted for the UK; it has also been liver-punched by a story suggesting US President Trump does not necessarily see a lifting of tariffs on China occurring in any US-Sino trade deal. Once more: it does appear that markets have seen the greatest gravitas in the Fed meeting, though. And traders’ nervousness is being betrayed by this: despite a dovish tact, corporate credit spreads have rallied, the VIX is off its multi-year lows, and US Break-evens are revealing greater inflation risk in the US economy. Australian markets to be defined by Fed and employment numbers: Fittingly, SPI Futures are suggesting the ASX200 will open somewhere between 5-and-10 points lower this morning. Speaking of markets and the growth outlook, not only will Australian trade be impacted by the fall-out from the Fed’s nervously dovish tilt, we also get some highly anticipated employment figures out this morning. The currency and rates markets will be what to watch for: the themes driving the ASX200 this week is the renewed push in iron ore prices, along with the rotation into yield-driven defensive sectors as Australian ACGB yields tumble. The RBA have hitched their hopes for the Australian economy on a tightening labour market and subsequent lift in wages growth and inflation. Watch therefore today for any major downside miss in employment numbers. Written by Kyle Rodda - IG Australia
  15. 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.
  16. 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.
  17. 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.
  18. 2 points
    Theresa May declares to end austerity in the much anticipated Conservative party conference yesterday. Bloomberg has also reported this morning that the prime minister plans to rush her Brexit deal through parliament in a bid to stop the opposition voting down the treaty. The DOW hits record highs of 26,951.81 but stocks close with minimal change on the day as rising interest rates have made investors wary. The tension between the U.S. and China continues as China plans to sell $3bn worth of dollar bonds. In EM the Brazilian stock market is having it's strongest rally over the past two years, up more than 3%, as far-right candidate Jair Bolsonaro has extended his lead in the Brazilian election, according to opinion polls. European market regulators, ESMA, are drafting a number of bilateral agreements with the FCA in an effort to reduce market instability going into Brexit. A lack of political agreement is the main worry, which the second tier financial regulation helps to mitigate. The 10-year US treasury rose to a seven year high in response to yesterday’s impressive US data which also drove the likes of the Dow and S&P 500 to record highs. AUD has fallen steadily against the US dollar, coming in at the lowest since mid-September, initially fueled by the release of weaker than anticipated local building approvals data in Australia. Asian overnight: Yet another day of losses for Asian markets has seen Japanese and Hong Kong indices trading in the red, with Australia representing the one outlier to that story. China remains on holiday and will do so for the duration of the week. Data-wise, the Australian trade data saw an improvement to the overall balance following a rise in exports (1% from -1%) and flat imports (0%). UK, US and Europe: Looking ahead, we have precious few notable economic events to look out for, with US unemployment claims, factory orders, and the Canadian Ivey PMI numbers providing the only releases worth watching out for. This leaves markets to ponder ongoing themes, with Brexit (post-Conservative conference), Italian deficit (as coalition aim to produce budget) and the US-China trade war remaining key drivers of uncertainty. The recent rallying of oil prices seems to have come to an end as prices fell from four-year highs. Theresa May has called for party unity over her plan to divorce the UK from the EU or risk having "no Brexit at all". The cry for support comes after Boris Johnson's explosive speech on Tuesday, which the prime minister admits made her "cross". RBS Boss, Ross McEwan, is someone who is hoping that Brexit does not get to the stage of a no-deal, as he warns a bad Brexit could see the UK go into a recession. The recent rallying of oil prices seems to have come to an end as prices fell from four-year highs. This is the result of rising U.S. oil inventories and multiple sources reporting that Saudi Arabia and Russia struck a private deal in September to raise output without consulting other producers, including OPEC. South Africa: US Index Futures and Asian equity markets are suggesting a softer start for our local bourse (Jse All Share Index). A stronger than expected US private sector jobs report yesterday, has resulted in a strengthening dollar and higher treasury yields. In turn precious metal prices have come under pressure while the rand has softened against the greenback. Tencent Holdings is trading 2.5% lower in Asia, suggestive of a similar start for major holding company Naspers. BHP Billiton is up 0.9% in Australia, suggestive of a positive start for local diversified resource counters. Today's economic calendar is light in terms of scheduled news events, with perhaps FOMC member Quarles' public address at 3:15pm the most relevant to watch out for. Economic calendar - key events and forecast (times in BST) Source: Daily FX Economic Calendar 1.30pm – US initial jobless claims (w/e 29 September): claims forecast to fall to 206K from 214K. Markets to watch: US indices, USD crosses 3pm – Canada Ivey PMI (September, seasonally adjusted): expected to decline to 61.4 from 61.9. Market to watch: CAD crosses Corporate News, Upgrades and Downgrades Ted Baker said that revenue rose 3.5% to £306 million for the first half, but pre-tax profit dropped 3.2% to £24.5 million. Electrocomponents reported a 10% rise in like-for-like sales for the first half, and half-year adjusted pre-tax profit is expected to be around £100 million, up from £79 million. Aston Martin shares fell on it's first full day of trading, having opened at £19 the shares fell as low as £17.75 before closing for the day at £18.10. Another recent company that had an IPO in the UK, the Funding Circle, also saw their stock price dive as much as 24%. With both of the recent high-profile IPO's in the UK failing to live up to initial expectations, it will be interesting to see trader sentiment for upcoming IPO's. The disappointing debuts have put the spotlight on some of the biggest investment banks in the world who were involved in the IPO's, such as BoAML, JPM, Morgan Stanley and Goldman, as analysts suggest the newly-listed companies were not priced correctly. Barnes and Noble is up 20% as the board has initiated a review process which aims to evaluate strategic alternatives, which includes the sale of the company. Cannabis stock Tilray has fallen 12% in the extended session after the firm announced plans to offer $400 million in convertible notes to institutional Canadian investors, which can be converted into shares. Watch out for Constellation, Corona beer owner, who are reporting earnings later today at 15:30 UK time. The company made headlines earlier this year as they poured $4bn into Canopy Growth, Canada's top cannabis producer. Software companies Horton and Cloudera have announced a merger which saw both shares raise 19% and 18% respectively. Swisscom Raised to Equal-weight at Morgan Stanley Gecina Rated New Overweight at Barclays Shaftesbury Upgraded to Neutral at Kempen & Co Swedbank Downgraded to Neutral at JPMorgan Sunrise 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.
  19. 2 points
    The London Metal Exchange: LME The LME is one of the last pit traded venues in the world which has escaped the computerisation and digitalisation of the modern world. The iconic image of the 80's with men in brightly coloured suits has all but gone, however the live 'ring' as it's known is still the number one place in the world to trade a number of ferrous, non-ferrous, precious and minor metals. LME participants can trade and take or make delivery of aluminium, copper, tin, nickel, zinc, lead, aluminium alloy and NASAAC, as well as steel and scrap contracts, LME silver and LME gold, and other lesser known metals such as cobalt and molybdenum futures. We recently spent an afternoon at the venue and I managed to take the following video which I thought I would share with Community members. The LME is used for dealers and institutional trading houses who sometimes work on behalf of real world companies such as car manufacturers who need aluminium for delivery. A staggering 80% of the worlds industrial metal prices are set in this room. Everyone tends to wait until the end of the session, so the final few moments can be very exciting! It's only a minute or so long, but you can see the excitement as people can't even stay on their seats around the 30 second mark! Trade LME metals with IG As as exciting as this can be, I still think it's quite good that you can get exposure to all these same assets on the IG dealing dealing platform. Simply check out the Commodities section on the left hand fly out, and scroll to 'Base Metals'. You can also use the 'news' section on the left to search for specific news relating to these markets which may be lesser known to yourself.
  20. 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.
  21. 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.
  22. 2 points
    Trade war: Geopolitical ructions became the dominant theme late in North American trade, setting up a day for Asian markets distracted by trade-war developments and rising diplomatic tensions in other geographies. The heightened trade war anxieties were piqued by news that China would be slapping retaliatory tariffs of 25 per cent on $US16b worth of US imports, in response to the Trump administrations go-ahead earlier in the week to implement comparable tariffs on Chinese imports. The trade concerns were then exacerbated by news that the US would increase sanctions on Russia for its involvement in poisoning an ex-Spy in the UK. Both stories are fresh but add to already tense diplomatic relations between the US and China, and the US and Russia: expect the news to rattle Asian and European markets, which have proven far more vulnerable to geopolitical risks. US Indices: Wall Street has slipped in late trade during the North American session, during a day in which US indices traded relatively flat. The industrials laden and therefore trade-war sensitive Dow Jones has given up the most ground, staring down a close of -0.2 per cent. The benchmark S&P500 is still effectively flat, while the NASDAQ has held onto very modest gains, illustrating once-more that the all-conquering tech spacer is what underpins US share-market strength in the face of trade-conflict. US share were showing signs of a potential run toward the record levels set at the start of 2018, with the S&P coming as close as 13 points to that milestone. The inflamed trade-war tensions may put this ambition on hold, notwithstanding the record earning’s season on Wall Street. Oil: Oil prices have experience the most volatility overnight, courtesy of the increase in geopolitical risks, falling several per cent, even despite a lower than expected print in US crude oil inventories. Brent Crude is currently trading around the $US72.35-mark, stripping most of this week’s gains, as markets factor in the greater risk of a global economic slowdown, along with the possibility Russia may intervene in oil markets in response to new sanctions. The dump in oil prices does not bode well for equity markets, which have benefited from climbs in energy stocks in response to the oil rally. The ASX200 will certainly remain amongst the most vulnerable to this dynamic, with eyes now on the performance of the energy and materials sectors today. ASX: SPI futures are slipping as the morning unfolds, as prices in that market progressively fall as news about trade war risks develop. The Australian share market performed relatively well yesterday, adding 0.23 per cent to close at 6268. The closing price placed the ASX effectively in the middle of its recent range, with traders now acclimatising to some sideways trading. It is difficult to imagine that further gains are on the cards for ASX today amid this morning’s trade war developments, particularly given a gathering fall in commodity prices. Perhaps a good indicator of trader sentiment and market strength will be in how well support at around 6235 holds up today. CBA: The major catalyst for the ASX200’s little climb yesterday was the relief rally in the price of CBA shares, which added 2.63 per cent throughout the day. Although the bank’s results effectively ended its run of recorded profits — weighed down by the roughly $1.1b of outlays relating to regulatory costs and legal penalties — the earnings report appeared to reassure investors that the poor results could be pinned on transitory factors, and that the business fundamentals appear strong enough to justify buying at current levels. It will be a point of interest as the markets digests CBA’s earnings and await updates from the other major banks, how far a rally in bank stocks can go: there is certainly a lid on prices around the bank’s pre-Royal Commission levels and given the headwinds of a slack economy and weaker property prices, further climbs in bank stocks seem improbable. China: Chinese markets will likely take much of the attention of global markets today, considering the unwelcomed developments in the trade war. Activity in the Yuan will be closely watched, as it appears the PBOC are beginning to play a big part in supporting the weakening Chinese currency. Anywhere above or near the 6.90 level seems to be the line in the sand for Chinese policy makers, with stabilization measures quickly applied to currency markets when traders push the Yuan through that mark. A strong argument could be made that the actions of the PBOC indicate that Chinese officials won’t look to weaponize the Yuan in this trade war, who appear to be more worried for now about the issue of financial stability within the Chinese economy. RBNZ: The RBNZ kept interest rates on hold this morning. More to come tomorrow. 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.
  23. 1 point
    US jobs report preview: will NFP follow ADP rise? The September US jobs report released on Friday provides traders with a fresh opportunity to scrutinise the economic recovery after months of improvements that have followed the first quarter (Q1) economic collapse. Coming at a time when we have seen a resurgence for the dollar, the jobs report will be released at 1.30pm on Friday 2 October. Tune in to IGTV live announcement and analysis this Friday at 1.25pm UK time on the IG platform. Will improved ADP helps lift sentiment The September Automatic Data Processing (ADP) payrolls figure released today has seen another month of improvement, with a figure of 749,000 representing the highest amount of job creation in three months. That rise can be specifically attributed to small and medium sized businesses, with hiring at large firms remaining largely steady. Unfortunately, markets are expecting the headline non-farm payrolls figure to move in the opposite direction, with a reading around 900,000 expected after last months 1.37 million figure seen last month. With the monthly jobs created moving lower, there is a fear that we could soon see that path of economic improvement take a negative turn. As things stand, that steady improvement seen over recent months remains on track, with the four-month decline in continuing claims pointing towards further reductions in the unemployment rate. Market forecasts point towards a reduction in the headline unemployment rate from 8.4% to 8.2%. However, one potential warning sign looks like it could come from the U6 unemployment rate, which also includes both workers who are no longer looking for employment, and part-time workers looking for a full-time job. With more comprehensive measure expected to rise to 15.4% from 14.2%, this month could see the first cracks appear in the recovery. Dollar index technical analysis Looking at the dollar index, we have seen the greenback drift lower following a bullish breakout last week. The wider downtrend remains intact, yet we have seen a clear bottoming out over the course of August and September. The rise through 93.64 brought about a bullish signal, with the weakness we have seen since Friday's peak providing a potential buying opportunity. As such, further upside looks likely before long, with a drop below 92.75 negating that bullish outlook. Until then, a bullish turn looks like for the dollar. Source: ProRealTime By Joshua Mahony 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.
  24. 1 point
    We are honoured to be nominated for The Good Money Guide Awards, which aim to champion financial services firms that excel in innovation, product, and customer service. Voting helps others make smart decisions about who to invest with and provide valuable feedback to improve online investing, trading, and currency transfer providers. In 2019, IG won Best Forex Broker and Best Overall Broker and we would love your help again in 2020. Vote for IG here: https://goodmoneyguide.com/awards/trading/ Get your votes in by Friday. As well as this, if you think we're missing anything for your trading needs please let us know here: Thank you so much for trading with us.
  25. 1 point
    Chris Beauchamp’s insight A shortened week for the US due to the Independence Day holiday sees non-farm payrolls published a day early coinciding with the trade balance and weekly jobless claims figures. Other key events of note include PMIs from China and first quarter figures from Sainsbury’s. Economic reports Company announcements Dividends Upcoming FTSE 100: Coca-Cola HBC, Homeserve, National Grid FTSE 250: Murray Int’l, ICG, Airtel, Workspace, Primary Health Properties Dividends are applied after the close of the previous day’s session for each market. So, for example, the FTSE 100 goes ex-dividend on a Thursday, but the adjustment is applied at the close of the previous day e.g. Wednesday. The table below shows the days in which the adjustment is applied, not the ex-dividend days. To find the full index dividend adjustments for this week please go to:
  26. 1 point
    Heikin-Ashi candles are now available on the IG trading platform for both desktop and mobile. This feature has been one of the more highly requested additions to charts as these types of candles are commonly used by traders looking at identifying trends visually without the need of complex analysis. How can I see Heikin-Ashi candles on the IG dealing platform? Turning on Heikin-Ashi candles is simple. If you want to see these candles; Simply open the main menu by right clicking on the charts Navigate to “Types” and bring up the second menu list Select “Heikin-Ashi” - the candles will appear straight away How are Heikin-Ashi candles different from regular HLOC candles? You can read more about what Heikin-Ashi candlestick are on IG.com, but to see a simple visual on the difference and how these could be used for identifying possible trends, just check out the charts below. Both charts are the same time fame on the same asset, one with regular candles and the other with Heikin-Ashi candles. Pic 1: regular candles (and the visual of how to turn H-A candles on) Pic 2: Heikin-Ashi candles
  27. 1 point
    Aussie growth underwhelms: Australian GDP data was the highlight of the economic calendar yesterday. All-in-all, the data was of minimal impact, though it did for make big headlines: the growth rate came-in at 1.8 per cent on an annualized basis, as expected – the slowest rate of economic growth since the GFC. A poor print undoubtedly, but one that had been priced into the market well in advance. Hence, markets were little moved upon the release. The ASX200 hardly budged. The Australian Dollar lifted very slightly, and temporarily tussled with the 0.7000 handle. And interest rate markets increased very marginally the probabilities of more RBA cuts by year-end. Where the weakness is: The data was more of interest for economists and other pedants. And there were some interesting takeaways from the release. As is well known, one of the major headwinds for domestic growth is private consumption, which continued to show signs of slowing. The savings ratio also lifted, as consumers seemingly opted to defer spending and pocket their modest pay rises. More than just demand side concerns, there was also a noteworthy drag on growth from the supply side. Dwelling investment also contracted in the last year, in line with what has been a well-publicised slowdown in construction activity, and sustained falls in the property market. Where growth is coming from: The GDP data wasn’t without its silver linings, of course. A series of factors leapt-out as the primary drivers of growth in the Australian economy in the past 12 months. It was largely improvements in the nation’s terms of trade, courtesy of the major multi-month rally in iron ore, followed by big government spending measures, mostly in form of the NDIS and other health services, that proved the greatest contributors to growth. Though welcomed, to be sure, the areas of Australia’s economy sustaining growth speaks of a country currently working below its capacity, and in need of some sort of a boost. Why the RBA is cutting rates: It’s this dynamic that explains, and perhaps even vindicates, the RBA’s decision to lower interest rates on Tuesday. Domestic economic conditions are weak (and likely softening), and requires a little policy support, from central bankers and government alike, to stimulate ongoing employment and GDP growth. Based on such a logic, the pricing-in of interest rate cuts into the back end of the year appear highly rational. And this seems especially so when considering that (as was alluded to by the RBA on Tuesday afternoon), international economic growth is likely to slow, if not falter, due to the pernicious consequences of an escalating global trade-war. Risk-appetite lifts overnight: Which leads to the overnight price action in North America, and to a somewhat lesser extent, Europe. Risk appetite has been piqued by news that US President Donald Trump stated his belief that Mexico wants a trade-deal to happen, as well as comments from Trump trade-advisor Peter Navarro that the tariffs on Mexico may not have to go ahead. The headlines (and really, for now that’s all they are) stoked a rally in US equity indices; catalysed a fall in the VIX; lead to a narrowing of corporate credit spreads; and provided room for a bounce in the US Dollar, Sentiment improves, fundamentals haven’t: The question becomes now whether we’ve put-in a new low in global equities, or whether this is just a little fake-out. There is lingering suspicion that it may be closer to the latter, given the fact that although friendly words are being passed between the Americans and Mexicans, nothing has truly changed yet. Even more to the point, the Americans and Chinese have in no way thawed their present animosity towards one another. It suggests that although market sentiment has clearly improved in the last few days, the fundamentals haven’t changed. They could, by all means: but signs of that aren’t here yet. The better measures of fundamentals: Probably the more pertinent facts here, too, is US stocks’ rally is very “defensive” in nature, and has been ignited mostly by an ostensibly dovish pivot from the Fed. Despite all the confidence that markets have reached a fresh turning point, US Treasuries are still rallying, especially at the front end of the curve. It suggests that the market is assuming the Fed will cut aggressively, and soon, to try to engineer a “soft-landing” for the US economy. The sectors in the S&P500 that have outperformed overnight are safe, yield-generating stocks – not those typically tied to greatest optimism about fundamental economic growth. Written by Kyle Rodda - IG Australia
  28. 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.
  29. 1 point
    New headlines to chase: The discourse in markets shifted early this week to where the next upside catalyst would come from. It needn't be substantial; just enough to fuel sentiment and attract buyers back into the market. In the last 24 hours, market participants received what they'd be yearning for: the combination of an in-principle deal in US Congress for border-security funding, along with the announcement that the US-China trade-truce deadline could be extended, has stoked bullish sentiment. These stories are more headlines than substance, however one thing traders ought to have heard ad nauseum recently is that, indeed, this is a headline driven market. So: for the last 12-18 hours in the financial world, markets have shown all the trappings of a renewed risk-on impulse. Short-term bullishness depends on Trump: It can be for some an uncomfortable thought: the key variable for both the US government funding and trade-was issues is the mercurial US President Donald Trump. The US President, it must be said, has outwardly advocated for a resolution to each concern. The worry for markets may be though whether Trump maintains his balanced temperament on the matters, and that there isn't an ulterior motive held by the President on either issue that could subvert the market's positivity. There isn't a clear timeline, other than those which have been imposed upon the President, to arrive at a decision regarding border funding or the trade-truce extension. Traders are taking bullish positions, but while doing so must surely be in a heightened state of vigilance, at least until firm validation for the rally arrives. Global growth concerns deferred: The activity at the margins driving price activity in financial markets overnight speaks of slightly diminished fears relating to the global growth slow down. It has to be said that the weakening growth outlook for the world economy is still hurtling like a freight train towards markets; the news last night simply increased hopes that perhaps there may be some tapping of the brakes when it comes to this phenomenon. Growth sensitive currencies were the major beneficiaries of last night's trade-headlines: the Australian Dollar, for one, is edging back to the 0.7100 handle. The US Dollar took a breather from its recent rally, as global bond yields climbed, and credit spreads narrowed – for the first time in several sessions. The confluence factors naturally gave a boost to stocks. Fear is falling, thanks to a friendlier Fed: Considering the balance of evidence, and the irrational, momentum chasing that pushed Wall Street to all-time highs in September 2018 may not be present right now. Fear is diminishing too: the VIX has fallen into the low 15s as of last night – a level also not seen since September 2018. If one were to infer a crude message from current market behaviour, it might be that maybe the Fed-engineered panic in Q4 2018 has been full remedied now. Of course, it was ultimately the Fed which fed to markets the medicine they were craving – the prospect of higher global rates and tighter financial conditions has evaporated. The strength in fundamentals is indeed waning, but appropriate conditions are in place for traders to take greater risks. US stocks recovery possesses substance: Wall Street is registering its best performance in several days on the back of the risk-on dynamic, though it's worth remarking volume has been below average and doesn't do much to validate the market's strength, just on an intraday basis. Market breadth conversely is portraying a broad willingness to jump into equities, with over 80 per cent of stocks higher for the S&P500 on the session -- at time of writing -- led by cyclical sectors and the high multiple tech stocks. What has been encouraging recently about US equities' recovery in 2019 is the substance behind it: the Russell 2000 (a deeper index made up of relatively smaller-cap stocks) is outperforming, and the SMART Money index suggests a market supported by buying from large institutional investors. ASX to be guided by global growth: As a trickle-down effect, the circumstances are favourable for Australian equities too, especially as our central bank joins the chorus of policymakers backing away from rate-hikes. Given the power of the RBA pales in comparison to that of the Fed, supportive monetary policy is eclipsed by the global growth outlook as the major determinant of the ASX’s direction. It does help in a meaningful way that market participants are receiving soothing words from central bankers, especially as our economy shows signs of slowing, as evidenced by yesterday’ weak home loan figures. The proof of what market participants see as the main risk to the Australian economy is in the price action, however: since the “Trump-trade-war-truce” news overnight, implied probability of an RBA rate cut in 2019 is once again back below 50%. ASX200 demonstrates will to power-on: The overnight lead has SPI futures pricing in a 27-point jump at the open for the ASX200. If realized, the index ought to challenge and likely break in early trade the resistance level at around 6100/05. From here, on a technical basis, the market meets a cluster of resistance, established during the period in September 2018 when the ASX traded range bound for the better part of a month. It’s been repeated frequently by the punditry that the market is overbought at these levels. Technically that appears true. But momentum is still in favour of the bulls, so for those with further upside in their sights, perhaps a break and close above 6100 this week could be the signal for some short-term consolidation, before the ASX200 builds strength for its next move higher. Written by Kyle Rodda - IG Australia
  30. 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.
  31. 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.
  32. 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.
  33. 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.
  34. 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.
  35. 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.
  36. 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.
  37. 1 point
    Deutsche Bank has kicked off the banking season in Europe today as the bank announced a net profit of €229 million, with analysts expecting a profit of €149 million, as the investment bank branch loses ground. Barclays has followed by beating expectations as net income came in at £1 billion vs. £723 million expected, Jes Staley announced he is "very pleased" with the Q3 results. The EU continues to mount pressure on the Italian government as Valdis Domborvskis, vice-president of the European Commission, has told Italy that it’s budget is “not sufficient” highlighting issues with further increasing debt in Italy. The Dow ended 126 points lower but recovered from the earlier 500-point loss during the day, as corporate results from Caterpillar and 3M disappointed. Nasdaq closed 0.4% lower whilst the S&P 500 slipped 0.6% Japanese manufacturing expanded to its fastest rate in six months In October a preliminary survey indicates PMI rising to 53.1, up from 52.5 in September. China's Shanghai Composite slipped 2.3% on Tuesday, counteracting the surge seen on Monday. China is in a state of doing "whatever it takes" to put an end to its stock market falling, as President Xi Jinping pledges to provide unwavering support for the Chinese private sector. Oil prices plunged more than 4% yesterday amid concerns amongst investors about increasing global tensions with Saudi Arabia and slowing global economic growth. Saudi Arabia's minister of energy has attempted to assure the markets that the Khashoggi scandal will not impact the supply of crude oil, with little success so far. Asian overnight: Asian stocks managed to arrest their recent slide, with markets throughout China, Japan and Hong Kong gaining ground overnight. The one outlier to this recovery came from the Australian ASX 200, which lost ground thanks to a sharp decline in the energy sector. With Saudi Arabia promising to keep the oil market well supplied, we saw a sharp decline in crude prices throughout the night despite an attempted rebound. Recent fears over the trade war impact on the Chinese economy have clearly shook stocks in Asia, and with the Italy-EU standoff looking set to rumble on, a risk-off sentiment is likely to stick around for some time yet. Trump's relationship with the Fed and China-US relations will be intriguing to follow over the coming days and how both factors impact trader sentiment UK, US and Europe: The US stock market is still in a sell-off state as the S&P 500 recorded its fifth straight decline, with all other major indices down at least 4.8% for the month of October. The driving force for the sell-off is the on-going trade tensions with China, which do not seem to be easing as Chinese government leaders indicate that they are not scared of a trade war with the US. Adding to this, Donald Trump continues his assault on the American central bank, when speaking to the Wall Street Journal he claimed that the Fed is the "biggest threat to the US economy", adding further scepticism around the US stock market. Trump's relationship with the Fed and China-US relations will be intriguing to follow over the coming days and how both factors impact trader sentiment in the US market. Looking ahead, we have a host of PMI releases from both Europe and the US. Preliminary eurozone PMI for France, Germany and the eurozone cover both services and manufacturing sectors, while the afternoon sees those same sectors covered by Markit for the US. The big release of the day comes from Canada, where the BoC is expected to raise rates once more. Keep an eye out for CAD volatility. Economic calendar - key events and forecast (times in BST) Source: Daily FX Economic Calendar 8.15am – 9am – French, German, eurozone mfg & services PMI (October, flash): eurozone mfg reading to rise to 54.4 and services to rise to 55.1. Market to watch: EUR crosses 2.45pm – US mfg services & mfg PMI (October, flash): mfg index to hold at 55.6, while services rises to 53.9. Markets to watch: US indices, USD crosses 3pm – Bank of Canada decision: rates expected to rise to 1.75% from 1.5%. Market to watch: CAD crosses 3pm – US new home sales (September): expected to rise 0.5% MoM. Market to watch: USD crosses 3.30pm – US EIA crude inventories (w/e 19 October): stockpiles to rise by 1.9 million barrels from 6.49 million a week earlier. Markets to watch: Brent, WTI Corporate News, Upgrades and Downgrades Barclays said Q3 profit fell to £3.12 billion from £3.45 billion, although excluding litigation and conduct charges group pre-tax profit was up 23% to £5.3 billion. Wells Fargo has been hit with a $65 million fine related into an investigation into statements made to investors regarding alleged fraudulent claims to "cross-sell" its business model. Caterpillar's disappointing results saw the stock closed 7.6% lower as the company highlights issues with increasing costs due to global trade conditions. Deutsche Bank report net profit of €229 million, a 65% fall in profits, in the third quarter amid the restructuring of the companies leadership. Analysts expected a sharper decrease than reported, a Reuters poll expected a net profit of €149 million. Another bank that has reported earnings today is Metro Bank, the company announced pre-tax profits of £39.2 million which is three times than the amount recorded in the same period of the previous year. Stobart saw a net loss of £17.5 million for the first half, compared to a profit of £111.9 million a year earlier. Revenue was up 21% to £151.3 million, while the dividend was raised 20% to 9p per share. Beer company Heineken has revealed impressive sales as volume grew by 9.2% and net profit increased to €1.606 million, fueled by warm weather in Europe. Shares in 3M slipped as much as 8.4% before recovering and trading at about 3.3% lower than its open, due to quarterly revenue missing expectations and adjusting its earnings perspective for 2018. Banco BPM upgraded to hold at Kepler Cheuvreux Datagroup upgraded to hold at Baader Helvea Salvatore Ferragamo raised to neutral at MainFirst Wartsila upgraded to buy at ABG Baader Bank downgraded to hold at HSBC Bayer downgraded to add at AlphaValue Cineworld downgraded to equal-weight at Barclays GAM Holding downgraded to neutral at MainFirst 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.
  38. 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.
  39. 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.
  40. 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.
  41. 1 point
    The growth-versus-risk paradigm shifted further in favour of the latter in the last 24 hours, as a multitude of stories compounded the bearish sentiment mounting in global markets. Though Chinese markets were more stable yesterday, an IMF report downgrading global growth forecasts for the first time since 2016 reinforced the possible growth-sapping impacts of the unfolding US-China trade war. Risks in Europe piqued again, following renewed inflammation of tensions between the Italian government and European bureaucrats, weakening the EUR/USD and pushing European bond spreads wider. While the trade war story also dented the growth story, after news broke that the US Treasury Department may be poised to officially label China a currency manipulator. ASX200: SPI futures are indicating a 4-point drop for the ASX200, following another belting of Australian shares yesterday. Futures markets have unwound the projected falls at the open for the ASX200 throughout the North American session, courtesy of an overall lukewarm but stable night’s trading on global markets. Support levels were brushed aside in local trade yesterday, with 6100 and 6060 offering little inertia, squashing the index into its eventual closing price at 6040. Downside momentum has really taken hold of the ASX now, shaping the perception that a short-term downtrend is emerging for the market. The daily-RSI reading suggests the sell-off is somewhat overcooked, but the prospect of a complete and immediate recovery of this week’s losses appears remote. Risk factors: Tuesday’s trading provided much of the necessary insight, however, into what cascading set of influences is driving the Australian share market. There are more than enough risk factors percolating through markets now to fuel bearishness on the ASX, but as always, the interest is in determining what weight each variable carries for the success and failure of the index. The global growth story is one of those, tied into fears of a Chinese economic slow-down and the effects of the trade war on financial markets. Another is the numerous risks to local and international financial stability, taking the form of underperformance from bank stocks, possible fiscal crises in Europe, and a possible blow up in emerging markets. All those stories play their part to a build-up in downside risk, but market-activity yesterday suggests that the biggest issue plaguing the market is this: the global sell-off in equities in the face of higher global interest rates. Local market drivers: The sectoral map for the ASX200 yesterday handed the clearest insight into this dynamic. For one, the bank’s stock prices pulled back after their modest recovery last week, no longer exhibiting signs of upside from higher global long-term bond yields; and the materials and energy sector also faulted, even despite a modest tick-up in oil and metal prices, and the easing of selling-pressures in Chinese equity markets. Though the truth in the ASX’s fortunes will often lie within activity in any one of these three sectors, the lion’s share of market action yesterday was generated by the heavy 4.11 per cent loss of the health care sector, catalysed by a 4.5 per cent and 5.2 per cent dumping of market darlings CSL and Cochlear, respectively. Heath care stocks: The rout in health care stocks ties back into a theme manifesting the world over: that growth stocks are coming out of vogue as global discount rates increase. Much alike the tech giants in the US, Australia’s major healthcare stocks – again, the likes of CSL and Cochlear – have carried the Australian share market this year, collectively generating a YTD return of over 21 per cent. These companies, better defined as bio-tech firms, have traded with increasingly stretched valuations, and with naturally lower yields. The spike in global rates over the past week has put pressure on valuations, as well driven investors to chase returns in safer, higher yielding assets. It’s a phenomenon playing out at a fundamental level the world-over, causing drag across equity markets and consequently an overall bearish sentiment within them. Although no reason for alarm yet, with opportunities still ample ahead of projected strong earnings growth, the combination may portend bearishness for ASX200 traders moving forward into the back end of 2018 and start of 2019. Risk-off: The parameters dictating market sentiment presently is tipping markets away from riskier assets and into safe havens. The already described activity in equity markets evidences this, but less structural and more transient and nebulous concerns are materializing in other asset classes. The Japanese Yen, for one, has attracted flows this week, falling back below the 1.13 handle last night. The stronger currency and risk-off dynamic has quashed the Nikkei’s bullishness, pulling that index down from its recent 27-year highs. Paradoxically, the AUD/USD has climbed within this context, bouncing off the bottom of the pair’s trend channel back above the 0.7100; however, after the multiyear lows registered last week, this is probably reflective of some opportunistic profit taking from short-sellers, with the more accurate growth-versus-risk currency pair, the AUD/JPY, falling below the significant 80.00 handle last night. North America: The rotation out of growth stocks is afflicting Wall Street indices, however the thrust behind this process did ease last night. The reasoning for this was the settling in US Treasury yields, which fell throughout the day, after the benchmark US 10 Year Treasury clocked new 7 highs at 3.26 per cent during the early stages of the session. The NASDAQ was subsequently allowed to arrest its 3-day tumble, closing effectively flat, while the comprehensive S&P500 dipped 0.1 per cent. The far narrower Dow Jones lost 0.2 per cent for the day and demonstrated best the unfolding rotation into defensive strategies by investors: putting aside the jump in oil prices that led the rally in the energy sector, once more the conservative consumer staples, communication and health care stocks proved the leaders of the day’s trade. 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
    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.
  43. 1 point
    Economic data flow has been relatively light overnight, but activity on financial markets is especially rife. It’s begun with the bond market – not in Europe this time, but in the booming United States. There doesn’t appear to be a discernible flashpoint that’s sparked this, but nevertheless and for whatever reason, bond traders have hit the sell button on US Treasuries. The phenomenon can be witnessed across the curve, with US 2 Year Treasury yields climbing to levels not seen since 2008 at 2.86 per cent, the benchmark US 10 Year Treasury yield hitting levels not seen since 2011 at 3.15 percent, and US 30 Year Treasury Yields clocking-in levels not seen since 2014 at 3.31 per cent. As one can safely assume, the DXY has rallied on the developments, pushing to a 6-week high just shy of 95.80. It’s growth, not inflation: An explanation for the sudden frenzy in fixed income markets is being foraged for. The concern in these situations is that such a move could indicate strife: something tied back to fears uncontrollable inflation, or a reflection of a higher likelihood of US fiscal deterioration. To the relief of market participants however, the consensus regarding the moves overnight is an optimistic one: traders are buying into the Fed’s “growth, growth, growth” view expounded over the last week, and are as such pricing in the prospect of higher US rates. Although myriad of risks now emerges for other asset classes as a consequence to the (apparently) inexorable rise in yields, the underlying reasons should be cause for a calm and collected cheer. Wall Street: How the rally in bond yields, provided it continues, manifests in US equity markets will become the centre of concern, one would imagine, in coming days and weeks. US indices faded into the close last night as the Treasury sell-off took hold, with the benchmark S&P500 closing only a fraction higher for the day. Both the Dow Jones and NASDAQ put-in a better performance for the session, posting gains of 0.2 per cent and 0.3 per cent respectively – the former registering new all-time highs in the process – but pulled-away notably from intraday highs at the back end of the trading day. Interest rate sensitive and high growth sectors underscored the day’s volatility, as financial stocks climbed along with information technology and industrial stocks; while real estate and consumer sectors suffered under the assumption higher US rates will weigh on property markets and consumption. The Fed and the stock-market: An implied maxim of the US Federal Reserve that elegantly describes last night’s trading dynamic (the articulation of which is often attributed to Ex-Fed-Head Alan Greenspan) is that the role of Fed is to “take away the punchbowl when the party is getting started”. It was this abstraction that was philosophically behind this year’s stock market correction in February and caused investors to flee from equity assets. Markets appear more circumspect at the moment, galvanized by a booming US economy, and higher corporate profits buttressed by US President Trump’s stimulatory tax cuts. Consensus is still that the times won’t immediately change for the US stock market, with valuations forecast to tighten as earnings keep improving. Even still, as the US equity bull market charges forward, an anxiety that will hover over markets will be whether the Fed’s determination to “normalize” interest rates will sober investors’ euphoria. ASX: The lead set by the heavy activity on North American markets overnight has SPI futures indicating a 14-point jump for the ASX200 at market open. Australian shares managed to recover territory yesterday, led by a catch up by materials stocks to the global recovery in commodities prices, coupled with a more general recalibration across the index following Tuesday’s bank led sell-off. The fortunes of the financial sector will be of interest today given the tick-up in global bond yields: the circumstances should lead to a favourable view of future bank profitability, but with the Royal Commission still overhanging the industry, perhaps this will be ignored. The ASX200 closed the day at 6146 yesterday, bouncing off support at 6120: previous support at 6160 may prove formidable resistance here and should be watched closely by technical traders. Oil rallies, EUR stable: There were a variety of other stories occupying traders last night that are worth touching on briefly. US Crude Inventory data was released, showing a surprise increase in oil stock piles. Despite this, the price of oil maintained its upward momentum, driven by the belief that blips in inventory data won’t change the structural problems caused by low production and undersupply. The other unfolding story that is moving markets is the Italian fiscal battle, currently being waged between bureaucrats in Rome and Brussels. The tensions and fears cooled in the last 24 hours, following news that the Italian government had agreed to reduce its budget deficit to 2.0 per cent by 2021. The risks here are ongoing, but for the time being the EUR has settled as the spread between Italian government bonds and German Bunds have narrowed. 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
    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.
  45. 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.
  46. 1 point
    A Habit of Cutting Down Progress Towards Ending Trade Wars This past week, optimism was dangled in front of the markets and violently snatched away before it became too established. We have been dealing with the escalation of explicit competition in trade policies for the since March, and each hint of progress in turning the major players back from economic stalemate has been consummately dashed. This past week, there were two fronts on which it seemed we were heading for an important breakthrough. The first upswing would come from the NAFTA negotiations. After US and Mexican officials seemed to come to an understanding on bilateral conditions, it was reported that Canada was coming back to the table to see if it could hash out its own understanding with the United States. With a soft ‘deadline’ presented for this past Friday it seemed there was the will and momentum to secure a trilateral agreement that could provide stability in the relationships between these major economies. Instead, Canada’s Foreign Minister announced they had not come to an agreement. In a now-familiar style of reaction, President Trump said the US was ready to go without Canada and said Congress should not interfere in the negotiation. The US President would also dash building confidence that the US and EU would head off a more threatening economic standoff between the two largest economies in the world. EU Trade Minister Malmstrom made remarks earlier in the week saying the Union could cut tariffs on US auto imports to zero if the US would do the same for European cars coming into their country. That was seemingly what the President was looking for in previous remarks, but rather than voice pleasure that talks had taken a favorable turn, Trump stated it was ‘not enough’. These developed world trade threats are ominous for global growth and the healthy flow of capital across the world’s financial centers. However, they are not as yet as intense as the impasse between the US and China. There was no material sign of improvement from which we could garner a fresh sense of disappointment this past week. The previous restart of talks between the two superpowers notably led to little traction according to US leaders. There has been little in the way of encouraging rhetoric from either side in the meantime. Furthermore, there are reports that President Trump is intent on pushing through the next, more onerous round of tariffs on the largest foreign holder of its sovereign debt. The open period for the public to weigh in on a proposed additional $200 billion in taxes on Chinese imports was original set for August 30, but was supposedly pushed back to September 5. Either way, the ultimate decision by the administration is likely soon – with some administrators believing news could come as soon as next week. This begs the question: at what level of total taxes or number of active trade war participants will global investors turn their fear over ill effects into action? What to Watch for as We Turn to Fall Trading Summer in the Northern Hemisphere doesn’t officially end until September 22; but for most intents and purposes, it came to a close this past Friday. Historically, August is the last month of the doldrums and the week preceding the US Labor Day holiday weekend is the final true week of passive drift. There is not a definitive flick of the switch from Friday August 31st to Tuesday September 4th where markets turn from listless chop back into full-fledged trend. That said, same seasonal factors the market abided by to overlook pressing issues such as trade wars, growing political risks and central bank commitment to normalize monetary policy will transition into active trade for a month that historically averages the only loss in the calendar year for the benchmark S&P 500 and is one of the top standings for volatility according to the VIX. It is possible that anticipation has been building up to this cyclical pivot and the weight of all of the aforementioned risks will come crashing down on the complacent market. More likely, we will see the ill-effects of eroding fundamentals slowly wear away at the speculative resolve that has promoted a situation where the S&P 500 is at record highs while the Vanguard’s World Index ex US fund (VEU) and Emerging Market ETF (EEM) are carving out multi-month bear trends. Important with monitoring the balance of the markets moving forward are the measures of general speculative activity and the relationship across favorite risk assets. Volume is almost certainly to increase over the coming month, and there is a long-standing correlation between turnover and volatility. For those keeping count, volatility has an inverse relationship with risk-leaning assets such as equities and carry trade. Open interest – essentially participation – will also be important to monitor. Are bulls significantly adding to the S&P 500 via cumulative shares, the SPY and eminis as it traverses new records or is stagnating (perhaps even declining)? As markets deepen and volatility increases, the discrepancy between risky assets (and typical havens) will demand reconciliation. If a broad appetite behind speculative benchmarks does not return, the incongruity will draw increasing unwanted attention from those looking to honestly evaluate the risks of their portfolios. Who is Devaluing their Currency and Why Not long ago, President Trump lobbed accusations against Chinese and European authorities for devaluing their respective currencies to afford unfair trade advantages. This was likely a means to add further justification for pursuing aggressive confrontational trade policies against these major economies that draw painful retaliations against American consumers and businesses in the process. It could also be the pretext for the US exacting its own FX policies that would categorically touch off a financial crisis as the market re-assesses pricing, reserves and economic relations wholesale (something we’ve discussed before). With big questions ahead of us, it is worth assessing who is utilizing policy currently that can fit classification of currency manipulation or may have in the recent past. The most frequently accused world player is China. And, there is obvious policy adopted just recently that qualifies it for the label. One of the country’s primary FX administrators (the People’s Bank of China or PBoC) announced a change to its pricing method that was clearly aimed at reducing volatility – and not so subtly meant to prevent the continued decline in the offshore Reminibi. That was a move that was likely taken in part to take the wind out of Trump’s manipulation claims sails as well as to head off concerns that there was a building wave of capital flight. These are moves that can be labeled efforts to curb political stress and prevent a financial crisis, but they are most definitely manipulation. And, distortions imposed long enough eventually lead to crises. As for the allegation directed at the Euro, the 2014 monetary policy connection the ECB made to EURUSD at 1.4000 was rather egregious. However, the application of rate cuts to zero and expansion of its balance sheet afterwards didn’t deviate far from many other large central banks – they were just late to the game and thereby less effective. Keeping up the argument recently finds much less weight as the Euro rallied in 2017 despite the Fed’s persistent hike pace while the European bank itself has signaled it plans to normalize in the foreseeable future. If the British Pound has purposefully been devalued to afford it trade advantage in this world of plateauing growth, using Brexit to afford this advantage would have to be the worst possible route. Japan has a long history of outright intervention on behalf of its currency owing to its dependence on trade, but both the Finance Ministry’s direct Yen selling and the Bank of Japan’s (BoJ) indirect monetary policy effort have seen their effectiveness fade after so many successive rounds. Both the RBA and RBNZ have attempted to ‘jawbone’ (talk down) their currencies, but that is something nearly every major central bank has done and it is just as ineffective for all. We could label the groups’ passive monetary policies as moving them out of favor as carry currencies, but that would be a poor plan as well as they will not attract foreign capital to help establish financial stability. The SNB clearly enacted a program meant to devalue its currency with negative rates and a hard EURCHF floor, but that effort failed spectacularly and the central bank now has to deal with the fallout from a lack of credibility. And, then there is the US Dollar. Was the Fed’s piloting the QE program after the financial crisis evidence of an effort to gain trade advantage? Perhaps expanding to a QE 2 and QE 3 even though the economy and financial system was no longer in crisis was the evidence? Or perhaps the Trump administration’s efforts to play down the long-held ‘Strong Dollar’ policy or the President’s ruminations over Fed policy and accusations against other trade partners? In some way, everyone is engaged.
  47. 1 point
    Three new crypto assets We are pleased to announce that you can now trade three new cryptocurrencies on our platform - EOS, Stellar and NEO. You should be able to see these on the CFD and spread betting leverage accounts under the 'Cryptocurrencies' header on the left hand side as well as on mobile. You can't trade these on a share dealing, ISA or smart portfolio account. Key contributors to the recent launch were IG Community members who participated in a poll and picked which new crypto assets they were most interested in. The results can be seen on the right, notably Stellar, EOS and NEO taking the lead, and whilst other factors were involved in the decision making process, I hope this helps show the importance of customer feedback. We have given a quick overview of EOS, Stellar and NEO below, but the Community moderation team just wanted to thank those on Community for continuing to share their feedback. Please feel free to help shape the future of IG by submitting your own thoughts and opinions - every feedback item is reviewed and where appropriate passed on to the correct developer team. Why trade EOS, Stellar and NEO with IG? New crypto assets can be traded throughout the week and over the weekend*. Go short as well as long on all crypto markets. Great liquidity with a reputable, regulated leverage provider you can trust where your funds are held in segregated bank accounts and protected by a variety of government schemes depending on your residency. EOS, NEO, and Stellar have a high position in China’s latest cryptocurrency ranking list. You can now trade this months top five most globally discussed alt-coin crypto assets with IG (as well as the grandfather of all cryptocurrencies bitcoin, it's fork bitcoin cash, and two crypto specific crosses ether/bitcoin and bitcoin cash/bitcoin). EOS Market cap (as of 21st Aug) - $4,400,000,000 USD Circulating supply (as of 21st Aug) - 906,245,118 EOS Total supply - 1,006,245,120 EOS EOS is a blockchain platform for the development of decentralised apps, similar to ethereum in function. EOS aims to combine the best features and promises of the various smart contract technologies (such as the security of Bitcoin and the computing support of ethereum) in a single simplified scalable platform. A key goal is to build a blockchain platform that can securely and easily scale to thousands of transactions per second. Recently Block.one announced that they are committed to investing over $1B into funds focused on the growth of the EOS in the blockchain economy. An interesting event in the Crypto-world is China’s blockchain ranking this month, which put EOS on top: The new ranking, created by two institutions funded by the Chinese government, is known for rating public blockchain networks based on their application and technology, and has chosen EOS as the current top performing blockchain network in the world, pushing back the previous leaders ethereum and bitcoin. Additionally, this month the ranking placed tokens and other major cryptocurrencies like NEO and Stellar ahead of the previously dominant cryptocurrencies. Stellar Market cap (as of 21st Aug) - $4,061,000,000 USD Circulating supply (as of 21st Aug) - 18,772,926,091 XLM Total supply - 104,224,393,646 XLM Stellar is open-source, distributed payments infrastructure - a platform, which aims to unite banks, payments systems, and users. In July, Stellar became a top performing crypto asset in its class with 40% gains. According to crypto analysts, Stellar is currently preparing for a wider adoption on top of its blockchain platform, described as “the best competitor to ethereum's platform aspirations” (SA, August 2018). It currently has several projects worth noting utilising its blockchain, including its flagship partner (and possible the reason for such significant gains in July), IBM. Additionally, it was the first blockchain to receive Sharia Certification. NEO Market cap (as of 21st Aug) - $1,168,000,000 USD Circulating supply (as of 21st Aug) - 65,000,000 NEO Total supply - 100,000,000 NEO NEO is a blockchain platform that facilitates the development of digital assets and smart contracts. As a cryptocurrency, it is designed to build a scalable network of decentralized applications. The base asset of the NEO blockchain is the non divisible NEO token which generates GAS tokens that can be used to pay for transaction fees generated by applications on the network. The main goal of NEO is to become a digital, decentralised and distributed platform for non-digital assets, through the use of “Smart Contracts.” This means that its goal is to become a digital alternative for asset transfers that are currently non-digital. An example, given by members of the NEO team, is paying rent using a smart contract, being automatically triggered once a month, instead of setting up a bank payment. Through a distributed network, NEO aims to create a "Smart Economy". Available now All three of these new crypto assets are now available on your trading platform and the charts are in the process of being respectively backdated. Please note that EOS and Stellar are quoted in cents, whilst NEO is quoted in dollars. You can see more information and all contract details on the Help and Support portal. Please visit your respective portal, however UK clients can see NEO, Stellar and EOS contract details here. *Markets close at 10pm on Friday night (UK time), then reopen on Saturday at 4am (UK time).
  48. 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.
  49. 1 point
    It is Not Wise to Start Financial Fires in a Market so Parched for Value The financial markets find themselves in between two storm fronts. On the one hand, there is the seasonal liquidity drain that is associated with Summer trade. More historical norm than actual exchange closures, the ‘Summer Doldrums’ present a consistent curb on volume, open interest, volatility and productive trend year after year. However, the restraint is not guaranteed. Though not as common as those Fall (for the Northern Hemisphere) triggered crises and deep bear trends, there are certainly bouts of panic that originate in these quiet months. And that is why we should pay closer attention to the other storm front that has consistently stood at the border of our collective consciousness. We have watched as growth forecasts have cooled, the limitations of monetary policy to offer temporary support have entered mainstream discourse and protectionism has emerged to threaten one of the most consistent sources of stability in globalization. These are not new risks, but they have been regularly brushed to the side in favor of short speculative opportunities to be pursue distractedly. Yet, draining liquidity in these questionable conditions has acted to call greater attention to the risks at hand. And, now with the tension applied by the United States on peers and counterparts alike, we are seeing the growth of clear conflict threatening to force the issue of more candid evaluations of value. Trade wars had – and still has – the capacity to trigger a full scale deleveraging of excess risk, but the temporary stay in the spread of kind-for-kind retaliations among developed world giants soothed imminent fears. This front is likely to erupt once again in the not-to-distant future under more pressing circumstances. In the meantime, a sister action in the form of US sanctions placed on less-friendly countries may take up the reins on global sentient. The Trump administration reversed its participation in the nuclear deal with Iran (27th largest economy) and restored sanctions on the country much to the condemnation of the other participants of the deal. The US has also moved to apply new penalties on Russia (12th largest economy) in response to its supposed use of nerve agent on a former spy. The USDRUB soared to a two year high this past week. And, showing the most severe short-term impact of all was the quickly escalating sanctions that the US is placing on Turkey (17th largest economy) for ostensibly the country’s refusal to release a US pastor swept up during the failed coup. The country’s currency has dropped over 55% versus the Dollar (through Monday’s open), and this time the financial exposure for major economies (particularly European) was quickly seized upon. Let’s see if this fire can be contained. Is the US Placing Pressure on Major Counterparts Like the EU Through Proxy? The Trump Administration has likely started to recognize that there are rumblings of coordination from those countries that are already under the influence of the United States’ sanctions or feel they soon will be. That is likely a key reason the President struck a conciliatory tone with EU President Juncker when a few weeks ago he agreed not to pursue further tariffs – particularly on autos – so long as the two economic superpowers were negotiating. That said, it is clear that the strategy being employed on the US side depends on applying enough pressure that counterparts are willing to sacrifice more in order to win a compromise to find relief. That brings in the proxy pressures that the US has seemingly favored over the past weeks in the stead of outright trade wars. As mentioned above, the US has announced sanctions against Iran, Russia and Turkey in short order. These moves would certainly draw less criticism from Americans dubious of the government’s foreign policy moves as each is considered more adversary than ally. Yet, there may be more to these pursuits than simply following a moral compass with global relations. Other countries have supported efforts to promote relationships with these countries over the past years which has entailed exceptional investment alongside diplomatic capital. On two fronts in particular, this particular application of pressure has had enormous side effects for the Europe. With Iran, the EU is still trying to hold together the agreement made between the OPEC member and the other participants of the original nuclear agreement, taking a lead to promote stability. When President Trump stated in a tweet that those that county to do business with Iran could have their business with the US halted, some business leaders took it seriously and looked to curb trade. Yet, the EU responded saying any European companies that complied with the United States’ demands on Iran – and thus jeopardized the effort to hold the agreement together – would face penalties from European authorities. With Turkey, there is no slow build up. The rapid tumble in the country’s currency (Lira) has risked the stability of assets foreign interests have pursued. European banks are particularly exposed and that led the ECB to voice concern over their connection should instability grow. While this rapidly escalating proxy pressure on Europe by the United States’ actions maybe unintentional, the nature of how it is playing out suggests otherwise. Dollar Rally a Result of Policy and Justification to Devalue? On July 20, President Trump lashed out (via Tweet as his want) at the Euro and Chinese Yuan claiming the currencies were being manipulated to render an unfair competitive advantage to their respective economies. Such claims are dubious at best. With the Yuan, history shows the country has a penchant for exerting influence over the activity level and direction of its ‘Renminbi’ to help promote economic, financial and social stability at home. However, their ability to keep all these efforts leveled out on the horizon is increasingly troubled. What’s more, a steady charge higher for USDCNH is exactly what would be expected if the United States’ tariffs on China were having their intend effects. As to the criticism of the Euro, there is little evidence to support that view. Four years ago, the anger would have been justified when the ECB said it would applied monetary policy in order to prevent the EURUSD exchange rate from passing 1.4000 – there must have been an agreement behind closed doors to allow this given how blatant the effort. This claim now, however, finds little support in action or event threat. Again, this is likely evidence of a strategy with questionable execution. Making a claim that multiple major currencies are being unfairly devalued – one others may agree to out of historical assumption and the other more dubious – can be used as pretext for enacting a policy aimed at counteracting the stated inequity. If there is indeed interest for US officials to abandon the ‘strong Dollar’ policy as has been hinted at multiple times over the past months and actually introduce policy to sink the currency, that appetite will be significantly bolstered this past week with the surge for the USD versus both the ‘majors’ and emerging market currencies. Arguably the result of the Trump Administration’s own policies, it may nonetheless serve as the foundation for a new course of global financial conflict.
  50. 1 point
    Just When You Think Trade Wars Can’t Grow More Extreme… The last we left global trade wars heading into the close Friday July 13th (the week before last), the situation was already firmly planted in worrying escalation with little sign of relief in the sidelines of diplomacy and political cheerleading. The United States was still applying its metals tariffs against competitors and colleagues alike, the $34 billion intellectual property oriented tariffs were in place against China (not to mention China’s retaliation upon the US), and threats of a massive escalation by the Trump administration to the tune of $200 billion in import duties on China and a 20 percent tax on all imported European autos was still hanging in the air. It would seem near-impossible to inflame the situation further than that. And yet, they have found a way. Looking to truly turn the screws in the face of retaliatory threats by China and WTO complaints, the US President warned Friday (and his Treasury Secretary echoed Saturday at the G20 meeting) that they could introduce tax on all of China’s imports – amounting to more than $500 billion. Normally, we would assume these are mere threats meant to prompt compromise out of shock, but this has been a threat issued and executed upon too frequently. While this just seems a self-defeating game of chicken where all participants suffer economically, there is certainly a strategy to this effort. There are hints of Eco Adviser Kudlow and National Security Adviser Bolton in this effort; but it should be said that regardless of what their intent may be, the outcome is likely to hasten an inevitable turn in the global economy and financial markets – whether they relent last minute or not. Ahead, there are two important meetings scheduled for trade talks: President Trump is due to meet the EU’s Juncker and Malmstrom Wednesday while the US Trade Representative is set to talk trade with the Mexican Economy Minister on Thursday. Good luck to us all. Watch my weekend Trade Video to see more in this topic. Is President Trump’s Dollar, Euro and Yuan Comments Pretense to a Currency War? This past Thursday, President Trump sent the Dollar reeling after he weighed in on the path of higher rates and the level of the Dollar. With a background in real estate (and thereby debt financing), he lamented the Fed’s gradual pace of monetary policy tightening amid the trade wars his administration had pressed and the growing debt financing the country was facing – again increased with the recent tax cuts. He said the rates and currency rise that followed made other efforts the government was pursuing more difficult and ultimately made the US uncompetitive. The White House later moved to clarify that the President was not questioning the Fed’s independence or competence, but he would take to Twitter to double down on his remarks Friday. A perception that the Dollar is low and claims that the Yuan and Euro are being lowered by their respective policy authorities looks suspiciously like pretext for starting a currency war. When it comes to the Chinese currency, there is little doubt that policy officials have a hand in its performance; but that is more and more likely a measure to dampen volatility rather than wholesale steer. Officials pointed to the rapid drop in the Yuan these past few months as evidence, but wouldn’t such a move arise if the trade war were having the intended effect? In fact China has shown over the past few years that too sharp a decline in the local currency was reason enough to step in and bid the CNH so as to curb fear of a capital flight. As for the Euro, there is little ground in their claims of manipulation now as monetary policy efforts have disconnected from exchange rate movement – though had they made this accusation back in 2014, I would have agreed. Whether this claim is just rising out of the blue or indicates a strategy, it should truly concern us. Currency wars do not end well for anyone, they are more likely to trigger a fast-tracked financial crisis and it can be yet another systemic risk that sees the Dollar permanently lose status as the world’s dominant currency long term. Evaluating How the ECB Rate Decision and US GDP Will Hit the Markets It is clear that the week ahead will find its market winds determined by themes (trade wars, currency wars and perhaps even systemic risk trends). However, there are high profile events scheduled that will certainly carry important fundamental weight for the big picture evaluation – even if they don’t trigger the same definitive direction and short-term volatility that have in the past. That said, fundamentals must be evaluated as a hierarchy: the most pressing theme to the largest swath of the market will more decisively define the market’s bearings (whether higher, lower or sideways). This in mind, two particular events should be watched closely whether they overcome the gravity of trade wars or not. Thursday’s ECB rate decision is very important. Over the previous meetings, there has been heavy speculation that the central bank is heading into an eventual and inevitable turn from its extremely dovish policy path with rhetoric clearly setting the stage. Speculation around this eventual hike has led to remarkable lift for the Euro even when the anticipation for the first move was 12 to 18 months ahead (as was the case throughout 2017). Yet, recent developments will make this policy gathering even more important. Will the central bank take into consideration the accusations by President Trump that it is fostering exchange rate manipulation? Will concern over trade wars’ curbing economic and financial health show through? As for the US GDP reading on Friday, we will see the general health of the world’s largest economy as trade wars started to go into effect and the tax cuts hit full stride. A weak showing here could add considerable fear to the already existing concern that retaliations to tariffs could tip the US economy into correction and reinforce reports that the tax cuts had little effect on US consumption through the middle and lower class American households. Context will definitely paint these events, but that doesn’t diminish their relevance at all.
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