Forex research
- Thread starter Alpari
- Start date
Alpari
Alpari Representative
- Messages
- 122
UK Opening Call from Alpari UK on 17 December 2014
Volatility reigns as BoE and FOMC look set to dominate
• Russian confidence at a low as ruble plummets
• Eurozone begins slowly turning around
• Falling UK CPI crucial ahead of US release
• MPC minutes key as falling inflation could change outlook
• FOMC announcement focused around potential language change.
Market volatility appears to be the order of the week, as a range of economic and political announcements mean that we have seen traders find it difficult to know whether we should be coming or going. A US fiscal deal, sharp movements in the oil price, a Russian central bank freakout, UK bank stress tests and a plummeting CPI has contributed to a particularly notable week where it can be quite tough to actually predict in which direction the indices will end up at the end of the day. This has been exemplified perfectly by the Asian markets overnight, which saw the likes of the Hang Seng and Nikkei swing between major losses and gains. Ultimately the current market indecision shone through with the Nikkei ending up higher while the Hang Seng closed lower. We are expecting the European markets to have more of a consensus, with the FTSE100 likely to open around -60 points, DAX -121 points and the CAX -66 points.
Yesterday saw an extremely volatile European session, personified by an absolute lack in the Russian central bank, a very mixed set of data points out of the eurozone, along with a UK CPI level that was the lowest since 2002. The Russian decision to hike their interest rate by 6.5% was a bold one to say the least, showing exactly how serious they are about halting the recent slide in the value of the ruble. However, the markets were far from tempted by these massive rates and instead saw it as an act of desperation, leading to an 11% fall against the dollar; the steepest fall since the 1998 Russian financial crisis. With Obama due to announce another set of sanctions in the very near future, it is clear that Putin may have to change tact to get their economy back on track and that can only really be a shift in Ukraine policies given that oil prices appears to only be heading in one direction.
The eurozone’s weaknesses appear to be abating to some degree, with the announcement of an absolutely massive ZEW report, along with a largely positive range of PMI figures. Exports appear to be on the rise and with a weakening oil price alongside an already weak euro, the conditions appear to be conducive to enabling a recovery in the region. Whilst it is not really worth getting too excited, this is a sign that the recent downturn may be ending and now we are moving towards one of a recovery.
UK CPI fell to the lowest level since 2002, as a rate of 1% shocked the markets and led many to believe that the BoE will have no choice but to become even more accommodative going forward in terms of interest rate hike timelines. One thing is clear and that is that this slump in inflation is to a large extent driven by falling oil prices and thus central bank policy is unlikely to really impact that factor. Should the BoE manage to compensate for this fall in inflation by raising core inflation (without energy), then they also run the risk of seeing the headline figure skyrocket once this game of chess being played by Saudi Arabia is over and prices return to ‘normal’ in the energy market.
What will be interesting is whether yesterdays figure is indicative of the global experience and that will be seen later today, when the US CPI number is released. So far, the US has managed to keep their head above the water somewhat, with disinflation in Europe having less of an impact upon their level of CPI. However, as falling oil prices are gradually factored into the prices at the pump and for firms, it will be likely that the US should follow suit. Both the core and headline figures are expected to fall, but given the experience within the UK, there is the possibility of a surprisingly larger fall than estimated.
The European session is looking likes it will be largely dominated by the UK, where the BoE minutes are released simultaneously alongside the jobs report. The BoE clearly has a penchant for releasing data points together, with the announcement that soon these minutes will be released alongside the initial announcement, starting in 2015. However, for now the focus will be upon the belated outlook seen within the meeting earlier this month and given the movement within inflation recently, there was an expectation that we could have seen votes change in favour of no change in the interest rates. This was not the case, however there is likely to have been a change in outlook from the committee, as the threat of further disinflation became increasingly evident. Thus the minutes will be crucial in determining whether the MPC is worried about the impact falling oil prices will have upon inflation and what they would do should it fall like it has yesterday.
Meanwhile, the US session will see the release of the latest FOMC decision, with many hoping for a change in language from Janet Yellen. The US economy has been booming of late and despite the woes felt across the likes of the eurozone and Japan, they are clearly not too worried about the threat of contagion as many expect an even more bullish Fed with month. This months meeting will be dominated by one single phrase and whether it is included or not will likely be the major determinant of market direction off the back of the meeting. That phrase relates to the FOMC’s promise to keep rates low for a ‘considerable time’. Should this be removed, then the timeline for a rate hike has surely got to be shortened in response. However, given the experience of the UK in relation to CPI, it is likely the Fed will be pragmatic at a time when oil prices are starting to hit global inflation levels. Thus I do not see it to be sensible for the FOMC to change their statement at a time when their inflation levels could follow suit, leaving Yellen and co in a sticky situation where the ‘considerable time’ phrase were to be put back into the statement.
Volatility reigns as BoE and FOMC look set to dominate
• Russian confidence at a low as ruble plummets
• Eurozone begins slowly turning around
• Falling UK CPI crucial ahead of US release
• MPC minutes key as falling inflation could change outlook
• FOMC announcement focused around potential language change.
Market volatility appears to be the order of the week, as a range of economic and political announcements mean that we have seen traders find it difficult to know whether we should be coming or going. A US fiscal deal, sharp movements in the oil price, a Russian central bank freakout, UK bank stress tests and a plummeting CPI has contributed to a particularly notable week where it can be quite tough to actually predict in which direction the indices will end up at the end of the day. This has been exemplified perfectly by the Asian markets overnight, which saw the likes of the Hang Seng and Nikkei swing between major losses and gains. Ultimately the current market indecision shone through with the Nikkei ending up higher while the Hang Seng closed lower. We are expecting the European markets to have more of a consensus, with the FTSE100 likely to open around -60 points, DAX -121 points and the CAX -66 points.
Yesterday saw an extremely volatile European session, personified by an absolute lack in the Russian central bank, a very mixed set of data points out of the eurozone, along with a UK CPI level that was the lowest since 2002. The Russian decision to hike their interest rate by 6.5% was a bold one to say the least, showing exactly how serious they are about halting the recent slide in the value of the ruble. However, the markets were far from tempted by these massive rates and instead saw it as an act of desperation, leading to an 11% fall against the dollar; the steepest fall since the 1998 Russian financial crisis. With Obama due to announce another set of sanctions in the very near future, it is clear that Putin may have to change tact to get their economy back on track and that can only really be a shift in Ukraine policies given that oil prices appears to only be heading in one direction.
The eurozone’s weaknesses appear to be abating to some degree, with the announcement of an absolutely massive ZEW report, along with a largely positive range of PMI figures. Exports appear to be on the rise and with a weakening oil price alongside an already weak euro, the conditions appear to be conducive to enabling a recovery in the region. Whilst it is not really worth getting too excited, this is a sign that the recent downturn may be ending and now we are moving towards one of a recovery.
UK CPI fell to the lowest level since 2002, as a rate of 1% shocked the markets and led many to believe that the BoE will have no choice but to become even more accommodative going forward in terms of interest rate hike timelines. One thing is clear and that is that this slump in inflation is to a large extent driven by falling oil prices and thus central bank policy is unlikely to really impact that factor. Should the BoE manage to compensate for this fall in inflation by raising core inflation (without energy), then they also run the risk of seeing the headline figure skyrocket once this game of chess being played by Saudi Arabia is over and prices return to ‘normal’ in the energy market.
What will be interesting is whether yesterdays figure is indicative of the global experience and that will be seen later today, when the US CPI number is released. So far, the US has managed to keep their head above the water somewhat, with disinflation in Europe having less of an impact upon their level of CPI. However, as falling oil prices are gradually factored into the prices at the pump and for firms, it will be likely that the US should follow suit. Both the core and headline figures are expected to fall, but given the experience within the UK, there is the possibility of a surprisingly larger fall than estimated.
The European session is looking likes it will be largely dominated by the UK, where the BoE minutes are released simultaneously alongside the jobs report. The BoE clearly has a penchant for releasing data points together, with the announcement that soon these minutes will be released alongside the initial announcement, starting in 2015. However, for now the focus will be upon the belated outlook seen within the meeting earlier this month and given the movement within inflation recently, there was an expectation that we could have seen votes change in favour of no change in the interest rates. This was not the case, however there is likely to have been a change in outlook from the committee, as the threat of further disinflation became increasingly evident. Thus the minutes will be crucial in determining whether the MPC is worried about the impact falling oil prices will have upon inflation and what they would do should it fall like it has yesterday.
Meanwhile, the US session will see the release of the latest FOMC decision, with many hoping for a change in language from Janet Yellen. The US economy has been booming of late and despite the woes felt across the likes of the eurozone and Japan, they are clearly not too worried about the threat of contagion as many expect an even more bullish Fed with month. This months meeting will be dominated by one single phrase and whether it is included or not will likely be the major determinant of market direction off the back of the meeting. That phrase relates to the FOMC’s promise to keep rates low for a ‘considerable time’. Should this be removed, then the timeline for a rate hike has surely got to be shortened in response. However, given the experience of the UK in relation to CPI, it is likely the Fed will be pragmatic at a time when oil prices are starting to hit global inflation levels. Thus I do not see it to be sensible for the FOMC to change their statement at a time when their inflation levels could follow suit, leaving Yellen and co in a sticky situation where the ‘considerable time’ phrase were to be put back into the statement.
Read the full report at Alpari News Room
Alpari
Alpari Representative
- Messages
- 122
US Opening Call from Alpari UK on 17 December 2014
Fed in focus as investors look to statement for rate clues
• Two MPC members continue to vote for rate hike despite low inflation outlook;
• Wage growth exceeds expectations again but remains below 2%;
• Russian Foreign Ministry looking to sell final $7 billion of reserves;
• Fed expected to remove commitment to low rates at today’s meeting.
The Bank of England minutes from the meeting a couple of weeks ago showed two policy makers – Martin Weale and Ian McCafferty – once again voting in favour of a 25 basis point rate hike despite the fact that inflation fell to 1% last month, as measured by the consumer price index. This is well below the BoE’s 2% target and while many have pointed to falling oil prices as being behind the move, core inflation which strips this out fell to 1.2%, which suggests there’s more to it.
With this in mind, I find it hard to understand how Weale and McCafftery can still justify wanting to raise rates which would typically weigh even heavier on the inflation outlook. That said, they are widely viewed as the most hawkish members of the Monetary Policy Committee so maybe it shouldn’t be too surprisingly. On that same point, their opinions are unlikely to represent those of the rest of the committee and I don’t see the voting changing much towards a hike for most of the year at least. It could even be 2016 before it happens given the outlook for inflation and wage growth.
Wage growth is improving in the UK and once again in the three months to October was better than expected, rising by 1.4% including bonus’ and 1.6% excluding bonus’. While this should be celebrated as it shows progress is being made and more importantly, it’s above inflation meaning real wages are finally rising on a consistent basis, it remains below the central banks 2% target so we can’t get carried away. The fact that real wages are rising is purely down to luck and if the BoE can achieve its target in the near future, real wage growth will once again be non-existent. Big improvements still need to be made and for that reason, it’s important that the BoE remains accommodative.
While the BoE may have become much less hawkish of late, its job over the next 12 months could not be much different than that of the ECB which is looking to aggressively expand its balance sheet in an effort to stop the eurozone falling into a deflationary spiral. Efforts made by the ECB so far have been good enough, with its balance sheet actually shrinking as a result of LTRO repayments. The first two take-ups of TLTRO’s have quite frankly been poor and nothing else appears to have done much at all, with inflation confirmed this morning as being at 0.3% in November. There was speculation after the last meeting that the ECB was drawing up plans for a broad based quantitative easing program which may be the best chance it has of preventing an deflation crisis. It may create political problems but the central bank is clearly getting desperate and running out of ideas.
Further efforts are being made by the Russian Foreign Ministry to stabilise its currency after two days of absolute mayhem for the rouble. Prices rose to an all-time high of 80 roubles to the dollar yesterday before retreating, having fallen to 58 earlier in the same day in some of the most volatile trading conditions most people will ever see. The ministry only reportedly has $7 billion of reserves which makes you wonder how much its efforts will actually stabilise it, given that the Central Bank of Russia has apparently conducted $80 billion of interventions this year to little avail.
As if everything that’s gone on this week wasn’t enough for the markets to get to grips with, this evening we’ll get the final monetary policy decision of the year from the Federal Reserve. The decision itself is unlikely to come as a shock, with rates remaining unchanged, it’s the wording in the statement that people are most concerned with. For a long time now, the Fed has committed itself to keeping rates at record lows for a “considerable” amount of time beyond the end of QE. The FOMC is believed to be considering removing it this month in a move that would clearly signal an imminent rate hike to the markets. I expect plenty of volatility around this event whatever they do. I’m sure if this is removed, Chair Janet Yellen will do her very best to assure the markets that it won’t come until the middle of next year, the only question is whether the markets will buy it.
The S&P is expected to open 7 points higher, the Dow 62 points higher and the Nasdaq 14 points higher.
Fed in focus as investors look to statement for rate clues
• Two MPC members continue to vote for rate hike despite low inflation outlook;
• Wage growth exceeds expectations again but remains below 2%;
• Russian Foreign Ministry looking to sell final $7 billion of reserves;
• Fed expected to remove commitment to low rates at today’s meeting.
The Bank of England minutes from the meeting a couple of weeks ago showed two policy makers – Martin Weale and Ian McCafferty – once again voting in favour of a 25 basis point rate hike despite the fact that inflation fell to 1% last month, as measured by the consumer price index. This is well below the BoE’s 2% target and while many have pointed to falling oil prices as being behind the move, core inflation which strips this out fell to 1.2%, which suggests there’s more to it.
With this in mind, I find it hard to understand how Weale and McCafftery can still justify wanting to raise rates which would typically weigh even heavier on the inflation outlook. That said, they are widely viewed as the most hawkish members of the Monetary Policy Committee so maybe it shouldn’t be too surprisingly. On that same point, their opinions are unlikely to represent those of the rest of the committee and I don’t see the voting changing much towards a hike for most of the year at least. It could even be 2016 before it happens given the outlook for inflation and wage growth.
Wage growth is improving in the UK and once again in the three months to October was better than expected, rising by 1.4% including bonus’ and 1.6% excluding bonus’. While this should be celebrated as it shows progress is being made and more importantly, it’s above inflation meaning real wages are finally rising on a consistent basis, it remains below the central banks 2% target so we can’t get carried away. The fact that real wages are rising is purely down to luck and if the BoE can achieve its target in the near future, real wage growth will once again be non-existent. Big improvements still need to be made and for that reason, it’s important that the BoE remains accommodative.
While the BoE may have become much less hawkish of late, its job over the next 12 months could not be much different than that of the ECB which is looking to aggressively expand its balance sheet in an effort to stop the eurozone falling into a deflationary spiral. Efforts made by the ECB so far have been good enough, with its balance sheet actually shrinking as a result of LTRO repayments. The first two take-ups of TLTRO’s have quite frankly been poor and nothing else appears to have done much at all, with inflation confirmed this morning as being at 0.3% in November. There was speculation after the last meeting that the ECB was drawing up plans for a broad based quantitative easing program which may be the best chance it has of preventing an deflation crisis. It may create political problems but the central bank is clearly getting desperate and running out of ideas.
Further efforts are being made by the Russian Foreign Ministry to stabilise its currency after two days of absolute mayhem for the rouble. Prices rose to an all-time high of 80 roubles to the dollar yesterday before retreating, having fallen to 58 earlier in the same day in some of the most volatile trading conditions most people will ever see. The ministry only reportedly has $7 billion of reserves which makes you wonder how much its efforts will actually stabilise it, given that the Central Bank of Russia has apparently conducted $80 billion of interventions this year to little avail.
As if everything that’s gone on this week wasn’t enough for the markets to get to grips with, this evening we’ll get the final monetary policy decision of the year from the Federal Reserve. The decision itself is unlikely to come as a shock, with rates remaining unchanged, it’s the wording in the statement that people are most concerned with. For a long time now, the Fed has committed itself to keeping rates at record lows for a “considerable” amount of time beyond the end of QE. The FOMC is believed to be considering removing it this month in a move that would clearly signal an imminent rate hike to the markets. I expect plenty of volatility around this event whatever they do. I’m sure if this is removed, Chair Janet Yellen will do her very best to assure the markets that it won’t come until the middle of next year, the only question is whether the markets will buy it.
The S&P is expected to open 7 points higher, the Dow 62 points higher and the Nasdaq 14 points higher.
Read the full report at Alpari News Room
Alpari
Alpari Representative
- Messages
- 122
UK Opening Call from Alpari UK on 18 December 2014
Data heavy day ahead with focus on UK, US and Germany
• Fed takes more cautious approach on rates and retains "considerable time" pledge;
• German Ifo surveys and UK retail sales the focus this morning;
• Lots of US data to come later including jobless claims and PMI readings.
Investors were given a small boost overnight which is driving index futures higher ahead of the open as the Fed spoke of its confidence in the US economic recovery, while taking a slightly smaller step towards warning on imminent rate hikes in 2015. The FOMC opted not to remove its pledge to keep rates low for a "considerable" time, instead adding a sentence that stated it can be "patient in beginning to normalise the stance of monetary policy" as well as a number of caveats that effectively gave it the freedom to alter its position at any point while technically remaining transparent.
It would appear that the Fed is going to be far more gradual in its approach to raising rates while remaining as transparent as possible with investors so as to avoid any unnecessary shocks in the market. The unprecedented nature of the Fed's exit strategy - with it attempting to return to normalisation following the greatest stimulus program in its history in which it raised its balance sheet to more than $4.5 trillion - means it needs to tread extremely carefully as it simply doesn't know what the consequences could be if it doesn't. The markets can become extremely volatile very quickly at which point panic will usually set in and this is something the Fed desperately wants to avoid.
I do wonder if the Fed's decision to take such a small and mindful step at this meeting has anything to do with the excessive amounts of volatility already seen in certain markets already this week. Maybe the Fed decided that given how trigger happy investors became following the rouble sell-off, it would be sensible not to risk further panic in the markets by removing its pledge altogether and risk sending the wrong message. Clearly the Fed is saying that the middle of next year remains the target but there are a number of things that could change this and just removing its pledge may suggest that the first rate hike will come sooner than expected, something the market were unlikely to be too pleased with.
While the biggest event of the week may now have passed without too many problems, there's still a lot to come starting today with a number of key economic releases. From Germany we'll get the latest Ifo readings of business climate, current assessment and expectations, all of which are expected to have improved slightly in December. The survey tends to be quite respected by the markets due to its larger sample and therefore can have a significant impact on the markets. Given the much better manufacturing PMI and ZEW surveys earlier in the week, I think we could see a much better improvement in the business climate reading for December, which hopefully bodes well for the new year.
In the UK the consumer is under the spotlight with retail sales figures for November being released. The consumer is so important to the UK economy and these figures could provide insight into what the consumer trends will be as we enter the hugely important holiday season. Holiday spending seems to start earlier and earlier nowadays as retailers bring forward sales more and more in an effort to entice customers into their stores. Expectations are for only a small rise in sales of 0.3% last month following a strong showing the month before. This markets a dramatic improvement on the year earlier period though so I don't think it's anything to be too disappointed with, especially at a time when wage growth remains subdued.
There's plenty more data to come from the US later including weekly jobless claims, December services and composite PMI readings, CB leading indicator and the Philly Fed manufacturing index. With all this to come, I think we have a few more days of market volatility to come before we enter the quieter holiday period.
The FTSE is expected to open 46 points higher, the CAC 35 points higher and the DAX 88 points higher.
Data heavy day ahead with focus on UK, US and Germany
• Fed takes more cautious approach on rates and retains "considerable time" pledge;
• German Ifo surveys and UK retail sales the focus this morning;
• Lots of US data to come later including jobless claims and PMI readings.
Investors were given a small boost overnight which is driving index futures higher ahead of the open as the Fed spoke of its confidence in the US economic recovery, while taking a slightly smaller step towards warning on imminent rate hikes in 2015. The FOMC opted not to remove its pledge to keep rates low for a "considerable" time, instead adding a sentence that stated it can be "patient in beginning to normalise the stance of monetary policy" as well as a number of caveats that effectively gave it the freedom to alter its position at any point while technically remaining transparent.
It would appear that the Fed is going to be far more gradual in its approach to raising rates while remaining as transparent as possible with investors so as to avoid any unnecessary shocks in the market. The unprecedented nature of the Fed's exit strategy - with it attempting to return to normalisation following the greatest stimulus program in its history in which it raised its balance sheet to more than $4.5 trillion - means it needs to tread extremely carefully as it simply doesn't know what the consequences could be if it doesn't. The markets can become extremely volatile very quickly at which point panic will usually set in and this is something the Fed desperately wants to avoid.
I do wonder if the Fed's decision to take such a small and mindful step at this meeting has anything to do with the excessive amounts of volatility already seen in certain markets already this week. Maybe the Fed decided that given how trigger happy investors became following the rouble sell-off, it would be sensible not to risk further panic in the markets by removing its pledge altogether and risk sending the wrong message. Clearly the Fed is saying that the middle of next year remains the target but there are a number of things that could change this and just removing its pledge may suggest that the first rate hike will come sooner than expected, something the market were unlikely to be too pleased with.
While the biggest event of the week may now have passed without too many problems, there's still a lot to come starting today with a number of key economic releases. From Germany we'll get the latest Ifo readings of business climate, current assessment and expectations, all of which are expected to have improved slightly in December. The survey tends to be quite respected by the markets due to its larger sample and therefore can have a significant impact on the markets. Given the much better manufacturing PMI and ZEW surveys earlier in the week, I think we could see a much better improvement in the business climate reading for December, which hopefully bodes well for the new year.
In the UK the consumer is under the spotlight with retail sales figures for November being released. The consumer is so important to the UK economy and these figures could provide insight into what the consumer trends will be as we enter the hugely important holiday season. Holiday spending seems to start earlier and earlier nowadays as retailers bring forward sales more and more in an effort to entice customers into their stores. Expectations are for only a small rise in sales of 0.3% last month following a strong showing the month before. This markets a dramatic improvement on the year earlier period though so I don't think it's anything to be too disappointed with, especially at a time when wage growth remains subdued.
There's plenty more data to come from the US later including weekly jobless claims, December services and composite PMI readings, CB leading indicator and the Philly Fed manufacturing index. With all this to come, I think we have a few more days of market volatility to come before we enter the quieter holiday period.
The FTSE is expected to open 46 points higher, the CAC 35 points higher and the DAX 88 points higher.
Read the full report at Alpari News Room
Alpari
Alpari Representative
- Messages
- 122
US Opening Call from Alpari UK on 18 December 2014
US jobless claims, PMIs and Philly Fed figures in focus
• FOMC stance helps lift global markets on Thursday;
• German Ifo provides optimism ahead of 2015;
• UK retail sales surge on black Friday sales;
• Putin inaction gets market disapproval as rouble falls further;
• US jobless claims, PMIs and Philly Fed figures in focus today.
An upbeat Fed message on the economy on Wednesday combined with encouraging economic data from Germany and the UK this morning is helping to lift global markets on Thursday, with US futures pointing towards another day of strong gains.
It was widely expected that the FOMC would remove its pledge to keep its target range for the federal funds rate between 0 and 0.25% for a “considerable time” after the end of quantitative easing, which came in October, but it instead opted to just soften the language around it, making it less of a commitment and more guidance. The message remained fairly dovish with the Fed stating that it would be patient when it comes to raising rates. The use of a number of caveats also gave it the option to be very flexible with the hikes. The most important message that came from this was that we’re unlikely to see a rate hike in the next couple of months but the US economy is finally in a position to stand on its own two feet and the markets clearly approve of the message.
The German Ifo business climate reading for December exceeded forecasts this morning, rising to 105.5 up from 104.7, with the rise being led by the expectations figure that rose to 101.1 from 99.7. Current assessment was unchanged at 110. While these figures don’t necessarily come as a great shock given the similar improvements in the manufacturing PMI and ZEW readings earlier in the week, they are nonetheless encouraging. The stabilisation in the current assessment figure alongside a more optimistic outlook hopefully points to some form of resurgence going into 2015 following what has been a year to forget in 2014.
UK retail sales were much stronger in November than expected which is helping to feed into the strength in the pound this morning. Any gains following the release were quickly reversed but this was probably largely driven by the strength of the rally into the release. It has since continued higher, further supporting the view that the reversal was merely a correction. It was expected that we’d see a small increase of 0.3% but this was smashed to bits, with the overall reading showing 1.6% growth, equating to a 6.4% improvement on the year. Black Friday sales were largely behind the upside surprise driven by heavy discounting which generated record annual sales growth in electrical and department stores.
In Russia, Vladimir Putin addressed the nation and took the expected stance of blaming external factors for the countries struggles and currency decline. He appeared to offer little in the way of a solution to the crisis, instead assuring people that the recession would pass in the next couple of years as the global demand for oil recovers. While his still strangely high popularity may mean he doesn’t receive a backlash from the Russian public for his inaction at a time of great distress for the country, the markets aren’t quite as forgiving and the dollar quickly rallied to 64 against the rouble before stabilising around 61. Once again, Putin is relying on nationalistic pride to get him through this, claiming the West is trying to put the “bear on a leash” and pull out its teeth. While this may work in his favour for now, once the economic troubles hit people hard, they may not be as willing to accept it.
Still to come today we have plenty of US data being released starting with the latest jobless claims figures. The numbers appear to be stabilising now just below the 300,000 level, with this week’s seen at 295,000. This remains a strong reading and provides further evidence of the strong position the US economy now finds itself in. The preliminary reading of the December services and composite PMIs will follow this and both are expected to show a rebound from Novembers small decline. The services PMI in particular could give us some great insight into the expected spending patterns of the consumer in the always important holiday period. Also being release is the CB leading indicator and the Philly Fed manufacturing index so there’s plenty for traders to get their teeth stuck into today.
The S&P is expected to open 24 points higher, the Dow 179 points higher and the Nasdaq 50 points higher.
US jobless claims, PMIs and Philly Fed figures in focus
• FOMC stance helps lift global markets on Thursday;
• German Ifo provides optimism ahead of 2015;
• UK retail sales surge on black Friday sales;
• Putin inaction gets market disapproval as rouble falls further;
• US jobless claims, PMIs and Philly Fed figures in focus today.
An upbeat Fed message on the economy on Wednesday combined with encouraging economic data from Germany and the UK this morning is helping to lift global markets on Thursday, with US futures pointing towards another day of strong gains.
It was widely expected that the FOMC would remove its pledge to keep its target range for the federal funds rate between 0 and 0.25% for a “considerable time” after the end of quantitative easing, which came in October, but it instead opted to just soften the language around it, making it less of a commitment and more guidance. The message remained fairly dovish with the Fed stating that it would be patient when it comes to raising rates. The use of a number of caveats also gave it the option to be very flexible with the hikes. The most important message that came from this was that we’re unlikely to see a rate hike in the next couple of months but the US economy is finally in a position to stand on its own two feet and the markets clearly approve of the message.
The German Ifo business climate reading for December exceeded forecasts this morning, rising to 105.5 up from 104.7, with the rise being led by the expectations figure that rose to 101.1 from 99.7. Current assessment was unchanged at 110. While these figures don’t necessarily come as a great shock given the similar improvements in the manufacturing PMI and ZEW readings earlier in the week, they are nonetheless encouraging. The stabilisation in the current assessment figure alongside a more optimistic outlook hopefully points to some form of resurgence going into 2015 following what has been a year to forget in 2014.
UK retail sales were much stronger in November than expected which is helping to feed into the strength in the pound this morning. Any gains following the release were quickly reversed but this was probably largely driven by the strength of the rally into the release. It has since continued higher, further supporting the view that the reversal was merely a correction. It was expected that we’d see a small increase of 0.3% but this was smashed to bits, with the overall reading showing 1.6% growth, equating to a 6.4% improvement on the year. Black Friday sales were largely behind the upside surprise driven by heavy discounting which generated record annual sales growth in electrical and department stores.
In Russia, Vladimir Putin addressed the nation and took the expected stance of blaming external factors for the countries struggles and currency decline. He appeared to offer little in the way of a solution to the crisis, instead assuring people that the recession would pass in the next couple of years as the global demand for oil recovers. While his still strangely high popularity may mean he doesn’t receive a backlash from the Russian public for his inaction at a time of great distress for the country, the markets aren’t quite as forgiving and the dollar quickly rallied to 64 against the rouble before stabilising around 61. Once again, Putin is relying on nationalistic pride to get him through this, claiming the West is trying to put the “bear on a leash” and pull out its teeth. While this may work in his favour for now, once the economic troubles hit people hard, they may not be as willing to accept it.
Still to come today we have plenty of US data being released starting with the latest jobless claims figures. The numbers appear to be stabilising now just below the 300,000 level, with this week’s seen at 295,000. This remains a strong reading and provides further evidence of the strong position the US economy now finds itself in. The preliminary reading of the December services and composite PMIs will follow this and both are expected to show a rebound from Novembers small decline. The services PMI in particular could give us some great insight into the expected spending patterns of the consumer in the always important holiday period. Also being release is the CB leading indicator and the Philly Fed manufacturing index so there’s plenty for traders to get their teeth stuck into today.
The S&P is expected to open 24 points higher, the Dow 179 points higher and the Nasdaq 50 points higher.
Read the full report at Alpari News Room
Alpari
Alpari Representative
- Messages
- 122
UK Opening Call from Alpari UK on 19 December 2014
BoJ remains steady, yet bullish markets push higher
• FOMC continues to drive bullish sentiment
• BoJ keeps stable yet election provides renewed mandate
• German GFK survey looking to top off strong week
The end of a memorable week in the markets, which seemed likely to go out with somewhat of a whimper given the relative lack of events to get the market moving. However, this doesn't look like it will affect sentiment too much with many still reeling from the massive news out from the likes of the FOMC, Japan and Russia. As a result, the European markets are hoping to extend the positive sentiment seen overnight in Asia, by pushing yet higher and closing out the week on a positive note. The FTSE100 is expected to open up by 77 points, CAC by 53 points and DAX by 106 points.
The dominant market sentiment driver appears to be the FOMC statement from Wednesday, which saw Yellen and co produce an increasingly dovish tone amid calls from many for the Fed to finally be done with the 'considerable time' section of the statement. In fact, they moved the opposite way, noting that they will be 'patient' with the process; no doubt a reference to the need to hold off until the oil price and thus inflation rate stabilises. Ultimately, Saudi Arabia's decision to push oil prices lower has brought about an unexpected source of market bullishness, where the likes of the BoJ and ECB are now even more likely to push for further easing, whilst the likes of the UK and US have taken a step back somewhat from what looked like a strong push towards raising rates in 2015.
Overnight, the BoJ kept monetary policy stable at 80 trillion yen of asset purchases monthly; a move that was largely expected by all. Kuroda, along with Shinzo Abe was essentially on the stand when Sunday's election went ahead given that his loose monetary policy has been a backbone of so-called 'Abenomics' as we know it. Thus the ability to retain a super-majority will have emboldened Kuroda and the BoJ to remain bold with their monetary policy going forward. With inflation likely to continue falling due to the impact of oil prices, it will be interesting to see if the BoJ will move yet again in heightening the rate of asset purchases. There is certainly the need to push both growth and inflation higher, but the question is whether the BoJ really believes that another shift in the rate of purchases will make an impact. Given that we have only recently seen a seismic shift from 50 to 80 trillion yen of QE, it is highly likely that the committee will leave the effects to work through into the economy for some time and only then will they know how effective it is by itself at raising prices. Thus as we come into 2015, it is not unlikely that we will see another rise in easing, yet Q1 seems to be somewhat of a stretch.
Looking at the European session, there seems to be very little in terms of major events, with one of note coming in the form of the German GFK consumer climate survey. This release has the chance of topping off a very strong week for the German economy following very strong manufacturing PMI, ZEW and Ifo surveys. Conditions are clearly improving the Europe biggest economy and that can only be a good thing for the eurozone. Signs point towards a potential bottoming out in eurozone fortunes of late and this is likely to have been driven by Germany. Given that surveys are typically seen as a great indicator of future quantitative figures, a clean sweep of positive figures would be a huge boost to an ailing economy of late. Markets expect a third consecutive increase in this figure, from 8.7 to 8.9, yet given the trend we have been seeing, I think it may even go higher yet.
BoJ remains steady, yet bullish markets push higher
• FOMC continues to drive bullish sentiment
• BoJ keeps stable yet election provides renewed mandate
• German GFK survey looking to top off strong week
The end of a memorable week in the markets, which seemed likely to go out with somewhat of a whimper given the relative lack of events to get the market moving. However, this doesn't look like it will affect sentiment too much with many still reeling from the massive news out from the likes of the FOMC, Japan and Russia. As a result, the European markets are hoping to extend the positive sentiment seen overnight in Asia, by pushing yet higher and closing out the week on a positive note. The FTSE100 is expected to open up by 77 points, CAC by 53 points and DAX by 106 points.
The dominant market sentiment driver appears to be the FOMC statement from Wednesday, which saw Yellen and co produce an increasingly dovish tone amid calls from many for the Fed to finally be done with the 'considerable time' section of the statement. In fact, they moved the opposite way, noting that they will be 'patient' with the process; no doubt a reference to the need to hold off until the oil price and thus inflation rate stabilises. Ultimately, Saudi Arabia's decision to push oil prices lower has brought about an unexpected source of market bullishness, where the likes of the BoJ and ECB are now even more likely to push for further easing, whilst the likes of the UK and US have taken a step back somewhat from what looked like a strong push towards raising rates in 2015.
Overnight, the BoJ kept monetary policy stable at 80 trillion yen of asset purchases monthly; a move that was largely expected by all. Kuroda, along with Shinzo Abe was essentially on the stand when Sunday's election went ahead given that his loose monetary policy has been a backbone of so-called 'Abenomics' as we know it. Thus the ability to retain a super-majority will have emboldened Kuroda and the BoJ to remain bold with their monetary policy going forward. With inflation likely to continue falling due to the impact of oil prices, it will be interesting to see if the BoJ will move yet again in heightening the rate of asset purchases. There is certainly the need to push both growth and inflation higher, but the question is whether the BoJ really believes that another shift in the rate of purchases will make an impact. Given that we have only recently seen a seismic shift from 50 to 80 trillion yen of QE, it is highly likely that the committee will leave the effects to work through into the economy for some time and only then will they know how effective it is by itself at raising prices. Thus as we come into 2015, it is not unlikely that we will see another rise in easing, yet Q1 seems to be somewhat of a stretch.
Looking at the European session, there seems to be very little in terms of major events, with one of note coming in the form of the German GFK consumer climate survey. This release has the chance of topping off a very strong week for the German economy following very strong manufacturing PMI, ZEW and Ifo surveys. Conditions are clearly improving the Europe biggest economy and that can only be a good thing for the eurozone. Signs point towards a potential bottoming out in eurozone fortunes of late and this is likely to have been driven by Germany. Given that surveys are typically seen as a great indicator of future quantitative figures, a clean sweep of positive figures would be a huge boost to an ailing economy of late. Markets expect a third consecutive increase in this figure, from 8.7 to 8.9, yet given the trend we have been seeing, I think it may even go higher yet.
Read the full report at Alpari News Room
Alpari
Alpari Representative
- Messages
- 122
UK Opening Call from Alpari UK on 30 December 2014
Greek elections and oil prices weigh further on sentiment
European investors are continuing to be put off by the growing risks associated with the snap Greek elections this morning, as fears that victory for the far left leaning Syriza party next month could encourage other austerity hit countries to move in the same direction.
We’ve already seen a rise in popularity in anti-austerity parties in many countries including the UK which has been suffered much less than many of the eurozone periphery. The European elections last year saw a significant rise in voting for these parties, leading to many being elected. The fear is that with so many elections in the hardest hit countries to come next year, the eurozone project could come under some serious pressure if more of these parties are elected.
The Syriza party is clearly confident of victory, as seen by its leader Alexis Tsipras’ tweet to the leader of Spain’s anti-austerity party in which he declared “We will win”. His confidence is understandable given the lead that his party has in the polls, although based on those numbers, he would not have enough support to gain a majority so there’s still plenty to play for.
US markets weren’t really impacted by the Greek news on Monday but they are edging lower this morning as lower oil prices continue to weigh on energy stocks. With so little data being released this week, we’re likely to see oil prices play a major role in equity market moves. The only notable release today is the December consumer confidence reading, which is expected to rise to 93 from 88.7, just shy of the seven year high reached in October.
The S&P is expected to open 5 points lower, the Dow 25 points lower and the Nasdaq 5 points lower.
Greek elections and oil prices weigh further on sentiment
European investors are continuing to be put off by the growing risks associated with the snap Greek elections this morning, as fears that victory for the far left leaning Syriza party next month could encourage other austerity hit countries to move in the same direction.
We’ve already seen a rise in popularity in anti-austerity parties in many countries including the UK which has been suffered much less than many of the eurozone periphery. The European elections last year saw a significant rise in voting for these parties, leading to many being elected. The fear is that with so many elections in the hardest hit countries to come next year, the eurozone project could come under some serious pressure if more of these parties are elected.
The Syriza party is clearly confident of victory, as seen by its leader Alexis Tsipras’ tweet to the leader of Spain’s anti-austerity party in which he declared “We will win”. His confidence is understandable given the lead that his party has in the polls, although based on those numbers, he would not have enough support to gain a majority so there’s still plenty to play for.
US markets weren’t really impacted by the Greek news on Monday but they are edging lower this morning as lower oil prices continue to weigh on energy stocks. With so little data being released this week, we’re likely to see oil prices play a major role in equity market moves. The only notable release today is the December consumer confidence reading, which is expected to rise to 93 from 88.7, just shy of the seven year high reached in October.
The S&P is expected to open 5 points lower, the Dow 25 points lower and the Nasdaq 5 points lower.
Read the full report at Alpari News Room
Alpari
Alpari Representative
- Messages
- 122
UK Opening Call from Alpari UK on 31 December 2014
US data in focus but year end trading volumes remain low
The final day of the year is likely to be very lightly traded with many investors getting ready for their new years celebrations rather than trying to work out what is exactly behind today’s market moves.
The problem we face on days like today is that because trading volume is so light, it can take very little to move the markets compared with an ordinary trading day. Throw into the equation that it’s the final day of the year and something as simple as fund managers balancing their books, locking in some profits or cutting losses can be behind market movements.
Of course we could look at yesterday’s selling in the US and suggest it has something to do with the snap Greek elections and how that may influence the ECBs decision to buy government bonds – quantitative easing – which many have suggested will come in January. However, there was no selling on Monday following the failure of the third Presidential vote which would suggest otherwise.
Oil prices are another thing that could be blamed for yesterday’s selling but again, prices did not close far from their opening levels, unlike with US stocks. And today we’ve seen further selling in oil, with it now back near the five year lows hit yesterday, and yet US futures are pointing higher.
It will be interesting to see what kind of an impact today’s US economic data will have on the markets, if any, with jobless claims, Chicago PMI and pending home sales numbers all being released. None of these tend to be particularly big numbers for the markets, but in this low volume environment, we may get more of a reaction than we are used to seeing.
US data in focus but year end trading volumes remain low
The final day of the year is likely to be very lightly traded with many investors getting ready for their new years celebrations rather than trying to work out what is exactly behind today’s market moves.
The problem we face on days like today is that because trading volume is so light, it can take very little to move the markets compared with an ordinary trading day. Throw into the equation that it’s the final day of the year and something as simple as fund managers balancing their books, locking in some profits or cutting losses can be behind market movements.
Of course we could look at yesterday’s selling in the US and suggest it has something to do with the snap Greek elections and how that may influence the ECBs decision to buy government bonds – quantitative easing – which many have suggested will come in January. However, there was no selling on Monday following the failure of the third Presidential vote which would suggest otherwise.
Oil prices are another thing that could be blamed for yesterday’s selling but again, prices did not close far from their opening levels, unlike with US stocks. And today we’ve seen further selling in oil, with it now back near the five year lows hit yesterday, and yet US futures are pointing higher.
It will be interesting to see what kind of an impact today’s US economic data will have on the markets, if any, with jobless claims, Chicago PMI and pending home sales numbers all being released. None of these tend to be particularly big numbers for the markets, but in this low volume environment, we may get more of a reaction than we are used to seeing.
Read the full report at Alpari News Room
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