Forex research

[Alpari]

US Opening Call from Alpari UK on 02 January 2014

Attention turns to US jobless claims and manufacturing PMIs

Today’s US opening call provides an update on:

• Chinese manufacturing data gets 2014 off to a bad start;
• European manufacturing PMIs mixed;
• Focus now turns to US jobless claims and manufacturing data.

With the festive period now behind us, it’s time to pick up where we left off a couple of weeks ago, focusing on the fundamentals now that the Fed has made its tapering intentions perfectly clear.

Corporate earnings season doesn’t start for another week, leaving us with only the economic data to drive market sentiment, and so far that has been relatively mixed. Things got off to a fairly bad start yesterday, with the release of the official Chinese manufacturing PMI, which fell to 51 in December, from 51.4 the month before.

This slowdown in manufacturing growth was confirmed during the Asian session over night, when the HSBC manufacturing PMI fell to 50.5 from 50.8 in November. This is the more concerning figure as it focuses more on the small to medium sized privately owned manufacturing firms and therefore provides a more accurate overview of activity in the country.

Both figures are still above 50, the level that separates growth from contraction, so there’s nothing to panic about at this stage. However, it does highlight the fact that China faces an uphill task in maintaining these very high levels of growth in the coming years.

The figures in Europe weren’t much better, with Germany, Italy and Spain all exceeding expectations, while France and the UK both fell short. The French figure is the most concerning of these, having fallen to 47 from 48.4 in November, now deep in contraction territory and showing no signs of reversing the trend.

European indices are trading lower this morning, following the release of all this data, although I don’t think this is necessarily driven by the data itself. This obviously hasn’t helped, but I think the losses being seen this morning are more likely due to traders locking in profits following a strong festive period, with the move being exaggerated by the increase in trading volumes.

We could see a similar scenario following the opening bell on Wall Street on Thursday. There is a little more data for investors to take on board, but I don’t expect it to have a huge impact on the markets. First up we have the initial jobless claims figure, which is expected to fall slightly to 334,000 from 338,000 last week.

Then the focus will turn to the two pieces of manufacturing data, the Markit PMI and ISM PMI, with only the latter being an initial reading. Many see the manufacturing sector as being key to the continuation of the US recovery in 2014, so these figures will be monitored very closely.

Read the full report at Alpari News Room​

 

[Alpari]

Daily Market Update - 2 January 2014 - Alpari UK

Markets lower following 'Santa rally' 00:23
Chinese manufacturing PMI comes in lower 00:47
Spanish manufacturing pushes back into expansion unexpectedly 01:15
UK manufacturing expansion slows, yet remains strong 02:33

[video=youtube;jKb_oV8XHY4][/video]

 

[Alpari]

UK Opening Call from Alpari UK on 03 January 2014

European futures track US and Asia lower

Today’s UK opening call provides an update on:

• European futures track US and Asia lower;
• Disappointing data prompts first negative start to the year since 2008;
• UK construction PMI eyed for signs that the recovery will continue into 2014;
• Fed speeches key later on today.

The negative start to the year looks set to continue on Friday, with index futures pointing to a lower open across the board in Europe after losses were recorded in both the US and Asia over night.

I don’t think these losses are anything to be concerned about, despite it being the first time since 2008 that we’ve seen a negative first trading day of the year. This just appears to be a little bit of profit taking after indices in the US ended 2013 at record highs. I still believe January is going to be another good month for the markets, we’ve just had a bit of a rocky start.

We’ve seen the Santa rally play out nicely in the final week of 2013, despite the Fed tapering against market expectations. I’d be surprised if the January effect didn’t prompt further gains this month.

The economic data over the last couple of days hasn’t exactly helped matters, with PMI readings in China, in particular, being a slight cause for concern. Both the official and the HSBC manufacturing PMIs fell in December, and the trend continued over night with the non-manufacturing PMI slipping to 54.6 from 56 in November.

This is probably nothing to be too concerned about right now as all the figures are still above the 50 level, that separates growth from contraction. That said, it’s not going to prompt a positive response in the markets either, with investors looking at this as a possible warning sign that the country is facing another tough year when it comes to maintaining the high growth rates.

There’s very little economic data being released on Friday that will have any significant impact on the markets. We may get a response to the release of the UK construction PMI, as this should provide early insight into whether the impressive recovery in the country in the second half of 2013 can continue into this year.

The PMI readings have been very encouraging for a number of months now and many view construction as one of the most important areas, as it was the one that was hit particularly hard following the downturn in 2008. If we can get another reading around the level seen last month, it will be viewed as a sign that the recovery is still gathering pace. The fear is that these figures start to drop off, as I’m not convinced that the recovery is strong enough at the stage to take even a temporary drop in confidence. It is hugely important that the UK recovery continues to gather momentum because at the moment, the recovery is being driven by consumers. If confidence takes a hit, we could find ourselves back at square one.

Later on the focus will be back on the Federal Reserve, with no notable pieces of data being released. We have a few Fed members scheduled to speak today, including outgoing Chairman Ben Bernanke. Given that the Fed only announced its first taper a couple of weeks ago, I’m not expecting anything out of the ordinary here, just confirmation that they will continue to monitor the data and reduce the pace of purchases as the economy improves.

Ahead of the open we expect to see the FTSE down 19 points, the CAC down 15 points and the DAX down 48 points.

Read the full report at Alpari News Room​

 

[Alpari]

Daily Market Update - 3 January 2014 - Alpari UK

Indices higher after negative start to the year - 00:14
UK construction PMI exceeds expectations - 02:25
Good news keeps coming for Spain - 03:12

[video=youtube;VMXgQtyzgS4][/video]

 

[Alpari]

Weekly market preview – 6 January 2014

A notable week in the markets, with the release of a number of key central bank and economic releases ahead. In the US, the focus will largely be upon the job report, due on Friday. Meanwhile in the UK, the services PMI figure on Monday gives us an idea as to the condition of the crucial sector driving the UK economy. Over in the eurozone, the German court ruling with regards to the constitutionality of the ECB’s Outright Monetary Transactions policy is going to be key.

In Asia, the focus is again on China, with the inflation data providing one of the most notable releases on Thursday morning. Finally, in Oceania, the Australian trade balance data is going to be key in gauging how the shifting economic environment is affecting their key export market.


US

A particularly busy week ahead for the US, where the usual furore surrounding the latest jobs data is also accompanied by the Fed chairperson nomination vote and FOMC minutes from December.

US jobs data releases are always hugely significant for global markets and this is reflected by the volatility seen around the non-farm payrolls in particular. However, in recent years employment figures have taken on an even more dominant role for investors given the association derived between the health of the employment market and the degree of asset purchases in place. Following the taper seen in December, the focus will now be upon when the FOMC will further trim the QE programme, with the next meetings in January, March and April.

The first notable employment release of the week comes on Wednesday when the ADP non-farm payroll figure is released. This measure has widely been seen as a proxy for the official government release on Friday. However the lack of public sector jobs within the calculation, amongst other differences mean that often the reality is that both measures are very different. Thus whilst this figure may not accurately reflect what we are likely to see on Friday, this is still a key data point and thus well worth watching out for. Markets expect to see the December figure show a fall to around 199k from 215k seen back in November.

On Friday, the big ticket release of the week comes with the jobs report in the afternoon. The non-farm payroll figure has often been seen as the major instigator of volatility owing to the fact that it is more unpredictable and spiky than the headline unemployment rate. The past two releases came in above the 200k mark, and this threshold can be seen as a good indicator of whether the figures are maintaining the positive trajectory seen in the lead-up to the December taper or not. Market expectation is for a fall to 194k in December, down from 203k in November.

The unemployment rate has always been a key release as it is this which typically takes the major headlines. However, with the forward guidance element of Fed policy specifically taking it’s lead from this measure, markets are paying especially close attention to it’s movement. Previous stipulation from the Fed was that upon reaching 6.5%, they were likely to discuss raising interest rates. However, this timeline has been extended somewhat with Bernanke’s statement that rates will remain at current low levels until “well after” 6.5%. The markets are expecting to see little movement from the current 7% level on Friday, however, even if this is the case, it is worth also noting any change in the participation rate. The rate finally rose for the first time in five months in November and the ability to prove that this is not just a one off would be a very positive sign for the direction of the jobs market.

On Monday, we are due to hear from the Fed following the vote with regards to appointing the next chairperson. I say chairperson as this is in all likeliness going to be the first female appointment to the position in its 100 year history. This is not necessarily going to move markets should we see Janet Yellen be nominated, which seems somewhat of a foregone conclusion. However should the vote come back as a no for her nomination, it could throw a spanner into the works somewhat.

Finally, the minutes from the last FOMC meeting are released on Wednesday. This meeting was the platform for the first taper of the current asset purchase scheme and thus the outlook of the committee to further cut in the forthcoming meeting is now key. Watch out for signs of how receptive the members are to another taper this month and possible prerequisites for such happening.

UK

A somewhat mixed week for the UK economy, which typically has a very busy first week of the month. Given the fact that only some of those events have been shifted back by a week, there is somewhat of a lessened load ahead. The two most notable events of the week come in the form of the services PMI figure and the latest monetary policy decision from the BoE.

On Monday, the business surveyor Markit are due to release their services PMI survey for December, following the manufacturing and construction figures released the week gone. Despite the importance of those two industries, it is the services sector which drives the UK economy, with the reliance upon the likes of law, insurance and financial services in particular. On the whole, 2013 has been a particularly strong year for the UK services sector, with the PMI reading beating expectations on 9 of the 11 months whilst remaining in expansion throughout the whole of 2013. This positive trend is expected to have continued in December, with the forecasters expecting to see a further rise to 60.7, following a reading of 60.0 in November. This would still represent a particularly strong figure, coming off the back of the highest reading in 16 years seen in October. However, I would be careful, given the fact that we have seen a downturn in both the manufacturing and construction PMIs for December, this could disappoint somewhat if it followed the same pattern.

Later in the week, the BoE are due to announce their latest monetary policy decision on Thursday. There is little expectation that we are going to see any tangible change to the current stance, given that the forward guidance policy has been laid out and reiterated by Mark Carney. Thus it is likely to be the case that traders are looking for anything new out of the accompanying statement or Q&A to move the markets.

Eurozone

A somewhat busy week for the eurozone region, with two major events taking centre stage in the form of the German constitutional court hearing along with the ECB rate decision. The first of these is a somewhat less regular occurrence than the latter, with the German Federal Constitutional Court due to announce their final ruling with regards to the whether they see the ECB’s Outright Monetary Transactions policy (OMT) as constitutional under German law.

The OMT programme from the ECB has been widely perceived as one of the key confidence backstops for beleaguered nations, serving to reduce the yields of sovereign bonds. This in turn lowers the likeliness of further crises driven by reduced liquidity at reasonable rates for the peripheral and indebted eurozone nations. The issue is that for some, the OMT system of promising to buy ‘unlimited’ bonds from stricken economies serves to defeat the purpose of bond yields, which traditionally are seen as a gauge to the quality of the issuer. The ability to artificially instill confidence regardless of the risk profile attached to the underlying instrument allows for somewhat misguided belief that austerity measures such as those seen throughout numerous nations may not be necessary as long as cheap credit is freely available.

Ultimately, the OMT programme is unlikely to ever be used, especially given the recent resurgent strength seen in some of the peripheral nations as signified by the recent decision from the EU to remove the credit line for Spanish banks. However, should the German courts manage threaten it’s existence, this could serve to throw some of the more fragile economies back into crisis where investor confidence is shaken. If the German courts decide that the OMT programme is unconstitutional, this could be a somewhat unnecessary kick in the teeth for the eurozone recovery.

On Thursday, the ECB will announce their latest monetary policy statement, with a similar feeling to the BoE in that we are unlikely to see much in the way of actual policy amendments. Mario Draghi et al decided to shock the markets somewhat back in November when they decided to cut rates following a worrying fall in the eurozone inflation rate. Since then the worries of deflation have subsided considerably and thus we are likely to return to the status quo where Draghi uses these meetings to talk down the value of the euro with mentions of negative rates and alike. Thus be aware of possible volatility in the session following the immediate announcement regardless of whether there is a shift in rates or not.

Asia & Oceania

Much of the action out of Asia this week comes from China, where the inflation and trade balance releases are likely to be the only potential market moving events of note. The CPI measure of inflation is released on Thursday where markets are hoping to see a shift lower, from last month’s reading of 3% towards somewhere closer to 2.8%. Bear in mind that the Chinese central bank (PBOC) has been propping up the economy throughout somewhat tough times in 2013. Thus should the inflation rate move towards their target of 3.5% for the year, it would somewhat limit their capacity to engage in further stimulus in 2014. Therefore a cooling in the inflation rate seen within the region would likely mean we could see higher growth in the forthcoming period owing to flexible PBOC intervention when required.

On Wednesday, the trade balance figure will be watched closely to see how imports and exports have fared in December. The importance of their export growth should not be understated despite the planned shift towards domestic growth. Much of the growth seen throughout the final months of 2013 has been driven by a return of their export markets and thus we will be looking for a continuation of this trend.

In Australia, the trade balance is also likely to be key, with a similar story to China. The Australian story is largely intertwined with the Chinese, given the impact the perceived slowdown in China had upon the Australian economy in the middle of this year. In some ways this slowdown contributed to the election of a new Prime Minister in Tony Abbott. However, as the Chinese economy has picked up, so have Australian hopes of a return to health for their economy. Close attention will be paid to exports, given the Australian focus upon commodity exports as a means of growth. The past two releases have shown 0% growth in exports and thus there is a dire need to see this figure pick up in this month’s announcement to show that Australia is benefiting from improved Chinese growth and the reduced value of the Australian dollar.

Read the full report at Alpari News Room​

 

[Alpari]

UK Opening Call from Alpari UK on 6 January 2014

Today’s UK opening call provides an update on:

• Very busy week ahead following quiet festive period;
• Chinese services PMI gets the week off to a bad start;
• European services PMIs in focus this morning;

After a very quiet couple of weeks in the financial markets, things should pick up dramatically this week as more traders return to their desks, economic releases increase significantly and Alcoa unofficially kicks off corporate earnings season.

It really is going to be quiet a chaotic week in the financial markets, particularly the latter half of the week, which will include the first batch of company earnings, the FOMC minutes from last month’s meeting, BoE and ECB rate decisions and the December US jobs report. There’s still plenty to focus on in the first half of the week though, especially compared to the last couple of weeks, which were severely lacking in data, earnings and trading volumes.

Things have already got off to quite a disappointing start, with the Chinese HSBC services PMI for December falling to 50.9 from 52.5 in November. This number still represents growth in the industry so it isn’t worth worrying about at this stage. However, it could be an early warning sign that, as in 2013, China is going to struggle to maintain these high levels of growth. The government may have to do more again to ensure growth remains above the minimum 7% threshold.

Focus will remain on the services sector this morning, as the December PMIs for a number of European countries are released, including for the eurozone as a whole. Some of these are revised figures, which may affect how big an impact they have on the financial markets.

The release attracting the most interest here will probably be the French PMI. Last week, the manufacturing PMI showed a significant amount of contraction in the sector in December, which acted as a reminder that the eurozone’s second largest economy is seriously struggling to get the economy moving again.

We’re expecting a similar result today, with the services PMI seen falling to 47.4 from 48 in November. This will be a cause for concern for investors, with France already at risk of falling into yet another recession in the fourth quarter, after recording a small contraction in the third. It’s no secret that France is approaching the whole austerity issue quite differently to other eurozone countries and early evidence suggests it isn’t working. There were fears last year that France could become the new problem child for the eurozone, although these fears eased early in the third quarter. Maybe 2014 is the year when France slips even further behind Germany and causes a few problems of its own.

The UK services PMI revision is also going to be monitored closely for signs that the recovery is losing momentum. The services sector is hugely important to the UK, in fact it makes up around two thirds of UK GDP, so this figure is seen as the best indication of how the economy is going to perform going forward.

Later on in the US we also have a couple of economic releases that will be of interest to investors. The first is the US services PMI, which is expected to rise to 54.6, a good sign given that like the UK, the US is very dependent on its services sector. Also being released is the November change in factory orders, which is expected to show a 1.8% increase.

Ahead of the open we expect to see the FTSE up 4 points, the CAC down 2 points and the DAX down 14 points.

Read the full report at Alpari News Room​

 

[Alpari]

US Opening Call from Alpari UK on 6 January 2014

Today's US opening call provides an update on:

• Trading volumes to pick up this week;
• Big week ahead with central bank meetings, earnings and US jobs report;
• US data in focus on Monday.

US futures are pointing to a higher open on Wall Street on Monday, as things start to pick up in the financial markets following a quiet couple of weeks.

Trading volumes should pick up significantly this week, as traders return to their desks following the festive period and the number of potential catalysts also rises substantially. Volumes over the last couple of weeks have been very low, which is not unusual at this time of year, as traders opt to spend time with family instead of in front of their monitors.

The lower volumes were not helped by a lack of catalysts in the market, with the economic calendar looking very thin and companies not yet reporting fourth quarter earnings. This will all change this week though with central bank meetings taking place, FOMC minutes being released, companies starting to report earnings and the labour department releasing the US jobs report.

All of these actually take place later on in the week though, which means that while trading volumes will naturally pick up as traders return from holiday’s, they could still remain at below average levels as traders opt to wait on the sidelines and see how these events play out.

This week should go a long way to telling us whether the Fed made the right decision last month in deciding to reduce the pace of its asset purchases, or whether it should have waited for more proof that the recovery is in fact sustainable.

If the data is as good as it was in October and November, it would suggest that the Fed did make the correct decision in December. It would also suggest that another $10 billion taper will take place in January, in line with the commentary that came out of the Fed during the December press conference.

Monday is looking a little quiet in terms of economic releases, although there is still a couple worth paying attention to. The first is the services PMI for December. This is expected to rise to 54.6 from 53.9 in November, which would be in line with expectations that the economy is on the road to recovery.

The services sector is hugely important to the US economy, as it contributes more than two thirds of GDP, so a figure higher than what we saw in November would suggest that the economic recovery is gathering pace.

The other noteworthy release is the November factory orders figure, which is expected to show 1.8% growth in November, following a small drop the month before.

Ahead of the open we expect to see the S&P up 2 points, Dow up 22 points and the NASDAQ flat.

Read the full report at Alpari News Room​

 

[Alpari]

Daily Market Update - 6 January 2014 - Alpari UK

[video=youtube;IRTH5e7rtJo][/video]

Chief market analyst James Hughes looks at the first full week of trading since the festive break, with the BoE, ECB and FOMC meeting minutes as well as Fridays US jobs report.

 

[Alpari]

UK Opening Call from Alpari UK on 7 January 2014

Today’s UK opening call provides an update on:

• Poor data weighing on indices so far this year;
• Risk aversion also contributing ahead of a heavy end to the week;
• German unemployment and eurozone inflation in focus this morning.

European indices are expected to open higher on Tuesday, despite the mood in the US and Asia over night being far from positive following the release of some disappointing economic data.

Economic data on the whole has been a little disappointing over the last week or so, although not disastrously so. The UK and China has seen a pull back in both their manufacturing and services PMIs, while the former has also seen the construction PMI fall back from its six year highs. The eurozone data was largely mixed, with the only really disappointing figures coming out of France, while US stocks yesterday retreated in response to a surprising drop in the services PMI.

All things considered this is not a cause for concern. To start with, the majority of these figures still remained comfortably in growth territory, which is the most important thing. With regards to the negativity in the stock markets, this looks like nothing more than a bit of profit taking following an impressive end to 2013, which saw a number of indices closing at, or near, all time highs. This rally in the equity markets still looks far from over.

We also have to consider the fact that the end of the week is packed out with some pretty significant events, including two major central bank meetings, the release of the December FOMC minutes and the US jobs report. That is almost always going to make investors more risk averse as all of these events have the potentially to create significant waves in the markets. This is especially true when a large number of investors have only just returned following the festive break.

The risk aversion is likely to continue today, with only a few important economic releases scheduled and tomorrow being the start of the hectic end to the week. This morning the focus will be on Germany and the eurozone, with unemployment data being released for the former and inflation data for the latter.

German unemployment has remained remarkably low throughout both the initial financial crisis and then the debt crisis, both when compared to the likes of the US and the UK and, particularly, the rest of the eurozone. The unemployment rates has remained at the upper end of 6% for the majority of the last couple of years and this is not expected to have changed in December, with the rate remaining at 6.9% following no change in the number of unemployed.

Eurozone inflation, which became a big concern towards the end of 2013, prompting the European Central Bank to cut interest rates to record lows of 0.25%, is expected to remain unchanged at 0.9%. While this is significantly below the ECBs target rate of 2%, it is unlikely to prompt further action from the central bank at this stage as this is largely intentional. The efforts being made in a number of eurozone states to become more competitive is naturally going to act as a drag on inflation.

As long as the figure doesn’t fall below 0.5% and become dangerously close to deflation, which can be just as damaging as high inflation as Japan found, I expect the ECB to allow inflation to remain at these low levels. This has also not been helped by the strength in the euro in 2013, which many don’t see lasting in 2014.

Ahead of the open we expect to see the FTSE up 4 points, the CAC up 5 points and the DAX up 21 points.

Read the full report at Alpari News Room​

 

[Alpari]

US Opening Call from Alpari UK on 7 January 2014

Today’s US opening call provides an update on:

• US futures point to first positive day of the year;
• German unemployment unexpectedly falls;
• Eurozone disinflation becoming a concern again;
• Little to focus on during the US session..

US futures are pointing to a higher open on Wall Street, with the S&P, Dow and Nasdaq all seen opening almost half a percentage point higher.

The gains come following a disappointing start to the year, which has seen US indices on a three day losing streak. I don’t think we can read into this too much though, especially when you consider the fact that both the S&P and the Dow ended 2014 at record highs. What we’ve seen so far this year is most likely just a case of profit taking rather than anything else.

That said, it has been accompanied by a number of disappointing economic releases, not just in the US, but also in other major economies. The manufacturing and services PMIs in China have all fallen short of expectations, as have the manufacturing, services and construction PMIs in the UK. The eurozone has been mixed which is nothing new, but there have been a few concerns about the French PMIs, which has slipped deep into contraction territory.

The majority of these have remained comfortably in growth territory though, so I don’t think they’re anything to be concerned about. Instead, it appears that they’re just being used as an excuse to take profits on long positions, which is why we’re already seeing some buying on the dips in the futures market.

The European session has been relatively quiet so far on Tuesday, with only a couple of pieces of notable data being released. The German DAX was boosted earlier on in day after data showed 15,000 fewer people were unemployed in December, which was below expectations.

Inflation in the eurozone is becoming a growing concern again, having fallen to 0.8% in December. This should make Thursday’s ECB rate decision all the more interesting, given that it was the fall to 0.7% in October that prompted the 25 basis point rate cut a few days later. I don’t think we’ll see a repeat of this on Thursday though and based on the reaction, or lack of, in the market, neither does anyone else.

The US session is likely to also be relatively quiet, ahead of what is expected to be a very busy few days. There is a lack of economic data being released, with the only notable release being the November trade balance figure. And even this is unlikely to have much of an impact on the markets.

Ahead of the open we expect to see the S&P up 7 points, Dow up 69 points and the NASDAQ up 13 points.

Read the full report at Alpari News Room​