Forex research

[Alpari]

UK Opening Call from Alpari UK on 14 January 2014

UK inflation data key as fears of BoE tightening grow

Today’s UK opening call provides an update on:

• UK inflation data in focus at a time when fears of BoE tightening are growing;
• Eurozone industrial production data also being released;
• Attention turns to US data and earnings after the opening bell on Wall Street.

The focus this morning will be on one of the few notable economic releases we have this week, the UK inflation data. There are a number of different inflation readings being released this morning, including consumer price index, retail price index and producer price index. Of course all of these readings are important, but the one people really pay attention to, including the Bank of England, is the consumer price index, or CPI figure.

Inflation in the UK has been a major issue throughout the financial crisis and even managed to surpass 5% for a short period of time towards the end of 2011. The timing of these high rates of inflation couldn’t have been worse, coming when wage growth is hovering around the 1% level, with many seeing no growth at all. That all appears to be changing though with inflation now very close to the BoE’s 2% target, although wage growth hasn’t yet picked up. However, with the recovery well and truly underway, it’s only a matter of time until we see wage growth overtake inflation.

For that to happen though, inflation will need to remain at these lower levels. The December reading is expected to do just that, remaining unchanged from November at 2.1%. This is great news for the BoE and the UK at a time when investors are concerned about the potential for an interest rate hike in the near future. These low levels of inflation takes some of the pressure off Governor Mark Carney and the other policy makers to do just that, which is a relief as this could potentially choke off the recovery.

We have a very quiet week ahead when it comes to economic data from the eurozone. The only release this morning is the November industrial production figure, which is only a low to medium impact figure. This is expected to show year on year growth of 1.4%, which is encouraging at a time of stagnation in the eurozone. That said, these figures are very volatile so there’s only so much we can read into the individual readings.

After this, attention switches to the US where we have some important data being released, while corporate earnings season gets into full swing with JP Morgan and Wells Fargo reporting. The US retail sales figure will be very closely watched for signs that consumer sentiment is improving in line with the economic outlook. Consumer spending is hugely important to the economy and given that we’ve just seen a very disappointing jobs report, investors could do with a bit of a boost. A poor figure here would only add to calls for the Fed not to taper in January, after getting the ball rolling last month.

Financial stocks will be closely following this week, with a number of them reporting fourth quarter results. This was the best performing sector in the third quarter and the same is expected again. On the upside, this should get earnings season off to a flyer. On the flipside of that, if results disappoint, it doesn’t bode well for the coming weeks.

Ahead of the open we expect to see the FTSE down 38 points, the CAC down 24 points and the DAX down 56 points.

Read the full report at Alpari News Room​

 

[Alpari]

US Opening Call from Alpari UK on 14 January 2014

US futures higher ahead of key data and earnings releases

Today’s US opening call provides an update on:

• Strong US retail sales may convince the Fed that Friday’s poor jobs report was just an anomaly;
• Disappointing festive trading figures suggest the retail sales figure may fall short of expectations;
• JP Morgan and Wells Fargo get earnings season underway for the banks.

There’s plenty for investors to focus on in the lead up to the opening bell on Wall Street today, with US retail sales data being released for December, and JP Morgan and Wells Fargo reporting fourth quarter earnings. Both of these will be followed very closely by investors, with the former potential providing clues about the pace of Fed tapering and the latter telling us whether the economy can stand on its own two legs.

Many view retail sales as the best indicator for economic activity, particularly in a country like the US which relies heavily on consumer spending for growth. With this is mind, a good number today could ease some of the concerns which arose following the poor jobs report on Friday and convince investors that the recovery is still on track.

As far as the Fed is concerned, this could convince them that the December jobs figure was an anomaly driven primarily by poor weather, and that another round of tapering in January is the correct option. At the end of the day, if consumers are spending, then confidence is growing and economic activity will almost inevitably pick up.

That said, we’ve already seen some disappointing festive trading numbers from a number of companies. This could mean that expectations of 0.4% monthly growth are too high and anything below will only add to calls for the Fed to hold off on further tapering until March.

Regardless of what the number is, it will be interesting to see what the reaction is in the markets. Will investors cheer good numbers and therefore improving fundamentals, or poor numbers and more quantitative easing. Or, will they cheer either, as has been the pattern at times recently.

Another focus today will be fourth quarter earnings, with JP Morgan and Wells Fargo both reporting. With the Fed intending to end its quantitative easing later this year, fundamentals will become increasingly important to investors. Without improving fundamentals, the stock market rally is on borrowed time.

In recent earnings seasons, companies have relied on cost-cutting measures for earnings growth, something that is expected again this time around. That can only go on for so long though and in the coming quarters, investors are going to be looking for signs of longer term growth. This is going to require companies to invest some of their large cash piles in order to generate growth, something they may be more willing to do now that the economy is showing signs of sustainable growth.

Ahead of the open we expect to see the S&P up 4 points, Dow up 28 points and the NASDAQ up 5 points.

Read the full report at Alpari News Room​

 

[Alpari]

Daily Market Update - 14 January 2014 - Alpari UK

[video=youtube;WcLW5bXZsbY][/video]

Markets marginally higher, following big sell-off yesterday - 00:09
New Zealand business confidence highest in 20 years - 00:17
UK CPI falls to 2% - 01:29
Eurozone industrial production at highest since 2007 - 03:02

Research analyst Joshua Mahony discusses the continued fall in the markets today. He also talks about the rise in business confidence seen in New Zealand overnight, along with the UK CPI move back down to the 2% inflation target. Finally, Joshua discusses the Eurozone industrial production rise which was the highest since the 2007 crisis

 

[Alpari]

UK Opening Call from Alpari UK on 15 January 2014

Europe to open higher following strong finish on Wall Street

Today’s UK opening call provides an update on:

• Best day of the year so far for US indices following strong retail sales figures;
• European session quiet on Wednesday, with focus turning more to earnings;
• US earnings, data and Fed Beige Book due this afternoon.

European indices are expected to open higher on Monday, after US indices had their best day of the year so far, following some encouraging economic releases.

The most important of these was the December retail sales figure, which beat expectations despite a number of companies reporting a difficult festive trading period a few weeks ago. A number of stores were forced to slash prices more aggressively than they normally would at this time of year in order to avoid a disastrous holiday period.

There was a fear that this could have meant higher sales figures but less spending, although this does not appear to have been the case. Clearly this shows that consumer confidence is still on the rise in the US and the recovery is gathering momentum. This could help convince the Fed that the December jobs report was nothing more than a one-off and therefore tapering should continue in January.

Investors appear to be comfortable with this at the moment, as long as this doesn’t mean interest rates rising earlier than expected, with current Fed forecasts pointing to the middle of next year. This is why indices had their best day of the year so far, although that isn’t a difficult achievement given the weak start to 2014.

The positive sentiment carried over into Asia overnight and appears to be filtering through to European futures this morning as well. Whether this can be maintained depends heavily on the economic data, which has been largely disappointing so far this month. I don’t think this is anything to be concerned about, but it could be an early warning sign that the recovery may not be quite as strong as we currently expect.

There’s very little economic data being released today that could help us out here. In fact, the European session could be very quiet indeed, with attention potentially turning to the earnings season which is now underway. There are a few European companies reporting earnings today, although the focus will be primarily on the UK, with Burberry and Taylor Wimpey reporting.

Then it’s over to the US later, where the week of bank earnings continues with Bank of America. JP Morgan and Wells Fargo got things moving yesterday, with the former beating earnings expectations and the latter falling in line. There were a couple of concerning points for both of these companies, with the mortgage market continuing to be a problem, while JP reported a difficult quarter from a fixed income and investment banking perspective. I think this could be a common theme throughout this week.

There are a few pieces of US data being released later, including the PPI inflation reading and the empire state manufacturing index. The Beige Book will also be released which should provide further insight into how the Fed view the economic recovery and what this means for tapering going forward. Also providing more colour here will be speeches from a couple of Fed members, Charles Evans (FOMC voter) and Dennis Lockhard (non-voter).

Ahead of the open we expect to see the FTSE up 22 points, the CAC up 17 points and the DAX up 39 points.

Read the full report at Alpari News Room​

 

[Alpari]

US Opening Call from Alpari UK on 15 January 2014

US futures pointing to a higher open on Wall Street

Today’s US opening call provides an update on:

• US futures pointing to a higher open on Wall Street;
• Bank of America the latest bank to report earnings;
• Economic data back in focus on Wednesday.

Investors look set to carry on where they left off on Wednesday, with US futures in the green across the board ahead of the opening bell on Wall Street.

The mood was much more positive yesterday following the release of the hugely important retail sales figure for December. There had been concerns in the lead up to the release that spending in December would disappoint, after a number of companies were forced to slash prices more aggressively in order to draw in shoppers.

Another concern has been the weather, which was largely responsible for the significant drop in job creation last month, with only 74,000 being added. Following such a disappointing jobs report on Friday, it was important for investor sentiment that we saw a strong retail sales reading yesterday, and it didn’t disappoint.

Clearly investors are not concerned about what this means for quantitative easing – with the Fed now more likely to reduce it by another $10 billion later this month – which is a positive thing going forward. It means that some normality is returning to the markets and investors are focused on the fundamental picture rather than how much money the Fed is pumping into the financial system.

With that in the mind, the focus will be on the fundamentals again on Wednesday with a couple of pieces of economic data being released, while corporate earnings season continuing with Bank of America reporting before the opening bell.

Earnings from banks so far have been relatively well received by the markets, despite clearly highlighting some areas of weakness, particularly surrounding mortgages. The same is expected when Bank of America report earnings today, although extra attention will be paid to the size of provisions being made by the bank for litigation costs.

This week there’s not much in terms high impact economic data, those releases that tend to have a significant impact on the markets, such as the jobs report, GDP figures and retail sales. That doesn’t mean that the releases don’t matter though, as they will all give us a better idea of how the US economy is doing and how sustainable the recovery is.

For example, the empire state manufacturing index, which is due to be released before the opening bell, is seen as a very good indicator of manufacturing activity in the US. This includes manufacturing for domestic use and exports, which can provide crucial insight into the overall health of the economy. This figure is expected to rise to 3.75 this month, which further supports the idea that the recovery is gaining momentum.

The PPI figure, while not being the Fed’s preferred measure of inflation, can be used to predict changes to consumer inflation readings in the months ahead. This is simply because any changes in the PPI will likely be reflected in the price of the finished product, especially increases. The core PPI readings are expected to be the same as in November, which suggests little change to consumer inflation readings in the coming months.

Ahead of the open we expect to see the S&P up 3 points, Dow up 28 points and the NASDAQ up 13 points.

Read the full report at Alpari News Room​

 

[Alpari]

Daily Market Update - 15 January 2014 - Alpari UK

[video=youtube;8Y4KzDNgUrk][/video]

James Hughes, Chief Market Analyst looks at a big week of earnings as financials take centre stage, as well as the return of economic data with US PPI readings.

 

[Alpari]

UK Opening Call from Alpari UK on 16 January 2014

Focus on eurozone CPI as ECB considers further stimulus

Today’s UK opening call provides an update on:

• Focus on eurozone inflation as ECB considers further stimulus measures;
• Plenty of important US data due out this afternoon;
• European and US earnings also important today;
• RBA rate cut a possibility as Australian employment situation deteriorates further.

It's going to be another quiet start to the European session on Thursday, with very few pieces of economic data being released.

Of the figures that are being released, none are likely to have a significant impact on the markets. The two most important releases are the German and eurozone CPI figures for December, but even these are revised figures, which should significantly reduce the market impact. On top of that, we haven't seen a revision to either of these in a long time, with the last revision to the eurozone figure coming in September 2012.

Of these, the one that has the most potential to move the markets is the eurozone inflation figure. This has fallen quite significantly in recent months, so much so that the European Central Bank cut the main refi rate to all time lows of 0.25% in November, in a rare knee-jerk reaction to the figure falling from 1.1% to 0.7% a month earlier. With inflation currently at 0.8%, the ECB may be forced to act again, especially if the figure is revised lower today.

The only problem now is that with the main refi rate at 0.25%, the ECB may be forced to be more creative with its monetary policy strategy, opting for something more unconventional than another refi rate cut. This could as simple as stricter forward guidance, with the current effort being so vague it's practically useless, or something more risky like negative deposit rates or another round of long term refinancing operations (LTROs). One option that appears to be off the table for now is quantitative easing, but that may change if the threat of deflation continues to rise.

The ECB monthly report, released this morning, could provide additional insight into just how close the central bank was to loosening monetary policy further last week. ECB President Mario Draghi appeared very relaxed on this during the press conference that followed the decision last week, claiming the fall to 0.8% was largely driven by one-off factors in Germany. If the report supports this then we may have to wait a few more months before the ECB is once again forced to act.

After this it's over to the US, where we have a few key pieces of economic data being released. The most important of these is the weekly jobless claims figure, which is expected to fall to 328,000 from 330,000 last week. Also being released is the Philly Fed manufacturing index, which is expected to rise to 8.6 from 7 in November. Yesterday's jump in the empire state manufacturing index to 20 month highs was encouraging and may suggest that expectations today are too low. Finally we have the US core CPI reading, which is expected to remain at 1.7% in December.

Also today, there are a number of companies scheduled to report fourth quarter earnings, which could have an impact on the markets. These include Associated British Foods, Ocado, Dixons and Halfords in Europe, and Citigroup, Goldman Sachs and American Express in the US.

This is a big weeks for the financial stocks, with so many reporting earnings. So far the results have been alright, with most reporting better than expected earnings. However, there has been a few common themes that we'll probably see again today, with the mortgage and fixed income businesses really struggling in the fourth quarter due to Fed tapering and higher interest rates.

Over night the only notable move during the Asian session over night came in Australia where the Aussie dollar plummeted against the greenback following the release of the latest unemployment figures. While the headline rate remained at 5.8%, the number of those employed fell by 22,600, well below expectations of a 7,500 rise, while November’s figure was also revised higher. This included the biggest drop in full-time employment since June 2012, which will only further encourage the Reserve Bank of Australia to cut interest rates in the coming months. Especially as the aussie is still more than three cents higher against the greenback than what the RBA considers fair.

Ahead of the open we expect to see the FTSE up 13 points, the CAC up 12 points and the DAX up 35 points.

Read the full report at Alpari News Room​

 

[Alpari]

US Opening Call from Alpari UK on 16 January 2014

US data and earnings in focus on Thursday

Today’s US opening call provides an update on:

• Eurozone disinflation continues as CPI figure is confirmed at 0.8%;
• US data in focus with jobless claims, manufacturing and inflation data being released;
• US earnings season continues with Goldman Sachs, Citigroup and American Express reporting.

It’s been another relatively slow start to the European session on Thursday, but things should pick up as the day goes on as another US bank reports earnings and more economic data is released.

Economic releases have been few and far between this week, as far as Europe is concerned, and those releases we have had haven’t historically been high impact events for the markets. This morning we’ve had inflation data from both Germany and the eurozone as a whole, which is of course important at a time when investors are concerned about the potential for deflation. However, both of these were not the preliminary readings and are very rarely revised. As a result, the impact on the markets tends to be minimal, if we see any at all.

The economic calendar, while still be relatively thin, has offered more from the US, with retail sales and manufacturing figures this week having a clear impact on investor sentiment. We could see a similar response today, with jobless claims, manufacturing and inflation figures all being released.

The weekly jobless claims figure has been fairly consistent over the last few months, coming in at around 330,000 – 340,000, barring the odd spike in the data. The same is expected again today, with analysts expecting 328,000 new claims for the previous week. Anything roughly in line with this should have little impact on the markets.

The figure investors will be most interested in this afternoon will probably be the Philly Fed manufacturing index as many see this industry as giving the clearest indication that the recovery is gathering momentum this year. A pick up in domestic spending and exports should benefit the manufacturing industry greatly and we’re already seeing evidence of this.

The empire state manufacturing index yesterday rose to its highest level since May 2012 in a sign that the industry is finally benefitting from a number of factors. These include the removal of uncertainty surrounding the US budget that led to the government shutdown in October, lower interest rates from the Fed’s ultra-loose monetary policy and a pick-up in demand both domestically and abroad.

Also being released is the December CPI reading, which is expected to show core inflation staying at 1.7%, compared to a year earlier. It’s worth noting that, while we should pay attention to this figure, it’s not the Fed’s preferred inflation measure and therefore shouldn’t have has big an impact on the markets as the core personal consumption expenditure index.

Finally today, earnings season continues with the number of companies reporting beginning to pick up. Once again, the focus will be on the financial stocks, with particular attention being paid to Citigroup and Goldman Sachs before the opening bell on Wall Street, followed by American Express after the close.

Ahead of the open we expect to see the S&P down 3 points, Dow down 17 points and the NASDAQ down 1 point.

Read the full report at Alpari News Room​

 

[Alpari]

Daily Market Update - 16 January 2014 - Alpari UK

[video=youtube;oGTcKivZ4nI][/video]

Aussie takes a hit following employment data - 0:20
Eurozone inflation confirmed at 0.8% - 2:33
US earnings and data in focus today - 3:28

Market Analyst Craig Erlam talks about why the Australian employment data over night prompted an aussie sell-off, what's been moving European markets this morning and what we should look out for as we approach the opening bell on Wall Street.

 

[Alpari]

US Opening Call from Alpari UK on 17 January 2014

US futures higher ahead of key economic releases

Today’s US opening call provides an update on:

• Investors more optimistic after a run of positive economic releases this week;
• Good start to the European session as UK retail sales smash expectations;
• US consumer confidence release key today;
• Morgan Stanley the latest bank to report fourth quarter earnings.

US futures are pointing to a higher open on Friday, as investors become more optimistic again following the release of some encouraging economic data this week.

The mood had turned a little more sour since the turn of the year, as we repeatedly saw data falling short of expectations, leading some to believe that the economic recovery may not be as strong as initially thought. Last Friday’s jobs report did little to improve sentiment among investors, showing a significant drop in job creating in December, although this was largely put down to poor weather.

The economic data has been much better this week, in particular the December retail sales figure and two pieces of manufacturing data, all of which easily exceeded expectations. That has given investors more confidence in the recovery, which has been reflected in the stock market rally this week, with the S&P hitting new record highs in the process.

Things have got off to an encouraging start in Europe this morning, where indices are currently trading half a percentage point higher. It has been a particularly positive start for the UK, where retail sales in December rose by 2.6% from a month earlier and 5.3% compared to the same month last year.

This is a huge jump and was well above expectations of 0.4% and 2.6%, respectively. The core retail sales figures were even better, rising 2.8% from November, and 6.1% from last year. Clearly the recovery in the UK is showing no signs of losing momentum and if anything is going from strength to strength. If we thought 2013 was a good year for the UK, 2014 could be unbelievable if these figures are anything to go by.

The US session could be a little quieter than we’ve seen so far this week. There are a couple of notable economic releases scheduled for today, the most notable of which is the UoM consumer sentiment figure. This is also a preliminary reading so tends to have the greatest impact on the markets.

The figure is expected to rise to 83.5 today, up from 82.5 in December, further evidence that the consumer is becoming more confidence in the economic recovery. For a country like the US, as with the UK, this is hugely important. If the consumer buys into the recovery, so will businesses and barring something disastrous, the recovery will rapidly gather momentum.

Corporate earnings season will also be in focus again today, with financial stocks once again being of interest. Today it’s Morgan Stanley’s turn to report fourth quarter earnings, after a week that has seen JP Morgan, Goldman Sachs, Wells Fargo and Citigroup, among others, already report. The results have so far been relatively good, so the pressure is now on Morgan Stanley to keep the run going.

Ahead of the open we expect to see the S&P up 2 points, Dow up 14 points and the NASDAQ up 2 points.

Read the full report at Alpari News Room​