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Alpari
Alpari Representative
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UK Opening Call from Alpari UK on 26 November 2014
Quiet day sees focus upon overall market sentiment
European markets are expected to move higher this morning, following a largely positive session overnight in Asia. The inability of the US markets to reach fresh highs did little to dampen investor sentiment elsewhere despite a poor consumer confidence survey as many chose to focus on the strong GDP figure and a globally accommodative monetary stance. Thus European markets are expected to open higher with the FTSE100 +40, CAC +24 and DAX +48 points.
A lack of economic releases overnight means that traders have had little to get their teeth into and for the most part this means having to tap into the overall market sentiment. The sharp increase in the rate of asset purchases in Japan last month, coupled with expectations that the ECB will move to purchase sovereign debt soon (as shown by the move lower in yields recently), means that there is an underlying feeling that whilst the previous rhetoric surrounding the markets was centred around monetary tightening, this couldn’t be further from the truth. The tumbling inflation that has been seen thanks in large part to oil prices has come at the perfect time, forcing central banks to respond by means of pushing back expectations for that first interest rate hike that everyone is speculating upon. Mark Carney played his best poker face yesterday at the inflation report hearings, stating that the next move the BoE will make is going to be a rate hike. However, we do not need to see another bout of QE to be bullish in such a low interest rate environment.
Yesterday saw very mixed messages out of the US, where a unexpected jump in Q3 GDP was somewhat undone by an equally surprising drop in consumer confidence, which reversed the big spike higher last month. The feeling for many is that US Q3 GDP is going to be about as good as it gets for the time being, as it starts to come back off the massive Q2 figure of 4.2%. The estimates across the likes of the UK economy point towards a more stable rate of growth as rates begin to normalise and the house price frenzy of 2014 starts to cool. Whether we will see a rate hike in 2015 remains a bone of contention at this moment, with inflation likely to dictate rates to a large extent. However, when it comes to the question of where the growth will be in the new year, I feel that there is now an overwhelming feeling that the US more so than the UK will experience a very strong 2015. The impact of the ongoing (and seemingly neverending) downturn in the Eurozone is of course greatly impacting the UK who sees the single currency region as its main trade partner. Also, the impact of Russian sanctions will hit the UK more so than the UK simply due to the size of flows between the two countries. However, one thing that many seem to be ignoring the impact that falling energy prices will have upon both businesses and consumers alike. While many believe that QE has a limited degree of impact upon consumer behaviour (see yesterday’s BoJ minutes for example), one thing that businesses and consumer alike have to buy is petrol. Should we see the falling price of petrol reflected properly at the pump, this is probably the strongest form of stimulus yet because it reaches the pockets of almost everyone. For this reason, I think it is likely that this could be the biggest festive season yet in terms of sales, starting this week for Black Friday.
Looking ahead at the European session, the major event of note comes in the form of the UK Q3 GDO number. Just like yesterday’s US number, this is a second revision and thus there is a possibility that it simply confirms the 0.7% figure revealed last month. However, taking a look at the spike we did see in the US number, there is a potential for significant revisions, causing market moves and thus for this reason, it is well worth watching out for this data point.
Quiet day sees focus upon overall market sentiment
- Quiet day sees focus upon overall market sentiment
- US GDP and consumer confidence paint alternate pictures
- UK GDP ahead.
European markets are expected to move higher this morning, following a largely positive session overnight in Asia. The inability of the US markets to reach fresh highs did little to dampen investor sentiment elsewhere despite a poor consumer confidence survey as many chose to focus on the strong GDP figure and a globally accommodative monetary stance. Thus European markets are expected to open higher with the FTSE100 +40, CAC +24 and DAX +48 points.
A lack of economic releases overnight means that traders have had little to get their teeth into and for the most part this means having to tap into the overall market sentiment. The sharp increase in the rate of asset purchases in Japan last month, coupled with expectations that the ECB will move to purchase sovereign debt soon (as shown by the move lower in yields recently), means that there is an underlying feeling that whilst the previous rhetoric surrounding the markets was centred around monetary tightening, this couldn’t be further from the truth. The tumbling inflation that has been seen thanks in large part to oil prices has come at the perfect time, forcing central banks to respond by means of pushing back expectations for that first interest rate hike that everyone is speculating upon. Mark Carney played his best poker face yesterday at the inflation report hearings, stating that the next move the BoE will make is going to be a rate hike. However, we do not need to see another bout of QE to be bullish in such a low interest rate environment.
Yesterday saw very mixed messages out of the US, where a unexpected jump in Q3 GDP was somewhat undone by an equally surprising drop in consumer confidence, which reversed the big spike higher last month. The feeling for many is that US Q3 GDP is going to be about as good as it gets for the time being, as it starts to come back off the massive Q2 figure of 4.2%. The estimates across the likes of the UK economy point towards a more stable rate of growth as rates begin to normalise and the house price frenzy of 2014 starts to cool. Whether we will see a rate hike in 2015 remains a bone of contention at this moment, with inflation likely to dictate rates to a large extent. However, when it comes to the question of where the growth will be in the new year, I feel that there is now an overwhelming feeling that the US more so than the UK will experience a very strong 2015. The impact of the ongoing (and seemingly neverending) downturn in the Eurozone is of course greatly impacting the UK who sees the single currency region as its main trade partner. Also, the impact of Russian sanctions will hit the UK more so than the UK simply due to the size of flows between the two countries. However, one thing that many seem to be ignoring the impact that falling energy prices will have upon both businesses and consumers alike. While many believe that QE has a limited degree of impact upon consumer behaviour (see yesterday’s BoJ minutes for example), one thing that businesses and consumer alike have to buy is petrol. Should we see the falling price of petrol reflected properly at the pump, this is probably the strongest form of stimulus yet because it reaches the pockets of almost everyone. For this reason, I think it is likely that this could be the biggest festive season yet in terms of sales, starting this week for Black Friday.
Looking ahead at the European session, the major event of note comes in the form of the UK Q3 GDO number. Just like yesterday’s US number, this is a second revision and thus there is a possibility that it simply confirms the 0.7% figure revealed last month. However, taking a look at the spike we did see in the US number, there is a potential for significant revisions, causing market moves and thus for this reason, it is well worth watching out for this data point.
Read the full report at Alpari News Room
Alpari
Alpari Representative
- Messages
- 122
US Opening Call from Alpari UK on 26 November 2014
Eyes on the US for further evidence of recovery
The combination of a highly stimulative environment in many of the world’s largest economies, along with strong recoveries in the US and UK is continuing to buoy markets on Wednesday.
With US markets set to close on Thursday as the country celebrates Thanksgiving, the end of the week may be very quiet as traders turn the holiday into a long weekend. That could make today even busier, especially with some data that would normally be released Thursday being moved forward to today. There is a lot of economic data scheduled for release today which could make for a very volatile US trading session.
Among all of the data releases, there are a number of key readings which makes today a very interesting one for the markets. For example, durable goods orders is due ahead of the opening bell and can be viewed as both forward and backward looking, making it a very good US economic indicator. Not only does it highlight the spending habits of consumers and businesses, the fact that it focuses on large investments on products that last longer than three years, means it provides insight into their economic outlook. People avoid spending on these large goods if they can if they anticipate tough times ahead. This makes it a very strong indicator for the markets. The overall reading can be quite volatile as it includes items such as aircraft orders which are large items and can be quite volatile themselves in nature, so many people focus more so on the core reading, which is expected to rise by 0.5%.
Being released alongside this number is the Fed’s preferred measure of inflation, the core personal consumption expenditure price index. Inflation has become a hot topic this year and is likely to continue to be in 2015, although the US seems to be suffering far less from low inflation than many of the other major nations. The latest reading is expected to pick up slightly from October’s 1.5% reading, which would be in keeping with the CPI and PPI inflation readings, both of which showed an improvement when released last week.
Also alongside these figures we have the latest jobless claims number, which is expected to be below 300,000 for an incredible eleventh week, as well as the latest personal income and spending figures, so 8.30am in New York (1.30pm GMT) is going to be extremely busy from an economic data perspective and significant market volatility could follow.
Things then calm down a little until shortly after the open when we’ll get the latest Chicago PMI, the revised UoM consumer sentiment reading and the latest housing data, with new home sales and pending home sales numbers for October being released. Despite probably being the least important releases of the day, these still have the potential to bring big moves to the markets and therefore should not be overlooked.
Also on people’s minds today is tomorrow’s OPEC meeting when members are expected to discuss the option of cutting oil production in an effort to stop the slide in prices that we’ve seen since June. Many people are expecting no cut in production, as the biggest members of OPEC refuse to give up market share despite revenue falling as prices tumble. There is a big chance that we’ll see some big moves regardless of the decision as there seems to be a fairly even split between those expecting a cut and those not resulting in quite a tense stand-off.
The S&P is expected to open 2 points higher, the Dow 17 points higher and the Nasdaq 8 points higher.
Eyes on the US for further evidence of recovery
- US data in focus ahead of tomorrow’s Thanksgiving holiday;
- Core durable goods orders an important release today;
- Core PCE Inflation seen rising in line with CPI and PPI;
- Tomorrow’s OPEC meeting likely to cause unease in oil markets.
The combination of a highly stimulative environment in many of the world’s largest economies, along with strong recoveries in the US and UK is continuing to buoy markets on Wednesday.
With US markets set to close on Thursday as the country celebrates Thanksgiving, the end of the week may be very quiet as traders turn the holiday into a long weekend. That could make today even busier, especially with some data that would normally be released Thursday being moved forward to today. There is a lot of economic data scheduled for release today which could make for a very volatile US trading session.
Among all of the data releases, there are a number of key readings which makes today a very interesting one for the markets. For example, durable goods orders is due ahead of the opening bell and can be viewed as both forward and backward looking, making it a very good US economic indicator. Not only does it highlight the spending habits of consumers and businesses, the fact that it focuses on large investments on products that last longer than three years, means it provides insight into their economic outlook. People avoid spending on these large goods if they can if they anticipate tough times ahead. This makes it a very strong indicator for the markets. The overall reading can be quite volatile as it includes items such as aircraft orders which are large items and can be quite volatile themselves in nature, so many people focus more so on the core reading, which is expected to rise by 0.5%.
Being released alongside this number is the Fed’s preferred measure of inflation, the core personal consumption expenditure price index. Inflation has become a hot topic this year and is likely to continue to be in 2015, although the US seems to be suffering far less from low inflation than many of the other major nations. The latest reading is expected to pick up slightly from October’s 1.5% reading, which would be in keeping with the CPI and PPI inflation readings, both of which showed an improvement when released last week.
Also alongside these figures we have the latest jobless claims number, which is expected to be below 300,000 for an incredible eleventh week, as well as the latest personal income and spending figures, so 8.30am in New York (1.30pm GMT) is going to be extremely busy from an economic data perspective and significant market volatility could follow.
Things then calm down a little until shortly after the open when we’ll get the latest Chicago PMI, the revised UoM consumer sentiment reading and the latest housing data, with new home sales and pending home sales numbers for October being released. Despite probably being the least important releases of the day, these still have the potential to bring big moves to the markets and therefore should not be overlooked.
Also on people’s minds today is tomorrow’s OPEC meeting when members are expected to discuss the option of cutting oil production in an effort to stop the slide in prices that we’ve seen since June. Many people are expecting no cut in production, as the biggest members of OPEC refuse to give up market share despite revenue falling as prices tumble. There is a big chance that we’ll see some big moves regardless of the decision as there seems to be a fairly even split between those expecting a cut and those not resulting in quite a tense stand-off.
The S&P is expected to open 2 points higher, the Dow 17 points higher and the Nasdaq 8 points higher.
Read the full report at Alpari News Room
Alpari
Alpari Representative
- Messages
- 122
UK Opening Call from Alpari UK on 28 November 2014
Falling oil prices to act as QE4
A mixed-looking open is expected for European markets, following a particularly strong Asian session. The release of poor inflation data from Japan drove much of that bullish prices action overnight, while the eurozone CPI number this morning means that many are holding off until what is expected to be a very volatile release takes place.
Meanwhile, the insistence of OPEC upon retaining a steady rate of oil output has shocked the markets, sending both Brent and WTI tumbling, and with it goes the chance of many producers to continue to operate.
The European open is expected to look somewhat mixed, with futures pointing towards the FTSE100 opening -3, CAC -7 and DAX +2 points.
Yesterday’s announcement from OPEC that saw them retain the current 30 million barrels per day output ceiling was somewhat of an market oxymoron, being both expected and shocking in its nature. The influence of the Saudi’s within the group has clearly been the single most influential protagonist within this saga, whose goals from forcing the price even lower are far-reaching, long term and disruptive. The ability to lower prices below the cost of production for many US shale producers means that many will invariably go out of business, leaving the market altogether or selling equipment and setting them back by years. Meanwhile, by lowering oil prices well below Iran’s cost of production, there is the hope that it will avert them obtaining a nuclear weapon anytime soon as funding dries up. However, the knowledge that many of these producers will have set their prices well into the future with buyers means that these ultra-low oil prices could be here to stay for some time yet.
The establishment of a new lower norm for oil prices comes at a very opportunistic moment, as monetary policy for many is beginning to dry up. However, whilst people protest about the 1% getting richer and how previous stimulus effects fail to adequately trickle down to many, it is hard to think of a more wide-reaching and effective stimulus measure than to lower the cost of gas at the pump for everyone globally. For this reason, we are effectively entering the era of QE4, with motorists able to allocate more of their money towards luxury items, while firms are now able to lower costs of production thus impacting the bottom line and raising profits. The impact of this could be bigger than anything that has come before and the first test dummy will be both black Friday and overall holiday season sales which I believe will be the biggest on record as multi year lows in unemployment come amid multiyear lows in petrol prices to culminate in extremely vibrant retail sales environment.
Overnight, the release of Japanese CPI gave Shinzo Abe more to worry about ahead of the snap election, due next month. Unfortunately for Abe, his decision couldn’t have come at a worse time, with Japan falling into recession a week later and now moving ever further away from his 2% target for CPI. The announcement that CPI fell back to 2.9% meant that when taking into account the April sales tax hike, Japan now has the first sub 1% inflation rate in 14 months, at 0.9%. Markets will be watching closely to see if the coming months show any sign of pickup following the BoJ decision to raise asset purchases to Y80 trillion, yet the bullishness in the Nikkei overnight points to expectations that we could see yet another move from the BoJ in the near future, with a Y100 trillion asset purchase scheme a possibility.
The main event within the European markets today will no doubt be the Eurozone CPI reading, which has been the thorn in the side of Mario Draghi for well over a year now. Unfortunately for Draghi, this does not seem to be going away, with market forecasts pointing towards a fall back to 0.3% after a brief respite last month which saw the opposite move from 0.3% to 0.4%. Yesterday’s German CPI reading of 0.6% was particularly notable given that Jens Weidmann has been one of the opponents to a particularly expansionary monetary policy from the ECB, no doubt driven in part by the German fear of hyperinflation like that seen in 1921-24 in what was then called the Weimar Republic. However, deflation must also be a problem for Germany and finally, their CPI levels are beginning to come closer to the average of the region which will likely bring their views more in line with that of Mario Draghi. For this reason, everything is setup for a more dovish ECB going forward as long as CPI remains low and thus should we see a return to 0.3% it is likely that the stock markets will reflect this in a positive way given what it means for potential monetary policy going forward.
Falling oil prices to act as QE4
- Oil prices tumble as OPEC play chicken
- Multiyear low Oil prices to act as QE4
- Japanese inflation falls, pushing Nikkei higher
- Eurozone CPI to dominate after key fall in German CPI.
A mixed-looking open is expected for European markets, following a particularly strong Asian session. The release of poor inflation data from Japan drove much of that bullish prices action overnight, while the eurozone CPI number this morning means that many are holding off until what is expected to be a very volatile release takes place.
Meanwhile, the insistence of OPEC upon retaining a steady rate of oil output has shocked the markets, sending both Brent and WTI tumbling, and with it goes the chance of many producers to continue to operate.
The European open is expected to look somewhat mixed, with futures pointing towards the FTSE100 opening -3, CAC -7 and DAX +2 points.
Yesterday’s announcement from OPEC that saw them retain the current 30 million barrels per day output ceiling was somewhat of an market oxymoron, being both expected and shocking in its nature. The influence of the Saudi’s within the group has clearly been the single most influential protagonist within this saga, whose goals from forcing the price even lower are far-reaching, long term and disruptive. The ability to lower prices below the cost of production for many US shale producers means that many will invariably go out of business, leaving the market altogether or selling equipment and setting them back by years. Meanwhile, by lowering oil prices well below Iran’s cost of production, there is the hope that it will avert them obtaining a nuclear weapon anytime soon as funding dries up. However, the knowledge that many of these producers will have set their prices well into the future with buyers means that these ultra-low oil prices could be here to stay for some time yet.
The establishment of a new lower norm for oil prices comes at a very opportunistic moment, as monetary policy for many is beginning to dry up. However, whilst people protest about the 1% getting richer and how previous stimulus effects fail to adequately trickle down to many, it is hard to think of a more wide-reaching and effective stimulus measure than to lower the cost of gas at the pump for everyone globally. For this reason, we are effectively entering the era of QE4, with motorists able to allocate more of their money towards luxury items, while firms are now able to lower costs of production thus impacting the bottom line and raising profits. The impact of this could be bigger than anything that has come before and the first test dummy will be both black Friday and overall holiday season sales which I believe will be the biggest on record as multi year lows in unemployment come amid multiyear lows in petrol prices to culminate in extremely vibrant retail sales environment.
Overnight, the release of Japanese CPI gave Shinzo Abe more to worry about ahead of the snap election, due next month. Unfortunately for Abe, his decision couldn’t have come at a worse time, with Japan falling into recession a week later and now moving ever further away from his 2% target for CPI. The announcement that CPI fell back to 2.9% meant that when taking into account the April sales tax hike, Japan now has the first sub 1% inflation rate in 14 months, at 0.9%. Markets will be watching closely to see if the coming months show any sign of pickup following the BoJ decision to raise asset purchases to Y80 trillion, yet the bullishness in the Nikkei overnight points to expectations that we could see yet another move from the BoJ in the near future, with a Y100 trillion asset purchase scheme a possibility.
The main event within the European markets today will no doubt be the Eurozone CPI reading, which has been the thorn in the side of Mario Draghi for well over a year now. Unfortunately for Draghi, this does not seem to be going away, with market forecasts pointing towards a fall back to 0.3% after a brief respite last month which saw the opposite move from 0.3% to 0.4%. Yesterday’s German CPI reading of 0.6% was particularly notable given that Jens Weidmann has been one of the opponents to a particularly expansionary monetary policy from the ECB, no doubt driven in part by the German fear of hyperinflation like that seen in 1921-24 in what was then called the Weimar Republic. However, deflation must also be a problem for Germany and finally, their CPI levels are beginning to come closer to the average of the region which will likely bring their views more in line with that of Mario Draghi. For this reason, everything is setup for a more dovish ECB going forward as long as CPI remains low and thus should we see a return to 0.3% it is likely that the stock markets will reflect this in a positive way given what it means for potential monetary policy going forward.
Read the full report at Alpari News Room
Alpari
Alpari Representative
- Messages
- 122
Weekly market preview from Alpari UK – 1 December 2014
The biggest week of the month ahead in terms of economic releases, as the focus returns to central banking, employment and PMI readings among other things. In the US, the week will be dominated by labour statistics as we see a crescendo of figures reach a pinnacle on Friday with the release of the jobs report. In the UK, the services PMI figure is going to be key as an indicator of growth going forward. Meanwhile, the eurozone we will see Mario Draghi take the stand once more as the ECB rate decision and press conference dominate Thursday’s European session.
Asian markets will be on the lookout for the Chinese manufacturing PMI number on Monday which will provide a dominant impact upon the start of the new trading week. In Australia, the release of the Q3 GDP figure is sure to be key in what is a particularly busy week for the country.
US
The US markets always brace themselves for volatility on the first week of the month, predominantly due to the release of the non-farm payrolls figure on Friday, which near enough guarantees strong market moves. The current economic backdrop within the US is a mixed one, in large part due to the recent moves in oil prices which were compounded even further by OPEC. Their decision to push prices lower by keeping output at the long term average of 30 million barrels per day sent prices tumbling, which is likely to impact the US in a number of ways. Firstly, the reduction in oil prices is likely to push a number of US shale producers out of business or at least stop production due to costs being above market price. This should lower GDP in the future for the US. Alongside this the falling price of oil will have a disinflationary impact, leading to a cautious Fed when it comes to monetary policy tightening. Finally, with less money being spent at the pumps, there is likely to be a stronger retail sector as consumers gain a greater spending power which should spell out a strong festive period in the US and globally.
The main events I am watching out for revolve around the labour markets, with the ADP non-farm payrolls figure, followed by Friday’s jobs report. This is also accompanied by a whole host of speeches from Fed members (10 in total), which have the potential to move the markets should they begin to move the goalposts in relation to monetary policy.
On Wednesday, the ADP non-farm payrolls figure will give us the first indication of how the labour market has fared in November, with expectations pointing towards a fall back to 228k from 230k last month. This ADP measure is a privately run study and this means they do not have access to public sector data. Partly due to this difference, the ADP and official non-farm payrolls figures can sometimes be unreliable in their correlations. However, this is a highly notable data point and we have seen significant volatility in the past upon release.
The main event of the week is going to be the jobs report, where a whole raft of labour market statistics are released. Arguably the biggest number is the non-farm payrolls figure, which due to its volatile nature has an ability to move the markets significantly. That being said, even when the figure remains stable or comes in as expected, there is often a response simply due to the fact that many will trade the release due to the consistent volatility. It seems the forecasters are expecting to see some correlation with the ADP number this week as they expect a number of 228k also, which would be a rise following last months 214k number. Be very aware of this figure as it has the ability to really move the markets.
Also released alongside the payrolls figure is the unemployment rate, which is often a headline grabbing number and thus is also very influential upon monetary policy. On this case, we are expecting a number of 5.8%, which would represent a steady number over last month. Finally, be aware of the qualitative statistics, such as average hours worked, average hourly earnings and the participation rate. These figures have become increasingly significant as Janet Yellen is on the look out for the degree of ‘slack’ within the economy.
UK
A busy week in the UK, where the release of PMI numbers and the latest BoE monetary policy decision means that almost every day has something to keep an eye out for. The PMI surveys are particularly important as they provide a leading indicator of health or weakness in a given sector prior to those changes being reflected in the statistical data. In the UK, the most important industry is the services sector, which accounts for around 80% of UK GDP and thus I use the services PMI (Wednesday) as a great leading indicator of where jobs, spending and ultimately GDP are going to move in the coming months. This month markets expect to see a moderate rise from 56.2 to 56.6, which is coming off the back of two months of very poor figures. Therefore any movement to the upside in that figure at least provides me with an idea that the sector is stabilising and gaining some ground back again.
Also be on the lookout for the manufacturing PMI (Monday) and construction PMI (Tuesday) figures. In particular the construction sector has been having a great time of it in 2014, with a buoyant housing market expected to provide continued support for new builds given the new valuations achievable. Despite the recent slowdown in the UK housing market, much of which I believe is cyclical to this time of the year, I expect new homeowners to be investing in their new properties which should keep the sector vibrant for some time yet.
Finally, Thursday sees the BoE provide their latest monetary policy decision which has been a major cause for volatility in the past. However, with a high likeliness that Carney and co will keep rates and QE unchanged, I do not expect this to be a particularly interesting event. For this reason, the release of minutes later in the month now appears to be a more noteworthy event as it provides us with clues as to when the MPC will seek to raise rates.
Eurozone
The eurozone area is set for a relatively relaxed week in comparison with the other regions, where the main event to be watching out for will be the ECB monetary policy decision on Thursday. Given the recent implementation of an ABS purchase programme, along with the ongoing TLTRO’s scheme, I do not foresee any big change in policy on Thursday. However, given that the announcement is followed by a press conference, I expect to see pressure put upon Draghi regarding a QE programme down the line given the persistent disinflationary pressures. Much has been made of a possible corporate or sovereign bond buying policy from the ECB and thus we could see some light shed on that element and how it could make up some part of the 1 trillion euro expansionary policy that has previously been mentioned by Draghi.
Asia & Oceania
A somewhat quiet week in Asia, where the lack of any Japanese figures means that the focus will be solely placed upon China. The release of the Chinese manufacturing PMI figure in the early hours of Monday means that for the most part, this coming week will be set on either a positive or negative footing by that release. Given that this figure has been at the forefront of the multiple downturns seen throughout the past year, it is absolutely key that we continue to see the sector grow, which is beginning to be questionable given the fall over recent months. With the sub-50 mark denoting a sector in contraction, the figure of 50.8 seen last month means China is in dangerous territory should we see any further movement to the downside. Estimates point towards a figure closer to 50.6, which would mean yet another step towards that dreaded scenario of a sub 50 survey.
Finally, the Australian economy has a very busy week ahead, where GDP and a RBA monetary policy decision are likely to dominate. On Tuesday, the RBA monetary policy announcement is going to be interesting predominantly for the statement that comes after. The weaknesses still evident within the economy means that I do not foresee any move higher in rates any time soon. However, with real estate prices rising to worrying levels, it is also unlikely we are going to see the RBA lower rates to stimulate jobs and growth. Thus for the time being I believe it is unlikely that there is going to be any shift in policy.
The second estimate Q3 GDP figure is of course absolutely massive, given the worries surrounding the economy within recent times. The mixed signals out of China means that the Australian economy has been slowing in recent quarters, with the initial 0.5% figure for Q3 being the lowest in 10 quarters. For the most part, this weakness has been attributed to a deterioration in net trade. However, with estimates pointing towards a better number of 0.7% on Wednesday, it is clear that the effects of a weakened Aussie dollar is finally being felt.
The biggest week of the month ahead in terms of economic releases, as the focus returns to central banking, employment and PMI readings among other things. In the US, the week will be dominated by labour statistics as we see a crescendo of figures reach a pinnacle on Friday with the release of the jobs report. In the UK, the services PMI figure is going to be key as an indicator of growth going forward. Meanwhile, the eurozone we will see Mario Draghi take the stand once more as the ECB rate decision and press conference dominate Thursday’s European session.
Asian markets will be on the lookout for the Chinese manufacturing PMI number on Monday which will provide a dominant impact upon the start of the new trading week. In Australia, the release of the Q3 GDP figure is sure to be key in what is a particularly busy week for the country.
US
The US markets always brace themselves for volatility on the first week of the month, predominantly due to the release of the non-farm payrolls figure on Friday, which near enough guarantees strong market moves. The current economic backdrop within the US is a mixed one, in large part due to the recent moves in oil prices which were compounded even further by OPEC. Their decision to push prices lower by keeping output at the long term average of 30 million barrels per day sent prices tumbling, which is likely to impact the US in a number of ways. Firstly, the reduction in oil prices is likely to push a number of US shale producers out of business or at least stop production due to costs being above market price. This should lower GDP in the future for the US. Alongside this the falling price of oil will have a disinflationary impact, leading to a cautious Fed when it comes to monetary policy tightening. Finally, with less money being spent at the pumps, there is likely to be a stronger retail sector as consumers gain a greater spending power which should spell out a strong festive period in the US and globally.
The main events I am watching out for revolve around the labour markets, with the ADP non-farm payrolls figure, followed by Friday’s jobs report. This is also accompanied by a whole host of speeches from Fed members (10 in total), which have the potential to move the markets should they begin to move the goalposts in relation to monetary policy.
On Wednesday, the ADP non-farm payrolls figure will give us the first indication of how the labour market has fared in November, with expectations pointing towards a fall back to 228k from 230k last month. This ADP measure is a privately run study and this means they do not have access to public sector data. Partly due to this difference, the ADP and official non-farm payrolls figures can sometimes be unreliable in their correlations. However, this is a highly notable data point and we have seen significant volatility in the past upon release.
The main event of the week is going to be the jobs report, where a whole raft of labour market statistics are released. Arguably the biggest number is the non-farm payrolls figure, which due to its volatile nature has an ability to move the markets significantly. That being said, even when the figure remains stable or comes in as expected, there is often a response simply due to the fact that many will trade the release due to the consistent volatility. It seems the forecasters are expecting to see some correlation with the ADP number this week as they expect a number of 228k also, which would be a rise following last months 214k number. Be very aware of this figure as it has the ability to really move the markets.
Also released alongside the payrolls figure is the unemployment rate, which is often a headline grabbing number and thus is also very influential upon monetary policy. On this case, we are expecting a number of 5.8%, which would represent a steady number over last month. Finally, be aware of the qualitative statistics, such as average hours worked, average hourly earnings and the participation rate. These figures have become increasingly significant as Janet Yellen is on the look out for the degree of ‘slack’ within the economy.
UK
A busy week in the UK, where the release of PMI numbers and the latest BoE monetary policy decision means that almost every day has something to keep an eye out for. The PMI surveys are particularly important as they provide a leading indicator of health or weakness in a given sector prior to those changes being reflected in the statistical data. In the UK, the most important industry is the services sector, which accounts for around 80% of UK GDP and thus I use the services PMI (Wednesday) as a great leading indicator of where jobs, spending and ultimately GDP are going to move in the coming months. This month markets expect to see a moderate rise from 56.2 to 56.6, which is coming off the back of two months of very poor figures. Therefore any movement to the upside in that figure at least provides me with an idea that the sector is stabilising and gaining some ground back again.
Also be on the lookout for the manufacturing PMI (Monday) and construction PMI (Tuesday) figures. In particular the construction sector has been having a great time of it in 2014, with a buoyant housing market expected to provide continued support for new builds given the new valuations achievable. Despite the recent slowdown in the UK housing market, much of which I believe is cyclical to this time of the year, I expect new homeowners to be investing in their new properties which should keep the sector vibrant for some time yet.
Finally, Thursday sees the BoE provide their latest monetary policy decision which has been a major cause for volatility in the past. However, with a high likeliness that Carney and co will keep rates and QE unchanged, I do not expect this to be a particularly interesting event. For this reason, the release of minutes later in the month now appears to be a more noteworthy event as it provides us with clues as to when the MPC will seek to raise rates.
Eurozone
The eurozone area is set for a relatively relaxed week in comparison with the other regions, where the main event to be watching out for will be the ECB monetary policy decision on Thursday. Given the recent implementation of an ABS purchase programme, along with the ongoing TLTRO’s scheme, I do not foresee any big change in policy on Thursday. However, given that the announcement is followed by a press conference, I expect to see pressure put upon Draghi regarding a QE programme down the line given the persistent disinflationary pressures. Much has been made of a possible corporate or sovereign bond buying policy from the ECB and thus we could see some light shed on that element and how it could make up some part of the 1 trillion euro expansionary policy that has previously been mentioned by Draghi.
Asia & Oceania
A somewhat quiet week in Asia, where the lack of any Japanese figures means that the focus will be solely placed upon China. The release of the Chinese manufacturing PMI figure in the early hours of Monday means that for the most part, this coming week will be set on either a positive or negative footing by that release. Given that this figure has been at the forefront of the multiple downturns seen throughout the past year, it is absolutely key that we continue to see the sector grow, which is beginning to be questionable given the fall over recent months. With the sub-50 mark denoting a sector in contraction, the figure of 50.8 seen last month means China is in dangerous territory should we see any further movement to the downside. Estimates point towards a figure closer to 50.6, which would mean yet another step towards that dreaded scenario of a sub 50 survey.
Finally, the Australian economy has a very busy week ahead, where GDP and a RBA monetary policy decision are likely to dominate. On Tuesday, the RBA monetary policy announcement is going to be interesting predominantly for the statement that comes after. The weaknesses still evident within the economy means that I do not foresee any move higher in rates any time soon. However, with real estate prices rising to worrying levels, it is also unlikely we are going to see the RBA lower rates to stimulate jobs and growth. Thus for the time being I believe it is unlikely that there is going to be any shift in policy.
The second estimate Q3 GDP figure is of course absolutely massive, given the worries surrounding the economy within recent times. The mixed signals out of China means that the Australian economy has been slowing in recent quarters, with the initial 0.5% figure for Q3 being the lowest in 10 quarters. For the most part, this weakness has been attributed to a deterioration in net trade. However, with estimates pointing towards a better number of 0.7% on Wednesday, it is clear that the effects of a weakened Aussie dollar is finally being felt.
Read the full report at Alpari News Room
Alpari
Alpari Representative
- Messages
- 122
US Opening Call from Alpari UK - 1 December 2014
Chinese and eurozone figures disappoint ahead of US PMI
• Disappointing Chinese and eurozone PMIs weigh on sentiment this morning;
• Central Bank decisions and US jobs report to come this week;
• Swiss vote against increasing Gold holding;
• US PMI readings in focus ahead of busy data week.
The week has got off to a slightly negative start on Monday as some less than pleasing PMI readings from the eurozone and China adds to global growth concerns in 2015.
The latest official manufacturing PMI reading from China narrowly avoided falling into contraction territory for the first time since September 2012, falling to 50.3 from 50.8 and below expectations of 50.6. It was an even closer call for the HSBC reading, which fell to 50 from 50.4, right on the boundary that separates growth from contraction. The decline in the readings may have been felt more had it not been for the interest rate cut from the People’s Bank of China a couple of weeks ago which should hopefully reverse some of the decline in the months ahead. The PBOC is also expected to announce further easing measures early next year, which may be providing further support to markets that remain addicted to central bank stimulus.
It’s a similar scenario in the eurozone where confidence is continuing to plummet, even in the regions strongest economy – Germany – where the manufacturing PMI reading for November fell back into contraction territory only two months after clawing its way back above 50. As in China, the focus at the moment is on the central bank and what it can do to support growth and slow the decline in inflation, with the eurozone lying dangerously close to deflation territory. The ECB has already announced a large batch of measures in an attempt to stop the decline but they don’t appear to be working. Following Draghi’s comments a couple of weeks ago when he claimed the ECB must do more, the latest policy decision on Thursday should be extremely interesting, with some suggesting that the ECB may be ready to unleash the QE bazooka.
The latest ECB decision is just one of many major events to come this week, with the Bank of England also announcing its latest policy decision on Thursday, the US jobs report being released on Friday and a large number of other significant economic releases scheduled throughout the week. Add to this the Autumn forecast statement in the UK and we have a very interesting week in store.
One major event that is already behind us is the Swiss vote on Gold holdings over the weekend. Had they voted in favour of increasing Gold holdings to 20% from the current 7.5% level, it could have had a significant impact on a number of markets, particularly Gold and the Swiss Franc. The EURCHF pair will have been one of the more interesting due to the Swiss National Bank’s pledge to implement a floor on the pair at 1.20, a level it is currently trading very close to and that the SNB may have found it very hard to protect had the initiative been passed. However, there was an overwhelming majority against increasing Gold holdings in the end, which prompted initial buying in the EURCHF pair and selling in Gold but both have reversed much of the moves already.
In the US today, the November manufacturing PMI readings from Markit and ISM are scheduled for release. It’s worth noting that the Markit PMI is a revised reading while the ISM PMI is an initial reading so it tends to have a greater market impact. The official reading is expected to rise slightly to 55, while the ISM number is expected to fall to 58, which is still comfortably in growth territory and very encouraging as we head into 2015.
The S&P is expected to open 5 points higher, the Dow 27 points higher and the Nasdaq 3 points higher.
Chinese and eurozone figures disappoint ahead of US PMI
• Disappointing Chinese and eurozone PMIs weigh on sentiment this morning;
• Central Bank decisions and US jobs report to come this week;
• Swiss vote against increasing Gold holding;
• US PMI readings in focus ahead of busy data week.
The week has got off to a slightly negative start on Monday as some less than pleasing PMI readings from the eurozone and China adds to global growth concerns in 2015.
The latest official manufacturing PMI reading from China narrowly avoided falling into contraction territory for the first time since September 2012, falling to 50.3 from 50.8 and below expectations of 50.6. It was an even closer call for the HSBC reading, which fell to 50 from 50.4, right on the boundary that separates growth from contraction. The decline in the readings may have been felt more had it not been for the interest rate cut from the People’s Bank of China a couple of weeks ago which should hopefully reverse some of the decline in the months ahead. The PBOC is also expected to announce further easing measures early next year, which may be providing further support to markets that remain addicted to central bank stimulus.
It’s a similar scenario in the eurozone where confidence is continuing to plummet, even in the regions strongest economy – Germany – where the manufacturing PMI reading for November fell back into contraction territory only two months after clawing its way back above 50. As in China, the focus at the moment is on the central bank and what it can do to support growth and slow the decline in inflation, with the eurozone lying dangerously close to deflation territory. The ECB has already announced a large batch of measures in an attempt to stop the decline but they don’t appear to be working. Following Draghi’s comments a couple of weeks ago when he claimed the ECB must do more, the latest policy decision on Thursday should be extremely interesting, with some suggesting that the ECB may be ready to unleash the QE bazooka.
The latest ECB decision is just one of many major events to come this week, with the Bank of England also announcing its latest policy decision on Thursday, the US jobs report being released on Friday and a large number of other significant economic releases scheduled throughout the week. Add to this the Autumn forecast statement in the UK and we have a very interesting week in store.
One major event that is already behind us is the Swiss vote on Gold holdings over the weekend. Had they voted in favour of increasing Gold holdings to 20% from the current 7.5% level, it could have had a significant impact on a number of markets, particularly Gold and the Swiss Franc. The EURCHF pair will have been one of the more interesting due to the Swiss National Bank’s pledge to implement a floor on the pair at 1.20, a level it is currently trading very close to and that the SNB may have found it very hard to protect had the initiative been passed. However, there was an overwhelming majority against increasing Gold holdings in the end, which prompted initial buying in the EURCHF pair and selling in Gold but both have reversed much of the moves already.
In the US today, the November manufacturing PMI readings from Markit and ISM are scheduled for release. It’s worth noting that the Markit PMI is a revised reading while the ISM PMI is an initial reading so it tends to have a greater market impact. The official reading is expected to rise slightly to 55, while the ISM number is expected to fall to 58, which is still comfortably in growth territory and very encouraging as we head into 2015.
The S&P is expected to open 5 points higher, the Dow 27 points higher and the Nasdaq 3 points higher.
Read the full report at Alpari News Room
Alpari
Alpari Representative
- Messages
- 122
UK Opening Call from Alpari UK - 2 December 2014
European and US markets could well be in for a quieter session today after yesterday’s volatility as the economic calendar is looking a little light of any real data from Europe or the UK. However It cannot be ignored that Asia has managed to buck the trend and post gains overnight after a poor session in Europe and the US. However the dominating force behind market volatility is likely to remain the oil price today as focus will shift to Russia and the almost 6% fall that we saw in the Russian Rouble during yesterday’s session. The oil price is also dominating movements in equity markets throughout Europe, however a move towards $70 is likely to calm investors somewhat.
With a lack of data from the economic calendar today there will be growing focus on the UK chancellor and his autumn statement that is due on Wednesday. There always seems to be the obvious questions when it comes to the statement and one of those is always what does that the city of London look for during these types of events. The honest answer to this is that very often they don’t look for too much. Things like the Autumn statement and the budget are seen as very much political events to traders and political events are usually ignored. However it’s the economics that become the most important for markets, so all eye will be on the projections for the likes of GDP inflation and most notably the country’s debt. The chancellor will be want to remind us all that this is an election year, hence why we have already been told about an extra £2bn for the NHS, but what will be asked in the city of London is where is that money going to come from? All in all as long as Mr Osbourne doesn’t change his outlook from what Mark Carney told us at the inflation report last week then the markets may well get away from Wednesday budget unscathed.
Later in the afternoon US markets will give us some much needed economic data but it will still be the case that the oil price dominates proceedings. The will also start to gear up to some of the big economic data later in the week. The fact still remains that the US economy is still in a very positive place and that the Fed is still on track with monetary policy to raise rates in the middle of next year. We are even getting to a situation now where markets are finally seeing positive economic news as good news for the markets instead of looking at the potential hawkish or dovish stance that leaves the central bank in.
European and US markets could well be in for a quieter session today after yesterday’s volatility as the economic calendar is looking a little light of any real data from Europe or the UK. However It cannot be ignored that Asia has managed to buck the trend and post gains overnight after a poor session in Europe and the US. However the dominating force behind market volatility is likely to remain the oil price today as focus will shift to Russia and the almost 6% fall that we saw in the Russian Rouble during yesterday’s session. The oil price is also dominating movements in equity markets throughout Europe, however a move towards $70 is likely to calm investors somewhat.
With a lack of data from the economic calendar today there will be growing focus on the UK chancellor and his autumn statement that is due on Wednesday. There always seems to be the obvious questions when it comes to the statement and one of those is always what does that the city of London look for during these types of events. The honest answer to this is that very often they don’t look for too much. Things like the Autumn statement and the budget are seen as very much political events to traders and political events are usually ignored. However it’s the economics that become the most important for markets, so all eye will be on the projections for the likes of GDP inflation and most notably the country’s debt. The chancellor will be want to remind us all that this is an election year, hence why we have already been told about an extra £2bn for the NHS, but what will be asked in the city of London is where is that money going to come from? All in all as long as Mr Osbourne doesn’t change his outlook from what Mark Carney told us at the inflation report last week then the markets may well get away from Wednesday budget unscathed.
Later in the afternoon US markets will give us some much needed economic data but it will still be the case that the oil price dominates proceedings. The will also start to gear up to some of the big economic data later in the week. The fact still remains that the US economy is still in a very positive place and that the Fed is still on track with monetary policy to raise rates in the middle of next year. We are even getting to a situation now where markets are finally seeing positive economic news as good news for the markets instead of looking at the potential hawkish or dovish stance that leaves the central bank in.
Read the full report at Alpari News Room
