Forex research
- Thread starter Alpari
- Start date
Alpari
Alpari Representative
- Messages
- 122
Weekly market preview from Alpari UK – 8 December 2014
A mixed week ahead, with markets trying to take in all the data from the week just gone. Given that many of the major economic releases have been seen in that first week of the month, we are looking primarily at second tier announcements for potential volatility in the markets. In the US, the main event will come in the form of the retail sales number, which many expect to be strong given the recent massive jobs report numbers. In the UK, the only event of note comes on Tuesday, with the manufacturing production figure. Meanwhile in the eurozone, the announcement of the latest takeup of the TLTRO programme is going to be key to determining the effectiveness of ECB’s recent monetary policies.
In Asia, the CPI reading out of China will be crucial to as it provides us with an idea of whether the PBOC is likely to enact any further monetary stimulus. On the other hand, the Japanese focus will be upon the final Q3 GDP number amid a very quiet week. Finally, the Australian economy is looking towards a busy week, which culminates in Thursday’s jobs report.
US
The US economy is coming off the back of an absolutely massive jobs report, where the payroll figure of 321,000 represents the highest in almost 3 years. Given that we have seen such a figure in November, coming into the festive month of December, there is a chance we could see this kind of jobs growth continue apace into the new year. This week looks somewhat less exciting from an announcement point of view, with the release of retail sales and consumer sentiment figures the only real events of substance.
Thursday’s retail sales number looks particularly interesting given the recent jobs report because we now see that there wages are rising, hours worked are increasing and hiring is rising faster. This means greater amount of disposable income should be available to consumers who will most likely go out and spent it at the shops, especially with the existence of Black Friday on 28 November. This month-on-month figure tends to be temperamental, yet with estimates pointing towards a positive figure of 0.3% to match last month, I believe we could see a strong number.
On Friday, the release of the preliminary University of Michigan consumer sentiment survey will be interesting for an economy that is so reliant upon the consumer base as a source of demand which subsequently drives growth. The latest figure released last year was the highest in over 7 years and thus there is a clearly positive trend in place which I expect to continue. The market estimates point towards a rise from last month’s figure of 88.8 to somewhere close to 89.1.
UK
A very quiet week ahead for the UK, where the manufacturing production figure is one of very few interesting releases. This figure is interesting predominantly because of the fact that it is a measure of actual output as opposed to simply a view of what the sector is perceived to look like as we get in a PMI figure. The manufacturing sector is the second largest in the UK, after the services sector. Thus it is going to interesting to see if the sector can remain in positive growth, following a strong year which has seen only a single month of contraction. Estimates point towards a fall in the monthly figure from 0.4% to 0.2%, while the year-on-year figure is expected to improve from 2.9% to 3.2%.
Eurozone
A key week for the eurozone for one reason; the release of the figures from the latest tranche of TLTROs. This policy is one of the most crucial arrows to Mario Draghi’s bow in a bid to bring inflation back to something resembling normality. Quite frankly, the steps taken so far by the ECB have been nothing short disastrous, with none appearing to bring any form of growth or inflation upside. Thus despite his best wishes, it appears to be the case that the monetary policy steps taken so far have only had a tangible effect upon the markets and not the real most important targets such as price stability. With that in mind, it came as no surprise to see the TLTRO programme that the ECB pinned their hopes upon had a shockingly poor uptake in September, with banks choosing to only utilise €82.6 billion of the funds despite expectations closer to €150 billion. Thus heads now turn to the December tranche which is hoped will make up for the poor September uptake and prove that banks truly buy into the ECB’s plan to stimulate the single currency region.
Unfortunately I do not expect a massive takeup, because if anything growth prospects have worsened in the eurozone and as such the banks will be hesitant to lend and take on too much risk until we see signs of a strong recovery. It is highly likely that we see an improved figure but anything short of €150 billion would bring question marks over whether this policy really has the ability to make an impact. In terms of monetary policy, the expectation is a weak TLTRO takeup would mean people believe a QE programme could be coming. However, should we see a strong move towards the policy on Thursday, it could mean a buoyant Draghi would be likely to appear at next meeting, safe in the knowledge that he could stoke investment going forward with this measure.
Asia & Oceania
Asian markets will be in focus this week as data from China, Japan and Australia will set the tone for what could be another busy week for global markets. The week will start with Japan with the final revisions for third quarter GDP growth set for release. Previous numbers have shown a contraction but next week’s revision could well show that the contraction was not as deep as first expected. The reason for this is that business investment that was previously estimated to have fallen by 0.2% has actually seen a 3.1% capital increase for Japanese firms. Business investment accounts for around 14% of Japanese GDP. Despite what could be a positive revision it is probably still a long shot to say that the economy did not contract in Q3 but with both Barclays and JP Morgan citing reasons why a contraction may not have happened it wouldn’t be a total surprise to see this revision tick positive. Expectations are that the number will still be a contraction but only of 0.1%.
Asia also sees data from China and Australia this week, the headlines of which are CPI from China and unemployment from Australia. With China still struggling with growth numbers there is a potential of the world’s seconds largest economy falling by the wayside somewhat and falling into the same trap as other major economies. One thing that has saved them has been the slightly higher inflation figures, and with their economy not being reliant on the oil price, the Chinese have managed to sustain a higher inflation rate. This week’s number is expected at 1.6%, a numbers till very much manageable but quite a long way off the central bank target of 3.5%. This gap means there is still a significant amount of legroom for the PBOC to ease further and thus be on the lookout for this figure as a driver of future monetary action.
Australian unemployment is the last number of any note out of Asia next week. Again, expectations are for the rate to remain close to 12 year highs as business still struggle under uncertain economic conditions. The unemployment rate this week will also set the tone for monetary policy over the next 12 months. Commentators in Australian had been calling for raise to start to rise, however the high unemployment has led for the doves to remain fully in control. Back in October the central bank warned that rates would be on hold for an extended period of time and much like the US it will be a situation where the economy will not be able to sustain a change in monetary policy until unemployment at least starts to fall back to sustainable levels.
A mixed week ahead, with markets trying to take in all the data from the week just gone. Given that many of the major economic releases have been seen in that first week of the month, we are looking primarily at second tier announcements for potential volatility in the markets. In the US, the main event will come in the form of the retail sales number, which many expect to be strong given the recent massive jobs report numbers. In the UK, the only event of note comes on Tuesday, with the manufacturing production figure. Meanwhile in the eurozone, the announcement of the latest takeup of the TLTRO programme is going to be key to determining the effectiveness of ECB’s recent monetary policies.
In Asia, the CPI reading out of China will be crucial to as it provides us with an idea of whether the PBOC is likely to enact any further monetary stimulus. On the other hand, the Japanese focus will be upon the final Q3 GDP number amid a very quiet week. Finally, the Australian economy is looking towards a busy week, which culminates in Thursday’s jobs report.
US
The US economy is coming off the back of an absolutely massive jobs report, where the payroll figure of 321,000 represents the highest in almost 3 years. Given that we have seen such a figure in November, coming into the festive month of December, there is a chance we could see this kind of jobs growth continue apace into the new year. This week looks somewhat less exciting from an announcement point of view, with the release of retail sales and consumer sentiment figures the only real events of substance.
Thursday’s retail sales number looks particularly interesting given the recent jobs report because we now see that there wages are rising, hours worked are increasing and hiring is rising faster. This means greater amount of disposable income should be available to consumers who will most likely go out and spent it at the shops, especially with the existence of Black Friday on 28 November. This month-on-month figure tends to be temperamental, yet with estimates pointing towards a positive figure of 0.3% to match last month, I believe we could see a strong number.
On Friday, the release of the preliminary University of Michigan consumer sentiment survey will be interesting for an economy that is so reliant upon the consumer base as a source of demand which subsequently drives growth. The latest figure released last year was the highest in over 7 years and thus there is a clearly positive trend in place which I expect to continue. The market estimates point towards a rise from last month’s figure of 88.8 to somewhere close to 89.1.
UK
A very quiet week ahead for the UK, where the manufacturing production figure is one of very few interesting releases. This figure is interesting predominantly because of the fact that it is a measure of actual output as opposed to simply a view of what the sector is perceived to look like as we get in a PMI figure. The manufacturing sector is the second largest in the UK, after the services sector. Thus it is going to interesting to see if the sector can remain in positive growth, following a strong year which has seen only a single month of contraction. Estimates point towards a fall in the monthly figure from 0.4% to 0.2%, while the year-on-year figure is expected to improve from 2.9% to 3.2%.
Eurozone
A key week for the eurozone for one reason; the release of the figures from the latest tranche of TLTROs. This policy is one of the most crucial arrows to Mario Draghi’s bow in a bid to bring inflation back to something resembling normality. Quite frankly, the steps taken so far by the ECB have been nothing short disastrous, with none appearing to bring any form of growth or inflation upside. Thus despite his best wishes, it appears to be the case that the monetary policy steps taken so far have only had a tangible effect upon the markets and not the real most important targets such as price stability. With that in mind, it came as no surprise to see the TLTRO programme that the ECB pinned their hopes upon had a shockingly poor uptake in September, with banks choosing to only utilise €82.6 billion of the funds despite expectations closer to €150 billion. Thus heads now turn to the December tranche which is hoped will make up for the poor September uptake and prove that banks truly buy into the ECB’s plan to stimulate the single currency region.
Unfortunately I do not expect a massive takeup, because if anything growth prospects have worsened in the eurozone and as such the banks will be hesitant to lend and take on too much risk until we see signs of a strong recovery. It is highly likely that we see an improved figure but anything short of €150 billion would bring question marks over whether this policy really has the ability to make an impact. In terms of monetary policy, the expectation is a weak TLTRO takeup would mean people believe a QE programme could be coming. However, should we see a strong move towards the policy on Thursday, it could mean a buoyant Draghi would be likely to appear at next meeting, safe in the knowledge that he could stoke investment going forward with this measure.
Asia & Oceania
Asian markets will be in focus this week as data from China, Japan and Australia will set the tone for what could be another busy week for global markets. The week will start with Japan with the final revisions for third quarter GDP growth set for release. Previous numbers have shown a contraction but next week’s revision could well show that the contraction was not as deep as first expected. The reason for this is that business investment that was previously estimated to have fallen by 0.2% has actually seen a 3.1% capital increase for Japanese firms. Business investment accounts for around 14% of Japanese GDP. Despite what could be a positive revision it is probably still a long shot to say that the economy did not contract in Q3 but with both Barclays and JP Morgan citing reasons why a contraction may not have happened it wouldn’t be a total surprise to see this revision tick positive. Expectations are that the number will still be a contraction but only of 0.1%.
Asia also sees data from China and Australia this week, the headlines of which are CPI from China and unemployment from Australia. With China still struggling with growth numbers there is a potential of the world’s seconds largest economy falling by the wayside somewhat and falling into the same trap as other major economies. One thing that has saved them has been the slightly higher inflation figures, and with their economy not being reliant on the oil price, the Chinese have managed to sustain a higher inflation rate. This week’s number is expected at 1.6%, a numbers till very much manageable but quite a long way off the central bank target of 3.5%. This gap means there is still a significant amount of legroom for the PBOC to ease further and thus be on the lookout for this figure as a driver of future monetary action.
Australian unemployment is the last number of any note out of Asia next week. Again, expectations are for the rate to remain close to 12 year highs as business still struggle under uncertain economic conditions. The unemployment rate this week will also set the tone for monetary policy over the next 12 months. Commentators in Australian had been calling for raise to start to rise, however the high unemployment has led for the doves to remain fully in control. Back in October the central bank warned that rates would be on hold for an extended period of time and much like the US it will be a situation where the economy will not be able to sustain a change in monetary policy until unemployment at least starts to fall back to sustainable levels.
Read the full report at Alpari News Room
Alpari
Alpari Representative
- Messages
- 122
UK Opening Call from Alpari UK on 8 December 2014
Disappointing Asian data weighs ahead of European open
• Chinese trade balance figures disappointing despite deceiving headline figure;
• Japanese GDP revision highlights further weakness in Q3;
• German industrial production and eurozone confidence readings in focus today.
Disappointing data from China and Japan is weighing on European futures ahead of the open on Monday, as concerns about the state of two of the largest Asian economies overshadows Friday’s hugely impressive jobs report from the US.
Further evidence emerged overnight of the divergence being seen in some of the largest global economies, as Chinese trade balance figures and Japanese revised GDP data highlighted the increasingly worrying state of affairs in these two countries. Meanwhile on Friday, the US jobs report displayed strength across the board, from unemployment to jobs creation and wage growth, raising serious questions about the need for the Fed to remain so accommodative.
This is certainly not the case in China or Japan and in fact, the opposite is true with regards to the respective central bank policies, as the People’s Bank of China and Bank of Japan are both likely to loosen policy further in 2015, not tighten it which is what is expected from the Fed.
It is worth pointing out that Chinese trade figures are far from being reliable and to an extent, should be taken with a pinch of salt because they have been seriously called into question many times in the past. Most recently, this has been because of companies apparently using false invoicing practices in an attempt to pass off capital inflows as exports. This has caused massive distortions between the reported Chinese and Hong Kong trade figures between the two countries, calling into question whether the Chinese data can be relied upon at all.
The crackdown on these practices may be responsible for the huge drop in exports in November but it’s very difficult to know for sure as I’m sure weak global demand will also have played a part. The surprise drop in imports has managed to cover up the overall weakness in the trade figures as it means the headline figure shows a strong surplus in November, which can be quite deceiving.
Despite what the headline figure would suggest, this is some very disappointing trade data and provides further evidence of the weakness in the Chinese economy. The decline in imports highlights further weakening domestic demand as well as a slowing housing sector, as well as weakness in commodity prices which in themselves reflect the weaker outlook for the Chinese economy. On the bright side, this does leave the door wide open to central bank stimulus, with the data due out this week likely to further support it.
Japanese GDP figures for the third quarter were revised lower overnight, once again calling into question the effectiveness of Abenomics as the sales tax hike appears to have derailed what economic recovery we were actually seeing in the country. The economy contracted by 1.9% on an annualised basis, falling from -1.6% previously. The third quarter data has really called into question whether domestic demand can pick up as much as Japanese Prime Minister Shinzo Abe had hoped when he laid out his plan to return growth and inflation to the country. Japan is expected to exit recession in the fourth quarter but with an election happening in the meantime, Abe may find that support for Abenomics is waning.
As is going to be the case for large parts of the week, there is very little notable data being released in Europe or the US today. We have German industrial production figures before the European open, followed by the sentix investor confidence reading for the eurozone shortly after but aside from this it’s slim pickings.
The FTSE is expected to open 1 point lower, the CAC 10 points lower and the DAX 3 points lower.
Disappointing Asian data weighs ahead of European open
• Chinese trade balance figures disappointing despite deceiving headline figure;
• Japanese GDP revision highlights further weakness in Q3;
• German industrial production and eurozone confidence readings in focus today.
Disappointing data from China and Japan is weighing on European futures ahead of the open on Monday, as concerns about the state of two of the largest Asian economies overshadows Friday’s hugely impressive jobs report from the US.
Further evidence emerged overnight of the divergence being seen in some of the largest global economies, as Chinese trade balance figures and Japanese revised GDP data highlighted the increasingly worrying state of affairs in these two countries. Meanwhile on Friday, the US jobs report displayed strength across the board, from unemployment to jobs creation and wage growth, raising serious questions about the need for the Fed to remain so accommodative.
This is certainly not the case in China or Japan and in fact, the opposite is true with regards to the respective central bank policies, as the People’s Bank of China and Bank of Japan are both likely to loosen policy further in 2015, not tighten it which is what is expected from the Fed.
It is worth pointing out that Chinese trade figures are far from being reliable and to an extent, should be taken with a pinch of salt because they have been seriously called into question many times in the past. Most recently, this has been because of companies apparently using false invoicing practices in an attempt to pass off capital inflows as exports. This has caused massive distortions between the reported Chinese and Hong Kong trade figures between the two countries, calling into question whether the Chinese data can be relied upon at all.
The crackdown on these practices may be responsible for the huge drop in exports in November but it’s very difficult to know for sure as I’m sure weak global demand will also have played a part. The surprise drop in imports has managed to cover up the overall weakness in the trade figures as it means the headline figure shows a strong surplus in November, which can be quite deceiving.
Despite what the headline figure would suggest, this is some very disappointing trade data and provides further evidence of the weakness in the Chinese economy. The decline in imports highlights further weakening domestic demand as well as a slowing housing sector, as well as weakness in commodity prices which in themselves reflect the weaker outlook for the Chinese economy. On the bright side, this does leave the door wide open to central bank stimulus, with the data due out this week likely to further support it.
Japanese GDP figures for the third quarter were revised lower overnight, once again calling into question the effectiveness of Abenomics as the sales tax hike appears to have derailed what economic recovery we were actually seeing in the country. The economy contracted by 1.9% on an annualised basis, falling from -1.6% previously. The third quarter data has really called into question whether domestic demand can pick up as much as Japanese Prime Minister Shinzo Abe had hoped when he laid out his plan to return growth and inflation to the country. Japan is expected to exit recession in the fourth quarter but with an election happening in the meantime, Abe may find that support for Abenomics is waning.
As is going to be the case for large parts of the week, there is very little notable data being released in Europe or the US today. We have German industrial production figures before the European open, followed by the sentix investor confidence reading for the eurozone shortly after but aside from this it’s slim pickings.
The FTSE is expected to open 1 point lower, the CAC 10 points lower and the DAX 3 points lower.
Read the full report at Alpari News Room
Alpari
Alpari Representative
- Messages
- 122
US Opening Call from Alpari UK on 8 December 2014
US futures pull back from record highs on quiet data day
• US indices seen pulling back from record highs on Monday;
• Current environment supports further gains;
• Chinese record trade surplus not as good as headline figure suggests.
US futures are pointing to a slightly weaker open on Monday after hitting new record highs on Friday on the back of a strong November jobs report.
The weakness being seen ahead of the first trading day of the week is probably largely bring driven by the disappointing data seen in China and Japan overnight, although I imagine there’s also an element of profit taking following another good week for US stocks. While the rally in the US hasn’t been as strong recently as it was following the October lows, we’re still seeing the dips being bought as investors still see value at these levels.
Despite markets being at record levels, the current environment still supports further moves to the upside. We have a great combination of an ever strengthening US economy – you don’t need to look much further than Friday’s jobs report for evidence of this – and ultra-loose monetary policy from a number of major central banks. It doesn’t even matter than the Fed has ended is asset purchase program as the ECB is growing its balance sheet, the Bank of Japan is currently buying ¥80 trillion of assets per year and the People’s Bank of China is loosening monetary policy and expected to do more in the coming months.
We’ve reached the point where the disappointing Chinese and Japanese figures that were released overnight don’t even really worry markets too much as it means there’s more chance of additional stimulus measures being announced by the central bank. The Chinese trade balance figures at one time would have sent waves through the markets and prompted some panic, but now the reaction is minimal.
Despite exports falling to a seven month low of 4.7% in November, China recorded its largest ever trade surplus thanks to an even greater decline in imports, showing that while the headline figure may tell one story, the details are far more worrying. One problem we have here is that Chinese trade figures always throw up more questions than answers due to the lack of transparency. For example, in recent months, distortions with the reported trade figures between China and Hong Kong have led to suggestions that capital inflows are once again being passed off as exports. With these now being investigated closer, the export number has plummeted suggesting the numbers we’ve been looking at aren’t reliable. Imports on the other hand are struggling due to falling domestic demand, a slowing housing market and falling commodity prices.
The week ahead is looking rather quiet for the US, following a fairly manic one just passed. Today there is no notable economic releases scheduled, although we will hear from Dennis Lockhart who is one of the more dovish members of the Fed, although he currently is not a voting member of the FOMC.
The S&P is expected to open 4 points lower, the Dow 39 points lower and the Nasdaq 11 points lower.
US futures pull back from record highs on quiet data day
• US indices seen pulling back from record highs on Monday;
• Current environment supports further gains;
• Chinese record trade surplus not as good as headline figure suggests.
US futures are pointing to a slightly weaker open on Monday after hitting new record highs on Friday on the back of a strong November jobs report.
The weakness being seen ahead of the first trading day of the week is probably largely bring driven by the disappointing data seen in China and Japan overnight, although I imagine there’s also an element of profit taking following another good week for US stocks. While the rally in the US hasn’t been as strong recently as it was following the October lows, we’re still seeing the dips being bought as investors still see value at these levels.
Despite markets being at record levels, the current environment still supports further moves to the upside. We have a great combination of an ever strengthening US economy – you don’t need to look much further than Friday’s jobs report for evidence of this – and ultra-loose monetary policy from a number of major central banks. It doesn’t even matter than the Fed has ended is asset purchase program as the ECB is growing its balance sheet, the Bank of Japan is currently buying ¥80 trillion of assets per year and the People’s Bank of China is loosening monetary policy and expected to do more in the coming months.
We’ve reached the point where the disappointing Chinese and Japanese figures that were released overnight don’t even really worry markets too much as it means there’s more chance of additional stimulus measures being announced by the central bank. The Chinese trade balance figures at one time would have sent waves through the markets and prompted some panic, but now the reaction is minimal.
Despite exports falling to a seven month low of 4.7% in November, China recorded its largest ever trade surplus thanks to an even greater decline in imports, showing that while the headline figure may tell one story, the details are far more worrying. One problem we have here is that Chinese trade figures always throw up more questions than answers due to the lack of transparency. For example, in recent months, distortions with the reported trade figures between China and Hong Kong have led to suggestions that capital inflows are once again being passed off as exports. With these now being investigated closer, the export number has plummeted suggesting the numbers we’ve been looking at aren’t reliable. Imports on the other hand are struggling due to falling domestic demand, a slowing housing market and falling commodity prices.
The week ahead is looking rather quiet for the US, following a fairly manic one just passed. Today there is no notable economic releases scheduled, although we will hear from Dennis Lockhart who is one of the more dovish members of the Fed, although he currently is not a voting member of the FOMC.
The S&P is expected to open 4 points lower, the Dow 39 points lower and the Nasdaq 11 points lower.
Read the full report at Alpari News Room
Alpari
Alpari Representative
- Messages
- 122
UK Opening Call from Alpari UK on 9 December 2014
Fed rumours and Greek instability lead markets lower
• Markets tumble on reports of more hawkish Fed position;
• Greece also threatens market calm as Presidential elections brought forward to this month;
• UK industrial production and GDP in focus today.
European markets look set to get off to another negative start on Tuesday as reports suggest that the Fed is going to withdraw its commitment to low interest rates when it meets next week.
For a long time, the Fed has committed itself to keeping rates close to zero for a “considerable time” after the end of its third quantitative easing program, which was brought to an end in October. That language has effectively reassured investors that Fed driven market turbulence will be kept to a minimum and more importantly, that it will not act too hastily in withdrawing its support for the US economy at a time when the recovery remains fragile.
However, the recovery is no longer as fragile as it once was and in fact, the recent data would suggest the economy is quickly returning to some form of normality, with Friday’s jobs report showing wage growth even picking up again. This would suggest that the Fed has achieved its goals and can therefore look to moving interest rates away from record lows, with many people concerned about the impact such a long period of low interest rates could have going forward.
But regardless of the motivation behind the decision to remove the language from its statement, the markets clearly do not like the prospect of higher rates in the US even though we’re seeing large stimulus programs being adopted by a number of major central banks elsewhere.
Another worry for the markets is Greece, where the Presidential election has been brought forward by two months to December. This could trigger snap elections that, by law, would happen if parliament cannot agree on a 180 person majority – out of the 300 seat chamber – for the Prime Ministers chosen candidate. The ruling coalition currently holds 155 seats in parliament which means it’s going to have to rely on support from some of the smaller parties, one of which will not be far left Syriza party, which has opposed them from day one and are favourites in the polls, if an election is called.
This would be a disaster for the country as it finally nears the end of the bailout, with Syriza wanting to reverse a lot of the work that has been done between Samaras’ government and its lenders which would put the remaining bailout payments and any future deals into jeopardy and risky destroying any confidence that has been built up in the financial markets. The hope is that the Presidential vote will get the 180 votes needed and allow the talks between Greece and its lenders to continue in two months after an extension was agreed yesterday.
One again today, things are looking a little quiet on the economic calendar. There is a slight focus on the UK, with industrial and manufacturing figures due out for October and expected to show monthly increases of 0.2% in both cases, resulting in annual rises of 1.8% and 3.2%, respectively. This will be followed later by the latest NIESR GDP estimate for the three months to the end of November which can provide some insight into the fourth quarter performance ahead of the preliminary release next month.
The FTSE is expected to open 45 points lower, the CAC 21 points lower and the DAX 59 points lower.
Fed rumours and Greek instability lead markets lower
• Markets tumble on reports of more hawkish Fed position;
• Greece also threatens market calm as Presidential elections brought forward to this month;
• UK industrial production and GDP in focus today.
European markets look set to get off to another negative start on Tuesday as reports suggest that the Fed is going to withdraw its commitment to low interest rates when it meets next week.
For a long time, the Fed has committed itself to keeping rates close to zero for a “considerable time” after the end of its third quantitative easing program, which was brought to an end in October. That language has effectively reassured investors that Fed driven market turbulence will be kept to a minimum and more importantly, that it will not act too hastily in withdrawing its support for the US economy at a time when the recovery remains fragile.
However, the recovery is no longer as fragile as it once was and in fact, the recent data would suggest the economy is quickly returning to some form of normality, with Friday’s jobs report showing wage growth even picking up again. This would suggest that the Fed has achieved its goals and can therefore look to moving interest rates away from record lows, with many people concerned about the impact such a long period of low interest rates could have going forward.
But regardless of the motivation behind the decision to remove the language from its statement, the markets clearly do not like the prospect of higher rates in the US even though we’re seeing large stimulus programs being adopted by a number of major central banks elsewhere.
Another worry for the markets is Greece, where the Presidential election has been brought forward by two months to December. This could trigger snap elections that, by law, would happen if parliament cannot agree on a 180 person majority – out of the 300 seat chamber – for the Prime Ministers chosen candidate. The ruling coalition currently holds 155 seats in parliament which means it’s going to have to rely on support from some of the smaller parties, one of which will not be far left Syriza party, which has opposed them from day one and are favourites in the polls, if an election is called.
This would be a disaster for the country as it finally nears the end of the bailout, with Syriza wanting to reverse a lot of the work that has been done between Samaras’ government and its lenders which would put the remaining bailout payments and any future deals into jeopardy and risky destroying any confidence that has been built up in the financial markets. The hope is that the Presidential vote will get the 180 votes needed and allow the talks between Greece and its lenders to continue in two months after an extension was agreed yesterday.
One again today, things are looking a little quiet on the economic calendar. There is a slight focus on the UK, with industrial and manufacturing figures due out for October and expected to show monthly increases of 0.2% in both cases, resulting in annual rises of 1.8% and 3.2%, respectively. This will be followed later by the latest NIESR GDP estimate for the three months to the end of November which can provide some insight into the fourth quarter performance ahead of the preliminary release next month.
The FTSE is expected to open 45 points lower, the CAC 21 points lower and the DAX 59 points lower.
Read the full report at Alpari News Room
Alpari
Alpari Representative
- Messages
- 122
US Opening Call from Alpari UK on 9 December 2014
Chinese bond market, Greece and Fed weigh on markets
• Chinese sell-off overnight weighs on sentiment in Europe and the US;
• Greek snap election possible as Samaras brings forward Presidential election;
• Speculation of more hawkish Fed spooks investors;
• UK GDP estimate and US job openings data in focus.
It appears we’ve entered the week of the jitters in which any news is perceived to be bad news and any lack of news is filled with speculation of worrying events to come.
In the last 24 hours alone we’ve seen a massive sell-off in China after the nation’s clearing agency announced that it will no longer accept bonds with ratings below AAA or those issued by companies rated below AA as collateral for repos. Repos allow a holder of collateral to obtain a short term loans, but following the new announcement, around 470 billion yuan of outstanding debt will no longer be eligible. This hit the value of this debt hard and the impact of it was felt throughout the Chinese markets, including Chinese stocks with the Shanghai Composite falling more than 5%.
At the same time, the eurogroup of finance ministers agreed to give Greece an extra two months to meet the conditions of the bailout, prompting the country’s Prime Minister Antonis Samaras brought forward the Presidential election to this month from February. Samaras has been backed into a corner recently because under Greek law, if a new President isn’t elected – which requires at least 180 of 300 lawmakers to vote for the Prime Ministers candidate – Parliament must be dissolved and snap elections held.
The problem with this is that the ruling coalition only has a 155 seat majority meaning they need 25 supporting votes from smaller parties. If they don’t get this, there will be snap elections which could create a much bigger problem in that Syriza currently leads in the polls and under their rule, any agreement between Greece and its lenders would be extremely difficult to reach, setting the country back significantly. At this stage, this is very unlikely to have the impact on the eurozone as it would have in 2011, but at a time when investors are already on edge, it does appear to be another excuse to sell.
On top of all this, there have been reports that the Fed is considering removing a particularly dovish section from the statement that it releases alongside its monetary policy decision, the next of which is due next week. For a long time now, the FOMC has committed to keeping rates at record lows for a “considerable amount of time” after the end of the third program of quantitative easing, which came in October. The removal of this phrase will be viewed by the markets as a sign that the first rate hike is imminent, which could well spook investors.
In reality, this should be celebrated as it means that, as Friday’s jobs report suggested, the economy is recovering well and no longer needs such strong support from the country’s central bank. However, with stock markets trading at record high levels as investors search for yield and Treasuries also trading near highs, the actual reality is that we may need to see markets correct, something all investors appear to be perfectly aware of and fearing.
There isn’t a huge amount of economic data being released today and the majority of what is being released is unlikely to have much of a market impact. Of interest though is the UK NIESR GDP estimate for the three months to the end of November, which should give some insight into how the economy is performing in the final quarter of the year with only a month to go. We also have the US JOLTS job openings for October, which is expected to rise to 4.823 million, not far from October’s high of 4.853 million.
The S&P is expected to open 8 points lower at 2,052, the Dow 64 points lower at 17,788 and the Nasdaq 19 points lower at 4,259.
Chinese bond market, Greece and Fed weigh on markets
• Chinese sell-off overnight weighs on sentiment in Europe and the US;
• Greek snap election possible as Samaras brings forward Presidential election;
• Speculation of more hawkish Fed spooks investors;
• UK GDP estimate and US job openings data in focus.
It appears we’ve entered the week of the jitters in which any news is perceived to be bad news and any lack of news is filled with speculation of worrying events to come.
In the last 24 hours alone we’ve seen a massive sell-off in China after the nation’s clearing agency announced that it will no longer accept bonds with ratings below AAA or those issued by companies rated below AA as collateral for repos. Repos allow a holder of collateral to obtain a short term loans, but following the new announcement, around 470 billion yuan of outstanding debt will no longer be eligible. This hit the value of this debt hard and the impact of it was felt throughout the Chinese markets, including Chinese stocks with the Shanghai Composite falling more than 5%.
At the same time, the eurogroup of finance ministers agreed to give Greece an extra two months to meet the conditions of the bailout, prompting the country’s Prime Minister Antonis Samaras brought forward the Presidential election to this month from February. Samaras has been backed into a corner recently because under Greek law, if a new President isn’t elected – which requires at least 180 of 300 lawmakers to vote for the Prime Ministers candidate – Parliament must be dissolved and snap elections held.
The problem with this is that the ruling coalition only has a 155 seat majority meaning they need 25 supporting votes from smaller parties. If they don’t get this, there will be snap elections which could create a much bigger problem in that Syriza currently leads in the polls and under their rule, any agreement between Greece and its lenders would be extremely difficult to reach, setting the country back significantly. At this stage, this is very unlikely to have the impact on the eurozone as it would have in 2011, but at a time when investors are already on edge, it does appear to be another excuse to sell.
On top of all this, there have been reports that the Fed is considering removing a particularly dovish section from the statement that it releases alongside its monetary policy decision, the next of which is due next week. For a long time now, the FOMC has committed to keeping rates at record lows for a “considerable amount of time” after the end of the third program of quantitative easing, which came in October. The removal of this phrase will be viewed by the markets as a sign that the first rate hike is imminent, which could well spook investors.
In reality, this should be celebrated as it means that, as Friday’s jobs report suggested, the economy is recovering well and no longer needs such strong support from the country’s central bank. However, with stock markets trading at record high levels as investors search for yield and Treasuries also trading near highs, the actual reality is that we may need to see markets correct, something all investors appear to be perfectly aware of and fearing.
There isn’t a huge amount of economic data being released today and the majority of what is being released is unlikely to have much of a market impact. Of interest though is the UK NIESR GDP estimate for the three months to the end of November, which should give some insight into how the economy is performing in the final quarter of the year with only a month to go. We also have the US JOLTS job openings for October, which is expected to rise to 4.823 million, not far from October’s high of 4.853 million.
The S&P is expected to open 8 points lower at 2,052, the Dow 64 points lower at 17,788 and the Nasdaq 19 points lower at 4,259.
Read the full report at Alpari News Room
Alpari
Alpari Representative
- Messages
- 122
UK Opening Call from Alpari UK on 10 December 2014
Futures pare losses but risks remain
It’s been a rather strange week in the markets so far as the second week of the month tends to be much quieter than the first due to the lack of scheduled economic releases or events. However, that has certainly not been the case so far this week as that void has instead been filled with Fed speculation, renewed Greek concerns and further reasons to worry about China.
The latter started yesterday when we saw a more than 5% sell-off in Chinese stocks following the decision to no longer accept lower rated bonds as collateral for short term lending. While Chinese markets have managed to bounce back a little today, the tone around China has remained quite negative with the latest CPI inflation reading once again raising concerns about deflation risks in the country.
The consumer price index fell to 1.4% in November from a year earlier, falling 0.2% on the month, as lower commodity prices continue to drag down the number. Producer prices were also lower than expected and these are already well into deflation territory, dropping to -2.7% last month. Given that the PPI reading is seen as a leading indicator with any movements in price later being passed on to consumer prices, this would suggest there’s plenty more disinflation to come in the Chinese economy yet.
That said, there are disagreements on just how worrying it is. In the same way that there is debates in many other countries about whether lower inflation driven by falling oil prices is actually a good or a bad thing, the same is true in China. Falling commodity prices should mean bigger savings for businesses and households, freeing up cash to spend on other things. Whether or not that will turn out to be the case, we’ll have to wait and see.
As already mentioned, the day ahead is looking very quiet on the economic data side of things, with trade balance figures from the UK being the only notable release and even this barely impacts the markets most months. That said, this hasn’t stopped there being some quite interesting moves in the markets in recent days.
Today it looks as though markets are paring losses from earlier in the week but I don’t sense a change in sentiment at this stage which suggests to me the risk off sentiment could largely continue throughout the week. As long as news-flow and speculation continues to view take the opinion that the glass is half empty, markets will continue to edge lower.
The FTSE is expected to open 15 points higher, the CAC 22 points higher and the DAX 51 points higher.
Futures pare losses but risks remain
It’s been a rather strange week in the markets so far as the second week of the month tends to be much quieter than the first due to the lack of scheduled economic releases or events. However, that has certainly not been the case so far this week as that void has instead been filled with Fed speculation, renewed Greek concerns and further reasons to worry about China.
The latter started yesterday when we saw a more than 5% sell-off in Chinese stocks following the decision to no longer accept lower rated bonds as collateral for short term lending. While Chinese markets have managed to bounce back a little today, the tone around China has remained quite negative with the latest CPI inflation reading once again raising concerns about deflation risks in the country.
The consumer price index fell to 1.4% in November from a year earlier, falling 0.2% on the month, as lower commodity prices continue to drag down the number. Producer prices were also lower than expected and these are already well into deflation territory, dropping to -2.7% last month. Given that the PPI reading is seen as a leading indicator with any movements in price later being passed on to consumer prices, this would suggest there’s plenty more disinflation to come in the Chinese economy yet.
That said, there are disagreements on just how worrying it is. In the same way that there is debates in many other countries about whether lower inflation driven by falling oil prices is actually a good or a bad thing, the same is true in China. Falling commodity prices should mean bigger savings for businesses and households, freeing up cash to spend on other things. Whether or not that will turn out to be the case, we’ll have to wait and see.
As already mentioned, the day ahead is looking very quiet on the economic data side of things, with trade balance figures from the UK being the only notable release and even this barely impacts the markets most months. That said, this hasn’t stopped there being some quite interesting moves in the markets in recent days.
Today it looks as though markets are paring losses from earlier in the week but I don’t sense a change in sentiment at this stage which suggests to me the risk off sentiment could largely continue throughout the week. As long as news-flow and speculation continues to view take the opinion that the glass is half empty, markets will continue to edge lower.
The FTSE is expected to open 15 points higher, the CAC 22 points higher and the DAX 51 points higher.
Read the full report at Alpari News Room
Alpari
Alpari Representative
- Messages
- 122
Webinar - 9 December 2014 - Alpari UK
[video=youtube;HXOgQiuPDiU]https://www.youtube.com/watch?v=HXOgQiuPDiU[/video]
Weekly Market Webinar
Live every Tuesday afternoon our chief market analyst James Hughes, market analyst Craig Erlam and research analyst Joshua Mahony take a look at the major stories moving the markets. They will also look at some of the charts and discuss the big technical levels traders should be looking out for.
Click here to Register for our Webinar
[video=youtube;HXOgQiuPDiU]https://www.youtube.com/watch?v=HXOgQiuPDiU[/video]
Weekly Market Webinar
Live every Tuesday afternoon our chief market analyst James Hughes, market analyst Craig Erlam and research analyst Joshua Mahony take a look at the major stories moving the markets. They will also look at some of the charts and discuss the big technical levels traders should be looking out for.
Click here to Register for our Webinar
Alpari
Alpari Representative
- Messages
- 122
US Opening Call from Alpari UK on 10 December 2014
Europe pares losses but US seen opening lower
• Europe pares losses but US seen opening lower;
• Asia offering little direction with central banks offsetting poor data;
• Oil prices not expected to bottom out any time soon.
While European markets are paring losses from earlier in the week on Wednesday, US futures are pointing back to the downside ahead of the open reflecting the more risk averse attitude in the markets this week.
The second week of the month is often one of the quieter weeks and much of the sentiment tends to be driven by Asia, where a number of important economic indicators provide an update on how the countries are performing. The problem we have at the moment is that the data coming from China and Japan paints quite a depressing picture, with both economies facing quite difficult situations and thus far, struggling to show they’re up to the task.
From a markets perspective we can’t really take too much away from the figures because both central banks are doing everything they can to provide support when the economy is faltering, the problem being that in both cases, it’s pretty much priced in. What is does give us though, at a time when stock markets are at a record high, is an opportunity to take a breather and allow for a correction, which is what I believe we’re seeing this week.
There’s little to come today on the economic calendar that will change this. MBA mortgage applications will be of interest but they don’t tend to have much of a market impact. Of more interest will be the change in EIA crude oil stocks, especially given the focus on oil markets at the moment. Oil prices remain under pressure, despite the temporary reprieve seen in WTI yesterday driven by a weaker dollar.
I see no reason why we won’t see a continuation of the downtrend, at least down to $60.31 where the 200-month SMA may offer some support. Below here we have 58.32, the lows from July 2009 and $53.55, where the 240-month SMA could offer a bottom as it did at the end of 2008 and early 2009. With oil producers intent on not losing market share, it’s just a case of who blinks first and folds underneath the pressure of these very low prices. OPEC held strong at the last meeting but there is talk that an emergency meeting may take place soon, well ahead of the planned June meeting, at which point production may be cut and prices may bottom out.
The S&P is expected to open 3 points lower, the Dow 27 points lower and the Nasdaq 8 points lower.
Europe pares losses but US seen opening lower
• Europe pares losses but US seen opening lower;
• Asia offering little direction with central banks offsetting poor data;
• Oil prices not expected to bottom out any time soon.
While European markets are paring losses from earlier in the week on Wednesday, US futures are pointing back to the downside ahead of the open reflecting the more risk averse attitude in the markets this week.
The second week of the month is often one of the quieter weeks and much of the sentiment tends to be driven by Asia, where a number of important economic indicators provide an update on how the countries are performing. The problem we have at the moment is that the data coming from China and Japan paints quite a depressing picture, with both economies facing quite difficult situations and thus far, struggling to show they’re up to the task.
From a markets perspective we can’t really take too much away from the figures because both central banks are doing everything they can to provide support when the economy is faltering, the problem being that in both cases, it’s pretty much priced in. What is does give us though, at a time when stock markets are at a record high, is an opportunity to take a breather and allow for a correction, which is what I believe we’re seeing this week.
There’s little to come today on the economic calendar that will change this. MBA mortgage applications will be of interest but they don’t tend to have much of a market impact. Of more interest will be the change in EIA crude oil stocks, especially given the focus on oil markets at the moment. Oil prices remain under pressure, despite the temporary reprieve seen in WTI yesterday driven by a weaker dollar.
I see no reason why we won’t see a continuation of the downtrend, at least down to $60.31 where the 200-month SMA may offer some support. Below here we have 58.32, the lows from July 2009 and $53.55, where the 240-month SMA could offer a bottom as it did at the end of 2008 and early 2009. With oil producers intent on not losing market share, it’s just a case of who blinks first and folds underneath the pressure of these very low prices. OPEC held strong at the last meeting but there is talk that an emergency meeting may take place soon, well ahead of the planned June meeting, at which point production may be cut and prices may bottom out.
The S&P is expected to open 3 points lower, the Dow 27 points lower and the Nasdaq 8 points lower.
Read the full report at Alpari News Room
