Forex Research

[Alpari UK]

US Opening Call from Alpari UK on 28 July 2014

Caution expected ahead of massive end to the week


• Caution expected ahead of massive end to the week;
• Fed statement Wednesday could determine how investors respond to data;
• Services PMI stands out as key data release today.

It’s been a fairly quiet start to the week, which is hardly surprising given the lack of economic data, or any other news for that matter, to drive market sentiment this morning.

This is also probably not being helped by the fact that the second half of the week is looking a little mental in the US, with almost one hundred S&P 500 companies reporting second quarter earnings, the FOMC announcing its latest policy decision and a large amount of major economic data being released, including the July jobs data.

Quite often, the week of the jobs report can see traders sitting on the fence a little, unsure over what the events will mean for the US recovery and how it will be received by the markets. We are fast approaching the point when I expect strong data to be greeted negatively on fears of an earlier rate hike from the Fed.

That could come as soon as this week if the Fed finally concedes that the economy is in much better shape and that rate hike expectations should be brought forward. If I’m honest, while the statement may contain more hawkish language, the absence of a press conference after this meeting suggests to me that this may be yet another year in which the Fed saves the big announcement for the Jackson Hole symposium next month.

As for today, we have a few important pieces of economic data being released. The services PMI stands out for me as the most important of these given the country’s reliance on the sector. Any indication here that growth is slowing in the sector could spook investors and point to further difficulties to come in the second half of the year. Expectations are for a small improvement which would suggest no such worries exist.

Also being released is the composite PMI which highlights confidence in both the manufacturing and services sectors, and the pending home sales for June. The latter is expected to show an increase of 0.5% from May, which would suggest that this period of lower rates is once again having a positive impact on the housing market. With rates seen rising towards the end of the year, we could well see these numbers slip again, just as we did at the end of 2013.

Ahead of the opening bell on Wall Street, the S&P is expected to open 2 points lower, the Dow 14 points lower and the Nasdaq 4 points lower.

Read the full report at Alpari News Room​

 

[Alpari UK]

Daily Market Update - 28 July 2014 - Alpari UK

https://www.youtube.com/watch?v=jZwpeRT_3pM

FOMC, GDP and Payrolls make for busy week in the US - 00:51
Japanese consumer data points to impact of sales tax hike - 02:51
Chinese manufacturing PMI expected to show further improvement - 04:18
UK manufacturing PMI only major release in quiet week - 04:52
Eurozone CPI crucial to future monetary stance at the ECB - 05:09

 

[Alpari UK]

UK Opening Call from Alpari UK on 29 July 2014

Europe to open higher as earnings take centre stage

• Hang Seng hits near four year high on improving data;
• Japanese spending figures lift the Nikkei;
• Lack of economic data could mean more choppiness today;
• More earnings to come including GSK, BP and Pfizer.

European futures are pointing to a slightly positive open on Tuesday following a strong Asian session overnight that saw Japan’s Nikkei rally to 4-month highs, China’s Shanghai composite reach seven-month highs and Hong Kong’s Hang Seng hit a near four year high.

The improvement seen in Chinese data over the last couple of months has been a big driver behind Chinese and Hong Kong stocks trading at these high levels. While many people have spent the year doubting whether China can sustain such high levels of growth and hit its 7.5% growth target, the country has undertaken a combination of targeted fiscal and monetary stimulus programs in order to counter the slower first half of the year. If the data is to be believed then this is just what the doctor ordered and the chance of the country not reaching its targets now look very slim. The only hope now is that these efforts to shore up growth in the short term aren’t damaging the long term economic stability in the country, for example by unintentionally assisting the growth of shadow banking.

In Japan, investors are more upbeat following the release of a batch of spending figures that showed the decline in household and consumer spending was not a severe in June as had been expected. Spending in the country is still falling as a result of the sales tax hike back in April, with consumers having upped their spending in anticipation of the hike beforehand and have since been deterred somewhat by the higher prices at a time when wage growth is still low. That said, the decline was not been as bad as feared in July and the numbers overnight showed household spending and retail sales exceeding expectations in a sign that the impact of the sales tax hike may not be quite as extreme as was first feared. It’s worth noting that the numbers for April and May were pretty awful so we’ll need to see more evidence that spending has improved before we get carried away but the July figures are encouraging.

While some of that positive sentiment appears to be filtering through into Europe ahead of the open, futures are only pointing to a marginally better open and another choppy session should be expected. Not only do we have a lot to come in the second half of the week, with lots of earnings reports, an FOMC decision and the jobs report, among other things, there’s a real lack of drivers to come today.

The economic calendar is looking very bare. In fact, the only notable releases are UK mortgage approvals for June and lending data for June and let’s face it, based on yesterday’s market response to the US PMI and housing data, the chance of a significant market impact is slim. This will be followed later by the S&P Case-Shiller home price index and consumer confidence readings for the US.

With such a lack of data being released today, additional focus may be paid to earnings season, with GlaxoSmithKline and BP among the notable companies reporting this morning, while later we’ll get results from Pfizer among others.

Ahead of the European open, the FTSE is expected to open 6 points higher, the CAC 1 point higher and the DAX 19 points higher.

Read the full report at Alpari News Room​

 

[Alpari UK]

US Opening Call from Alpari UK on 29 July 2014

Traders cautious ahead of busy schedule to come

It’s been another fairly slow start to the day in Europe and this is unlikely to change as we head into the US session, as a lack of economic data leaves traders without any form of catalyst for the next big move in the markets.

We won’t have to wait too long for this though, with the next few days bringing an abundance of tier one economic data and earnings reports, as well as the latest policy decision from the Federal Reserve. This is probably contributing to the lack of volatility in the markets again this week. Traders can quite often stay on the side-lines during periods like this when so much can change in such a short period of time. All it would take is a hint at an earlier rate hike in the FOMC statement tomorrow and all of a sudden we could see a significant amount of selling in both equities and bonds, not to mention Gold, while we’d probably finally see that dollar strength that so many predicted at the end of last year.

While this may not be much of a bother to intra-day traders, who would aim to be in and out of positions before then, many others may be deterred by this and instead opt to wait until after these announcements to make their move. This is why we tend to see a little less volume and volatility during such periods and this has probably been exacerbated this week by the fact that we have the FOMC decision, preliminary US GDP reading and the US jobs report all in the same week, which is very rare. Let’s not also forget that we’re now right in the middle of the summer holidays so a lot of people will now be topping up their tans rather than looking at the charts.

While the economic calendar is looking very bare, the is still a couple of pieces of data being released, but based on yesterday’s market reaction to similar figures, I have doubts about the kind of impact these will have. The one that stands out for me is the consumer confidence figure for July, which is seen rising from 85.2 to 85.3. The consumer is so important to the US economy right now that I would normally pay far more attention to this but yesterday’s muted reaction to the services PMI suggests to me that this is unlikely to get much of a response either. One thing about this though is it does tend to be wide of the mark from expectations which could wake up the markets a little.

Another focus for investors today could be earnings season, with another 48 companies from the S&P 500 due to report including Pfizer, Merck & Co and American Express. We’ll also get an update on the second quarter from Twitter after the closing bell so there’s plenty to keep an eye on in this area today.

Ahead of the opening bell, the S&P is expected to open 2 points lower, the Dow 10 points lower and the Nasdaq 2 points lower.

Read the full report at Alpari News Room​

 

[Alpari UK]

Daily Market Update - 29 July 2014 - Alpari UK

https://www.youtube.com/watch?v=gz7vb4PmWRA

Japanese data brings both possible sales tax hike and further QE into focus - 00:33
US Consumer confidence later - 04:16
ADP, GDP and FOMC tomorrow - 04:50

 

[Alpari UK]

UK Opening Call from Alpari UK on 30 July 2014

Data and Fed eyed as Russian sanctions hit risk appetite

• European indices edge lower as Russia is hit with more sanctions;
• European confidence readings unlikely to have much market impact;
• US GDP and employment readings key ahead of the US open;
• Another $10 billion taper expected from FOMC, statement eyed for rate hike clues.

European indices are expected to open marginally lower on Wednesday following choppy sessions in both the US and Asia, while a new round of sanctions announced by the US and Europe also weighed on risk appetite.

So far, the sanctions announced by the West have arguably not had the desired impact given that the Kremlin has continued to support the rebels in eastern Ukraine, even following the shooting down of flight MH17 a couple of weeks ago. That said, the Russian economy is clearly feeling the pain of the sanctions and the latest round could be enough to send the country into recession and cause unrest among some of Putin’s closest allies.

The sanctions are also likely to hit the economies of those dishing them out, particularly in Europe, but Germany has made it clear in recent days that this is a price worth paying in order to pressure Russia into helping bring this conflict to an end. Germany and Russia are large trading partners and exports from Germany have fallen since the first sanctions were announced leading to a slowdown in the economy and a drop in confidence among businesses. The only question now is which side will blink first, with both currently giving the impression that it has no intention of backing down on the issue. Russia has got away with a lot in the past but the shooting down of flight MH17 is seen by many as a game changer.

A certain amount of the weakness seen ahead of the open can also be attributed to traders sitting on the side lines ahead of some major economic releases and an the FOMC decision. It’s been a very slow start to the week and any data we have seen has had little to no impact on the markets but I am convinced that will not be the case today.

The data released during the first half of the European session may not do much to the markets, despite it containing some valuable information regarding confidence in different areas of the Eurozone economy. Aside from coming just before some major economic releases, these numbers are generally seen as lagging because they are released after other, more widely followed confidence readings, so in theory should already be priced in. That’s not to say they should be ignored because they provide important insight into sentiment in different areas of the economy and in general, if we see a big swing one way or another, they could get a reaction. That may be a little less likely today though given what’s to come.

The GDP and employment readings for the US will surely shake things up ahead of the FOMC decision this evening. The decision itself shouldn’t offer any surprises with asset purchases falling by another $10 billion to $25 billion, but the statement may provide insight into the outlook for interest rates with many expecting the Fed to adopt a slightly more hawkish tone in the coming months. With no press conference scheduled today, Chairwoman Janet Yellen may wait for the Jackson Hole symposium next month to provide more details on the path for interest rates and what exactly it will take to bring forward the first hike.

Ahead of the European open, the FTSE is seen 5 points lower, the CAC 8 points lower and the DAX 16 points lower.

Read the full report at Alpari News Room​

 

[Alpari UK]

US Opening Call from Alpari UK on 30 July 2014

US GDP, ADP and Fed statement in focus on Wednesday

• Volatility hit from all sides ahead of key data and Fed announcements;
• ADP and GDP readings massive ahead of the opening bell;
• Fed statement eyed for rate hike clues.

It’s been a fairly slow start to the week so far, with volumes and volatility being hit from all sides. The biggest cause of this has been a lack of significant economic data to provide any kind of catalyst for the markets, along with the fact that when we see such a large amount of major data releases and central bank decisions later in the week, traders tend to remain on the side lines more so than usual. Add this to summer slowdown that is often witnessed in the markets and you’re left with the kind of situation we’ve seen so far this week.

Fortunately, we’re now entering the latter half of the week so volatility and trading volumes should improve significantly. The first half of the European session has been pretty quiet but that’s to be expected considering the data and Fed decision to come and, as with the rest of the week, the lack of big data being released.

This should all change ahead of the opening bell on Wall Street with the release of the ADP employment change and second quarter GDP figures. The ADP release is intended to be an estimate of the non-farm payrolls figure, which will be released on Friday and measures the number of jobs created in July. In reality, the first reading tends to be a pretty unreliable estimate of the official NFP figure and is only useful in predicting a much higher or lower number than analyst forecasts. The best example of this was last month when the ADP figure was close to 300,000 than 200,000 which was expected and the NFP release followed suit.

The GDP reading could really shake things up today and may well play a big part in the Fed’s decision on interest rates. The 2.9% contraction in the first quarter was extremely disappointing for the US, given that heading into the year hopes were for a strong recovery in 2014. However, it was also expected following some dreadful weather in the first quarter which forced analysts to significantly lower their forecasts. This left us with a situation in which the country needs to record 2.9% growth in the second quarter, which is what is expected, if the country is going to head into the second half of the year having no contracted in the first half.

If the US falls short of expectations here, it may suggest that the impact of the first quarter slowdown has stretched beyond the quarter itself and had an impact on the overall recovery. This would not be ideal by any stretch of the imagination, the only silver lining for the markets is that it may be enough to delay the first rate hike which could come as early as the first quarter of next year, at this rate.

Finally today we have the FOMC monetary policy decision, which is almost guaranteed to include another $10 billion taper, bringing the asset purchase program to $25 billion, and no rise in interest rates. While there is no press conference scheduled for after the announcement, a statement will be released alongside and this will be picked apart for any hawkish tones or hints at earlier rate hikes. Should we get either of these, I expect to see quite a significant market reaction, with investors then pricing in an announcement of some kind at the Jackson Hole symposium next month. This event has been used on numerous occasions in the past to drop big hints at changes in monetary policy so I see no reason why it won’t be used again.

The S&P is currently seen opening 2 points higher at 1,971, the Dow 22 points higher at 16,934 and the Nasdaq 9 points higher at 3,968.

Read the full report at Alpari News Room​

 

[Alpari UK]

Daily Market Update - 30 July 2014 - Alpari UK

https://www.youtube.com/watch?v=d0PdI-GlNY8

Reasons behind this week’s poor volatility - 00:09
GDP and ADP figures key ahead of the US open - 01:21
What to look for in the FOMC statement later - 05:15

 

[Alpari UK]

UK Opening Call from Alpari UK on 31 July 2014

Europe mixed ahead of unemployment and inflation data

• FOMC very dovish despite ongoing improvement in the economy;
• Yellen may wait until Jackson Hole next month to discuss rate hikes;
• German unemployment and retail sales figures being released this morning;
• Eurozone inflation data less important, unemployment rate also being released.

European futures are looking a little mixed ahead of the open, following similarly mixed sessions in the US and Asia overnight. US stocks were initially off a fair bit but the Fed’s very dovish stance managed to drive some late gains to leave the S&P marginally higher on the day, while the Dow ended with a small loss.

The Fed announced another $10 billion taper and left interest rates unchanged at below 0.25%, which is exactly what the market was expecting. It was the statement that investors were really interested in as the economic data has improved dramatically in the second quarter, capped off with the first GDP reading yesterday showing the economy grew at a 4% annualised rate, ahead of expectations. Given that the first quarter figure was also revised higher to -2.1%, from -2.9%, I imagine many people’s outlooks for growth will paint a much more rosey picture now.

The only people that don’t seem to be getting carried away with the recovery is the Federal Reserve, or most members anyway. While it was always suggested that Chairwoman Janet Yellen is even more dovish than her predecessor Ben Bernanke, I don’t think everyone quite realised just how much more dovish a leader she would actually be. Yesterday’s statement was extremely dovish given the strides made in most areas of the economy, to the point that Charles Plosser, a known hawk, dissented.

I understand that there is still a significant amount of slack in the economy, as there is in the UK, but I get the feeling that the Fed, in effectively refusing to even discuss rate hikes, is putting itself in the position that when it finally does, the markets are going to go mental, something it has tried to prevent recently. Talk of rate rises could even come as early as next month, when Yellen will speak at the Jackson Hole symposium, an event that has been used many times in the past by the Fed Chair to drop a big hint of a coming change in monetary policy. I guess I just find it difficult to believe that the Fed is actually as dovish as it’s trying to appear which brings into question how transparent it is actually being.

Regardless, the markets are loving this while it lasts, so it may well be onwards and upwards from here, for the next month at least. With the Fed decision out of the way, traders will now turn to tomorrow’s jobs report and inflation data for further signs of improvement in the economy, including the amount of slack that still exists. That said, there is plenty of economic data being released today that shouldn’t be overlooked, despite it not necessarily being as important as yesterday’s or Friday’s numbers.

Of note this morning, we have the German unemployment data, which is expected to show a small decline in the number of unemployed with the rate remaining unchanged at 6.7%. It is worth noting that we’ve had similar expectations the last couple of months and each time unemployment has risen. We also have retail sales data for Germany this morning, which is expected to show a 1% increase in June.

The Eurozone inflation data is another one worth keeping an eye on, although following the ECBs decision a couple of months ago to announce a big monetary stimulus package, the numbers have lost some importance. Unless we see a significant decline in the inflation figures, the ECB is very unlikely to announce any further stimulus and instead insist that the current package needs time to feed into the economy. Eurozone unemployment will also be released this morning and is expected to remain unchanged at 11.6%.

Ahead of the European open, the FTSE is expected to open 4 points higher at 6,777, the CAC 11 points higher at 4,323 and the DAX 5 points lower at 9,588.

Read the full report at Alpari News Room​

 

[Alpari UK]

US Opening Call from Alpari UK on 31 July 2014

Europe lower on Adidas profit warning due to Ukraine crisis

• Europe lower on Adidas profit warning due to Ukraine crisis;
• Argentine default weighs further on sentiment;
• Eurozone inflation falls again but ECB unlikely to react;
• US jobless claims to come but focus on tomorrow’s jobs report.

We may have seen a positive response to the Fed’s dovish statement on Wednesday evening but that boost has proven to be temporary, with a few stories this morning weighing on investor sentiment and pushing US futures lower.

The biggest of these appears to be the profit warning from Adidas, which sank almost 15% early in European trade. The company lowered its forecasts for the year quite significantly and warned about the impact of the crisis in eastern Ukraine on exports to Russia, which not only confirmed what people had already feared but highlighted the fact that the pain felt in Europe could be much larger than anticipated.

German stocks were the worst hit this morning, which is hardly surprising given the amount of trade the country conducts with Russia. When you see profit warnings like these from such a large company, it really makes you realise exactly what these countries are losing every time a fresh batch of sanctions are imposed on Russia.

With the countries in the eurozone already experiencing very low levels of growth, this is really not going to do them any favours. And as we’ve seen a lot in recent years, when one region is falling further and further behind the rest in the recovery cycle, it tends to weigh on growth everywhere.

The Argentine default isn’t helping matters this morning, although had this not come alongside the Adidas profit warning, I doubt it would have weighed too heavily on sentiment today.

One other thing potentially hitting sentiment this morning is the disappointing inflation reading for July. Up until a couple of months ago, this reading would have been met with rising expectations of monetary stimulus from the ECB but with the central bank having recently announced a large stimulus package, it’s very unlikely that we’ll see any more stimulus this year. With that in mind, further moves towards deflation in the eurozone will not be well received at the moment.

The US session is looking a little quiet today, with the only notable release being the weekly jobless claims number. This is seen rising to 301,000 following the surprise dip to 284,000 last month. I don’t expect this to have too big an impact today though, with the US jobs report and inflation data tomorrow seen as the far more important releases.

The S&P is currently seen opening 13 points lower at 1,957, the Dow 93 points lower at 16,787 and the Nasdaq 27 points lower at 3,949.

Read the full report at Alpari News Room​