Forex Research

[Alpari UK]

US Opening Call from Alpari UK on 22 July 2014

US futures rally ahead of data and earnings

• Cooperation from rebels doing no harm to investor sentiment;
• EU foreign ministers likely to announce further sanctions;
• Earnings season key as Apple, Microsoft and Coca Cola report;
• US inflation reading the highlight of the economic data releases.

Given how well US stocks have held up over the last couple of days, it’s difficult to claim that investors have been pricing in too much risk when it comes to the conflicts in the Ukraine and Gaza. However, the developments in the former over the last 24 hours have certainly done no harm to investor sentiment, with the returning of the bodies to the Netherlands and the black boxes from the plane to the relevant experts, at least showing some form of cooperation from the rebels and more importantly, Russia.

This is unlikely to prevent further sanctions being imposed on Russia, with foreign ministers from Europe meeting today to discuss exactly what those will be. Many countries in Europe are in a much tougher position than the US when it comes to sanctions, as they themselves stand to lose quite significantly due to the ties they currently have with Russia. With that in mind, I don’t expect any sanctions from Europe to be too severe, with foreign ministers avoiding areas such as the oil and gas industry that could significantly damage the Russian economy but do plenty of harm to the fragile European economies at the same time.

With investors not appearing to be overly concerned with the current situation in the US, focus is likely to remain firmly on earnings season with some big names scheduled to report on the second quarter today. Top of the list is Apple, the largest component of the S&P 500, which is scheduled to report after the close in the US. Alongside this we’ll hear from Microsoft, United Technologies and Coca Cola, to name just a few, which could quite easily have a major baring on sentiment as the day goes on.

Aside from earnings, there’s also plenty of economic data being released, again from the US. The one release that stands out above all others is clearly the CPI inflation reading for June. While this may not be the Fed’s preferred measure of inflation, it could provide insight into the future direction of the personal consumption expenditure price index and therefore when the Fed will first hike rates.

There isn’t a huge amount holding the Fed back now, with growth in the second quarter likely to be confirmed as very strong, job creation growing at a very good rate and unemployment falling rapidly, and not just because of a falling participation rate. Wage growth is a big concern and low inflation is allowing the Fed time to see if this improves before it acts. However, if this rises significantly above its target, it may lose that privilege and be forced into a hike earlier than it wants. The figure is seen remaining at 2.1% today, marginally above the Fed’s 2% inflation target, while the core number is seen exactly in line with it. Any spike could be taken negatively by traders and prompt some selling in equities and Treasuries, while the US dollar would likely benefit.

Ahead of the opening bell, the S&P is seen 3 points higher, the Dow 42 points higher and the Dow 11 points higher.

Read the full report at Alpari News Room​

 

[Alpari UK]

Daily Market Update - 22 July 2014 - Alpari UK

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

 

[Alpari UK]

US Opening Call from Alpari UK on 23 July 2014

Earnings in focus as US indices near highs

US indices are expected to open marginally higher on Wednesday as the S&P continues to close in on 2,000 while the Dow is once again very close to new record highs having managed to close above 17,000. Ahead of the opening bell, the S&P is expected to be 2 points higher, the Dow 19 points higher and the Nasdaq 3 points higher.

These gains clearly show that investors are more concerned about economic data and earnings season right now than the conflicts in eastern Ukraine and the Gaza strip. That’s not to say that both of these don’t have the potential to cause further disruptions and weigh further on investor sentiment, it just means that the risk associated with these events is fully priced in and there has been no new significant developments.

With this in mind, corporate earnings are likely to be the biggest driver of markets today, given that the economic calendar is offering very little in terms of significant releases. The only releases coming from the US are MBA mortgage applications for the week ending 18 July and crude oil stocks change for the same period. Mortgage applications can give some important insight into the current state of the housing market in the US at the moment but the market impact tends to be minimal. The crude oil stocks change on the other hand tends to only impact oil prices.

We do have one number being released for the eurozone, the preliminary consumer confidence reading for July. This again doesn’t tend to get much of a reaction from traders, potentially because the number remains in negative territory which suggests consumers remain pessimistic and are therefore less likely to spend. The lesser dependency on the consumer in the eurozone compared to the likes of the US and the UK, may also explain why this carries less weight.

This leaves earnings season as the major driver today, with the likes of AT&T, Boeing and Facebook all reporting on the second quarter. As always, while the earnings results themselves may primarily have an impact on equity markets, and more specifically the specific stocks and sectors, the sentiment surrounding the entirety of earnings season can be a driver of investor sentiment and therefore impact other markets indirectly.

Read the full report at Alpari News Room​

 

[Alpari UK]

Daily Market Update - 23 July 2014 - Alpari UK

https://www.youtube.com/watch?v=v-l1TXjyyms

Geopolitical fears calm following recent risk off sentiment - 00:18
Australian CPI rises to 3%, sending the AUDUSD higher - 01:16
BoE minutes show indecision around 'degree of slack' - 02:32
A look ahead to a busy day tomorrow - 06:08

 

[Alpari UK]

UK Opening Call from Alpari UK on 24 July 2014

Earnings in focus as US indices near highs

• European indices lower following mixed sessions in Asia and the US;
• Earnings back in focus as many big names report on the second quarter;
• Eurozone PMI readings seen providing further evidence of 2014 slowdown;
• UK retail sales to show another good month as businesses take some pressure off the consumer.

European indices are expected to open marginally lower following a fairly mixed session in Asia overnight. A strong Chinese HSBC manufacturing PMI reading was offset somewhat by disappointing trade data for Japan, while the US session didn’t exactly provide much direction as the S&P closed at record highs and the Dow finished lower on the day.

Once again today, focus is likely to be firmly on the release of second quarter earnings results and economic data, both of which we have in abundance. On the earnings front, we’ll get results from a number of companies including Unilever, Nokia and Easyjet. As always, the bulk of the impact from these results is likely to be felt in the stocks themselves, as well as the sectors they fall in. Commodity stocks can also heavily impact the commodities that they deal with. That said, sentiment is very important in all markets and earnings season is likely to be a big driver of investor sentiment in the coming weeks so the overall feeling around earnings season should not be ignored.

As well as sentiment, these earnings results are likely to have an impact on central bank decisions even if the results themselves are not something that is discussed too heavily at the meetings. The results can contain important information that provides clues on the sustainability of the recovery at any point, such as consumer spending patterns and business investment. The latter in particular tends to suggest that companies are confident in the long term health of the economy and therefore the business.

In many markets though, such as currency and bond markets, traders do pay more attention to the economic data as it gives a broader update on how an economy is performing at any point. Today, there is a lot of economic data being released, both forward and backward looking and across a number of countries, so I expect to see a rise in market volatility.

PMI readings are generally seen as important economic indicators, particularly at a time of recovery, as they are focused purely on confidence and expected performance in the coming months. That said, the fact that they are surveys and not based on any real numbers means they are not as reliable as hard data, but that does not mean they are not extremely useful. Confidence within a sector doesn’t come from nothing, and it is a very good indicator of how companies see things progressing in the coming months, which is why traders follow these numbers so closely.

This morning, we’ll get manufacturing and services PMI readings from Germany, France and the Eurozone for July. A lot has been said about the slowdown in the Eurozone recently, particularly in Germany which has been the most concerning thing as many don’t believe we can see a strong recovery in the region without its strongest member leading the way. Today’s PMI readings are expected to suggest that the slowdown will continue well into the second half, with the numbers seen either remaining as they were in June or slightly falling. The French numbers are expected to point to another contractionary month in the eurozone’s second largest economy, which is yet another concern for the area, given that people were hoping that this would be the year that we’d start to see some improvement. In many countries are seeing this, unfortunately that doesn’t include those at its core.

Shortly after the PMI releases, we have UK retail sales numbers for June. While these are extremely important readings for the UK, given the importance of the consumer to the economy, they are arguably not as important as they have been for the last 18 months. The reason for this is that until now, we have been witnessing a consumer driven recovery and therefore had consumers taken their foot off the gas, the recovery would have stalled. However, in the last quarter, businesses investment has increased dramatically which has played a much bigger part, taking some of the burden off the consumer. This is far healthier for the economy as consumers could not keep solely supporting the economy when inflation is rising so much faster than wages. Eventually, either the spending would have to slow or debt would have to rise. Fortunately instead, businesses have finally stepped in and are likely to play a much bigger role going forward.

We have more data coming later from the US, with weekly jobless claims, home sales and manufacturing PMI data all being released.

Ahead of the European open, the FTSE is seen 5 points lower, the CAC 3 points lower and the DAX 3 points lower.

Read the full report at Alpari News Room​

 

[Alpari UK]

US Opening Call from Alpari UK on 24 July 2014

Traders turn to US data and earnings after eurozone boost

• World cup and good weather gives PMI readings a boost;
• UK retail sales slip in June but business investment cushions the blow;
• 50 S&P 500 companies due to report on what has so far been a very good third quarter;
• Plenty of data being released for traders to get their teeth stuck into.

US futures are taking the lead from Europe and posting small gains early on Thursday, after a batch of stronger than expected eurozone PMI readings made everyone a little more optimistic about what the second half of the year will bring.

The manufacturing and services PMI readings caught many people off guard, with most expecting to see a further decline in the numbers as we head into the third quarter. We’ve seen no other sign that the economies of the eurozone are improving, not even in Germany which has shown itself to be far more robust than the rest.

That said, you can never ignore the impact that a world cup and good weather can have on an economy. We’ve already seen, for example, that beer sales in Germany exceeded expectations during the world cup and it seems that spending in other areas may have also increased. Given Germany’s success at the world cup, I would be surprised if we didn’t see strong figures across the board for the month of July.

The services sector in France seems to have taken full advantage of these as well, propelling the PMI reading out of contraction territory to 50.4. The manufacturing sector didn’t perform quite as well, falling to 47.6, a third contractionary reading. The only question now is whether all of this is sustainable or not. The world cup is finished now which may take some of the spark out of future readings but as long as the good weather stays, we could see these sectors gather some momentum.

One downside this morning came from the UK, where core retail sales unexpectedly fell by 0.1% in June. This was only just shy of expectations though and the figures compared to the same month last year are still extremely encouraging, with retail sales up 4% and core retail sales up 3.6%. The UK consumer has almost single-handedly driven the recovery over the last year despite low wage growth, which was never going to be sustainable. However, stats have shown that in the second quarter, business investment has risen which has picked up the slack from the drop in consumer spending. With that in mind, we have nothing to worry about just because retail sales are not rising as much as we hoped.

Looking ahead to the US session and earnings season, as well as all the economic data scheduled for release, will be in focus. There’s another 50 S&P 500 companies due to report on the second quarter today, including some big names such as General Motors, Caterpillar and Amazon. Earnings season has been very good so far, especially when compared to the last couple of years. We’re seeing earnings growth driven by larger revenues, less cost cutting and, arguably most significantly, fewer profit warnings. This is a great sign as we head into a very important second half of the year.

On the data front we’ll get new home sales data for June, which is expected to fall back to 0.479 million following the unexpected spike in May, the July manufacturing PMI, which is expected to improve slightly to 57.5, and initial jobless claims.

Ahead of the opening bell, the S&P is seen 2 points higher, the Dow 27 points higher and the Nasdaq 9 points higher.

Read the full report at Alpari News Room​

 

[Alpari UK]

UK Opening Call from Alpari UK on 25 July 2014

European futures lower ahead of key UK and German data

Yesterday was very much a day of mixed data, with Japan getting the day off to a bad start with weaker export figures only for Chinese manufacturing data to offset it. This was followed by better than expected Eurozone PMIs but a bad month of retail sales for the UK, before being wrapped up with strong jobless figures but weak housing and manufacturing data from the US. It’s hardly surprising then that traders were left struggling for direction, with the S&P once again scraping its way to another finish while the Dow recorded marginal losses.

In Europe, indices were comfortably in the green thanks largely to the PMI readings for July which far exceeded expectations. Today we’re expecting to see a slightly weaker start, as indices pare some of yesterday’s gains ahead of some key data releases and another batch of earnings.

On the data front we have the German IFO business climate survey for July. As it stands, analyst expectations are for another decline in the number to 109.4. However, following yesterday’s PMI readings I imagine most analysts will have raised their expectations for this and I think we’re likely to get a comfortable beat here. The only question now is how much more has been priced into the markets.

I think temporary factors such as the world cup win and the good weather will have played into the stronger PMI readings yesterday and could therefore feed into today’s number. It now just remains to be seen whether this can produce a more long term boost to confidence or whether the end of the world cup signalled the end of this brief economic boost.

It’s then over to the UK for the first estimate of second quarter GDP. This is expected to be 0.8% for the quarter and 3.1% compared to a year ago, which is the kind of growth figure many western economies would kill for right now. What’s more encouraging is that it’s likely to have been driven more by business investment and less by consumer spending, which is extremely important if this is going to be sustainable.

Finally, it’s over to the US later where the only data release is durable goods orders for June. This is widely viewed as a very important reading as people only invest in big items, such as machinery in the case of a business or a new car for people, when they’re feeling more confident in the economic outlook and, with respect to the latter, when they feel safe in their job. While these numbers can be volatile, they have been very good for the most of this year and this is expected to continue today, with a 0.5% increase in orders.

Ahead of the European open, the FTSE is seen 13 points lower, the CAC 10 points lower and the DAX 18 points lower.

Read the full report at Alpari News Room​

 

[Alpari UK]

US Opening Call from Alpari UK on 25 July 2014

German Ifo disappoints as UK output surpasses 2008 peak

Having closed at record highs for each of the last two sessions, the S&P 500 is facing a more negative start on Friday, with futures currently showing it falling by 4 points ahead of the open, while the Dow is seen 48 points lower and the Nasdaq 16 points lower.

This comes following a fairly mixed start in Europe, where the German DAX is off around a quarter of a percent following the disappointing release of the Ifo survey for July. Yesterday’s surprisingly strong PMI for July suggested activity and confidence had actually picked up during the month, potentially due to a combination of good weather and a world cup win lifting people’s spirits, but apparently no one told the 7,000 businesses surveyed by Ifo, who saw current and future conditions deteriorating more than had been expected.

Clearly businesses are suffering as a result of the weakening trade ties with Russia, which has had sanctions imposed on it by Europe and the US due to its involvement in the crisis in eastern Ukraine. Russia is a big trading partner of Germany and given the deterioration in business confidence, it’s not surprising that Germany is reluctant to impose more sanctions on Russia that it believes would have an increasingly negative impact on its economy. While this should not theoretically come into the equation, it clearly does and it tells us a lot about what kind of response we can expect from Europe if the situation worsens.

The UK continued its impressive run of growth in the second quarter, with another 0.8% expansion. This growth means that output in the UK has finally surpassed the level reached in the first quarter of 2008 and suggests the country is well on its way to a real recovery. To make matters even better, it would appear that business investment is picking up the slack from a drop in consumer spending, which is not only healthy in terms of the quality of the recovery, it would suggest that productivity may finally improve and finally lead to real wage growth in the not too distant future.

The US session is looking a little quieter today, with the only economic release being durable goods orders for June. These numbers are far more useful that some people give them credit for. Not only do they represent people’s and companies confidence in the economic outlook, as people only tend to make these purchases when the outlook is positive, but it shows people are putting their money where their mouth is. It’s one thing to say you’re confident in the economic outlook, it’s another thing to act on it and this data shows whether or not people and companies are. The numbers have been very good this year, although they can be volatile at times, and we’re expecting another decent figure of 0.5% today.

Read the full report at Alpari News Room​

 

[Alpari UK]

Weekly market preview from Alpari UK on 28 July 2014

Back to a focus on economic factors this week, following a predominantly geopolitical week just gone. Russian sanctions and progression of the Gaza conflict remain an underlying threat to markets, yet much of this seems to now be factored in. From an economic standpoint, the release of the US jobs report means that markets will be on guard for substantial volatility as we progress. In the UK, the manufacturing PMI figure dominates what is a pretty quiet week in stark contrast to the action in the US. The eurozone focus will almost certainly be placed upon the release of the latest CPI figures early on Thursday as Mario Draghi watches on.

In Asia the Chinese manufacturing PMI will be viewed as a potential market booster following strong readings coming out of the region, while Japanese consumption data will shed yet more light on the impact the April sales tax had upon spending.


US

By far and away the busiest nation of all those in view, the US is braced for a handful of market moving releases in the form of the FOMC monetary policy decision, along with GDP and jobs data. This is joined by the pending home sales data, a consumer confidence survey and the manufacturing PMI figure which add up to an all-round interesting week.

On Wednesday, the first of the jobs data is released, with the ADP non-farm payroll figure expected to provide an insight into the potential direction of employment trends in July. On one side, it is well known that as a indicator of Friday’s headline figure, this may not be too reliable. That being said, the two measures have become more consistent in recent months, with the June release coming within 7k of the headline 288k figure. Thus with many people still relying on this as a key gauge of the jobs market health, we have seen substantial volatility in the past. As such, watch out for this figure where any major release wide of expectations could bring some notable price action. Expectations point towards a pullback to 241k from the bumper 281k figure seen last month.

Only 15 minutes after the ADP figure, the release of US advance GDP gives us the first insight into possible growth seen throughout Q2. After a particularly poor weather driven Q1, the markets are expecting to see a marked pick-up in growth in the second quarter of the year. Much like the UK, signs are pointing towards a particularly strong past few months in the US, where employment conditions have picked up to accompany growing business revenues and consumption. The strength of the US shale boom has meant that they are now the world largest exporter of oil and whilst that has been showing in the export figures, we should finally be able to see this strength reflected fully in the growth data again. Market expectations point towards a reversal from -2.9% to 2.9% on the annualised figure.

The third major event to happen on an action packed Wednesday will be the latest decision from the FOMC regarding monetary policy. Now unlike previous occasions, this seems somewhat of a foregone conclusion owing to the fact that the Fed have already notified the markets that the path of tapering is set to end asset purchases in October with a final cut of $15 billion. However, with that knowledge the focus is now upon interest rates and understanding what type of timeline Janet is going to have for the first hike. Previous testimony has pointed towards there being a considerable time. However, with jobs data improving faster than expected, there is the possibility that we could see rates rise earlier than expected. Thus markets will be expecting to see a $10 billion taper and more importantly, traders will be looking out for any timeline for interest rate hikes. That being said, given that this meeting occurs prior Friday’s jobs report, there isn’t too much additional data to go on after the last time we heard from Yellen in Washington. Thus there is a risk that we may hear much of the same.

On Friday, the jobs report is expected to bring about the usual volatility back to the markets. In what has been a particularly slow period in the markets, the US jobs report is one of very few releases which are a reliable source of volatility and price action. With Janet Yellen stalling on providing any sort of concrete guidelines for when interest rates are set to hike, the feeling is that this will be largely determined by how quickly the employment conditions improve. Thus should we see another particularly strong report like last month’s I would expect the markets to start pricing in an earlier rate hike. Expectations point towards a more steady month from an unemployment standpoint, remaining at 6.1%. However, the non-farm payrolls figure is where the volatility is likely to come from, with expectations pointing towards a major fall back to 230k from 288k in June. That being said, in my mind this sets the markets up nicely for a beat and strong reading. The past three months have seen an average reading of 264k and thus there is certainly a good chance of a higher figure than 230k. However, much of the time the initial figure is revised higher at the following month’s announcement and thus even if we did see a lower number, watch out for revisions to the previous month’s reading.

UK

In stark contrast to the US, the UK has a very quiet week from an economic standpoint, looking for the manufacturing PMI to provide some form of interest later in the week. Typically joined by the construction and services figures, this time the releases are split out across separate weeks. The manufacturing sector is certainly not the mainstay that it is in the likes of the US or Germany. However it has been performing particularly well throughout the past year, as manufacturers take advantage of a low interest rate environment. Orders both domestically and particularly internationally have been strong despite the existence of a strong pound. However, markets are expecting to see this reading move lower with the median forecasts coming in at 57.2 from the 57.5 seen last month.

Eurozone

The week also looks a little thin on the ground for the eurozone where the most important release to watch out for will be the CPI figure on Thursday. However, this is released in tandem with the unemployment figure which is expected to raise some interest.

The eurozone CPI measure of inflation is always one of the biggest releases of the month given the fact that Mario Draghi has effectively been forced into an expansive monetary policy off the back of a persistent disinflationary environment. Despite cuts to the headline interest rate, price stability remained elusive and as a result Draghi has implemented a whole raft of measures such as TLTRO’s, the end of sterilisation of bond purchases and negative deposit rates. However, these measures have to start making an impact to inflation, and soon. Otherwise the potential of an asset purchases scheme for the whole eurozone could become very real. At 0.5%, the inflation rate is at the lowest rate since late 2009 and any further fall could be a shock to the system for those at the ECB who expect to see the measure gradually move to the upside in the coming months. I would expect to see strength in the euro should the CPI figure move higher, or conversely a poor figure would likely weaken the euro owing to the expectations of a potential move towards QE at the ECB down the line. Markets are expecting no move in the figure from the current 0.5%.

Eurozone unemployment is a key gauge of exactly how the single currency region is faring following such a protracted downturn. However, signs are pointing towards a gradual strengthening with even the Spanish unemployment rate providing a positive surprise recently. The eurozone figure has been faring better than many expected with the past five figures beating market forecasts. As such, I wouldn’t be surprised to see another beat this month with markets looking for the rate to remain 11.6%. That being said, with pretty much all the other major economies looking at figures closer to 6%, the eurozone clearly still has a long way to go before we can look at it with any confidence in terms of a solid recovery.

Asia & Oceania

The main event of the week within Asia is likely to be the manufacturing PMI figure out of China, following on from some increasingly positive releases out of the region. Meanwhile, the Japanese consumer habits come back into focus this week when the household spending and retail sales figures are released on Tuesday.

Friday’s manufacturing PMI from China is likely to raise substantial global attention given the importance of the Asian powerhouse. Recent strength in both the headline and HSBC manufacturing PMI figures have given greater confidence that the region is starting to pick up and following yet another strong HSBC figure, we expect to see more of the same this week. The headline figure focuses more on the larger and state backed firms, which are expected to fare better than their smaller counterparts. However, it is crucial that they do fare well given the impact any weakness can have upon the economy. Market estimates point towards a rise from 51.0 to 51.4.

Finally, the Japanese consumers come back into focus this week where retail sales and household spending figures seek to provide clarity over the longevity of the after-effects of April’s sales tax. Initial signs have pointed towards a moderate pullback in spending which has led some within Japan to cite a potential second hike which will be discussed in December. Such a move closer to 10% would require solid consumer figures well ahead of December. Looking at the market forecasts, the story looks mixed, with retail sales expected to remain at -0.4% while household spending is expected to trim back from -8% to -3.8%. Generally we are just looking for signs of improvement as we go forward to show that the negative effect of the sales tax is only temporary. Should that be the case, there is a strong case for further tax hikes down the line given the huge debt to GDP ratio that needs to be addressed.

Read the full report at Alpari News Room​

 

[Alpari UK]

UK Opening Call from Alpari UK on 28 July 2014

Europe of to a bright start ahead of huge week for the US

• US to be a major driver in the markets this week;
• Earnings reports from Europe the focus this morning;
• US PMI readings and housing data key this afternoon.

A week that is widely focused on the US is expected to start in much the same way, with no economic releases due from Europe this morning while only a little over a dozen European companies are scheduled to announce earnings. In fact, things don’t really pick up in Europe until Wednesday and even then the releases aren’t exactly game changers.

With that in mind, the US is likely to be the biggest driver of most of the major markets this week. This is particularly true in the second half of the week when we’ll have a barrage of massive economic indicators, almost 100 S&P 500 companies reporting second quarter earnings and an FOMC decision to cap everything off. Do not underestimate how big an impact that final few days of the week could have on the markets. We’ve all been looking for that thing that brings volatility back to the markets, well this could well be it.

With so much to come later this week, we could see a little bit of risk aversion and fence sitting from traders in the early part of the week. Although, with so many companies from the US, UK and Eurozone still releasing earnings, we may not see the kind of paralysis in the markets which we could at other times expect.

There is also a few notable economic releases scheduled for today, including the Markit services and composite PMI readings for July and the pending home sales numbers for June. Given the importance of the services sector in the US, accounting for more than two thirds of total output, changes in the PMI reading are well worth tracking as they give the best indication of whether the improvements seen in the second quarter are likely to carry into the second half of the year. A rise to 61.5 in July would indicate that confidence is high and only improving.

Finally we should forget about the conflicts that are still occurring in the Gaza strip and eastern Ukraine. While these may not have weighed too heavily on the markets recently, this can change rapidly and may well play into the more cautious tone expected in the early part of the week.

Ahead of the European open, the FTSE is seen 12 points higher, the CAC 6 points higher and the DAX 7 points higher.

Read the full report at Alpari News Room​