Forex Research

[Alpari UK]

US Opening Call from Alpari UK on 8 October 2014

Attention turns to FOMC minutes and earnings season

• Attention shifts to FOMC minutes following equity sell-off;
• Alcoa kicks off the third quarter earnings season.

With the sell-off over the last 24 hours now behind us, investors can look forward to the next two big events that are likely to dominate the markets in the coming weeks, the Fed and earnings season.

The stance of the Fed is always a major talking point for the markets, particularly when we appear to be approaching a change in monetary policy and even more so when it’s the first rate hike since June 2006. Later on today we’ll get the release of the FOMC minutes from the September meeting and people are going to look very closely at these for signs that the Fed is becoming more hawkish and could bring forward its first rate hike.

The dot plots that we saw after the last meeting, along with the fact that we now have two dissenting members of the Fed – Charles Plosser and Richard Fisher – suggests certain members, at least, are becoming more hawkish. However, there are still plenty of dovish policy makers including Chairwoman Janet Yellen, who is widely viewed as one of the most dovish of the group.

This is why the message coming from the Fed continues to promise these low interest rates for a considerable amount of time, but that can only continue for so long. At some point this will need to be dropped from the statement and there has been a lot of speculation recently that the time has come. Some expected this to happen at the September meeting but instead we may have to settle for clues in the minutes that it will be dropped in the coming months. If that comes this year, people may be forced to bring forward their hike expectations from the middle of next year, which is when many expect the first hike to come.

Alcoa unofficially kicks of corporate earnings season after the closing bell today, which could for the next month or so turn people’s attention away from economic data and even central banks to an extent, and towards company reports. People have been clinging to anything central bank related recently simply because there hasn’t been much else to focus on and even though the first hikes from the Fed and BoE aren’t expected for another six months at least.

Earnings season should provide great insight into both how companies performed in the third quarter and how confident they are in the economic recovery. For a long time, investors have focused primarily on earnings growth, regardless of how it was driven, which has enabled stocks to continue to rally even at a time when economies were not performing well and central banks were being forced to provide extraordinary support. Now, economies are recovering and investors may be less inclined to accept austerity driven earnings growth, bringing revenue growth back into focus. We need to see organic growth if this recovery is going to be sustainable, not to mention evidence that companies are investing and confident in the economic outlook.

Ahead of the opening bell on Wall Street, the S&P is seen unchanged at 1,935, the Dow up 1 point at 16,720 and the Nasdaq up 2 points at 3,960.

Read the full report at Alpari News Room​

 

[Alpari UK]

Daily Market Update - 8 October 2014 - Alpari UK

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

US markets looking technically vulnerable - 00:16
IMF downgrades growth estimates - 00:50
A look at the FOMC meeting - 02:48

Research analyst Joshua Mahony discusses the IMF downgrades that have led to selling in the markets. He also provides a preview to the FOMC meeting minutes released later today

 

[Alpari UK]

UK Opening Call from Alpari UK on 9 October 2014

BoE rate hike close but no change expected today

• Indices rally as Fed minutes offer less hawkish tone than expected;
• Another volatile Australian jobs report makes assessing the labour market difficult;
• BoE unlikely to make changes to interest rates or asset purchases;
• US jobless claims the only notable release this afternoon.

European futures are pointing to a very strong start on Thursday, with most major indices seen opening more than 1% higher after even larger gains were made in the US overnight.

You would imagine that gains of this nature would come off the back of some pretty significant news but in fact, it's just another sign that the markets are acting very irrationally at the moment. Only a day ago, we were talking about the fact that indices shed more than 1% after the IMF revised down its global growth forecasts in a move that no one could be surprised about and, in fact, most were expecting.

Now we've seen even larger gains as a result of the Fed not appearing more hawkish in the minutes from the September meeting. At the same time, the central bank did not appear more dovish and, in fact, there were discussions on removing its commitment to keeping rates low for a considerable amount of time, but there was concerns about what impact this would have on the markets. All things considered, this doesn't strike me as something worth cheering to that extent, by any stretch of the imagination, which certainly makes the recent moves quite bizarre.

The fact that investors are still clearly rather obsessed with that first rate hike is a little concerning and it doesn't fill me with confidence that the markets can withstand even slightly more hawkish language from the Fed. Once again, it just suggests that investors are very sensitive at these levels which suggests it's only a matter of time until the markets come crashing down. I don't think a 10% decline would be a bad thing to be honest, the concern is if we go beyond that. We've seen many times before just how quickly large amounts of cash can be wiped off the stock market and what that does to confidence.

There's been a lot said recently about the volatility in the Australian jobs data and how difficult it makes providing an accurate assessment of the labour market. This hasn't just come from the markets, only 24 hours ago the Reserve Bank of Australia made similar comments. Well, that volatility continued overnight and the new methodology regarding seasonal adjustments doesn't appear to have helped much.

We were expecting 20,000 net new jobs to be created in September but instead there was a decline of 29,700 leading to a rise in unemployment to 6.1%. The rise could potentially have been more but for the unexpected decline in the participation rate to 64.5%. The only plus side in all of this was that the decline in the jobs figure was driven by a significant drop in part-time employment while full-time employment actually rose by 21,600. This is only a small positive from the report but still a positive nonetheless.

The rest of the day, as has been the case all week, is looking a little quiet. We'll get the latest rate decision from the Bank of England later, which is likely to be something of a none event due to the central bank's insistence on offering no corresponding statement or press conference, as we get from most other major central banks. Instead, all we're likely to get is confirmation that rates and asset purchases are unchanged at which point we'll have to wait for the minutes and voting in a couple of weeks. The chances of any change are slim despite the fact that two members have voted in favour of hiking rates recently, but we'd need to see three more policy makers join them which is very unlikely at the moment.

The US session is also looking a little quiet, with the weekly jobless claims figure the only notable release. Alcoa unofficially kicked off corporate earnings season last night but that won't get into full swing now until next week, at which point investors will be very interested to see exactly how US companies are performing and whether they're actually confidence enough in the economic outlook to invest in it.

Ahead of the European open, the FTSE is expected to open 60 points higher, the CAC 54 points higher and the DAX 113 points higher.

Read the full report at Alpari News Room​

 

[Alpari UK]

US Opening Call from Alpari UK on 9 October 2014

Jobless claims in focus as BoE leaves policy unchanged

• Fear driven markets may signal imminent correction;
• Alcoa gets earnings season off to a flyer;
• Four sub-300,000 claims not seen since 2006;
• BoE expected to leave policy unchanged.

We’re expecting another positive start to the trading session in the US on Thursday, following the strong gains made on Wednesday after the Fed maintained its dovish stance on interest rates.

There’s a lot of fear in the markets at the moment and it’s all centred around the Federal Reserve, when it will raise interest rates and the pace of hikes after the first one takes place. That fear is leading to some irrational moves in the markets which concerns me given that it’s occurring at these record high levels. Investors are clearly quite uncomfortable with current valuations and are hitting the panic button at the first sign of trouble, for example on Tuesday after the IMF revised down its global growth forecasts.

The Fed is very aware of this which is why it opted to maintain its commitment to keep rates low for a considerable amount of time. At some point this language will have to be removed and when it does, it could prompt a significant correction. What we need now to calm the nerves is a very good earnings season, something that shows us that we don’t need Fed stimulus to justify current valuation, that companies are performing well and things are only going to get better.

Alcoa got things off to a great start on Wednesday evening but they are not considered the bellwether they once were. What they did show though is that all of the cost cutting pain of recent years was not for nothing and the company is now in a great position going forward. That is the message we need to get from the rest of earnings season and if we can see companies beating on both earnings and revenue expectations while keeping profit warnings to a minimum, it may be enough to ease investors’ concerns about interest rate hikes.

Today is shaping up to be a fairly quiet day with not much due on the data side of things. The only notable release is the weekly jobless claims number which is expected to rise slightly to 294,000. This would mark a fourth consecutive week of sub 300,000 claims which would be the first time since the start of 2006. Needless to say that says a lot about the progress made in the US over the last 12 months and further suggests that the economy no longer needs such an accommodative central bank.

We’ll also get the latest monetary policy update from the Bank of England before the open, although no change is expected in either interest rates or asset purchases. The fact that the BoE doesn’t release a statement or follow up with a press conference, this tends to make it something of a non-event despite it having the potential to cause major ripples in the markets.

The S&P is currently seen opening 5 points higher, the Dow 27 points higher and the Nasdaq 13 points higher.

Read the full report at Alpari News Room​

 

[Alpari UK]

Daily Market Update - 9 October 2014 - Alpari UK

https://www.youtube.com/watch?v=15QJp3fzg6c

 

[Alpari UK]

US Opening Call from Alpari UK on 10 October 2014

US futures edge lower as DAX monthly losses exceed 10%

Stock markets are getting battered again in morning trade on Friday, as the German DAX extends its weekly losses to a staggering 5.65% taking its losses from last month’s highs until now to 10.82%.

People have been talking for such a long time about when we will get a big correction in the markets but these figures suggest that not only are they under way, we’ve actually surpassed a 10% correction and momentum is not slowing. The DAX appears to be a bit of a special case given that many of the concerns right now are focused around the slowdown in the eurozone, with poor German numbers attracting particular attention.

While US losses are lagging their German counterpart’s, both the S&P and the Dow are down 2% this week and look likely to extend these losses before the end of the week. They’re also down around 4.5% and 4%, respectively, since hitting new highs last month so the correction that people fear may be well under way. A lot has been blamed for these losses but I think it’s clear that they are being driven by fear. No one wants to be the last out and it’s become perfectly clear recently that people are uncomfortable with the current levels.

One thing that may support stocks in the coming weeks is earnings season, which unofficially started on Wednesday when Alcoa announced results for the third quarter. If we get a good earnings season that includes above expected earnings and revenues as well as minimal profit warnings and generally positive outlooks, I would expect fears to ease and people may look quite favourably on the buying opportunities that have been created.

As far as today is concerned, there is very little scheduled for release in terms of economic data or earnings, which means there is little to stop the sell-off. What we could see towards the end of the session is some profit-taking given the size of the losses over the last 24 hours.

The S&P is currently expected to open 9 points lower, the Dow 84 points lower and the Nasdaq 35 points lower.

Read the full report at Alpari News Room​

 

[Alpari UK]

Daily Market Update - 10 October 2014 - Alpari UK

https://www.youtube.com/watch?v=V4HGzQeqT1c

 

[Alpari UK]

Weekly market preview from Alpari UK on 13 October 2014

A somewhat mixed week ahead in terms of economic announcements, where the quantity of releases is negated by a lack of quality. In the US, a speech from Janet Yellen on Friday allows markets to gauge exactly where the Fed stands following somewhat dovish FOMC minutes. In the UK, Wednesday’s jobs report looks to take centre stage in a somewhat quiet week otherwise. Meanwhile, the eurozone focus is likely to be geared towards the German ZEW sentiment figure following a shockingly poor few months for the industrial powerhouse. Finally, in Asia the Chinese trade balance is going to be key, given it’s ability to shed light upon the export and import statistics for September.


US

A somewhat busy week ahead for the US economy, where the release of retail sales, Philly Fed manufacturing index and the UoM consumer sentiment figures are likely to dominate. However, possibly the most noteworthy event of the Aweek is Janet Yellen’s speech on Friday. The recent release of minutes from the last FOMC meeting provided markets with an insight into the current stance of the committee and for the most part it was more cautious and dovish than many expected. The focus upon potential weaknesses in inflation, along with global growth risks from the likes of the eurozone meant that many took the release as one which pushed back the potential 2015 interest rate hike. However, for the most part, it is the view of Janet Yellen which most people in the market follow closest and as such Friday’s speech will be key to determining whether she wishes to purvey a more dovish or hawkish stance.

On Wednesday, the release of the September retail sales figures provide yet another look into consumer behaviour and habits following a strong reading of 0.6% growth last month. The US economy is particularly reliant upon the spending patterns of domestic citizens owing to the substantial growth and demand that originates from domestic consumption. In much the same way that the Chinese and Australians are trying to realign their economies towards domestic consumption, the US economy is a prime example of what they strive to be. Therefore, strong retail sales figures provide us with an idea that there will be strong output too for the month. Market estimates put the MoM figure around 0%, yet I am hoping for something a little higher given that the past four years have seen an average of 0.8% growth in September.

The final two releases to look out for are major surveys, with the Philadelphia Fed manufacturing index and University of Michigan (UoM) consumer sentiment figures. Of these two, I would expect Friday’s UoM consumer sentiment number is going to be the most important, given the reliance of the US economy on it’s consumer base. Market estimates are pointing towards a marginal fall from 84.6 to 84.3, following a massive spike last month. Given that August saw the biggest jump in this reading in 10 months, I would not be surprised to see it pull back somewhat.


UK

A quiet week ahead for the UK economy, where the inflation readings and jobs report are the only figures due out of note. Tuesday’s CPI figure brings a focus back upon the consistent deterioration of inflation which has been in place since late 2011. The worries surrounding weak inflation is currently an issue facing most of the developed countries globally, with the the likes of Japan, the eurozone, US and UK all seeking to avoid further disinflation. The UK hasn’t been in too much trouble so far, however with estimates pointing towards the year-on-year figure falling to 1.4% from 1.5%, we could yet see the lowest level in 5 years.

Wednesday sees the focus shift to the UK jobs report, where the unemployment rate is expected to fall to the lowest level since December 2008. Conversely, the claimant count figure is expected to pull back somewhat from -37.2k to -34.2k. Those two headline figures typically move the markets and as such, a unidirectional move in both should be enough to swing the markets. The use of the unemployment data as a key barometer of when the BoE will chance monetary policy means that any strong swings in either direction for this report will no doubt be associated with either a longer or shorter term timeline for interest rate hikes. However, with that in mind, it is important to watch out for the average earnings figure too which provides an idea of how much people’s wages are growing by. When compared against the inflation figure from Tuesday, you can obtain an idea of the real change in wage growth. Estimates point towards a rise from 0.6% to 0.7%.

Eurozone

An interesting week ahead for the eurozone, where significant weaknesses across the indices have put further pressure on the region. The main events of note to be watching out for are Tuesday’s German ZEW economic sentiment reading and the final CPI reading on Thursday.

The German economy has been having a particularly tough time recently, with the much fabled manufacturing sector in particular suffering, as personified by poor factory orders, manufacturing PMI figures, industrial production numbers and subsequent export numbers. With that in mind, Tuesday’s German ZEW economic sentiment figures are going to be key to determine what the current sentiment is surrounding the German economy within analysts and institutional investors. This continued weakness is expected to be shown in Tuesday’s figure, where estimates are pointing towards a fall to 0.2 from 6.9. The 0 mark separates optimism and pessimism and thus should we see this number fall below 0, it could bring further attention in the markets.

Thursday sees the final CPI reading for the eurozone, where the focus returns to the continued weakness of prices in the single currency. Previous falls in this figure have brought about continued loosening of monetary policy from the ECB and thus any further downside is likely to pressure Mario Draghi to take firmer actions. For the most part, the final reading tends to rarely sway from the preliminary number, which came in at 0.3%. However, should we see this fall further, there is likely to be yet more focus upon whether the recent measures implemented by Draghi are going to be enough to raise prices.

Asia & Oceania

A quiet week across Asia, where Chinese data represents the only events of note to watch out for. The biggest event from China is the trade data release on Monday, where diverging export and import figures are expecting to provide a picture of strength for the Asian powerhouse. The headline figure is always the total trade balance which markets expect to fall back somewhat from $49.83 billion to $41 billion. However, I always watch out for the specific export and import numbers, where we are expecting to see a different pathway, with exports looking to rise from 9.4% to 11.8% and imports expected to fall from -2.4% to -2.7%.

Read the full report at Alpari News Room​

 

[Alpari UK]

UK Opening Call from Alpari UK on 13 October 2014

Dollar weakens and equities fall ahead of busy week

If it has been the Fed and the US dominating markets over the last few weeks we are about to see that change this week as economic data from the UK and Europe yet again takes centre stage. Of course markets will still be looking towards the US as heavy falls on equity markets look set to give the week a somewhat jittery start. Earning season also gets into full swing this week with some of the major Banks getting set for release. Fears over growth on Wall Street are starting to cause concern after as earnings season looks to get going, after a couple of poor weeks for equity markets traders are now starting to expect a rather week set of corporate numbers this quarter.


The week starts in a fairly subdued way as Columbus Day in the US means that US markets are closed, add to that the fact that there is next to no economic data due for release today and we get the fact that we may as well start by looking straight to Tuesday’s numbers. Saying that however Asian markets have managed to find something to keep the slide going as losses were extended across the board overnight, this has hit futures and could well see the negativity continue into the new trading week. It seems that yet again fears over ultra low rates in the UK, US and Eurozone are causing the issues. Last weeks FOMC meeting saw no significant change to the language meaning that Janet Yellen’s timeline for a rate hike still hasn’t changed. I feel this is a potential turning point for the equity markets after such a strong rally over the last 12 months. Traders are now using the same news that saw them rally in the past as a catalyst for negative moves and that is a worrying sign for the state of current equity market levels.

With everything looking so quiet on Monday, traders will naturally look ahead to the rest of the week for the big events. Tuesday and Wednesday will undoubtedly take centre stage as CPI inflation readings in the UK and Eurozone are released on Tuesday and Wednesday sees the UK unemployment figure. Both of these sets of readings are important for both central banks, of course Mario Draghi and the ECB have been fighting the war against ultra low inflation and the fear of deflation for almost 2 years now, however the numbers shows no sign of improvement. A continued low figure could well be met with a positive equity market move as it would seem to force the hand of Mario Draghi and move the ECB a step closer to a full round of quantitative easing. The UK on the other hand will be keeping an eye on the average earnings figure within its Jobs report on Wesnesday. Mark Carney has already indicated that rates will not start to move higher until he is convinced that wages are moving in the same direction, this will be interesting to see as recent months have shown an increase in the average earnings number, but only a minor one. The BoE will definitely want to see a sustained move before making a further decision on interest rates.

All in all markets will start quietly this week but will no doubt have traders bracing themselves for a whole host of data later in the week, not just from the UK and European economy but from a US corporate perspective as well. Ahead of the open we expect to see the FTSE 100 open lower by 57 points and the German DAX lower by 87 points.

Read the full report at Alpari News Room​

 

[Alpari UK]

Daily Market Update - 13 October 2014 - Alpari UK

https://www.youtube.com/watch?v=ZSG2FFsadaQ

Market indecision marks start to the week - 00:09
Chinese trade balance posts surprisingly strong numbers - 00:47
A look ahead to tomorrows UK CPI and German ZEW numbers - 04:48

Research analyst Joshua Mahony discusses a somewhat quiet day in the markets, where the Chinese trade data has dominated. Other than that, Joshua discusses tomorrows UK and German ZEW figures.