Apr
15th
Market Wrap - 15th April
By Michael Hewson CMC Markets
Anyone hoping for a quiet start to the week in the lead up to
this week’s G20 and IMF meetings got a rude awakening as European
markets dropped sharply on the open in the wake of disappointing
Chinese economic data which showed that economic
growth for Q1 only came in at 7.7%, well below expectations of a
rise to 8%.
Mining stocks and commodity prices have got absolutely battered
with gold prices falling though a key technical support level and
silver prices also doing the same thing.
Copper prices have also dropped sharply hitting
their lowest levels since the end of 2011 making the mining
sector the biggest faller on the day.
The biggest fallers have been Fresnillo (FRES LN),
Polymetal (POLY LN) and Randgold Resources (RRS
LN) all lower with Fresnillo in particular being
battered on the back of a “sell” downgrade from Citigroup.
Plunging oil prices have also hit oil services stocks with
Petrofac (PFC LN) and John Wood Group
(WG. LN) also lower.
Investors have sought sanctuary today in the defensive sector of
utilities with Severn Trent (SVT LN) and
United Utilities (UU. LN) in the blue, while
airlines are also higher on the back of the sharp drop in oil
prices with Easyjet (EZJ LN) and
International Consolidated Airlines (IAG LN)
near the top of the UK benchmark.
US markets took their cues from the falls in the European session
this morning though it wasn’t helped by a disappointing read from
the latest Empire Manufacturing survey for April
which came in well below expectations at 3.05, well below the
March number of 9.24.
In earnings the news was more positive as
Citigroup reported quarterly earnings above
analysts’ estimates on both EPS and revenues. Q1 earnings came in
at $1.29c a share on revenues of $20.81bn.
The Japanese yen has been the best performer
today after the US treasury fired a warning shot across Japan’s
bows over the weekend with respect to the recent weakness in the
yen. With the IMF and G20 due
to meet later this week traders have decided to book some profits
from the recent yen weakness after the failure to push through
the 100 level earlier this month.
The US dollar has also pushed higher across the
board with the commodity currencies taking the biggest hits with
the New Zealand dollar, Australian dollar and Canadian dollar all
sliding sharply on the plunge in gold, oil and copper prices.
The pound has remained a relative haven in all
of this activity in what is likely to be a busy week with
inflation, unemployment and Bank of England minutes due later
this week.
It’s the commodity space that has driven price action today as
gold, copper and oil prices
have plunged across the board.
The gold price in particular has plunged sharply
after breaking through a key technical support level at $1,525 on
Friday amid reports that a large 400 ton forced sale on
COMEX on Friday tipped the yellow metal over the
precipice, triggering a barrel load of stops just below the
$1,520 area. The estimated sum was the equivalent of 15% of
annual gold mining production, while reports of possible margin
hikes on the Shanghai exchange also gave prices an added impetus
lower. The yellow metal could well fall as far as the $1,310
level on this technical break which we last saw in 2011, and was
the low that year.
Silver prices have also been hit hard on the
back of weaker demand concerns with respect to its place as an
industrial metal, as well as being caught in the back draft of
the gold sell-off after it also fell through multiyear key
technical support at $26.
Brent crude prices have also dropped sharply
approaching the $100 a barrel mark for the first time since July
last year on the disappointing Chinese growth numbers while US
prices have also hit their lowest levels this year after US
economic data continued to disappoint today after Empire
Manufacturing missed to the downside for the second month in a
row.
Copper prices also declined sharply hitting
fifteen month lows against the US dollar on concerns that the
perceived likely future demand from China may not be as great as
investors had originally been pricing in.
Jan
22nd
Market Wrap - 22nd January
By Michael Hewson CMC Markets
A rather choppy morning session in Europe gave way to a rather
more sedate afternoon session as US traders returned to their
desks after their long weekend break.
The reasons for this morning's sharp sell-off weren't entirely
clear, but have been attributed to reports that the
German regulator Bafin asked two German
financial institutions, including Deutsche Bank to model a break
up scenario, to split out trading operations, from its retail
unit.
Rumours, swiftly denied that Bundesbank Chief Jens Weidmann had
resigned also fed into the skittish nature of trade, though
better than expected ZEW figures helped pull stocks off their
lows.
The nature of this morning's move can also be attributed to the
multi-year lows in the VIX which suggests that
investors are under protected against sharp market falls, trading
at its lowest levels since 2006, and pre crisis. These lows
suggest some complacency amongst market participants about the
likelihood of further stock market gains.
The worst performing sectors today have been the telecoms and
technology sector with Vodafone (VOD LN) lower
after US partner Verizon posted numbers which
missed expectations.
The biggest fallers have been in the mining sector with Mexican
silver miner Fresnillo (FRES LN) falling sharply
after projecting stable production for 2013. Fellow miner
Polymetal (POLY LN) has also felt the heavy hand
of selling pressure.
FT owner Pearson (PSON LN) has remained under
pressure following on from yesterday's underwhelming trading
statement.
On the plus side B&Q owner Kingfisher (KGF
LN) is trading higher after a price target upgrade from
Paribas.
Defensives have also outperformed with Shire (SHP
LN) and medical devices company Smiths Group
(SMIN LN) higher, on the back of a positive read across
from US pharmaceutical giant DuPont.
US markets returned from their long weekend break slightly lower
after Friday's late surge ahead of a raft of earnings
announcements as investors reacted with disappointment to
announcements from Johnson and Johnson and
Verizon.
Du Pont on the other hand has seen a positive
reaction despite announcing a 70% drop in earnings slightly
better than expected as profits came in at $0.12c a share above
expectations of $0.07c.
Analysts are eagerly awaiting the results of tonight's
IBM and Google earnings
announcement with some concern that we could see a miss on both.
Economic data was a disappointment with the Richmond Fed
manufacturing contracting while December
existing homes sales dropped 1%.
The Japanese yen has been the biggest gainer
today, not altogether surprising in a classic sell the rumour and
buy the fact kind of way. The decision by the Bank of Japan to
defer the start of its unlimited program of asset purchases until
2014 has given traders sufficient reason to take profits, however
it remains unlikely to change the overall direction of travel of
yen weakness in the longer term.
The single currency surprisingly has struggled
for direction despite the much better than expected ZEW survey
from Germany and the Eurozone. The high number wasn't really that
much of a surprise given the recent recovery in equity markets,
drop in peripheral bond yields and higher euro.
The pound has continued to come under pressure
hitting its lowest levels against the euro in nearly a year after
public sector borrowing came in slightly above expectations with
tax receipts once again declining and spending rising.
While oil prices got a brief push higher from a
higher ZEW reading out of Germany and Europe this morning the
disappointing US data has to some extent helped temper these
gains as concerns about the US manufacturing sector once again
trouble investors.
Copper prices have got a lift from this
morning's decision by the Bank of Japan to adopt unlimited easing
while the ZEW also helped, however upside is likely to be
tempered by stockpiles which still remain at historically
elevated levels.
Jan
4th
Market Wrap - 4th January
By Michael Hewson CMC Markets
Last night’s rather hawkish takeaway from the December Fed
minutes initially lent a softer tone to European markets in early
trading today, especially so given market anticipation about
today’s US non-farm payroll numbers after the
much better ADP report seen yesterday.
Given the anticipation of a good number it was perhaps inevitable
that the actual numbers would once again diverge from the ADP
number and disappoint raised market expectations.
Rather perversely the fact that the numbers were disappointing
has seen markets push higher, with the FTSE100 hitting its
highest levels since May 2011 when it touched 6,100, on the basis
that the small rise in the unemployment rate to 7.8% makes it
less likely that the Fed will look at stepping back from QE in
the shorter term.
Even allowing for the move higher in equity markets, volumes
continue to remain light, while the worst performing sector is
the basic resources sector, weighed down by a broker downgrade to
Fresnillo (FRES LN), while a sharp move lower in
gold and platinum prices hasn’t helped either with
Randgold Resources (RRS LN) and
Polymetal (POLY LN) also lower.
High street bellwether Marks & Spencer (MKS
LN) is also getting a bit of beating ahead of its latest
results next week as investors fret that they will disappoint.
On the plus side BP (BP. LN) is higher after its
Gulf oil spill partner Transocean settled its dispute with the US
Department of Justice at a lower rate than was expected.
Also doing well are the more defensive sectors with telecoms and
health care stocks having a positive day, with BT (BT.A
LN) and Vodafone (VOD LN) higher on the
day.
US markets opened slightly mixed after the December jobs report,
came in as expected, disappointing those who had expected a much
better number in light of the ADP report yesterday. What it did
do though was take the sting out of the market reaction to the
unexpectedly hawkish spin on last night’s FOMC minutes.
With new jobs increasing by 155k and the November number revised
up to 161k from 146k, investors seemed caught between two stools.
It was the slight increase in the unemployment rate to 7.8% that
saw investors take the view that the Fed would be unlikely to
step back from QE anytime soon, given the comments that they
would only reconsider if there was a “substantial improvement” in
the unemployment rate.
In other economic data the December services ISM
also came in much better than expected at 56.1, well above
expectations of 54.1. November factory orders were more
disappointing, coming in flat below expectations of a gain of
0.4%.
After being positive for most of the day the US dollar has
slipped back sharply in the afternoon session, particularly
against the Japanese yen as traders took some profit on recent
gains. A pullback in US 10 year yields from their highest levels
in 7 months at 1.97% has also prompted some profit taking and
some US dollar selling.
The single currency hit its lowest levels against the US dollar
for three weeks after last nights Fed minutes suggested that
further QE could have a limited shelf life. Sentiment wasn’t
really helped by disappointing services PMI data from France,
though Spain and Italy did improve slightly.
The pound has lost ground across the board after this morning’s
disappointing services PMI data suggested that it was now much
more likely that Q4 would be a negative quarter. The poor reading
of 48.9 was the worst reading since the snow affected December
2010 in a sector that has expanded for every month since then.
With construction also disappointing this week and with it being
the main drag on GDP for most of 2012 it also increases the
probability of a ratings downgrade sooner rather than later.
The Canadian dollar has had a particularly good day after the
latest jobs report showed an increase of nearly 40k jobs in
December and the unemployment rate fell from 7.2% to 7.1%.
Gold prices have pulled back from the lowest
levels since August last year after the small rise in the US
unemployment rate pared back expectations that the Fed would
consider stepping back from further QE, despite the market
interpretation of last nights Fed minutes.
Crude oil prices have struggled to react with
conviction one way or the other, though they have pulled off
their lowest levels of the day after this afternoon’s US data.
Sep
14th
Market Wrap - 14th September
By Michael Hewson CMC Markets
European markets have soared today as investors gorged themselves
on the prospect of unlimited free cash from the Federal Reserve
over the coming months as well as central banks around the world.
Given the actions of the Fed yesterday evening, it is highly
likely the ECB could well follow suit as it becomes apparent the
European economic data also continues to disappoint and if
Spanish yields start to rise again.
There is also the fact that a rising euro will do enormous damage
to European export competitiveness at a time when the more
indebted countries need a weaker currency, not a stronger one. As
such expect the ECB to look at easing monetary conditions further
into the end of the year to counter yesterday’s actions by the
Fed.
The FTSE100 has hit its highest levels since March this year, led
by the basic resources sector, which has soared as commodity
prices jumped sharply higher on expectations that this liquidity
boost will provide the much needed growth boost to the global
economy.
Leading the gainers in London are Vedanta Resources (VED
LN), Kazakhmys (KAZ LN) and Fresnilllo (FRES
LN) as base and precious metals push sharply higher.
Banks have also surged with Barclays (BARC LN)
going on a tear.
On the downside defensive plays have missed out on the rally with
the health care sector the worst performer with
GlaxoSmithKline (GSK LN) and AstraZeneca
(AZN LN) missing out on the fun. Consumer goods giant
Reckitt Benckiser (RB. LN) has also slid back
after being hit by a sell note from Liberum Capital.
U.S. markets have held onto yesterday’s gains early this morning,
pushing higher as Europe plays catch up after last night’s +200
point rally in the Dow. The S&P500 has recovered to levels
last seen at the end of 2007, above 1,470..
U.S. economic data continues to paint an
uncertain picture with retail sales for August
coming in at 0.9%, slightly above expectations.
Industrial production figures for August were
pretty horrible, sliding 1.2% well outside expectations of 0%.
Manufacturing production also disappointed
sliding 0.7%, missing expectations of -0.3%.
Despite the apparent dire state of the U.S. economy, that has the
Fed so worried, the latest Michigan consumer confidence
indicator jumped sharply in September to 79.2 from 74.3.
Business inventories also jumped sharply in July
by 0.8%, well above expectations of 0.3%.
Shares in the spotlight include Apple as
consumers look to pre-order the new iPhone5 for
the first time.
Telecoms stocks Verizon is expected to come
under scrutiny after being downgraded to a hold, on the back of
lower earnings estimates.
Kraft Foods is set to be relegated from the Dow
as it gets set to split into two next month.
The U.S. dollar has taken an absolute pummelling
as it slides back across the board, with the exception of the
Japanese yen, as investors worry about the prospect of Bank of
Japan intervention, after comments by Japanese finance minister
Azumi.
The single currency has continued to rise
sharply, breaking through the 1.3000 level for the first time
since early May as European finance ministers started a two day
meeting in Nicosia Cyprus to discuss the next steps in the
European debt crisis. Speculation about the timing of a Spanish
bailout continues to be the main topic with talk that a Spanish
downgrade could well be forthcoming from one of the ratings
agencies in the next day or so.
The euro has also gained ground against the
pound, and the Japanese yen hitting its highest levels since
mid-June as investors continued to gain confidence that Europe’s
leaders are starting to get to grips with the crisis.
Not unexpectedly oil prices have surged on the
back of last night’s stimulus measures with U.S.
crude hitting $100 a barrel for the first time since
early May. With Brent prices also hitting the
highest levels since May as well the Fed may come to rue last
night’s decision as consumers find they have less discretionary
income due to higher fuel costs and growth starts to stall.
Fed Chairman Bernanke cited a subdued inflationary outlook
yesterday, however the reality is that since the June lows in
commodity prices the Reuters CRB is up over 22%, US crude is up
over 25% and Brent prices are up over 33%, and that’s before you
even factor in soft commodity prices. That doesn’t sound a
particularly subdued inflationary environment to me and could
well see politicians look to consider an SPR release.
Gold prices have also surged with the next
resistance level at the $1,800 level, a break of which could well
re-target the all-time highs above $1,900.
Copper prices have also hit their highest levels
since early May on an expectation that yesterday’s measures could
lead to a recovery in industrial activity.
Sep
3rd
Market Wrap - 3rd September
By Michael Hewson CMC Markets
Despite continued poor economic data from China, as well as
Europe, investors appear to be taking comfort from the fact that
this is likely to make further monetary easing more likely in the
near term, thus supporting asset prices.
Expectations continue to grow that we could see the
Chinese move to ease monetary policy in the coming
days, after this morning’s disappointing manufacturing
data. Remember when the People’s Bank of China trumped the Bank
of England’s July policy decision, and it would appear that
investors are expecting some form of easing again in the wake of
recent data weakness. Whether markets will get what they want, or
expect, remains to be seen.
We’ve also seen further weakness in shorter term Spanish
bond yields as a result of expectations of action ahead
of this week’s latest ECB rate meeting. The weakness in not only
Spanish and Italian manufacturing PMI data, but
German and French data as well, continues to
drive concerns about the lack of growth in the euro area as debt
levels continue to rise.
The best performing sector is the basic resource sector largely
on expectations of a stimulus boost from Chinese authorities, but
volumes are anaemic, with Vedanta Resources (VED LN),
Antofagasta (ANTO LN) and Fresnillo (FRES
LN) leading the market higher.
On the downside broker downgrades have sent chipmaker ARM
Holdings (ARM LN) sharply lower, while food retailer
Morrisons (MRW LN) is also lower ahead of its
latest results later this week and a broker downgrade from
Nomura. Royal Bank of Scotland (RBS LN) is also
lower as shareholders line up to sue the bank over the 2008
rights issue to the tune of £3.3bn.
Car insurer Admiral Group (ADM LN) is also
sharply lower on the back of a downgrade from Credit
Suisse.
U.S. markets are closed today.
An upside surprise in UK manufacturing PMI for
August has helped support the pound in quiet trading
today, coming in at 49.5, and well above the expected 46.1. While
still in contraction, the recovery in activity would appear to
herald a bounce back from the disappointing July revision of
45.2, and is a marked contrast to the continued slide in activity
in Europe.
The single currency has weakened slightly against the pound while
trading sideways against the U.S. dollar, as markets put to one
side the disappointing economic data from the manufacturing
sector in Europe.
Amongst the worst performers we’ve seen the Australian and New
Zealand dollar slide back, with the Aussie being hit by a double
blow of disappointing Chinese data as well as a sharp fall in
July retail sales by 0.8%.
The Swedish krona has also underperformed after Swedish
manufacturing PMI saw a sharp drop in activity from 50.6 in July
to 45.1 in August, with new orders slipping sharply at the
fastest rate since 2009.
Gold prices have remained near their highest
levels since March on speculation over additional stimulus
measures, more so given the weakness of this morning’s data but
with volumes being light due to the U.S. holiday ranges have been
tight.
This is also true of crude oil prices today,
though they have retreated from their highest levels on this
morning’s weaker than expected manufacturing data from Asia and
Europe.
Aug
23rd
Market Wrap - 23rd August
By Michael Hewson CMC Markets
Despite fairly clear indications that the Fed is looking at
additional accommodative measures with respect to the U.S.
economy, markets have reacted cautiously which is not surprising
given we’ve seen significant gains over the past seven weeks in
anticipation of such an outcome.
The caution can also be put down to the fact that U.S.
employment data since the last Fed meeting has been
better than expected, as was the most recent ISM manufacturing
and retail sales numbers. This suggests that the Fed could well
hold back especially if the August employment
report in two weeks’ time shows similar gains. As Fed
President James Bullard so aptly put it the “minutes are a bit
stale”.
As such, the guessing game looks set to continue into next week,
and the Jackson Hole symposium where investors
will be looking to further clues as to the Fed’s thinking when
Fed Chairman Bernanke makes his latest speech.
Disappointing Chinese and European PMI data has also tempered
enthusiasm after the gains of recent weeks given that it points
to additional economic contractionary pressures in the economies
of both regions.
The speculation about further QE has certainly put the wind in
the sales of gold miners Randgold Resources (RRS
LN) and Fresnillo (FRES LN) as well as
the gold price. Other basic resource stocks have also managed to
outperform with Antofagasta (ANTO LN) also
higher on the prospect of easier Chinese monetary policy. Also on
the plus side Guinness and whisky maker Diageo (DGE
LN) also reported results slightly ahead of market
expectations.
On the downside engineering group IMI (IMI LN)
has come under pressure after reporting that its outlook for the
second half could well come in under expectations due to the
slowdown in Europe. Asian miner Kazakhmys (KAZ
LN) is also lower after announcing a drop in revenues
and earnings in the first half of the year..
The lack of any significant bounce back despite an unexpectedly
dovish set of minutes from the Fed suggests that markets remain
nervous that any new measures could well be priced in already.
The assertion by Kansas Fed President James Bullard that the
minutes were stale has also tempered some of the enthusiasm for
taking markets higher.
In economic data, U.S. weekly jobless claims
continues to remain fairly consistent, increasing slightly from
last week to 372k. US preliminary August PMI data also seems to
be holding up quite nicely.
New homes sales for July showed some semblance
of a recovery, rising 3.6% after June’s 3.5% decline.
Stocks in focus are likely to include PC maker Hewlett
Packard as the company just beat expectations of $0.98c
share. The company adjusted its outlook for the year towards the
lower range of expectations.
Big investors continue to hedge their bets with
Facebook after one of the co-founders sold 450k
worth of shares in the last few days.
The Australian dollar appears to have taken fright at the recent
comments by Australia’s resource minister that the country’s
mining boom was over. Even though he appeared to clarify his
comment, the damage was done. This appears to have been
reinforced by some rather disappointing Chinese HSBC
manufacturing PMI data for August, which hit a nine
month low.
The U.S. dollar, despite the easing speculation
has held up fairly well but remains capped by the extent of
possible measures in the near term.
The single currency which initially got a boost
from the Fed minutes to hit its highest levels since 4th July,
has found progress above 1.2560 somewhat difficult to maintain,
given that Spanish bond yields are once again pushing higher
which as a rule tends to limit euro gains.
The pound is holding up fairly well despite some
very disappointing CBI retail sales numbers for August which
showed a sharp drop to -3, well below expectations of 16, though
this is likely to be as a result of people staying at home
watching the Olympics. Tomorrow's Q2 GDP
revision is likely to be heralded as a somewhat positive
factor, though it can’t hide the problems facing the UK
economy.
Gold prices have continued their recent buoyant
tone, pushing above the 200 day MA and recent range highs as
easing speculation continues to persist.
Crude oil prices continue their dizzy rise
higher, particularly Brent prices which are now approaching $120
a barrel for the first time since early May. Yesterday’s surprise
fall in inventories has helped underpin U.S. prices, while
stimulus speculation always tends to weaken the U.S. dollar.
Copper prices have continued the rises of recent
days ignoring the fact that Chinese economic data continues to
show worrying signs of weakness. The expectation is that the
Chinese authorities will intervene to stimulate demand and this
is supporting prices.
Platinum prices hit their highest levels since
May as concerns about continued industrial unrest in South Africa
raise supply concerns.
Jul
18th
Market Wrap - 18th July
By Michael Hewson CMC Markets
Equities have spent most of the day in positive territory as
investors digested the contents of the latest Bank of
England minutes and put aside the disappointment from
yesterday’s straight bat from Fed Chairman Ben Bernanke about the
prospects of further QE. Investors appear to be focussing more on
the micro with respect to earnings which are coming in more on
the positive than the negative.
The latest minutes from the Bank of England policy meeting
highlighted divisions as to the efficacy of the latest £50bn
injection of QE from policymakers. The committee discusses a
number of policy options including a larger £75bn injection as
well as further reducing the bank rate. There were two
dissenters, chief economist Spencer Dale and external member Ben
Broadbent, who favoured waiting to see the effects of the new
funding for lending scheme as well as the newly started
ECTRF. These divisions suggest a good deal of
uncertainty as to the efficacy of any new stimulus measures at a
time when economies around the world are adopting similar
stimulus methods.
Reported comments from German Chancellor Angela Merkel that she
was unsure whether the European project could survive did briefly
weigh on markets.
On the upside after three successive days of big losses
G4S (GFS LN) is starting to rebound as investors
presume that the shares have fallen too far relative to the value
wiped from its share price. Also doing well is fund manager
Ashmore (ASHM LN) after being upgraded to “buy”
by Goldman Sachs. Mining stocks have also been given a lift from
positive results from BHP Billiton (BLT LN) and
silver and gold miner Fresnillo (FRES LN).
Amongst the underperformers is insurance group RSA (RSA
LN) after the company warned that insurance claims as a
result of the recent wet weather could well hit profitability in
the coming year. HSBC (HSBA LN) is also lower as
the bank copes with the fallout from the money laundering scandal
in the U.S.
U.S. markets opened lower this morning, but soon turned higher
despite earnings numbers continuing to come in mixed. Profits
continue to beat on the top line, but revenues are tending to
come up short.
One of the latest examples of this has been the latest figures
from Bank of America which returned $0.19c
earnings for Q2, above expectations of $0.15c. On the flip side
revenues came in short of expectations of $22.87bn at $21.97bn.
It also transpires that the bank is being questioned as part of
the Libor investigation.
Technology company Honeywell exhibited similar
results posting Q2 earnings above expectations while also seeing
revenues fall short. Another technology company chip maker
Intel posted Q3 numbers above expectations;
however the stock has come under pressure after the company cut
its 2012 revenue growth forecast.
Fund manager BlackRock announced that Q2 profits
fell 11%.
U.S. housing and building data continued its propensity to come
in mixed with June housing starts beating
expectations rising 6.9%, while building permits
slid 3.7%.
Investors will also be looking ahead to this evening’s
Fed “beige book” of economic activity for signs
of any further slowdown in economic activity.
The Pound has been mixed today after
unemployment data showed a fall in the three months to May, with
the ILO measure falling to 8.1%. A lot of this fall is probably
down to temporary hiring ahead of this summer’s Olympics, which
begs the question how much of it is temporary.
The Bank of England minutes came in slightly neutral as markets
digested the fact that the decision to embark on more stimulus
was not unanimous.
The Euro slid back from its highest levels of
the day after this mornings reported comments from German
Chancellor Angela Merkel, about the risks to the euro project,
and her doubts as to whether it could survive.
Yield differentials continue to weigh against the euro as the
polarisation in the European bond market
continues to highlight the stresses in the euro system. This
morning’s Spanish housing data highlights the strains in the
European banking system after data showed that bad loans
increased to 8.95%.
This morning’s two year German auction saw
negative yields for the first time ever, as investors look at
return of capital rather than return on capital .
The Japanese yen continues to gain despite the
pledge by the Bank of Japan to scrap its yield floor so that it
can continue to buy enough bonds to maintain its asset purchase
program.
Oil prices hit seven week highs late last night
despite concerns about the outlook for growth in emerging
economies and while economic data continues to come in on the
weak side. The deteriorating situation in the Middle East appears
to be underpinning Brent prices certainly with
respect to today’s events in Syria.
U.S. inventories came in with a decline of 809k barrels below
expectations of a bigger decline of around 1.1m barrels.
Jun
12th
Market Wrap - 12th June
By Michael Hewson CMC MarketsIn the absence of any new factors European markets initially had a slightly firmer tone today despite Spanish and Italian bond yields continuing to push higher, signalling increasing investor disquiet about the ability of these countries to fund their future borrowing requirements.
It is becoming increasingly apparent to investors that Spain may well need a bailout itself after borrowing costs on the 10 year bond hit post euro highs above 6.80%. The 7% level is the level at which Greece, Ireland and Portugal all succumbed to pressure for a bailout.
These gains soon evaporated in the afternoon session after ratings agency Fitch downgraded the ratings of 18 Spanish banks following on from its downgrade of the sovereign earlier this month.
Among the best performing stocks has been interdealer broker ICAP (IAP LN) after a broker research note suggested that the company could do well from the increased volatility as the Eurozone crisis escalates.
Other gainers include gold miners Randgold Resources (RRS LN) and Fresnillo (FRES LN) as precious metals prices move higher on expectations of further easing after ECB policymaker Makuch suggested that ECB rates could fall to zero.
Data showing that Chinese bank lending and money supply expanded also gave a slightly firmer tone to miners, with Vedanta Resources (VED LN) and Anglo American (AAL LN) higher. Defensive telecoms have also done well with Vodafone (VOD LN) higher.
U.S. markets opened higher this morning after comments from FOMC member and Chicago Fed President member Evans suggested that more easing could well be required to help jobs growth.
These initial gains proved to be somewhat short-lived after ratings agency Fitch cut the ratings of 18 Spanish banks sending shares briefly into negative territory.
Shares in focus include Texas Instruments after the company cut its Q2 earnings forecasts, while three brokers cut their price targets on the company.
Apple shares edged higher in the wake of yesterday’s unveiling of its new iOS6 operating system.
The better than expected Chinese lending and money supply numbers have continued to support the recent bounce back in the Australian and New Zealand dollar as both currencies push back towards the upper end of their recent ranges.
The Yen has been the worst performer with upside limited ahead of this week’s central bank rate decision after this morning’s comments from the IMF that the yen was overvalued.
The Pound has been able to shrug off this morning’s disappointing manufacturing data for April which showed a slide of 0.7%.
The Euro has remained under pressure as Spanish and Italian borrowing costs continue to push higher, and the weakness was exacerbated by the Fitch downgrade of Spanish banks.
Gold prices have had a much firmer tone today on the back of speculation about further easing from central banks. Comments from the Fed’s Evans and the ECB’s Makuch about easier monetary policy has seen prices push back above the $1,600 level, while silver prices have also pushed higher.
Oil prices have remained mixed ahead of this week’s OPEC meeting despite the stimulus speculation as markets speculate as to whether we could well see an output cut at this week’s meeting.
Given that only a few weeks ago G7 leaders were talking about an SPR release, an output cut is not likely to go down well if it happens. Fears about this are likely to keep a floor under prices in the short term, while we could see a bounce if Saudi Arabia shows signs of shifting its recent position with respect to this after Saudi oil minister said he was “happy with the way things are”
May
22nd
Market Wrap - 22nd May
By Michael Hewson CMC MarketsEuropean markets have continued to bounce back today on the back of some bargain hunting as well as some expectation that European policymakers could well come up with some new measures at tomorrow’s EU summit to reassure investors that they have a strategy for containing the risks of a further deterioration in risk appetite after the declines of recent weeks. Recent history, post these types of summits, doesn’t augur well but for the time being given the oversold nature of the markets, some form of bounce back is welcome, but the fear remains it could well just be a pause, especially if EU leaders fluff their lines. The stakes remain high especially given that the OECD once again downgraded its growth forecasts for the EU region as well as for Spain and Greece for 2012 and 2013, while the IMF has urged further stimulus measures in the event of further economic deterioration.
Positive company announcements have also helped drive today’s rally with telecoms giant Vodafone (VOD LN) surging ahead after announcing quarterly revenue that exceeded analyst estimates. The company also announced an increase in its dividend of 52% making it the highest yielding stock on the FTSE100. This figure also includes the 4p special dividend paid in February. Europe remains a concern with revenues sliding in Spain, but this was offset by growth in UK, Germany and India.
Other gainers include resource stocks as speculation grows that the Chinese authorities will act to boost growth as the economy starts to slow down. Mining stocks Antofagasta (ANTO LN), Rio Tinto (RIO LN) and Fresnillo (FRES LN) have been the main outperformers, as copper prices rebounded.
On the downside retail shares have taken a hit with Morrison’s (MRW LN) and Tesco’s (TSCO LN) under pressure after data showed the two grocery stores losing market share to Sainsbury’s (SBRY LN) and Asda. More defensive health care stocks are also underperforming with AstraZeneca (AZN LN) slipping back.
U.S. markets opened just above the flat line today shrugging off the OECD Europe downgrades as well as Fitch downgrading Japan’s sovereign rating. Facebook has continued its post IPO slump, pushing down close to the $30 mark as buying appetite continues to diminish. In earnings news Best Buy and Ralph Lauren have both beaten expectations for their latest quarters.
Electrical retailer Best Buy posted Q1 earnings of $0.72c a share excluding restructuring costs, above expectations of $0.59c a share. Fashion retailer Ralph Lauren also blew past expectations on its Q4 earnings, coming in at $0.99c a share, and also increased its quarterly dividend, doubling it to $0.40c a share.
In economic data existing home sales for April rose more than expected by 3.4%, recovering from a decline of 2.8% in April. In the manufacturing sector disappointing numbers from the Richmond Fed for May showed a slow down as it slipped from 14 in April to 4 in May.
The Japanese yen has been the main loser today after Fitch ratings downgraded Japan’s sovereign credit rating. Never has a sovereign downgrade been more welcome given the strength of the yen which continues to weigh on Japanese exporter profit margins.
The Canadian dollar has held up quite well after the OECD urged Canada’s central bank to raise rates to cool house prices, and contain inflationary pressures.
The Pound has come under pressure after UK May inflation data showed a sharp fall from 3.5% to 3% on an annualised basis. This has raised expectations that the June meeting of the MPC could well herald a fresh round of QE. This may be somewhat premature, but we should know more tomorrow when the latest minutes from the Bank of England policy meeting will be published. Any more than one vote for further QE could well raise the stakes for additional measures in a couple of weeks.
The Euro has slid back despite softer long term bond yields in Spain and Italy ahead of tomorrow’s EU summit.
The firmer U.S. dollar has weighed on gold and silver prices today after yesterday’s failure to overcome the $1,600 level prompted some profit taking.
Crude prices have remained becalmed near the bottom end of their recent ranges with the slightly mixed economic data failing to generate much in the way of any movement.
Copper prices have slipped off their highs despite talk of China policy stimulus on the back of a firmer U.S. dollar
May
21st
Market Wrap - 21st May
By Michael Hewson CMC MarketsAfter five days of consecutive declines core European markets have rebounded today, though Italian and Spanish markets have underperformed. The gains have been helped by comments from Chinese policymakers that suggested that they could well take measures to help boost growth and boost domestic consumption.
Basic resource stocks that have been among the heaviest fallers in recent days have seen some gains with Vedanta Resources (VED LN) bouncing back strongly. These gains haven’t been replicated across the board though with Antofagasta (ANTO LN) and Fresnillo (FRES LN) amongst the bigger fallers.
Amongst the biggest gainers of the day is hedge fund Man Group (EMG LN), higher on the back of acquiring $8bn worth of assets in its takeover of FRM Holdings, with the shares trading sharply higher after sinking to new all-time lows last week.
Banking stocks have enjoyed somewhat of a rebound with Barclays (BARC LN) an outperformer after announcing it was selling its holding in BlackRock. Royal Bank of Scotland (RBS LN) is also finding some buying interest after being heavily sold last week.
U.S. markets have started the week on the front foot after heavy falls last week; however expect gains to be limited with concerns about Europe likely to dampen sentiment. In company news Facebook looks set to start its first full day of trading in negative territory as the euphoria of the first day of trading looks set to evaporate, with the shares sharply lower.
In earnings news home improvement chain Lowe’s saw Q1 earnings come in ahead of expectations at $0.44c a share; however the company downgraded its outlook for 2012, prompting the shares to slip lower. Campbell Soup also beat estimates for its latest Q3 earnings, coming in at $0.56c, while Best Buy could well come under pressure after being downgraded by BB&T Capital.
The U.S. dollar has been the out performer today gaining against the Swiss franc, Euro and Japanese yen as investors once more look to the U.S. dollar as the least worst alternative to park their cash.
The Euro has once again slid back weighed down by scepticism that EU leaders will be able to come to any form of quick measures to help assuage market concerns about a Greek exit and Spanish banks solvency.
The New Zealand dollar has enjoyed a slightly better day after several days of sharp losses; however this could be short lived if tomorrow’s inflation expectations data comes in lower than expected.
The Pound has enjoyed a rather mixed day ahead of inflation data due out tomorrow, which is expected to show a sharp fall back in price pressures from 3.5% to 3.1%. If prices fall back as sharply as expected expect further pressure to mount for further QE at the June meeting in two weeks’ time.
Crude oil prices have enjoyed a little bit of a rebound today after the pledge by China to look at boosting demand while the lack of any new measures to put out the fires of the European sovereign debt crisis could well weigh on the upside.
Copper prices are also bouncing back after the selloff of the past week or so, buoyed by the comments out of China at the weekend.
Gold and silver prices have had a rather indifferent day, slightly lower on the back of a stronger U.S. dollar.
Viewing 1 - 10 of 38
Subscribe
