Jun
11th
Market Wrap - 11th June
By Michael Hewson CMC Markets
In a classic case of “spitting the dummy out” global markets sold
off sharply today after the Bank of Japan left
its current stimulus measures unchanged, and upgraded its outlook
for the Japanese economy.
Some market participants had hoped that the central bank would
increase its current levels of stimulus, but that was never
really likely, given that the current program was only announced
in April and the Japanese economy has been improving, as shown by
this week’s upward GDP revision.
As things stand the current program involves the purchase of
7.5trn yen of long term Japanese government bonds a month, which
is roughly 70% of the number of bonds sold each month.
Furthermore the bank has pledged to double the monetary base by
the end of 2014, so it seems optimistic in the extreme for
investors to expect the Bank of Japan to do anything extra given
the recently improving fundamentals.
Today’s move lower therefore speaks to the fickle nature of
investor sentiment when unable to get their own way, and as such
we’ve seen a big sell-off in equity and bond markets across the
globe, with yields in US treasuries in particular pushing towards
levels last seen in March 2012 as investors start to become
slightly more optimistic about the longer term outlook for the US
economy.
This also feeds into the belief that the US is closer to the end
of its fiscal stimulus program than other global central banks.
Emerging market indices have also sold off heavily in a global
rout of profit taking as investors book profits on the
significant gains seen so far this year.
A slide in commodity prices on the back of a firmer US dollar as
well as concerns about the Chinese, and broader European
economies weighed on overall demand.
The biggest fallers have been in the mining sector which
continues to drop to levels last seen in 2009, with
Polymetal (POLY), Fresnillo (FRES) and
Glencore (GLEN) leading the way lower.
Financials were also feeling the heat with Aberdeen Asset
Management (ADN), Old Mutual (OML) and
Prudential (PRU) all getting pounded.
Bright spots were few and far between but there was one with
Easyjet (EZJ) just about hanging onto positive
territory with lower oil prices likely to feed into healthier
margins.
In the absence of any meaningful economic data US markets took
their cues from the sell-off in Asia and Europe opening sharply
lower.
Apple shares opened slightly lower after
yesterday’s announcement of a revamped iOS7 and
a new iTunes radio service to compete with
Pandora and Spotify.
Microsoft fresh out of announcing the launch of
the new Xbox One last month announced a raft of
new game titles in order to encourage buyers ahead of the
November launch.
US bank JP Morgan was also a heavy faller after
having its credit rating outlook changed to negative.
With the Paris show on the horizon aircraft maker
Boeing is in the spotlight after raising its 20
year jet demand forecast by 3.8%.
The Japanese yen has been the best performer today after the Bank
of Japan left its stimulus program unchanged at the current
levels. This has prompted some profit taking in the yen, not
altogether surprising given that in October we were trading at
sub 80 levels,
The worst performer has been the Australian
dollar as it continues its decline its lowest levels in
over 3 years as concerns grow that the slowdown in China will act
as a drag on the Australian economy. This week’s jobs data could
give further clues as to the timing of the next rate cut.
The pound has held up fairly well given some
disappointing manufacturing data earlier this morning, though the
improvement in industrial production was welcome. The latest
NIESR GDP estimate for the three months to
April came in at 0.6%, slightly down from a
revised upwards 1% in April.
Any chatter surrounding the OMT court hearing in
Karlsruhe has been put to one side with the euro
treading water against the US dollar, though it is sinking
against the yen, much like everything else.
Oil prices have slid back after OPEC increased
crude output in May while at the same time keeping its 2013
demand forecast unchanged on concerns about the demand outlook.
Gold prices have stayed under pressure as
markets try and second guess likely Fed tapering scenarios. No
one wants to be the wrong side of that move if and when it
happens.
Copper prices have also remained under pressure
falling to their lowest levels since April as demand concerns
keep purchasers on the sidelines.
Jun
5th
Market Wrap - 5th June
By Michael Hewson CMC Markets
Matt Basi – head of UK Sales Trading at CMC Markets UK for
Michael Hewson
The FTSE 100 has lost ground throughout today’s session despite better than expected service sector growth, as traders take their lead from disappointing EU data and ongoing fears of Federal Reserve QE tapering.
The FTSE 100 has lost ground throughout today’s session despite better than expected service sector growth, as traders take their lead from disappointing EU data and ongoing fears of Federal Reserve QE tapering.
Disappointing numbers from supermarket giant Tesco
(TSCO) saw them report falling sales as non-food
revenues disappointed and the fallout from the horse meat scandal
fed through into the bottom line. The stock has slipped almost 4%
early on, though at these levels a forward PE of just 10 may be
enough to attract some support…
National Grid (NGG) have been the worst
performers in the blue chip space today, with the stock offered
over 5% lower – though this is in large part attributable to
being ex-dividend to the tune of 29p, and not to infrastructural
issues as indicated in earlier note (apologies).
Aberdeen Asset Management (ADN) also find
themselves towards the bottom of the performance table after
their Chief Investment Officer offloaded 1.4m shares in the
company and UBS removed the stock from its ‘Preferred’ list.
Stellar YTD share price performance may have informed both
decisions, and the stock is taking a well-earned breather…
US equity markets have followed their European counterparts
lower, with the prevailing uncertainty over the tapering of US
central bank stimulus weighing on prices as investors take their
foot off the gas. No doubt this decision for traders was made
somewhat easier by the disappointing ADP National
Employment figures which despite showing an increase
from last month, missed expectations coming out at 135,000 in May
versus 170,000 expected and 119,000 previously.
Financial stocks bore much of the brunt, with the sector down
more than 1%. JP Morgan Chase was one of the
worst hit after the firm announced it will take forgo $842
million of debt previously owed to it by Jefferson County,
Alabama who blame the bank for miss-selling of securitised assets
which led to the county filing for bankruptcy in November 2011.
Stocks also trading with the prevailing downtrend include tech
heavyweights Apple and
Microsoft. Apple is suffering on the news that
the International Trade Commission has ruled that a number of
older versions of its hardware violate Samsung patents, the
latest in a long line of legal disputes between the two firms. As
a result of the latest filing, the firm faces a US import ban on
its iPhone 4 and iPad 2 devices. Microsoft also trades lower
despite unveiling details of an update to its Windows 8 operating
system that attempts to address many users concerns with the
product.
Sterling continues to strengthen against the
Dollar, with Cable reaching 3-week highs. The
data this morning from the UK showing manufacturing output
to not only have grown more than last month but also more than
was expected by analysts added impetus to the pound which has had
a good run since it approached the psychological 1.50 level at
the end of May. This follows good PMI data for the UK yesterday
and a weak ADP figure from the US which adds even more focus onto
the Non-Farm Payroll data from the US on Friday.
Prime Minster Shinzo Abe today failed to provide
any additional detail on the stimulus which led to traders
heading to safer assets and hence a move from equities, causing
Yen to strengthen against both the Euro and Dollar.
Brazil’s currency is another affected by decisions in government
as they attempt to arrest the recent decline in value by
eliminating a tax on foreign investment which should help the
central bank rein in consumer prices.
Gold futures have been buoyed by poor ADP
figures from the US this afternoon, with the 13:15 figure coming
in short of expectations. The number will support calls for
the continuation of an all-important QE program that tends to
make gold more attractive to investors. Like so many other
markets, traders will look to Friday’s decisive Non-Farm Payrolls
for clues on the Fed’s likely next move.
A big drop in inventories in today’s EIA report helped both
grades of Crude oil higher this afternoon, with
stocks dropping 6.2 million barrels vs expectations of 400k from
analysts. Whispers of a bullish number seem to have
circulated the market prior to the release, with futures rallying
strongly in the half hour prior to the announcement
Corn fell after supply side concerns look to
have been swept aside by a strong harvest from the Northern
Hemisphere. Regardless of late planting due to heavy
rainfall in the U.S, Morgan Stanley have claimed that production
is still likely to hit a record 13.3 billion bushels, a huge hike
after last year’s draughts. Any hole in production from the
late start to the season stateside is likely to be filled by
increased production from Ukraine and Russia.
May
28th
Market Wrap - 28th May
By Michael Hewson CMC Markets
Despite there being very little evidence of a turnaround in
economic fundamentals in Europe we’ve seen a complete about turn
in sentiment after the sharp losses seen at the end of last week
as investors pile back into equity markets on little more than
continued central bank support from the Bank of Japan, and
expectations of future support from the ECB after comments from
ECB member Peter Praet that there was still scope to reduce rates
further.
These gains were given an extra shove this afternoon after better
than expected economic data from the US helped push the
EuroStoxx50 to its best levels since 2011 and the DAX back to
within 30 points of last week’s all-time highs.
Poor consumer confidence data from France and a sharp slide in
German import prices has fuelled expectations of further easing
from the ECB at next week’s rate meeting. While these
expectations of further ECB generosity has helped confidence in
risk assets there is no getting away from the fact that Europe’s
two largest economies continue to diverge away from each other.
Consumer confidence in France sits at its lowest levels since
2008, in complete contrast to Germany where it’s at its highest
levels since September 2007, with no expectation that EU leaders
have any idea of what to do about it.
The gains have been pretty broad based across all sectors with
the notable exception of the basic resource sector which has
lagged behind as concerns about the future trajectory of Chinese
growth weigh down on the miners.
The worst performers have been Evraz (EVZ), Randgold
Resources (RRS), Eurasian Natural Resources (ENRC) and
Anglo American (AAL), as JP Morgan cut the
target prices on a number of the sector.
On the plus side financial stocks are higher with
Barclays (BARC) leading the gainers on
expectations of continued central bank support. Even a downgrade
from Citigroup for Lloyds (LLOY) hasn’t been
enough to prevent the bailed out banks’ shares from having
another good day.
Irish construction firm CRH (CRH) is having a
good day on weekend reports that the Irish government is
considering a €1bn fund to boost the construction sector.
Health care stocks are also doing well led by
GlaxoSmithKline (GSK), higher on a broker
upgrade and AstraZeneca (AZN) whose shares hit
an eleven year high after announcing that it had agreed to buy US
pharmaceutical company Omthera for $323m.
US markets have opened significantly higher today, following in
the wake of Europe’s sharp rebound as well as a better than
expected gain in the Case Shiller housing index for
Q1, showing a gain of 10.2%, above expectations of 9.6%,
and well above the previous 7.25%, to show their biggest
percentage gain since 2006.
US consumer confidence also blew away expectations of a rise to
71.2 coming in at 76.2, its highest levels since 2008, helped in
some part by the recent fall in oil prices.
In company news luxury retailer Tiffany posted
Q1 sales in excess of market expectations helped by rising demand
from Asia, though the gains were tempered slightly by the company
maintaining its full year guidance.
Pharmaceutical stocks helped drive the gains with
Merck and Johnson and Johnson
leading the way.
The Japanese yen has come under pressure once
again after Japanese policymakers reaffirmed their commitment to
managing any potential volatility from the bond markets to ensure
smooth transmission of monetary policy.
The Swiss franc has also slipped back as traders
move back into the commodity currencies of the Australian and New
Zealand dollar as commodity prices rebound from their recent
lows.
The euro has also struggled to rally with any
conviction held back by fears of lower rates, while improving US
economic data has helped underpin the US dollar.
Oil prices have surged on the back of todays’
much better than expected US economic data as both housing data
and consumer confidence rose to multi year highs, as optimism
about economic recovery outweighed any concern about the
possibility of the Fed tapering its asset purchase program. WTI
and Brent prices look set to once again retest their recent range
highs at $98 and $106 respectively.
This improvement in US economic data also manifested itself into
a sharp selloff in both gold and silver prices.
Apr
12th
Market Wrap - 12th April
By Michael Hewson CMC Markets
European markets have struggled to see the week out on a cheery
note, with traders taking a risk-off attitude heading into the
weekend, in a week that will nevertheless go down as another win
for the equity bulls.
In the UK, temperature control specialists Aggreko (AGK
LN) announced earnings this morning that saw the stock
dip early on, before recovering to trade as one of the biggest
gainers on the day as the market digests improved revenues across
the business and a strong order book for 2013. Analysts at
Panmure Gordon saw enough in the numbers to upgrade the stock to
a ‘buy’ recommendation.
Insurer Legal & General (LGEN LN) are
amongst the worst performers after JP Morgan cut their rating on
the stock, citing its lofty valuation. A P/E ratio of 12 doesn’t
look enormously expensive, but with sector peers such as
Aviva (AV. LN) trading on a forward P/E closer
to 7, analysts at the US bank see better value there.
US equities saw a weaker open after worse than expected earnings
releases and more disappointing macroeconomic data.
University of Michigan Consumer Sentiment
although slightly up on the previous month’s reading at 72.3 vs
71.8, was still well short of economists’ forecasts at 79 and
added to bearish sentiment following US retail sales
numbers released before the market opened showing a fall
of 0.4 per cent in March, the biggest drop in 9 months.
Whilst it may still be too early to blame the sequester for the
disappointing numbers, the pattern of weak data following last
week’s big non-farms miss is still yet to trouble equity bulls,
with any short term sell-offs viewed as buying opportunities by
investors who remain only too aware of the enormous safety net
provided by FED and BOJ asset purchasing programmes.
JP Morgan and Wells Fargo stocks were sold-off in early trading
following Q1 earnings releases announced before the opening bell,
with JP Morgan beating estimates of $1.39 per
share with a healthy $1.59 per share but narrowly missing on
revenues, a picture that was echoed in Wells
Fargo’s numbers of $0.88 vs. $0.92 but revenues of $21.3
billion missing estimates by $$0.29 billion
Ashland Inc., the industrial chemicals
specialist was able to buck the market trend with a little help
from some friends at hedge fund Jana Partners,
who revealed owning a 7.5% stake in the company, citing the
possibility of further growth potential for the stock in an SEC
filing.
Infosys Technologies shares were hammered by
investors, with a fifth of the companies value wiped out in the
wake of very disappointing numbers released by the struggling
Indian software firm. A stock familiar with fairly erratic price
swings, these results also follow a difficult 2012 but it was the
lack of any guidance on future earnings that seems to have really
irked investors.
The Dollar has been slightly firmer against the
majority of its major peers today despite a poor retail sales
figure increasing speculation that the Fed will keep the QE
peddle firmly to the floor for now. The major exception to this
has been the Yen, with $/Y bulls booking profits after
yesterday’s failed attempt at the landmark 100 figure.
The Euro traded lower after confirmation today
that Portugal and Ireland have agreed 7 year extensions to the
term of their bailout loans from Eurozone finance ministers.
Today’s lack of risk appetite saw the Kiwi and Scandinavian
currencies comfortably lower, as investors move to safer assets
ahead of the weekend.
Gold continued its recent retreat today, with a
stronger dollar and diminishing safe haven demand leading the
yellow metal to a 10 month low. The next step for gold may prove
decisive, with resistance at the 1530 level having provided
protection for gold bulls on several occasions since last
September, and a clear break lower may spook more buyers into
leaving the table. Gold ETF’s continue to follow a similar
picture, with holdings in the largest fund (SPDR gold trust) now
at the lowest levels since May 2010.
WTI crude gave back most of its gains for the
week. With retail sales missing in the US, and pleads from Cyprus
for more financial aid reminding us of the struggles ahead for
the Eurozone, the global demand outlook remains weak in the short
term. Copper moved lower on concerns that recent
increases in supply will not be matched by Chinese demand, and
Wheat was one of the biggest gainers as cold snaps in both the
U.S and Russia threaten to thwart winter crop yields
Mar
25th
Market Wrap - 25th March
By Michael Hewson CMC Markets
European indices picked up the torch from their Asian
counterparts to start the week in the green this morning, after
weekend negotiations saw a deal agreed in principle to avoid the
collapse of the Cypriot banking system. Full details of the
agreed terms remain sketchy, giving way to equity market weakness
this afternoon, but it appears likely that savers with less than
E100k on deposit will be protected. The fact that such a decision
had to be made at all shows how far we have fallen…
Financials responded positively to the proposed bailout deal, and
fund manager Aberdeen Asset Management (ADN LN)
have seen their stock trade better today as they announced a big
bump in assets under management - up 10% since the end of 2012 as
inflows of new client money hit £3.5bn in the last two months. JP
Morgan have taken a positive view of the stock’s medium term
prospects, recommending that their clients take an overweight
position with a price target of 532p.
With smart phones and their component parts never far from the
front pages of the financial media, ARM Holdings (ARM
LN) rarely escape the gaze of traders and analysts for
long. The recent retreat in the share price represents an
opportunity for value investors to add the stock to their
portfolios – so say analysts at Bank Of America Merrill Lynch,
who reiterated their buy recommendation and promptly sent the
stock to the top of the FTSE 100 leader board.
Mid-cap engineers Kentz (KENZ LN) are also
forging their way higher as traders send the shares better bid on
news of improved full year revenues that fed a strong rise in
pre-tax profits. CEO Christian Brown commented that the future
outlook for the firm continues to be positive, with a strong
order book heading into 2013.
US equities have taken a turn lower this afternoon, appearing to
struggle for direction in the aftermath of the Cyprus bailout
which initially saw futures markets trade positively. Negative
sentiment hasn’t been helped by comments from Jeroen
Dijsselbloem – the Dutch President of the
Eurozone group of finance ministers – who
appeared to suggest bank restructurings may well form the
template for any further bailouts.
Only nine S+P 500 companies are due to report quarterly earnings
this week, yet there is still much speculation around the
all-time closing highs on US indices which remain firmly in
sight.
Dollar General, the discount retailer, announced
Q4 profits ahead of expectations which helped lift the stock
nearly 5% in pre-market trading. Earnings of $0.97 per share were
up from $0.85 last year beating average analyst expectations of
$0.90, and were helped by the company’s focus on selling more
food items and other basics.
Dell was up over 3% in early trading after it
confirmed that it has received two additional offers following
that made by founder Michael Dell last month with private equity
backing from Silver Lake Partners. The newly tabled offers from
Blackstone Group and activist investor Carl
Icahn both come in higher than the original offer in per-share
terms but any outcome is expected to take weeks to materialise.
Also in technology, Microsoft were the subject
of a positive ruling from the International Trade Commission, who
decided that the firm did not violate a patent held by Google in
connection with its Xbox video game system. Despite initially
trading better bid, Microsoft has been dragged lower during the
US morning session.
The Euro slipped back against most of its major
peers today, as a Cypriot lawmaker claimed abandoning the single
currency must be considered. Hurried negotiations continue to try
find terms acceptable to both parties before the hourglass drops
its last grains of sand. The valid argument from
Papadopoulos, the chairman of the parliamentary finance
committee, was that as the country plunges deeper into recession,
and the prospect of growth seems bleak in wake of the impending
upheaval of its banking industry, they need to explore all
possible alternatives. Cyprus’ outcome aside, this whole story
has knocked the confidence of many deposit holders across Europe
that policy makers will struggle to win back.
Sterling neared a six week high against the
Euro, seeing increased safe haven demand as investors took risk
off the table and cut long Euro bets in light of recent events.
The Japanese Yen has sold off as investors
position themselves short ahead of Haruhiko Kuroda’s first policy
meeting as Governor of the BOJ tomorrow. After months
of speculation over the choice for the post and the mandate
handed to the chosen candidate, we will finally get to see if he
lives up to expectations of aggressive measures to end deflation
and spark Japans economy back to life.
Weekend hopes of a Cyprus agreement led to WTI
Oil rising to one-month highs as the worries surrounding
the Eurozone abated in early trade before rearing up to take the
gloss off gains later in the session.
Indications that China may be ready to tackle its inflation
(having reached a 10-month high) through interest-rate increases
have caused Copper to extend its declines as
traders expect a curb in metals demand, together with the fact we
are up to a nine-year high on global copper inventories.
Corn stockpiles however are estimated to be at
their lowest level since 1996 once the next harvest is in,
leading the market to be better bid to start the week.
Mar
15th
Market Wrap - 15th March
By Michael Hewson CMC Markets
Leading the winners board in the UK this morning were
Rentokil (RTO LN), who announced growing sales
across the business in addition to better-than expected cost
savings and a strong start to 2013. The stock is testing the 100p
level for the first time since Spring 2011 – up 10% on the day.
Experiencing contrasting fortunes are shareholders of
Bwin.Party (BPTY LN) who saw their stock fall
aggressively on big volume at the open as the company revised
their outlook for 2013. Revenues have been adversely impacted by
“user experience issues” – particularly concerning given the
strength of online competition in the gaming space.
In Sweden popular fashion retailer H&M saw
their stock offered marginally lower as traders responded to
lower than expected like-for-like sales for the month of
February. The market reaction looks kind relative to the sell-off
in Spanish firm Inditex yesterday despite their impressive
numbers.
Banking stocks have come into focus this morning after both
JP Morgan and Goldman Sachs
came to loggerheads with the Fed over their capital strength last
night – both were warned to revise their adequacy plans by the
end of Q3 this year. Adding to the pressure on JPM stock was the
almost laughable approach taken by former executives at the
‘London Whale’ hearing, with everyone claiming
to have been looking the other way – presumably counting their
multi-million dollar salaries – whilst Bruno Iksil punted away
$6bn of company funds. Unsurprisingly, the bank find themselves
at the bottom of the Dow performers list this morning…
In a more positive banking story, Bank of
America launched a welcome $5bn share buy-back that sees
them top the Dow leader board in early trade.
While acknowledging the fall of Sterling has
helped UK exports since the onset of the financial crisis, Mervyn
King today stressed that policy makers are not actively talking
down the pound. £/$ has fallen nearly 5% since Feb 1st, and many
analysts have highlighted the potential inflationary pressures
that a weak currency brings for a country where the average
basket of goods relies so heavily on imports.
Cable was up as much as 0.3% in response.
The big question for the US Dollar remains if
and when the Fed will begin phasing out its asset purchase
program. CPI figures today came in roughly in line with
forecasts, indicating there is still room for the Fed to push on
with monetary stimulus to try and ensure the recent US recovery
remains firmly on track. This has weighed on the greenback
for much of the day, with E/$ up over 0.4% by mid-afternoon,
aided by Euro strength following progress made by political heads
over a rescue package for Cyprus.
Gold looks set to post another welcome gain this
week, which will make it back to back green candles for the
yellow metal for the first time since January. Demand as a
classic inflationary hedge seems to be picking up and Bullion
refiners claim that physical demand remains strong at these
levels, notably from the far-east. A report released last weekend
shows that Banks have made substantial headway in reducing short
positions in recent weeks, overall short exposure has dropped
from 140k tonnes down to 89k tonnes since last summer.
Other notable movers were Cotton and
Coffee. Cotton surged to an 11 month high
on reports that China will increase imports. Estimates from
the US department of Agriculture have been bumped 1.4% from the
prior month. It was a supply side story for Robusta Coffee
markets, as Vietnam, the world’s largest grower of the bean, may
be forced to cut exports as this years’ harvest is hampered by
drought. Production is tipped to dive as much as 30%, which
would be the lowest since 2006.
Mar
14th
Market Wrap - 14th March
By Michael Hewson CMC Markets
After a couple of days pause Europe’s markets have started to
push higher again, touching four and a half year highs on the
Stoxx600, once again pushing aside concerns about disappointing
European economic data and getting a lift from some positive
earnings stories as well as some vague chatter that EU leaders
may well be preparing some short term measures to promote jobs
and growth.
A continued improvement in US economic data, after another
surprise fall in weekly jobless claims has also helped sentiment.
Amongst the high risers temporary power provider Aggreko
(AGK LN) is the outperformer on the benchmark index
after winning a power supply contract in Mozambique and Namibia.
Also enjoying a boost, despite some disappointing profits numbers
for 2012, is Morrisons (MRW LN) after the
company announced it was in talks with Ocado (OCDO
LN) to create an on-line presence by 2014.
Another positive retail sector story is that of Argos and
Homebase owner Home Retail (HOME LN) which had
until recently been feeling the pinch from a cash strapped
consumer.
The company announced profits above analyst expectations in its
latest trading update, raising its profit forecast for the fiscal
year, with the Argos brand appearing to start to feel the
benefits of the new digital business strategy announced by
management in the middle of last year, when they announced that
they wanted to push into Amazon’s market space.
On the downside the underperformers include mining stocks with
Rio Tinto (RIO LN), Fresnillo (FRES LN) and
BHP Billiton (BLT LN) amongst the worst
decliners as fears about lagging metals prices and Chinese demand
weighed on the sector.
US markets have continued where they left off with the Dow set to
post its 10th successive up day while the S&P500 looks set to
close in on its previous all-time highs at 1,576. Another set of
positive weekly jobless claims coming in at 332k, the lowest
levels in 5 years.
Apple shares are in focus today as its fierce
rival Samsung gets set to launch its latest
Galaxy S4 phone to much fanfare in New York
later today. In a sign that Apple is clearly rattled one of its
senior management criticised its Android competitor for its
so-called shortcomings, in what can only be construed as a sign
of concern that the tide may be shifting away from the iPhone as
Samsung continues to edge away from it in the handset market.
Amazon shares are lower today after being
downgraded by JP Morgan on concerns about a slowdown in its
profit margins
The Australian dollar has been the main
outperformer today after a surprise decline in the unemployment
rate to 5.4% as over 70k new jobs were added in the month of
February. Despite scepticism over the number due to a
“statistical quirk” according to the RBA, markets have pushed out
the likely timing of a rate cut as a result, causing some short
covering.
The pound has also had a good day as well
rebounding back above the $1.50 level on profit taking, and short
covering, reversing some of the declines of recent days. It has
also been helped by some euro weakness after the Bank of Italy
ordered Italian banks to hike their bad loan provisions to
reflect worsening Italian fundamentals, while also ordering them
not to issue dividends.
With Italian bad loans at elevated levels this would seem
sensible advice; however it has weighed on the euro, pushing it
to three month lows against the greenback.
Some of the other reasons cited for the sterling rebound this
afternoon included a story last night about Qatar
investing £10bn in UK infrastructure. Given that this
story is well over 15 hours old it does beg the question why it
took markets so long to price it in.
The Norwegian krona has dropped sharply after
the Norges Bank kept interest rates unchanged, however it was the
tone of the post rate statement which sent the krona sharply
lower as policymakers played down the prospect of imminent
tightening until 2014.
The surprise fall in weekly jobless claims has
seen US oil prices find some support, while Brent
prices appear to be enjoying a bit of a pickup after
hitting 3 month lows yesterday as the April contract rolls off.
Gold prices initially dropped today as the US
dollar continued to gain ground, however demand has remained
fairly well underpinned despite a continued improvement in US
economic data, and this has brought the yellow metal back from
its intraday lows
Nov
8th
Market Wrap - 8th November
By Michael Hewson CMC Markets
In a somewhat mixed session markets have managed to stabilise
somewhat after last night’s Greece austerity
vote and today’s decision by the Bank of
England and the European Central Bank
to leave monetary policy unchanged. Even so despite trading
higher for most of the day markets have struggled to make much in
the way of significant progress and started to slide lower in the
afternoon after a rather downbeat assessment of the European
economy from ECB President Draghi at his monthly press conference
where he stated that growth momentum in 2013 in Europe was likely
to remain weak. The downward momentum was given a helping hand by
comments from an EU official that a Greek aid request could well
be delayed until much later this month.
On the plus side we’ve seen luxury retailer Burberry
(BRBY LN) shares bounce back a little after yesterday’s
sharp sell-off, helped in some part by a price upgrade from
Barclays.
Also doing well is Aviva (AV. LN) after
announcing it is on the brink of selling its underperforming U.S.
business, albeit at a loss. Some upbeat broker comment from
Panmure Gordon has also helped.
On the downside it’s been less rosy with security firm
G4S (GFS LN) coming under pressure after losing
out on a government contract to run Wold prison, with some
speculation that it could well be in some way connected to this
year’s earlier problems surrounding the Olympics contract.
Also under pressure is Eurasian Natural Resources (ENRC
LN) after nine month revenues declined on lower metals
prices. Tate and Lyle (TATE LN) is also lower
after only seeing a small rise in profits with weak trading
environment in Europe weighing.
After its biggest one day fall this year yesterday U.S. markets
opened higher today helped largely by more stable European
markets and last night’s successful Greek vote.
U.S. economic data came in slightly better than
expected with weekly jobless claims coming in at
355k, below expectations of 363k, though these numbers are likely
to have been distorted by hurricane Sandy.
The September trade balance improved to a deficit of $41.5bn
helped in no small part by exports of aircraft and heavy
machinery.
JP Morgan Chase is helping U.S. markets after
announcing that it has been granted permission by the Fed to
buyback $3bn worth of its own stock.
In company news McDonalds reported same store
sales for the month of October as declining 1.8%, as the chain
battles slowing consumer demand.
Apple shares are also attracting attention after
dropping into bear market territory yesterday, as investors begin
to question whether the company can continue to generate profits
at its current levels in the face of increasing competition from
companies like Samsung.
Later on today markets will be paying close attention to earnings
announcements from Walt Disney and
NVidia after the close.
The single currency has once again been amongst the biggest
fallers today after data showed that German exports fell at their
fastest rate in twelve months, highlighting the slowdown
spreading across Europe. Greek unemployment also rose again to
over 25% for August with youth unemployment at an eye-watering
58%, begging the question if it is that high in August, one can
only imagine it must be even higher now. News that EU leaders
look set to delay a Greek aid request once again has also hit the
currency sending it to two month lows against the U.S. dollar.
On the plus side Spain managed to sell €4.76bn worth of new debt
of varying maturities, however the success of this auction makes
it much less likely that Spain will avail itself of a bailout any
time soon given that the success of the auction brings the
country that much closer to being fully funded for 2012.
The pound has moved up a touch by the
decision to leave monetary policy unchanged, however recent data
suggests it could well have been a fairly close decision not to
act.
Amongst the better performers the Australian
dollar has remained fairly resilient given the much
better than expected unemployment numbers that came out overnight
which saw the unemployment rate fall back to 5.4%.
The slightly firmer tone in equity markets today initially
translated across to a firmer tone in oil prices
after yesterday’s sharp sell-off, helped in no small part by the
better than expected U.S. jobless claims and trade numbers,
however as in equity markets upside has been short lived as
prices slipped back.
Copper prices have bounced back slightly after
yesterday’s sell off ahead of tomorrow’s Chinese data for
inflation, retail sales and industrial production for
October. Expectations are for an improvement on retail
sales and industrial production while CPI is expected to remain
at 1.9%.
Oct
12th
Market Wrap - 12th October
By Brenda Kelly (CMC Markets)
A death cross is a technical indicator that
provides confirmation that a major trend change is underway. It
occurs when the 50 day moving average drops below the 200-day
moving average. It confirms the start of a new downtrend and is
the opposite of the more commonly known golden cross.
Back in July, the US Dollar index peaked and
since then, USD and its moving averages have been rolling over.
Today the 50-day and 200-day averages are "Even Steven" but any
further decline from here would generate a death cross, a bearish
signal for USD. The previous golden cross occurred a year ago,
while the last death cross on USD was in September 2010, as
expectations of the QE2 program were building.
There are two trends now undermining USD. First, the greenback
and US treasuries had benefitted earlier this year from huge
inflows of capital from other regions in a flight to safety.
While the global economy is sluggish, for many countries it’s
more of a correction within an expansion than a new recession.
Also, Europe continues to muddle along causing fears of a
financial meltdown to recede as shown by falling treasury yields
for countries like Greece and Spain even though they continue to
struggle with austerity. As fears dissipate, and the US economy
shows signs of life with recent employment numbers, capital is
starting to work its way back out into other markets including
stocks, commodities, resource currencies and European currencies
in a normal rebalancing.
Second, although many countries are easing monetary policy
through interest rate cuts and QE programs, the US QE3 program
appears particularly aggressive with its open ended nature. This
can undermine the value of the greenback against other paper
currencies and particularly against gold and silver.
These broad shifts of capital highlight why stocks, commodities
and precious metals, which had rallied so much and become so
overbought in August and September, have remained well supported
in recent weeks and have essentially consolidated at higher
levels rather than dropping straight back.
With earnings season starting in earnest, and the potential for
developments in Greece and Spain, the next several weeks may
generate a lot of news driven short-term trading opportunities.
It’s important though for traders to avoid getting too caught up
in day to day chatter by stepping back and recognizing the
broader capital flows in order to best take advantage of market
moves.
Economic news
US producer prices were up 2.1% over year last month, more than
the 1.8% street estimate.
China new yuan loans were 623B in September, down from 703B in
August and short of the 700B the street had expected.
Corporate news
Advanced Micro (AMD) put out a profit warning last night,
announcing it expects Q3 revenue to be down 10% from Q2. Previous
guidance was for revenues to come in between a 0.4% decline and a
0.2% increase.
Earnings reports are out from two major banks
today:
JPMorgan Chase JPM $1.40 vs street $1.21
Wells Fargo WFC $0.88 vs street $0.87
North American indices
The Dow Industrials (US30 CFD) is holding 13,300 support for now
as it bounces up from an oversold 4-hour RSI but needs to clear
13,400 in a meaningful way to call off the current
downswing.
The S&P 500 (SPX500 CFD) is up a bit this morning but
remained below trend resistance overnight. It needs to clear
1,445 to call off the current downtrend with next resistance near
1,460 and current support near 1,425.
The S&P/TSX 60 (Toronto60 CFD) remains in the lower half of a
695-715 channel currently flirting with the 700 level
again.
Commodities today
- Copper has fallen back a bit toward the low end of its
$3.70-$3.85/lb trading channel with next support near
$3.65.
- US crude remains nicely supported above $91.50/bbl with
resistance near $93.00, $93.75 and $94.80.
- UK crude has slipped back a bit with narrowing spread with WTI
suggesting political tensions may be easing for now (but could
resurface at any moment). Resistance now near $116.00/bbl with
support near $114.00 then $112.25.
- Gasoline was unable to break $3.10/gallon and has dipped back
under $3.00. A break of $2.96 could signal a deeper downdraft
toward key neckline support near $2.86.
- Natural Gas remains above $3.40/mmbtu, a breakout point that
has become a new support level with measured upside resistance
near $3.60 and $3.80.
- Corn is testing $7.70/bushel, a key support/resistance level
today with next support near $7.40-45 and resistance near $7.70
then $7.92.
- Soybeans was unable to break through $15.90/bushel resistance
and has slumped back toward $15.45 with more support near
$15.20.
- Wheat has slipped back from $8.80/bushel toward $8.65 with more
support near $8.45 following yesterday’s big jump.
FX
- Gold held $1,760/oz support, setting a higher low that keeps
its broader uptrend intact. It has started to work its way higher
toward $1,775 with key resistance in place in the $1,795-$1,800
area.
- Silver has been holding steady near $34.00/oz overnight within
a $33.50-$35.00 trading channel.
- USDCAD continues to bump up against $0.9800 as it tries to
decide whether to break out or resume its downtrend. Lower highs
suggest the primary downtrend remains intact with next support
near $0.9730 then $0.9630.
- EURUSD continue to recover, trading near $1.2975 with next
resistance near $1.3000 and $1.3075 and support near $1.2950 and
$1.2920.
- GBPUSD continues to claw back lost ground, advancing on $1.6100
today with next resistance on trend near $1.6200 and support near
$1.6050.
- USDJPY is holding in the upper half of a 77.00 to 79.00 trading
range.
- AUDUSD stalled short of $1.0285 and has dropped back a bit with
support near $1.0230 then $1.0200.
Oct
8th
Pre Market Commentary - 8th October
By Brenda Kelly (CMC Markets)
The response to the US jobs figures released to close out the
week seems to have been determined based on political
predispositions. This is unfortunate. The weakness in the US
economy has not been helped by political point scoring and even
while there is no shortage of negatives to keep taking from the
job situation it’s sad that there can be no celebration of
heading in the right direction – even superficially.
Ahead this week the Q3 earnings are released in
the US with companies like Chevron early on in
the piece and JP Morgan, Wells Fargo and
Citi later on in the week. There has been a lot
of negative commentary about expectations for this earnings
season. While this may be founded on negative expectations for
the US economy the market isn’t nearly as bearish. The US market
has climbed solidly in recent times and in the last week was
higher on 4 of the last 5 sessions. This is not the action of a
market bailing out.
For today though, early signs seem to suggest weakness ahead.
S&P 500 futures are struggling around recent highs and have
sold-off from the highs seen earlier on during the Asian session.
Importantly given the momentum of recent months there is plenty
of room for the S&P to manoeuvre without seeing any sort of
break in the trend.
Austerity seems to be the buzzword again in Europe with a heavy
focus on the outlook for Spain. This is one of these frustrating
items where the market gets the financial release one day (from
the ECB) and the associated political fallout over the following
weeks. Despite the rationalisations of austerity I think the fear
for Spain is that they will be forced into a position where, like
Greece, they have to try and save their way out of debt. The
track record for this isn’t great.
Not all in Europe is as it seems though. There has been a
technical breakout on Spanish 10 year
bond yields to the downside which doesn’t point to
growing concerns. When yields are falling there is clearly demand
growing for the bonds which isn’t the theme of terror.
At the same time the EURUSD has been on the up and up in recent
sessions. There has been a recent retest of the 200 day moving
average which has been respected so I remain bullish while this
is the case.
GBPUSD like the wider currency world us been
under pressure since the open today. Price has retraced to the
outside of the volatility bands (+1.25 SD of 200 day MA) so may
find support around these levels. I think much of a dip below the
recent lows (1.6067) may see a reversion to the 200 day moving
average. This would not come as any surprise to those who have
watched the pound languish in a broad trading range since late
last year.
Gold prices too have been under pressure during
the Asian session with the strength in the USD telling. The
expectation for higher gold prices has been palpable and I think
it seems set to grow. However, even with a bullish outlook it
doesn’t mean that the trader can simply leap in at any time. I
like to use the +1.25 standard deviation of the 50 day moving
average to gauge short term momentum and currently price is
sliding below this level. This doesn’t mean price is capitulating
but is certainly blowing off some steam.
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