May 22ndMichael Hewson CMC Markets
After trading for most of the day in or around break even European markets went on another ramp higher as Fed Chairman reiterated comments from senior FOMC voting members that reinforced the prospect that we remain quite some way from the likelihood of an imminent program of the Fed adjusting the pace of their current stimulus program. His comments in prepared remarks that “premature tightening risks slowing or ending the recovery” sent the DAX to new record highs and the FTSE100 ever closer to its all-time highs at 6,950.
These comments would appear to have knocked any talk of tapering on the head for the time being, or at least until the next set of good payroll numbers, where we will no doubt go through this particular dance again.
In the Q&A to Congress the Fed Chairman didn’t really offered anything particularly insightful over and above what we already know. The US economic recovery remains uneven.
The best performers today have included the partially state owned banks of Royal Bank of Scotland (RBS) and Lloyds Banking Group (LLOY) after the new UK financial regulation authority gave the two banks are clean bill of health with respect to their respective capital positions.
Also doing well Chilean copper miner Antofagasta (ANTO) is a top riser as copper prices enjoy a positive session hitting their highest levels in over a month. Anglo American (AAL) is also enjoying somewhat of a rebound after coming to an agreement with trade unions over job cut measures at Amplatts, its South African platinum operation.
On the downside chip maker and Apple supplier ARM Holdings (ARM) is on the slide as investors wake up to the fairly high valuation the company has, and the demand outlook and headwinds in attempting to maintain that valuation.
US markets opened higher ahead of the latest testimony of Fed Chairman Ben Bernanke to Congress on the outlook for the US economy.
As far as earnings are concerned the picture continues to remain mixed with general retailer Target reporting a 29% fall in profits for Q1 while revenues also fell back as well. Expectations had been for profits of $0.95c a share, but came in at $0.77c. The company also lowered its full year guidance for 2013.
Sliding same store sales in the US and Europe also hit Staples numbers as profits came in below expectations for Q1, as the company absorbed a 9.2% decline in revenues.
DIY retailer Lowe’s also appeared to be feeling the pinch as it reported a rise in Q1 earnings of 2.5%, and revenues that came in inline. Market expectations had been somewhat higher though.
On the currencies front the euro initially outperformed largely as a result of some negative sentiment surrounding the US dollar and the pound.
The pound suffered after retail sales for April slid sharply by 1.3%, well below expectations though this is likely to have been as a result of the unseasonably cold weather and the fact that Easter was in March this year. Food sales were also lower for the same reasons while public sector borrowing came in at £8bn, better than expected and an improvement on the £12.6bn in March.
The MPC minutes didn’t contain any surprises with the 6-3 split to hold pat on current QE remaining intact, while the weakness in the pound suggests that the markets are betting that we could well see this split start to move towards a looser monetary policy.
The US dollar has enjoyed a turbulent afternoon dropping sharply initially after Fed chairman Bernanke’s testimony to Congress as he reiterated that the risks to an early end to stimulus were too great and risked derailing the recovery. His response to Q&A though saw these gains reverse as he refused to rule out the possibility of tapering asset purchases this year if the labour market were to improve.
The Japanese yen has continued its slide hitting multi year lows against the euro, and the US dollar pushing above the previous levels above the 103.20 level against the US dollar.
The Swiss franc also slid sharply after Swiss National Bank chief Jordan reiterated the central banks openness to raising the ceiling on the EURCHF rate while also keeping the option of negative rates on the table. There was nothing new in any of this but it does highlight the determination of the SNB to keep a lid on the franc.
Gold and silver prices initially continued their rebounds after this week’s earlier sharp sell-off as market participants try to second guess what will come out from Bernanke and the latest Fed minutes later today. Gold briefly poked its head above the $1,400 level in the wake of the post Bernanke prepared remarks, but slid back sharply in response to the Q&A response that suggested we could see tapering as early as this year.
Oil prices on the other hand continue to be weighed down by concerns about economic growth and rising inventories, after the American Petroleum Institute reported a fourth straight week of rises. Rising China stockpiles have also weighed on Brent prices.
Apr 24thMichael Hewson CMC Markets
Given recent data misses out of Germany it wasn’t too much of a surprise to see the latest IFO indicators go the same way, and miss by some distance. Unsurprisingly, given the reaction to yesterday’s poor data equity markets remained unfazed, concentrating on the prospects next week of an ECB rate cut as a host of investment banks proceeded to move their predictions of a cut from the June decision to next week’s May meeting.
It doesn’t seem that long ago when the then CEO of Citigroup, Chuck Prince stated that “as long as the music is playing then you have to get up and dance, and we’re still dancing” and markets certainly seem to be taking that view, as bad data becomes the catalyst for further stock market gains, on the premise that central banks will continue to prime the money pump. The fact that an ECB rate cut will have little or no effect is being conveniently ignored for now.
Company results continue to come in mixed with Barclays (BARC LN) announcing a 25% fall in pre-tax profits in the first quarter as restructuring costs weighed on profitability.
Lloyds Banking Group (LLOY LN) was faring slightly better after announcing the collapse of its program to sell a number of branches to the Co-op leaving the option of a flotation as the only viable alternative.
The worst performers have largely been ex-dividend stocks with Legal and General (LGEN LN), Rolls Royce (RR. LN), Centrica (CNA LN) and Aggreko (AGK LN).
Amongst the better performers has been Standard Life (SL. LN) which saw funds under management increase in the first quarter.
The mining sector has also enjoyed somewhat of a rebound after making three year lows yesterday on the back of slightly firmer copper and gold prices with Fresnillo (FRES LN) and Rio Tinto (RIO LN) leading the moves higher.
US markets got a bit of a jolt in pre-market trading from a horrid durable goods number for March which showed a drop of 1.4% in the core number and a drop in 5.7% including transportation, much worse than expected. This along with all the other weak data is likely to put paid to talk of asset tapering in the short term, and quickly saw markets regain their poise.
Disappointment with Apple’s earnings numbers have seen the stock open lower as markets price in lower profit expectations and the news that any new products aren’t likely to be seen until the autumn.
In other company news Boeing has shrugged off its Dreamliner woes by beating estimates on both revenues and profits by quite some distance.
Also beating estimates this morning we’ve seen US carmaker Ford come in higher on both measures as have Proctor and Gamble.
Despite a shockingly poor IFO number and rising speculation of an ECB rate cut the euro has remained remarkably resilient, despite hitting a two week low just above its 200 day MA. A number of investment banks have revised their estimates for a reduction from June to May, next week.
The US durable goods miss has tempered US dollar gains as market participants speculate that this could well push back the likelihood of further consideration of tapering of asset purchases at next week’s FOMC meeting.
The pound, despite continued poor economic data continues to remain remarkably resilient after this morning’s announcement from the BOE of the extension of the funding for lending scheme into 2015.
Despite much softer than expected inflation numbers the Australian dollar has remained quite well supported as weaker US data offsets the prospect of the possibility of a rate cut.
The New Zealand dollar has outperformed today after the RBNZ left rates unchanged, despite warning of the effects the high value of the dollar was having on its exports.
Continued poor economic data along with speculation about further easy money has helped gold and silver prices continue their recent rehabilitation.
Oil prices have been trading broadly higher despite disappointing German and US economic data. A slightly lower than expected rise in inventories has also helped while the positive moves in equity markets have served to limit the downside.
Copper prices have enjoyed a bit of a rebound after hitting their lowest levels since October 2011 yesterday
Nov 27thMichael Hewson CMC Markets
Today's gains in equity markets on the back of last night's so called Greek deal have been tempered by uncertainty about how the buyback will be financed and questions surrounding the numbers with respect to debt sustainability.
Another factor that hasn't helped is the fact that the OECD downgraded its growth projections for 31 of its 34 members refocussing market attention back on the small matter of the toxic effect the European crisis continues to have on global growth prospects, and particularly growth prospects in the Euro area.
The reality is this agreement has more to do with the politics of German Chancellor Angela Merkel getting re-elected next year, rather than helping the Greek economy back on to its feet, and as such the perception remains that this deal is merely delaying the inevitable once again. EU officials continue to rule out any talk of debt restructuring, despite it being plain to everyone that it remains the only way forward. There was some ambiguity about looking at further measures if and when Greece returned to a surplus position, but the idea was left hanging.
As far as the FTSE is concerned the biggest gainers are state owned banks Royal Bank of Scotland (RBS LN) and Lloyds Banking Group (LLOY LN) on the back of some positive broker comment and ratings upgrades from UBS and Barclays Capital, while Barclays (BARC LN) own shares have bounced back after yesterday's sharp falls.
Other gainers include computer chip maker ARM Holdings (ARM LN) which continues to benefit from a series of positive broker updates over the past few days, while outsourcing specialist Capita (CPI LN) jumped up the leader board after announcing it was preferred bidder on an £85m a year deal with Staffordshire County Council.
On the downside it's a pretty mixed bag lead by Pearsons (PSON LN), while Aberdeen Asset Management (ADN LN) is sliding after being on the wrong end of a downgrade from Citigroup, despite posting market beating results yesterday.
U.S. markets opened slightly lower this morning and have struggled to make gains despite better than expected economic data across the board. Consumer confidence rose to a four year high in November post Obama's re-election and despite the after effects of Hurricane Sandy. Durable goods for October came in flat, better than an expected 0.7% decline, however this was somewhat offset by a revision lower for September from 9.8% to 9.2%.
U.S. home prices also rose in September for the sixth month in a row according to the Case-Shiller index.
Despite all this positivity markets remain concerned about the differences between Republicans and Democrats in acting quickly enough to resolve the looming fiscal cliff of tax rises and spending cuts.
The U.S. dollar has had one of its better days, somewhat surprisingly given that last night's so called Greek deal should have translated into a risk-on day. The fact that it hasn't suggests that widespread scepticism remains about the sustainability of the latest solution and the single currency has slid back from its highest levels in four weeks. This morning's comments by Dallas Fed Richard Fisher about the sustainability of loose fiscal policies have also boosted the dollar.
The Scandinavian currencies have borne the brunt of today's losses with the Swedish krona the worst performer after a survey of consumer and business confidence showed a decline in optimism about the state of economic growth in Sweden.
The pound has outperformed after the latest GDP numbers confirmed growth of 1% in Q3 with a surprise jump in exports, outweighing a decline in imports seeing the UK post a trade surplus for the first time in quite some time.
Crude oil prices have struggled to gain much in the way of traction today despite the latest Greek deal. Concerns about the level of further demand continue to weigh in the upside after today's OECD growth downgrades; while expectations are for a build in inventories when tomorrow's storage numbers are released.
Gold prices have also slid back as the U.S. dollar has rebounded, heading back towards support just below the $1,740 level, hindered by this morning's rather hawkish comments from Dallas Fed's Fisher.
Oct 2ndMichael Hewson CMC Markets
After initially starting the day on the back foot, after ratings agency Moody's dismissed the Spanish stress tests European markets have pulled back from the lows of the day on the back of a rebound in resource stocks on the back of this morning's Australian rate cut which is seen more likely to benefit the miners and basic resource stocks.
Markets are also becoming more sanguine about the likelihood of a Spanish bailout as Spanish bond yields continue to fall back in anticipation of a bailout request in the coming days.
Today's grim unemployment numbers from Spain have also reinforced the inevitability of a Spanish bailout request, with some talk that a request could come this weekend, however the Spanish PM has denied this, further creating uncertainty and confusion.
This uncertainty and confusion is undoubtedly behind ratings agency Moody’s decision to delay an announcement on their ratings decision until later this month, though if they are waiting for a Rajoy decision in the coming days they might want take a seat and sit down.
The only unknown remains one of timing with investors rotating capital back into equities pushing them back towards the top end of their recent ranges. On the plus side engineering group Babcock's (BAB LN) is near the top of the index after announcing that it was trading in line with market expectations.
Also trading higher British Airways owner International Consolidated Airlines (IAG LN) is higher on expectations that Qatar Airways will be joining the OneWorld Alliance, replacing Qantas which announced last month it was ending its relationship with BA to pursue one with Emirates.
On the downside, both Royal Bank of Scotland (RBS LN) and Lloyds (LLOY LN) have underperformed after UBS cut its price targets on the state owned lenders citing increased regulatory burdens which will impact negatively on their future profitability.
Despite a late sell off from the highs last night U.S. markets opened higher after car maker Chrysler reported September sales well above expectations, and the best sales in five years, rising 12%.
It wasn't exactly good news across the industry with Ford missing estimates, dropping 0.1% in September, below expectations of a 2% rise. General Motors also posted sales that missed expectations rising 1.5%, below expectations of 1.9%.
Even allowing for slightly more positive data out of the U.S. with New York ISM coming in slightly better than expected upside momentum is being tempered by the mixed messages coming out of Europe, and particularly Spain, where continued indecision is keeping investors cautious.
JP Morgan is likely to be in focus after the announcement that the bank is being sued for allegedly defrauding investors by the New York attorney general.
After this morning's unexpected rate cut by the Reserve Bank of Australia the Australian dollar has been the worst performer, slipping sharply against the New Zealand dollar as well as the euro. Expectations of another rate cut before the end of the year hasn't helped in this respect.
The Euro has continued to remain fairly well underpinned as Spanish bond yields once again slip back, the 10 year down 13 points on the day, even as Spanish unemployment jumped by 79k in September, well above expectations. The view being, that the worse the data the more likely that a bailout will come, sooner rather than later.
The pound has remained under pressure after construction PMI for September came in below expectations, raising concerns that the recent recovery in activity in Q3 could well be short-lived. Coming on the back of yesterday's disappointing manufacturing report attention will now turn to tomorrow's services PMI data, which could also disappoint as consumers retrench after August's surprise rise.
Oil prices have remained becalmed today, as economic data continues to perplex and surprise in equal measure. A positive New York ISM following on the heels from yesterday's manufacturing ISM has been tempered ahead of tomorrow's US private jobs data and disappointing European employment data.
Gold prices remain near the top end of their recent ranges, helped in no small part by this morning's Australian rate cut, as a reminder to all that central banks will continue to indulge in tit for tat easing measures. The $1,790 level remains a key resistance level in the short term.
Sep 18thMichael Hewson CMC Markets
Europe’s markets continue to weaken on the back of continued uncertainty as to whether Spain will ask for a sovereign bailout. It would appear that the drop in yields has encouraged Spanish politicians to try and tough it out, but the numbers aren’t good. This morning’s news that distressed loans increased in July to 9.86% to around €170bn, suggests that Spanish banks are going to need a whole lot more than the €100bn set aside for their banking bailout.
The concern remains that continued prevarication will send bond yields higher again, with attention now turning to this Thursday’s 10 year auction of €4.5bn. While today’s 12 and 18 month T-bill auction sold its full allotment, yields around 3% for such short term paper still remain unrealistically high.
There was some slightly better news on the economic data front after German ZEW sentiment data improved more than expected, coming in at -18.2, better than the -20.2 expected. This wasn’t too much of a surprise given last week’s events with respect to the German court decision, the ratification of which put a very messy outcome to one side. It would have been a surprise if there hadn’t been some form of rebound, but now we need to see if it can be sustained.
For now markets are continuing to re-evaluate and absorb the effect unlimited easing will have against a backdrop of deteriorating economic fundamentals. Financials are taking a bit of a beating with insurance company Aviva (AV. LN) leading the decliners after a broker downgrade from BOA and Deutsche Bank. Also lower are Royal Bank of Scotland (RBS LN) and Lloyds (LLOY LN) with RBS on the end of some downbeat broker comment from Investec.
GKN (GKN LN) also hit the wall today sliding back after European new car sales data slid sharply in August by 8.9%, well above expectations. In recent weeks tobacco stocks have been absolutely smoked on fears about lower revenues, however it seems Nomura thinks they have fallen far enough. The broker upgraded its price targets for both Imperial Tobacco (IMT LN) and British American Tobacco (BATS LN).
Vodafone (VOD LN) shares are also making a bit of a comeback, having declined about 8% in the past month, on concerns about a tax bill on its Indian operations.
U.S. markets have opened on the back foot this morning on the back of softer European markets; however earnings news hasn’t exactly helped either. Financials, as in Europe have led the falls with Bank of America leading the declines.
Courier company FedEx, a key bellwether of the U.S. economy, downgraded its latest earnings outlook citing a worsening global economy.
Brokers continue to remain bullish on Apple’s future earnings as they continue to slide their estimates ever higher with Bank of America raising its price target $850.
U.S. housing data did provide some encouragement with the latest NAHB rising by more than expected to 40, from 37 in August.
The Swedish krona has been the major gainer today after Riksbank deputy governor Ekholm said it would be “highly unlikely” that the central bank would intervene in the markets to weaken the krona. Having just cut interest rates to 1.25% earlier this month it stands to reason that another cut is probably quiet some distance away.
The New Zealand dollar has also had a good day largely due to significant buying against the Australian dollar, after the RBA raised concerns about the high level of the Aussie and was slightly more dovish than the markets expected.
The single currency has been the major faller today, having failed to move towards 1.3200 as traders’ book some profits after the gains of recent days. Firmer Spanish bond yields have filtered through and prompted a more cautious approach.
The pound has had a rather mixed day after inflation data for August came in pretty much as expected, showing a monthly rise of 0.5%, while the year on year measure slipped back slightly to 2.5%. The pound has lost ground against the Swedish krona, but gained ground against the euro.
The sudden sharp decline in crude oil prices late last night in New York remains a mystery today; however the fact is that a slowing growth outlook is never a particularly good environment for crude prices, given that a rise in prices merely exacerbates economic problems. For that reason the decision to embark on unlimited bond purchases remains a risky one on the part of the Fed. Speculation about a possible release of reserves from the SPR remains on the table according to U.S. government officials. In any case even if plans were imminent U.S. officials are unlikely to sell into a rising market, and releasing reserves two months before an election would undoubtedly raise political questions. Be that as it may, oil prices are a little bit weaker today with U.S. prices slightly heavier than Brent prices.
Gold and silver prices continue to benefit from a weaker U.S. dollar and the prospect of continued easing on the part of the Federal Reserve after a Fed official said the bank would be running flat out in its efforts to boost the economy. A host of bullish gold notes from a number of investment banks has also helped underpin sentiment in the gold price.
Aug 21stMichael Hewson CMC Markets
Markets continued their slow low volume move higher today on reports that Germany might be persuaded to grant some concessions to Greece. Meanwhile speculation that the ECB may well be minded to go against the Bundesbank in capping bond yields has also helped underpin equity markets.
It would appear that the prospect of further central bank intervention, no matter how unlikely, is continuing to drive what capital there is into equities as the preferred asset of choice.
The biggest gainers today have been the in the basic resources space with Vedanta Resources (VED LN) and Anglo American (AAL LN) leading the sector higher, on reports that Chinese leaders remained ready to embark on further stimulus measures in the coming months.
Barclays (BARC LN) was helping the banking sector higher after announcing that it was looking at integrating its ABSA operations in Africa into its core business. Sector peers RBS (RBS LN) and Lloyds (LLOY LN) were also posting solid gains.
On the downside, defensive sectors have underperformed with utilities falling back led by Centrica (CNA LN) while the worst performer is supermarket group Morrisons (MRW LN).
U.S. markets opened higher this morning with the S&P500 hitting its highest levels since 2008 on expectations of better U.S. economic data later this week. Tomorrow’s FOMC minutes are also likely to reiterate the likelihood that the Fed remains committed to an ultra-loose monetary policy and stands ready to act if the data should falter.
In company news, Apple shares continue to post new highs as expectations remain high that a significant product launch is in the offing. It also raises the possibility that the market could well be lining itself up for a significant disappointment, if Apple fails to deliver.
Electronics retailer Best Buy is also in the news after the company reported a fall in same store sales at the same time as suspending its guidance.
The U.S. dollar has slid sharply today as once again hopes have risen that the ECB will take steps at its next meeting to address the issues of high borrowing costs for countries like Spain and Italy. Reports that Germany might be agreeable to an easing of Greece’s bailout terms along with a fairly successful Spanish T-bill auction has helped the single currency push above 1.2400 for the first time since early July.
Unfortunately, this also raises the prospect of enormous disappointment in the event the ECB fail to deliver, which seems likely.
Also rising against the U.S. dollar are the commodity currencies the Australian dollar which, though higher, has lagged despite the strong rally in the mining sector on the hopes for Chinese stimulus, suggesting that maybe the Aussie is starting to look a little overpriced.
The pound has had a mixed session slipping against the single currency after UK public finances data for July saw a deficit of £0.6bn, confounding expectations of a £3bn repayment in what is traditionally a strong month for tax revenues. The fall in tax revenues suggests that the Chancellor will find it almost impossible to meet his finance targets for 2012 and increase calls for further measures to stimulate economic growth.
Commodity prices have rallied sharply today across the board, with the Reuters CRB almost matching its May highs as both grains and metals prices rally in unison. Corn and wheat prices have resumed their upward trajectory as has soymeal, which, if it continues will have significant risks to inflationary pressures going forward.
Crude oil prices have jumped sharply today on rising hopes that Europe’s policymakers are getting ready with the first baby steps towards a credible response towards easing tensions in the European sovereign debt crisis. The weaker U.S. dollar has also helped drive gains on the margins, but the bigger concern remains that the continued increasing price of oil, in a low growth environment will choke off any prospect of a recovery in the European economy. The only question remains around what price point, demand destruction kicks in.
Gold prices have also benefitted from the weaker U.S. dollar, as well as rising speculation of further central bank loosening, hitting its highest levels since May and getting within touching distance of its 200 day MA at $1,644, after breaking above trend line resistance at $1,624 from the June highs.
Copper prices have also risen sharply on the Chinese stimulus speculation, hitting their highest levels in a month.
Aug 16thMichael Hewson CMC Markets
It's been another slow and mixed holiday trading session in Europe. Markets continue to tread water in the vacuum of no new developments in the Eurozone debt crisis, while the ability of the U.S. to post continued mixed economic data reports just about keeps the wheels on the QE train.
Commodity stocks have led the gainers on the FTSE despite continued evidence of a slowing Chinese economy.
Data released this morning that showed Foreign Direct Investment in China dropping to a two year low would, under ordinary circumstances, be treated as a negative given that it suggests that investors are pulling back over concerns about falling economic growth. This has been turned into a positive, following recent comment from Chinese PM Wen Jiabao that he sees growing room for further monetary policy action. This has seen mining stocks lead gainers with Vedanta (VED LN), Anglo American (AAL LN) and Kazakhmys (KAZ LN) pushing higher.
The best performer in London has been Lloyds Banking Group (LLOY LN) after announced the sale of £1bn worth of private equity assets to investment group Coller Capital.
On the downside, insurance group Prudential (PRU LN) is lagging after having its target price downgraded by Nomura, on the basis that the company is overvalued at current levels. Eurasian Natural Resources (ENRC LN) has continued its declines from yesterday after seeing UBS downgrade its target price for the stock in the wake of its disappointing results yesterday.
After benefitting from sector takeover chatter yesterday water utility Pennon Group (PNN LN) is also amongst the losers, ahead of an interim management statement tomorrow.
U.S. markets opened mixed today as once again economic data shows a mixed picture of the U.S. economy. Weekly jobless claims continue to trade near the middle of their recent range at 366k, while building permits jumped sharply in July by 8.6%, well above expectations, however housing starts fell by more than expected, by 1.1%.
In the wake of yesterday's miss on Empire Manufacturing, today's Philadelphia Fed index also missed expectations for August coming in at -7.1, recovering from last month's -12.9, but not by as much analysts had hoped.
Companies in focus include technology bellwether Cisco Systems who posted profits above expectations, after the bell last night, while revenues also came in higher than expected.
Facebook shares are also once again in the spotlight as the lockup period on share sales expires and the shares once again plumb new lows. Video games maker Electronic Arts is another mover, pushing higher on the back of bid speculation.
Currency markets remain stuck in their ranges with the main gainers being the Swiss franc and the euro, both pushing higher. Spanish bond yields continue to fall on speculation that the Spanish government is on the brink of getting the first tranche of its banking bailout, which in turn has led to a slightly bid bias in the single currency against the U.S. dollar.
The pound has had a good day as well after UK retail sales data showed a 0.3% gain in July and a sharp upward revision in June from 0.1% to 0.8% which suggests that we could well see a significant upward revision to Q2 GDP next week, given that last week we saw that the construction component was also overstated.
The U.S. dollar has hit its highest levels in over a month against the yen as US 10 year yields push back to levels since early May on the back of speculation that further easing measures might be some way off. This has seen bonds sell off, which in turn pushes yields higher, however some still cling to the belief that the Fed will ease policy at their September meeting. Today's economic data has kept that option just about on the table as the US dollar slips back, however the commodity currencies don't appear to be buying it, as they underperform the rest of the FX market.
Gold prices continue to find support despite a report today showing that demand has fallen sharply over the last quarter, raising speculation that we could see further falls. This seems unlikely given that the yellow metal is trading in a range for now. The lack of any significant price movement in itself is not that significant given that historically gold has a tendency to drift for quite some time before then embarking on its next move. Over the last 12 years gold has never had two negative quarters in a calendar year, and demand over the next two quarters looks likely to remain fairly robust due to seasonal buying from India as well as concerns about the economic outlook in Europe and Asia, and the likelihood of further stimulus measures.
Brent crude prices continue to defy gravity, more on the basis of geopolitical concerns than demand concerns. Israel's threat to attack Iran has certainly helped underpin prices widening the premium over WTI to $20 again.
U.S. prices are also edging higher despite the mixed economic data from the U.S., hitting $95 a barrel for the first time since May.
Jul 19thMichael Hewson CMC Markets
European markets are once again focussing on the micro and less on the macro as company results continue to come in ahead of expectations. It should also be said that it’s easier to beat expectations when they continually get downgraded, with a common theme of companies lowering their outlooks being overlooked for now.
In any case, markets have the bit between their teeth with tech stocks leading the way higher in the wake of strong showings from chip makers ASML and Intel late in the U.S. while IBM also raised its earnings target for 2012. ARM Holdings (ARM LN) is a key beneficiary today of this particular tech bounce, while mining stocks have also pushed higher as a sector.
Other big gainers today include luxury retailer Burberry (BRBY LN) on a read across, after sector peer Hermes reported better than expected Q2 sales due to strong demand from Asia. Banking stocks are having a better day with Barclays (BARC LN) and Lloyds (LLOY LN) higher, as Lloyds finally agrees a deal with the Co-op to sell 600 or so branches for a knock down £350m.
On the downside, energy giant BG Group (BG. LN) is having a difficult day after being downgraded by Credit Suisse on the back of its exposure to Brazil and the slowing growth story there. Other underperformers include B&Q owner Kingfisher (KGF LN) as demand for outdoor products was hit by the awful weather seen so far this year. Other retail stocks also blamed the weather for their woes but were holding up for an Olympic boost in the coming weeks.
Mobile telecoms giant Vodafone (VOD LN) also slid lower in the afternoon session after its U.S. partner Verizon reported Q2 numbers in line with estimates.
U.S. markets opened higher this morning on the back of better than expected reporting from a number of different companies.
Investors are choosing to focus on the positive numbers and set aside the more disappointing figures. For example, Morgan Stanley posted poor numbers for its latest quarter missing on EPS and revenues. The company blamed a decline in trading revenues. Expectations for banks tend to be on the low side of expectations
Auction site eBay also buoyed investor sentiment by announcing a doubling of its net income, due to an increase in PayPal business. Revenue jumped from $0.22c a share to $0.53c a share.
IBM did disappoint on the revenue side, but it did maintain its guidance for 2012, and its profits held up for the latest quarter.
On the economic data front weekly jobless claims jumped sharply from 352k to 386k, well above expectations of 365k. On the manufacturing side the Philadelphia Fed survey for July came in at -12.9 missing expectations of -8.8, while existing home sales plunged 5.4% in June, despite expectations of a 1.5% rise.
Despite these data misses markets will no doubt interpret this as bringing forward the day the Fed is forced to ease again.
The U.S. dollar has been hit across the board today as markets speculate on further easing from the Federal Reserve and the Chinese government.
As a result the biggest gainer has been the Australian dollar rising to 11 week highs, also helped by a story that the Bundesbank is looking to buy Australian assets.in Q3.
The Pound has also shown surprising resilience even though retail sales for June slipped back to 0.1%, well below expectations of a rise of 0.6%. Against the euro the pound has once again made new highs to close in on the 0.7800 level.
A weak Spanish bond auction once again weighed on the Euro as yields increased and demand fell through the floor. A bid to cover drop on 2 year bonds from 4.3 to 1.9 illustrates perfectly the lack of confidence markets have in Spain’s finances. Even so, an admission by Spain’s budget minister Montoro that the government had no money won’t have helped. As a result Spanish 10 year bond yields are once again above the 7% level despite the latest Spanish banking bailout likely to be approved in the German parliament. Italy’s parliament despite the political problems in the country also ratified the ESM and fiscal pact.
Crude oil prices have once again continued their advances on the back of the more positive tone in equity markets. Today’s disappointing U.S. economic data has done nothing to diminish the positive bias. If anything it has supported it on the basis that it makes further easing more likely.
Tensions in Syria and the Middle East continue to underpin Brent prices, while belligerent comments from Israel’s Netanyahu towards Iran have helped to push prices back to pre EU Summit levels..
Agricultural commodities also remain in the spotlight with soybean prices hitting record levels as the worst drought since 1956 raises fears of inflation in the form of higher food prices. Corn prices have also hit their highest levels since 2008 with no signs of any break in the weather, to help hold down prices.
Jun 28thMichael Hewson CMC Markets
Against the backdrop of the EU Summit, good news has been hard to find on the economic front. German unemployment edged higher in June, while UK GDP showed a bigger contraction in Q4 than originally estimated, while Italy managed to sell 5 and 10 year bonds at the highest yields since December.
Sentiment hasn’t been helped by another scandal plaguing the banking sector with respect to LIBOR manipulation as investigations begin to extend to the rest of the European banking sector. The likelihood is that other banks could well become embroiled in the controversy given that Barclays (BARC LN) would have been unlikely to pull off anything like this on their own. This has hit share prices hard as investors fear further regulatory burdens on the beleaguered sector.
At one point Barclays shares were down 17%, while Royal Bank of Scotland (RBS LN) and Lloyds (LLOY LN) were also being hit hard.
Whilst all this has been going on, regular side briefings from un-named EU officials have suggested that the bailout funds could well be used for direct bond buying purposes something that Berlin has been opposed to without strict conditionality. Markets appear to be shrugging this off given the fact it would be no more than another band aid.
Basic resource stocks are also lower with Polymetal (POLY LN) and Evraz (EVZ LN) getting pummelled after being on the receiving end of some broker downgrades. Good news stories have been hard to find today but BSkyB (BSY LN) shares are holding up after major shareholder News Corp announced plans to splits its entertainment and publishing divisions. Temporary power provider Aggreko (AGK LN) is also higher after being on the end of a broker upgrade.
U.S. markets opened lower this morning taking their cues from the negative sentiment in Europe.
Economic data didn’t offer much in the way of comfort with the latest revision of U.S. Q1 GDP staying unchanged at 1.9%, while weekly jobless claims came in at 386k, down from a revised 392k.
Building on the banking story in Europe news that JP Morgan’s London Whale trading loss could grow to as much as $9bn is weighing on the share price with questions continuing to be asked about Jamie Dimon’s role in the affair.
News Corp also confirmed recent speculation that it would be splitting the company in two with the entertainment business on the one hand and the publishing business on the other.
News Corp also confirmed recent speculation that it would be splitting the company in two with the entertainment business on the one hand and the publishing business on the other.
In earnings news low cost retailer Family Dollar reported Q3 earnings growth of $1.06c a share below expectations of $1.07c. After the bell the latest earnings reports for Nike and Accenture are also due.
Once again the U.S. dollar has been the currency of choice today with the biggest decliners being the commodity currencies of the Canadian, New Zealand and Australian dollar as fears about the economic outlook throughout the globe weigh on demand for the raw materials that these countries produce.
The Pound has also slid sharply after GDP data showed that the economic contraction in Q4 was much deeper than estimated, while business investment was also shown to have grown by much less than expected. These figures in turn increase the likelihood that the Bank of England will ease monetary policy further at next week’s rate meeting.
The Euro has also had another poor day sliding against the U.S. dollar after German unemployment came in higher than expected for June, while an Italian bond auction came in rather mixed with higher yields on the 5 and 10 year.
Gold and silver prices have slid sharply today as investors jump into the relative safe haven of the greenback.
Crude oil prices have remained under pressure today as economic data continues to disappoint as investors grow more downbeat about the economic outlook across the world.
We had a jump in German unemployment numbers while U.S. weekly jobless claims continue to remain elevated.
Jun 22ndMichael Hewson CMC Markets
European markets have struggled to reverse the late sell-off in New York trading last night but have managed to recover off their lowest levels of the day.
While Italian and Spanish markets look set to finish the day higher the bigger European markets have been unable to reverse the declines after opening significantly lower. Given the declines seen in the last couple of days, it is important to note that both the DAX and the FTSE still look set to finish the week higher.
The widely expected downgrades of European and U.S. banks by Moody's appears to have been largely shrugged off with banking shares in London with Lloyds (LLOY LN) and RBS (RBS LN), who were both downgraded by one notch amongst the main gainers. The easing of collateral rules by the European Central Bank to include a wider range of assets also helped the rebound in banks, as they widened the type of collateral to auto loans, consumer finance and other mortgage backed securities, in a sign of increasing stresses in the funding markets.
Defensive sectors have outperformed, with health care stocks doing well with Shire (SHP LN) and GlaxoSmithKline (GSK LN) amongst the gainers while BT Group (BT.A LN) has led the telecoms sector higher.
The main focus of markets away from the banks remains on the lack of any good economic news after the latest German IFO Business confidence data dropped to a two year low of 105.30. As such the biggest fallers have been in the sectors most exposed to the economic cycle, with basic resource, mining and oil services stocks the biggest drags, led by Petrofac (PFC LN) and Fresnillo (FRES LN).
Carnival Cruise Lines (CCL LN) has also had a disappointing day after admitting that it had to discount heavily to tempt passengers back on board after the Costa Concordia tragedy.
After last night's large sell-off U.S. markets have bounced back strongly with financials leading the way in a classic case of sell the rumour, buy the fact. With no economic data of note out today stocks are trading fairly lightly on low week end volumes.
Other stocks in focus include video game maker Electronic Arts after it was downgraded to "neutral" by Citigroup.
Microsoft is also in the news after announcing it is considering making its own smartphone.
The U.S. dollar has pulled back some ground after yesterday's strong rally falling back against most of the major currencies, after yesterday's strong up move.
Today's meeting of European leaders Merkel, Hollande, Monti and Rajoy, in Rome resulted in all the usual platitudes about the irreversibility of the euro and the need for growth and fiscal responsibility, but was unsurprisingly short on specifics.
There was agreement on a growth package of €130bn, or 1% of euro GDP, which would be discussed at next week's EU summit, but it was light on detail.
All this chatter has seen the Euro recover some ground and helped Spanish bond yields continue their recent slide lower, declining four successive days in a row.
The Japanese yen has continued to weaken on expectations that the Bank of Japan could well take further steps to weaken monetary policy.
Crude oil prices have bounced back after yesterday's sharp falls with Brent rebounding from one year lows of $88.50 and US prices from 9 month lows of $77.50. The reversal has coincided with the firmer tone in US markets; however prices still look set to post a fairly significant loss on the week.
Gold prices have remained in the doldrums after yesterday's sharp falls saw the yellow metal retest this month's lows.
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