CFDs

Archive for the ‘CFDS – Forex Trading’


European Indices Remain Under Pressure on Multitude of Negative Concerns 0

Posted on April 08, 2014 by Frankie Lawson

European indices are under pressure again on Tuesday, while US futures are currently treading water with the S&P down 2 points, the Dow down 13 points and the NASDAQ down 1 point.

There’s a clear lack of appetite for risk among traders at the moment and there’s plenty of things you could blame this on.

It could be the underwhelming data from the US, the Fed’s ongoing tapering, the flare up in Donetsk, the slowdown in China, the overvaluation of certain parts of the stock market or the low expectations as we head into another corporate earnings season.

To be fair, any of these would be a legitimate reason for traders to be a little risk averse.

The problem we have on top of this is that there’s very little to be positive about.

We had a whole host of economic data and announcements last week that could have given investors a reason to be more optimistic but there was nothing that blew us away.

The US jobs report on Friday showed a good number of jobs created in March but coming off the back of three poor months, it needed to be much better.

Stocks Await Alcoa Results

The European Central Bank could have been the catalyst that spurred the next push higher in stocks, but once again the central bank opted to hold off, despite inflation now running at 0.5%.

Instead, all we now have to look forward to is a mediocre earnings season for US shares and hopefully a gradual improvement in the economic outlook.

Alcoa gets earnings season underway today, reporting its first quarter earnings after the opening bell.

The aluminium giant, formerly a constituent of the Dow 30, may no longer be viewed as a bellwether for the stock market or the economy, it is the first major company that reports earnings and people still monitor this for an indication of how the earnings season is shaping up.

This week is looking pretty quiet from an economic data perspective, with today offering very little that would ordinarily have much impact on the markets.

Sterling Rallies on Manufacturing and Production Figures

The only notable release left today is the UK NIESR GDP estimate for the previous three months, which on this occasion is the first quarter of the year.

This is therefore the first estimate we’ll get of GDP growth in the quarter so can have a greater market impact.

As long as the number is roughly in line with that of the last six months, 0.7-0.8%, I think traders will be fairly pleased.

Anything above could lift expectations ahead of the first official release.

The data released already this morning has actually be quite positive, although you can only really see that reflected in the pound, with the FTSE currently down 0.7%.

The pound on the other hand responded very positively to the manufacturing and industrial production figures, which were significantly better than expected on both a monthly and yearly basis.

Given that this industry was previously viewed as a weak point for the UK, with the country overly reliant on its services industry, this is very encouraging.

The Bank of Japan meeting overnight was something of a non-event, with the central bank holding off on announcing an increase to its quantitative easing program.

There had been suggestions that the BoJ could act in anticipation of an economic slowdown in response to last week’s sales tax hike, but that never materialised.

Instead the tone of the press conference after suggested that the central bank will wait until the third quarter before acting, which would give them a chance to see what impact the tax has on the data and whether there’s a risk of the country falling into recession, as it did the last time the tax was raised.

 
CFDs, margined forex and financial spread trading are leveraged products. They carry a high level of risk to your fund. It is possible to lose more than your initial capital outlay with these products and they may not be suitable for all investors, do ensure that you fully understand the risks involved, seek independent financial advice if necessary.

Content by Alpari. This content should not be construed in any circumstances as a recommendation or solicitation of any offer to buy or recommendation or offer to sell any security or other financial instrument.

Equities Gain on Declining Ukraine Tensions and Chance of Loosening Chinese Monetary Policy 0

Posted on March 26, 2014 by Frankie Lawson

As concerns over a conflict between the West and Russia continue to ease, US economic data improves and the prospect of looser monetary policy from the ECB and the PBOC rises, investors appear willing to take on a little more risk.

This improved risk appetite is benefiting stock markets as we head into the middle of the week.

US indices are currently seen opening higher for a second day, with the S&P up 5 points, the Dow up 59 points and the Nasdaq up 20 points.

The biggest factor here has to be the lack of action taken against Russia by the G7 this week, even though the US is due to meet with NATO and its EU partners today.

Clearly the Western governments are far more concerned about the impact of sanctions on their own economies than Russia is and it seems their attention has, as a result, turned to discouraging Russia from invading any other parts of the Ukraine, rather than forcing it into negotiations on Crimea.

This is potentially a dangerous stance from the West, but that is not a worry to investors right now as they enjoy this brief period of lower uncertainty.

Of course it can flare up again at any time but right now there is nothing to suggest this is going to be the case.

Loose Monetary Policy from China and the ECB?

Aiding this improved investor sentiment is reports that the People’s Bank of China is planning to loosen monetary policy, potentially through a cut to the reserve requirement ratio.

This chance in stance from the PBOC is clearly an attempt to paper over the cracks that have become apparent since the government began its transition from an export driven model to one focused more on domestic consumption.

While this could lead to further problems down the road, which is has attempted to prevent with its tight monetary policy approach over the last year, it’s become clear that the economy is at risk of growing much slower than was initially expected and something must be done.

The monetary stance of the European Central Bank also appears to be softening, as evident by the comments made by Jens Weidmann yesterday.

Weidmann is the President of the Bundesbank and arguably the most hawkish member of the ECB governing council.

His claim yesterday that ECB purchasing bank assets to fight deflation is an option, is therefore very dovish and would suggest the central bank is finally seriously considering using unconventional tools as they grow more concerned about falling inflation.

Looser monetary policy from central banks tends to be positive for financial markets so this double whammy is unsurprisingly being well received by investors.

Especially as is comes at a time when the Bank of Japan is believed to be considering loosening monetary policy further.

US Consumer Confidence and 6-Year High

US economic data is another thing that’s been encouraging over the last couple of weeks. While it hasn’t blown us away, the improvement has certainly been there.

Perhaps this could be seen as confirmation that the weather did in fact play a significant role in the deterioration in the figures during the winter months.

Of course only the data in the next couple of months can confirm this but what we’ve seen recently has been encouraging.

Yesterday’s consumer confidence number was particularly encouraging, rising to a six year high of 82.3 for March.

Given how important the consumer is for the US economy, this is extremely positive and should hopefully be reflected in a number of data releases in the coming months, most notably retail sales.

Today is looking a little quieter on the economic data front, with attention being firmly on durable goods orders and the preliminary reading of the March services PMI.

Both of these can be very good economic indicators and therefore attract a lot of attention and have the potential to move markets.

The services sector is responsible for more than two thirds of US output and therefore the PMI reading can be a very good indicator of future activity and therefore growth.

Durable goods on the other hand provide excellent insight into longer term investment of companies and individuals.

Durable goods are seen as those that last for three years or more, if companies and individuals are investing in these, it would suggest they’re confident in the long term economic health of the economy.

Both the services PMI and the durable goods orders are expected to improve in March and February, respectively, which is very encouraging for the US economy heading into the second quarter.

 
CFDs, margined forex and financial spread trading are leveraged products. They carry a high level of risk to your fund. It is possible to lose more than your initial capital outlay with these products and they may not be suitable for all investors, do ensure that you fully understand the risks involved, seek independent financial advice if necessary.

Content by Alpari. This content should not be construed in any circumstances as a recommendation or solicitation of any offer to buy or recommendation or offer to sell any security or other financial instrument.

CFDs Move Lower After Janet Yellen Brings Interest Rate Hike Expectations Nearer 0

Posted on March 20, 2014 by Frankie Lawson

Both European indices and US futures have been moving lower following yesterday’s announcement from Janet Yellen that brings expectations of interest rate hikes closer to home.

The continuation of asset purchase tapering was largely expected, trimming bond-buying by another $10 billion to $55 billion per month.

However, it was the particularly hawkish comments from Yellen which took CFD markets by surprise, bringing the US dollar bulls back to the table and caused the US markets to pull back sharply.

Yellen Gives Herself More Room for Manoeuvre

Whilst the announcement that rates would be likely to start rising ‘around six months’ after asset purchases, this is not necessarily anything too new in terms of a timeline seen by many.

As expected, an element of ‘forward guidance’ has been implemented, citing the requirement for rates to remain in place as long as projected inflation remains well below the 2% Federal target, along with ‘a wide range of information’.

This gives Yellen substantially more leeway than Bernanke in her decision of when rates should rise, bringing an element of uncertainty despite her fairly stark prediction of a six month lag between the end of asset purchases and the beginning of interest rate hikes.

Thus whilst yesterday marked the beginning of a new Yellen Fed, it seemed to also mark the end to the transparency seen under Bernanke by signing away the so-called ‘Evans rule’ which attached distinct thresholds to interest rate guidance.

Fed Continues Tapering

The decision by the Fed to taper asset purchases was certainly no surprise, given the predictable eagerness of the Fed to show that they are set on a strong path of asset purchase reductions despite a weakening in key jobs data.

Whilst poor non-farm payroll figures were previously attributed to adverse weather conditions seen in December and January, the February figure could not utilise that same reasoning and thus the decision by the Fed is notable for the fact that it comes despite clear deterioration in key jobs data.

However, the decision to taper now sets a marker, meaning that we know that as long as payrolls do not push lower than 175k levels and unemployment remains at or below 6.7%, then we are likely to see a continuation of the current pace of asset purchase reductions.

Based upon the current trajectory, we are likely to thus see a taper in the 6 remaining meetings within 2014, bringing an end to QE in December 2014.

Ultimately, I believe that despite Yellen deciding to express a possible six month timeline, the imposition of more vague quantitative guidance means we more emphasis will be placed upon qualitative guidance going forward.

New Zealand Growth Slows Down

Overnight, the release of growth data out of New Zealand showed a slowdown in the region, with Q4 2013 coming in at an underwhelming 0.9% along with the Q3 figure being revised lower to 1.2%.

This comes amid a period of expansion for the economy, where the recent interest rate hike shows an emphasis upon the inherent growth within the economy without the need for monetary stimulus.

This brings about a possibility that the RBNZ has moved a little too early in their policy decision earlier this month and will likely impact decision making going forward.

Despite this clear slowdown in the rate of growth, the announcement came with a bullish outlook for exports, which rebounded strongly in Q4.

However, it is notable that dairy exports have been suffering, given that this sector is highly dependant upon the Chinese market which has been slowing significantly.

Looking ahead, the US future point towards a negative open, with S&P 500 -8 and the DJIA -44 and NASDAQ -12 points.

 
CFDs, margined forex and financial spread trading are leveraged products. They carry a high level of risk to your fund. It is possible to lose more than your initial capital outlay with these products and they may not be suitable for all investors, do ensure that you fully understand the risks involved, seek independent financial advice if necessary.

Content by Alpari. This content should not be construed in any circumstances as a recommendation or solicitation of any offer to buy or recommendation or offer to sell any security or other financial instrument.

American Futures See Cautious Gains Ahead of FOMC Tapering Decision 0

Posted on March 19, 2014 by Frankie Lawson

American futures are pointing slightly higher on Wednesday, although not very much highlighting a clear an element of caution being adopted ahead of the FOMC decision and press conference.

Ahead of the opening bell on Wall Street, the S&P is expected to open 1 point higher, the Dow 13 points higher and the Nasdaq 2 points higher.

Caution ahead of the FOMC decision is perfectly normal and the only times we don’t see it tends to be when nothing interesting is expected from the central bank.

Of course that has rarely been the case in recent years but the perfect recent example of that is the Bank of England, who’s rate and asset purchase decisions have become something of a non-event.

BoE Minutes Have Little Impact

Even the minutes, which were released earlier on today, got very little response from the markets, with sterling move a fifth of a cent against the dollar before settling.

This is largely due to the fact that the UK economy is performing very well and inflation is coming down.

Therefore, the central bank is showing no willingness to change anything, either through rate hikes and cutting asset purchases, or additional monetary easing.

The BoE has communicated this very clearly and has even adopted a more subjected forward guidance which hasn’t created any uncertainty at this stage.

This may be the route that the Federal Reserve is headed for under the leadership of Janet Yellen.

FOMC Meeting and Tapering

The FOMC is determined to continue its gradual tapering of asset purchases, with the idea of ending the program altogether later this year.

Once this has been completed, I imagine the meetings will become less of an event for the markets as we’ve seen with the BoE, as long as the economy doesn’t falter again of course.

Today’s meeting though is likely to be a little more eventful.

Not because of uncertainty surrounding whether the Fed will taper, as it has in previous months, the market is pretty much convinced that another $10 billion reduction will be announced.

The caution being seen ahead of today’s meeting is related to the new economic forecasts that Yellen will deliver, during her first press conference as Fed Chair, and the expected amendment to the Fed’s forward guidance on interest rates which I believe will bring it more in line with the BoE.

As it stands, the FOMC has committed to maintaining low interest rates well beyond the point when unemployment falls below 6.5%.

This is wearing a little thin with unemployment currently being at 6.7%.

Yellen is expected to announce later that the FOMC will use a variety of economic indicators when making their decision going forward while providing assurances than no rate hike is likely for some time yet.

Regardless of what is expected to happen, expectations have been very wrong in the past, especially when it comes to predicting what the Fed will do so I expect this cautious approach to continue from now until the press conference.

The rest of the day is offering very little from a US perspective.

 
CFDs, margined forex and financial spread trading are leveraged products. They carry a high level of risk to your fund. It is possible to lose more than your initial capital outlay with these products and they may not be suitable for all investors, do ensure that you fully understand the risks involved, seek independent financial advice if necessary.

Content by CMC Markets. This content should not be construed in any circumstances as a recommendation or solicitation of any offer to buy or recommendation or offer to sell any security or other financial instrument.

FTSE 100 CFDs Break Resistance as UK Retail Sales Show Signs of Strain 0

Posted on February 21, 2014 by Frankie Lawson

US stock futures are pointing higher today in what would be the second consecutive day in the green following on from a strong Asian session.

This comes against the backdrop of a particularly bullish day for European markets, with the CAC currently testing a 5 year high at 4365 and the FTSE 100 breaking to the highest level since May 2013.

US futures are indicating the S&P 500 will open +1, DJIA +13 points, and NASDAQ +2 points.

It is the DJIA move which takes much of the headlines as markets try to put the conspiracy theorists ideas of a parallel between 1928/29 and 2013/14 to bed.

Such a parallel would place us at the beginning of a more protracted bear trend.

This notion will possibly only be fully allayed with the creation of a new swing high above 16200 which would also take out a key level of resistance.

Bank of Japan Minutes Raise Concerns

Overnight, the Bank of Japan released the minutes from their last monetary policy meeting.

Markets had low expectations regarding this release given the somewhat stable nature of their recent rise back into growth and positive inflation.

However, the minutes showed that there were concerns regarding the pace of the current recovery seen in the region, a view which resonates with many who fail to see how Abe and Kuroda can achieve their targeted 2% inflation within the two years originally speculated.

To some this meant a possible requirement to hike up the rate of asset purchases as a means to drive both growth and inflation, especially ahead of the sales tax hike in April.

That being said, the minutes showed members had few worries regarding the ability of the Japanese economy to cope with the new sales tax rate given that consumption appears to be ‘front loaded’ ahead of such a rise.

UK Retail Sales Drip Lower

The main focus of the European session has been driven by the UK, where the release of the retail sales figure drew increased attention following the updated ‘forward guidance 2.0′.

Retail sales has always been key as a determinant of where the economy is going given that it reflects both current and future expectations for the everyday person from an employment, wage growth and inflation standpoint.

For this reason, retail sales can be seen as both quantitative (how much are people buying) and qualitative (what are expectations of future conditions).

However, it was the inclusion of consumption within Mark Carney’s newly enhanced forward guidance policy which has brought this measure to a head, providing markets with a new range of indicators to look out in addition to the CPI and unemployment rates.

However, with unemployment and inflation closer to target, there will now be increased focus upon the likes of earnings growth and consumption as a driver of market volatility.

The retail sales release was ultimately somewhat disappointing, falling -1.5% from December to January.

On an annualised basis, sales did rise by 4.3% compared to last year, yet this too fell short of market expectations.

Given that potential interest rate increases are now in part reliant upon consumption, the rise in the likes of the FTSE 100 shows that possibly the association between central bank behaviour and markets is not weakening as seemed to be the case.

The shift back towards a scenario where markets take data on face value could perhaps take a little longer.

With the rise of unemployment seen this week, poor retail sales growth and a inflation/wage growth differential that means real earnings continue to fall, it is easy to see that an interest rate hike could still be some way off.

That being said, signs are pointing towards a positive trend for all these measures on the whole and with the inflation rate not finally below 2%, the BoE is likely to be in no rush to begin tightening monetary policy anytime soon.

 
CFDs, margined forex and financial spread trading are leveraged products. They carry a high level of risk to your fund. It is possible to lose more than your initial capital outlay with these products and they may not be suitable for all investors, do ensure that you fully understand the risks involved, seek independent financial advice if necessary.

Content by Alpari. This content should not be construed in any circumstances as a recommendation or solicitation of any offer to buy or recommendation or offer to sell any security or other financial instrument.

Sterling Weakens on Falling Inflation Data but FTSE 100 Maintains Strength 0

Posted on February 18, 2014 by Frankie Lawson

American indices are expected to open relatively unchanged on Tuesday following the long weekend in the US.

The S&P is seen starting 3 points lower at 1,835, whilst the Dow is predicted to open 7 points lower at 16,147 and the Nasdaq 8 points lower at 3,655.

The markets were relatively quiet on Monday which isn’t uncommon during a US bank holiday.

The lower trading volumes were not helped by a severe lack of catalysts, with the Asian and European sessions offering very little direction for the markets, either with economic data or earnings.

There’s been more to speak about on the economic data front this morning though, with UK inflation data bringing about some weakness in sterling.

Sterling Slips as CPI Falls

The CPI figure for January fell to 1.9%, from 2% in December, which is a positive thing for now as it is comfortably within the Bank of England’s target of around 2%.

However, we did see some selling in sterling as falling inflation makes it less likely that the BoE will hike interest rates later this year, something that some analysts have been predicting will happen and that had driven the pound higher.

While this is negative for sterling, it is very good for the UK economy as it means there’s less chance of the recovery being choked off by a premature rate hike and it continues to close the gap between wage growth and the cost of living.

Poor ZEW Survey Hits European Stocks

The ZEW economic sentiment figures for Germany and the Eurozone were not so good, with both falling well below expectations and the German figure recording its second monthly decline.

This has weighed on investor sentiment this morning, pushing European indices lower, with the Euro STOXX 600 and the CAC down around 0.5% and the DAX lower by 0.2%.

The FTSE 100 isn’t holding up too bad, trading 0.02% lower, boosted slightly by that inflation reading.

The first day of the week for the US is likely to be a quiet one, with very little economic data being released and little direction coming from Europe.

The only notable release today is the Empire State manufacturing index which is expected to fall to 9 in February, from 12.51 the month before.

 
CFDs, margined forex and financial spread trading are leveraged products. They carry a high level of risk to your fund. It is possible to lose more than your initial capital outlay with these products and they may not be suitable for all investors, do ensure that you fully understand the risks involved, seek independent financial advice if necessary.

Content by Alpari. This content should not be construed in any circumstances as a recommendation or solicitation of any offer to buy or recommendation or offer to sell any security or other financial instrument.

American Stocks Slide as Uncertainty Over US Unemployment Remains in Focus 0

Posted on February 05, 2014 by Frankie Lawson

There’s a few important pieces of economic data being released on Wednesday, one of which could provide important insight into how the US labour market performed in January ahead of Friday’s jobs report.

That figure is the ADP non-farm employment change, a measure of employment growth in the private sector, which has been designed to act as an estimate of Friday’s non-farm payrolls figure.

In theory, this should remove a lot of the uncertainty in the markets this week, which has been partly driven by a very disappointing jobs report for December.

However, I’m not convinced that it will.

Last month’s ADP release, in particular, highlighted just how inaccurate this figure can be as an estimate of job creation in the US as a whole.

Especially the first reading, which tends to prompt the biggest reaction in the stock markets.

While the ADP release today may still get a small reaction, traders are likely to take it with a pinch of salt.

Therefore, the uncertainty that has led to so much risk aversion in the markets is likely to continue until at least Friday.

US Services Sector

There are other figures being released that may prompt more of a reaction from traders, such as the two services PMIs, the official and the ISM readings.

The services sector is hugely important for the US economy, accounting for more than two thirds of output.

Both of these figures are expected to show an improvement in sentiment in the services sector, with the final reading of the official PMI rising to 56.6 and the ISM rising to 53.7.

This would be very encouraging for the US, given that a lot of the data for December and January has been hit by the poor weather conditions during those months.

Figures in line with these forecasts would suggest that this is not impacting sentiment and that the rest of the data should improve as the weather improves in the coming months.

Whether this will be enough to encouraging investors to be less risk averse remains to be seen, but it would certainly be encouraging.

US Housing Market

We will also get another look at how the housing market is doing when the MBA mortgage applications figure is released for the final week of the month.

The housing market was seen as a key driver behind the recovery in the US last year but, unsurprisingly, the numbers haven’t been that great in recent months as rates rose in anticipation of Fed tapering.

What we need now is for the market to stabilise, as potential buyers become used to the higher rates, before continuing to support the recovery.

This has been difficult in December and January due to the poor weather in the US, but hopefully this will improve in the coming weeks and months.

European PMI Figures

European markets this morning are trading higher despite data being relatively mixed.

Services PMIs in Spain, Italy and France were all better than expected, although the two latter remained below the key 50 level that separates growth from contraction.

However, the drop in the German services PMI clearly weighed on the overall Eurozone figure, leaving it below analyst expectations and but still higher than in December.

While overall this seems mostly positive, what wasn’t so good was the retail sales figures for December.

These fell by 1.6% from November’s surprisingly strong reading, which was also revised lower, resulting in a yearly drop of 1%.

This could be due to people in the Eurozone getting ready for the holiday season earlier than normal in order to spread the cost during such tight financial times.

Sterling Slides on Weaker UK Services Number

The reaction to the UK services PMI also wasn’t great despite the number remaining at very high levels of 58.3.

This was below expectations and represented the third consecutive monthly decline in the number, raising fears over whether the pace of the UK recovery is sustainable, or whether it is likely to slow in the coming quarters.

Sterling sold off aggressively in response to the number following an initial spike.

Ahead of the open we expect to see the S&P down 8 points, Dow down 58 points and the NASDAQ down 17 points.

 
CFDs, margined forex and financial spread trading are leveraged products. They carry a high level of risk to your fund. It is possible to lose more than your initial capital outlay with these products and they may not be suitable for all investors, do ensure that you fully understand the risks involved, seek independent financial advice if necessary.

Content by Alpari. This content should not be construed in any circumstances as a recommendation or solicitation of any offer to buy or recommendation or offer to sell any security or other financial instrument.

How will the ECB React as Eurozone Deflation Risk Returns? 0

Posted on January 31, 2014 by Frankie Lawson

The risk of deflation in the Eurozone has become a hot topic again this morning after the Eurozone CPI was seen falling back to 0.7%.

This is the level that prompted the ECB to cut interest rates to record lows of 0.25% back in November, and therefore speculation will be rife about how they will respond at the meeting next week.

The problem the ECB now faces is that any interest rate cut to, say, 0.1%, will probably have minimal impact, which means they will be forced to consider more unconventional measures.

Will the ECB Use Unconventional Monetary Policy?

The options that have been discussed at previous meetings include negative deposit rates, with the rate currently standing at 0%, and forward guidance, which the ECB attempted last year and proved to be very unsuccessful due to the lack of any form of threshold.

The central bank policy makers appear very reluctant to fully adopt either of these options which should make next week’s decision all the more interesting.

Other options that the ECB may consider include another round of long term refinancing operations (LTRO’s), although many have raised doubts about whether this would address the real issue.

Quantitative easing is one that has been successful in other countries, but I feel this would be more of a last resort than a likely option at an upcoming meeting.

On the bright side, Eurozone unemployment was lower at 12%, with the November reading also revised down to this level.

Unemployment stabilised over the last year following its relentless rise to record levels prior to this.

The fact that we’re finally seeing this number come down, albeit slowly, is a sign that the Eurozone is turning a corner.

Although I’m sure there’s still plenty of countries that aren’t seeing this yet.

US Economic Releases

The focus for the rest of the day will remain on economic data, with fewer companies reporting fourth quarter earnings on Friday.

We have a number of releases which will be of interest to traders today, with particular focus on the consumer.

The UoM consumer confidence figure is expected to be revised higher to 81 from 80.4, which will be music to the ears of those hoping for a strong recovery in the US this year.

It will also ease concerns about consumer spending levels in January, which has been another poor month on the weather front, a potential deterrent for shoppers.

Even if this has had an impact on consumer spending, a good consumer sentiment figure would suggest that these are one-off figures and things should improve in the coming months.

Shortly before this, we’ll have the release of the December personal spending figure, which is expected to fall to 0.3%.

Anything above this would further ease concerns about falling consumer spending.

Also being released today is the core personal consumption expenditure index, the Fed’s preferred measure of inflation.

This is unlikely to have much impact on the online CFD markets though as it is expected to remain at low levels of 1.1%.

Finally we have the January Chicago PMI, which is seen remaining relatively unchanged at 59.

Ahead of the open we expect to see the S&P down 17 points, Dow down 146 points and the NASDAQ down 32 points.

 
CFDs, margined forex and financial spread trading are leveraged products. They carry a high level of risk to your fund. It is possible to lose more than your initial capital outlay with these products and they may not be suitable for all investors, do ensure that you fully understand the risks involved, seek independent financial advice if necessary.

Content by Alpari. This content should not be construed in any circumstances as a recommendation or solicitation of any offer to buy or recommendation or offer to sell any security or other financial instrument.

Sterling Rallies as Tumbling Unemployment Data Points to Rate Hike 0

Posted on January 22, 2014 by Frankie Lawson

Corporate earnings are going to be a key driver in the financial markets again on Wednesday, as investors continue to look for evidence that the economic recovery will continue this year.

So far the fourth quarter earnings season has been very similar to the last few, but with one key difference.

The period of ultra low interest rates appears to be coming to an end as the Fed winds down its quantitative easing program and passes the baton to US companies to carry on the recovery.

US Companies Continue to Cut Costs

We’re seeing little evidence of this so far, with companies continuing to report higher earnings driven largely by cost-cutting.

While it is important for companies to improve productivity at times like these in order to ensure they remain profitable, we also need to see improvements to the top line in order for this earnings growth to be sustainable.

At the same time, we need to see companies investing in order to drive this future earnings growth, which is something we’re not seeing enough of at the moment.

This doesn’t exactly fill me with hope, although we do know that companies are sitting on large cash piles so that offers some comfort.

Surely it’s only a matter of time until some of that cash is invested in order to generate future earnings growth.

Consumer sentiment is improving, along with other aspects of the economy and the economies of other nations.

There’s no longer any reason to hold back.

In terms of US economic releases, it’s been a very slow week so far.

Of course there was no data released on Monday as the markets closed for Martin Luther King Day, but yesterday and today hasn’t been much better.

Things should pick up tomorrow though, with jobless claims, manufacturing and housing data all being released.

Unemployment Data Shows Up Forward Guidance

So far this morning the focus has been on the UK, where we had the release of the Bank of England minutes and the unemployment data for November.

There was no real surprised in the minutes, with the MPC clearly reluctant to change the unemployment threshold linked to its forward guidance.

It did highlight that it doesn’t need to raise interest rates if the threshold is hit soon, but with unemployment falling to 7.1% in November, that isn’t going to reassure anyone.

The fact of the matter is, the forward guidance hasn’t worked because the BoE was wildly inaccurate with its unemployment forecasts and has since been very inflexible with the unemployment threshold.

At the very least it should take a page out of the Fed’s book and say rates won’t be raised until well after the threshold is hit, especially given that inflation is currently in line with its 2% target.

If this doesn’t happen, sterling will continue to rally strongly against the other currencies, as traders price in an interest rate hike earlier than was previously expected.

This could be damaging for UK exports at a time when the manufacturing industry is only just recovering.

Ahead of the open we expect to see the S&P down 1 point, Dow down 30 points and the NASDAQ up 1 point.

 
CFDs, margined forex and financial spread trading are leveraged products. They carry a high level of risk to your fund. It is possible to lose more than your initial capital outlay with these products and they may not be suitable for all investors, do ensure that you fully understand the risks involved, seek independent financial advice if necessary.

Content by Alpari. This content should not be construed in any circumstances as a recommendation or solicitation of any offer to buy or recommendation or offer to sell any security or other financial instrument.

Improving US Data Sees Caution Ahead of NFP as CFD Traders Fear Tapering 0

Posted on December 06, 2013 by Frankie Lawson

It’s been a very quiet start to the European session on Friday, which is hardly surprising considering that one of the biggest US jobs reports this year will be released shortly before the opening bell in the US.

Up to about a month ago, most investors had written off the possibility that the Fed could taper its asset purchases at the December meeting, following an apparent change of heart from them in September, a government shutdown that lasted almost three weeks and a near-default from the US on its debt.

It was difficult to know what kind of impact this would have on the economic data and many thought it would be at least a few months until we saw it cleansed of the temporary distortion that it would bring.

That was not the case though and the data we’ve seen so far for October and November has suggested that the economy preformed very well throughout, and after, the shutdown.

In fact, it improved on the months leading up to it.

Improving Jobs Data May Encourage Tapering

The most important figures of these though, as far as the Fed is concerned, are the ones contained in the US jobs report.

The October report was far better than all expectations, as 204,000 jobs were created and unemployment rose only marginally to 7.3%, which will be entirely due to the furloughed government workers that have since returned to work.

If we see a similar performance in the November jobs report today, I believe the Fed will seriously consider a small reduction in asset purchases at the next meeting in two weeks time.

And I’m sure I’m not alone in that thinking.

All you have to do it look at the activity in gold, US Treasuries and indices this week when we’ve seen positive US data to see that traders are hedging more against a possible taper.

And this will become even more priced in today if we see another strong jobs report.

Revisions Add to the Picture

It’s not just November’s figures that we need to pay attention to though.

The revisions to past non-farm payrolls figures are also extremely important, as it’s only because these were revised higher last month that we’re even talking about the possibility of a taper this month.

If we see a strong figure for November, but previous figures are revised lower, the Fed’s decision will be made much harder and it may suggest to them that the evidence isn’t there to suggest that the recovery is sustainable.

Unemployment and Participation Rates

A number of other parts of the jobs report will also play into the Fed’s decision next month, for example the unemployment rate.

The rate itself can be deceiving, however the participation rate that has impacted it a lot in the last year could tell us a lot about people’s view on the recovery in the US.

If people are continuing to drop out of the labour market, it means they have no faith in the recovery.

This is not what the Fed wanted when it set its unemployment thresholds last year.

Personal spending and income is also important as it gives an indication about whether the recovery is being driven by Americans spending more because of improved earnings, which is sustainable, or by running up more debt, which isn’t.

Also we have the core personal consumption expenditure index, the Fed’s preferred measure of inflation, which is expected to show inflation falling slightly to 1.1%, well below its 2% target.

Ahead of the open we expect to see the S&P up 7 points, Dow up 65 points and the NASDAQ up 15 points.

 
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