An Unchanged FOMC Asset Purchase Decision Could Boost the USD/JPY Market
Posted on | June 19, 2013 | No Comments
Since late January, we maintained the Fed would not alter its monthly shopping list of $85bn in treasuries and agency securities this year.
But no matter how certain we might be of this assessment, it is the path towards this conclusion, which matters most and yet remains cloudy. All roads may lead to “Rome”, but the exact path shall remain volatile (subject to data, reporters’ articles and Fed speeches/interviews).
Considering Fed Chairman Bernanke’s accommodation of the financial markets since QE1 in March 2009, the Chairman’s readiness to stimulate has continuously been the path of least resistance and of the most support by financial spread betting markets.
Tapering the current round of asset purchases is highly unlikely, despite any rhetorical preparations and testing for the markets.
So far this year, we’ve had 4 Fed meetings, 4 US jobs reports and 2 congressional testimonies by Fed Chairman Bernanke.
FX trading markets interpreted each event with one of the following ways: Fed will reduce its $85bn in monthly asset purchases (tapering); maintain the purchases intact (taper off); or; the possibility of increasing the purchases (raising QE).
None of this is much different from this time one year ago when US data reports were interpreted by either of the two interpretations; QE3, or sticking with operation twist (selling short term bonds and buying long term bonds).
Go back 1 year further (2011) and the general interpretation was again, either QE2 or no more QE2.
In each case, the market reaction function was and remains generally the same: a binary set of interpretations, implying more Fed stimulus, or maintaining the status quo.
The latter would mean a stronger US dollar, falling European and commodity currencies and weak global equity indices. More Fed stimulus would imply the opposite. This used to be called risk-on, risk-off, now it is referred to as taper-on, taper-off.
The “stimulus” side of the equation was further bolstered by the ECB’s September announcement to be willing to show its own version of QE (Outright Monetary Transactions) in order to stabilise sovereign bond yields and give politicians time to implement. It worked.
Markets hit new highs, yields hit 3-year lows, euro stabilised, shrugging off an election impasse in Italy and penalising depositors in Cyprus.
The ECB has addressed the issue of “market stress”, now it faces the “macro stress”. Slashing ECB interest rates to negative will return to the agenda in autumn.
What can be Expected from the FOMC Decision?
When all is said and done, we expect the Fed to maintain its $85bn monthly purchases unchanged into mid Q1 2014, and the ECB to slash interest rates to negative levels by year-end.
This may imply a neutral-to-strong US dollar, but with a higher confidence level play in buying the USD/JPY and EUR/JPY.
The yen’s occasional gains during rare risk aversion episodes remain an opportunity to sell at higher levels.
Meanwhile, the reactionary pullbacks in the US dollar from “taper off” signals become a greater opportunity to buy the US currency on the bolstering premise that another 9-10 year bear market in the greenback has been played out.
Please remember that Spread Betting and CFD Trading are leveraged products that carry a high level of risk to your capital and can result in losses that could quickly exceed your initial outlay. These products may not be suitable for everyone, so please make sure you fully understand the risks involved.
Spread Betting and CFD comments by Joshua Raymond, Chief Market Strategist, City Index.
The above should not be construed in any circumstances as a recommendation or offer to sell or recommendation or solicitation of any offer to buy any security or other financial instrument.
Neither City Index nor Spread-Betting.org warrant or represent that the material is accurate, complete, not misleading, or fit for the purpose which it is intended and it should not be relied upon as such.
Improved Like-for-Like Sales Boost the Whitbread Spread Betting Market
Posted on | June 18, 2013 | No Comments
European markets have continued to find support in early trade this morning, with a small beat on the German ZEW survey propping up stocks after an early morning bounce.
In the UK, the FTSE 100 is headed by hotel and restaurant group, Whitbread.
The firms’s stock is up around 3% on improved like-for-like sales in their Premier Inn business and strong outperformance at their Costa Coffee chain during the quarter, with the inclement British weather forcing customer inside for something warm.
Suffering contrasting fortunes are shareholders of Aggreko, who find themselves toward the foot of the index despite reaffirming their full-year outlook.
Narrowing margins and declining sales in their Asia Pacific business have given shares spread betting investors cause for caution this morning.
Security group, G4S, are also under pressure early on after Goldman Sachs downgraded the stock with a near-term price target of 194.
Goldman appear to be taking the view that the current earnings outlook at the firm may prove overly optimistic, as a forward PE of just 11 makes them cheap to the index.
Most market chatter continues to centre on tomorrow’s update from Fed Chairman Bernanke, with last night’s swings inspired by Financial Times speculation that tapering could be imminent.
This morning’s equity market strength suggests many in the spread betting market are taking the opposing view.
CPI inflation data due from the States at 13:30 along with Housing Starts numbers will provide brief distraction this afternoon, but otherwise it’s all eyes on Wednesday.
Hold onto your hats people.
Please remember that Spread Betting, FX and CFDs are leveraged products and carry a high level of risk to your capital. It’s possible to lose more than your initial investment. These products may not be suitable for all investors, please ensure you understand the risks involved and seek independent advice if necessary.
Spread Betting, FX and CFD comments by Michael Hewson, Market Analyst, CMC Markets.
The above should not be construed in any circumstances as a recommendation or offer to sell or recommendation or solicitation of any offer to buy any security or other financial instrument.
Neither CMC Markets nor Spread-Betting.org warrant or represent that the material is accurate, complete, not misleading, or fit for the purpose which it is intended and it should not be relied upon as such.
Spread Betting Investors Move into Gold Positions ahead of Fed Q+A Session
Posted on | June 17, 2013 | No Comments
In the absence of key data or significant corporate earnings, shares spread betting markets are managing a slight rebound this morning with European indices starting the week on the front foot.
Focus is already centred around this week’s Fed meeting and Chairman Bernanke’s Q&A session on Wednesday, where traders will be hoping for clarification on the timescale for any tapering of the asset purchase programme.
Any wording to suggest that the taps will be left on until later in the year has the potential to spark a resumption of the bull market – though obviously the opposite is also true.
Given the potential for volatility, it’s come as no real surprise to see our clients taking conflicting views, as they remain evenly split on the direction of travel for equity markets.
One area where they are taking a more consistent stance is in the perceived safe haven of gold, where 70% of clients with positions are long.
A flight to safety would be far from surprising in the event of an immediate slow-down in Fed stimulus, and with the yellow metal marked significantly lower year to date, an element of bargain hunting may also be coming into play.
Tuesday’s economic calendar makes for more lively reading with UK inflation data and the German ZEW survey both scheduled for morning release.
However, until then, we might see markets develop a range-bound pattern, with volumes less than impressive as spread betting investors go into ‘wait and see’ mode.
Please remember that Spread Betting, FX and CFDs are leveraged products and carry a high level of risk to your capital. It’s possible to lose more than your initial investment. These products may not be suitable for all investors, please ensure you understand the risks involved and seek independent advice if necessary.
Spread Betting, FX and CFD comments by Michael Hewson, Market Analyst, CMC Markets.
The above should not be construed in any circumstances as a recommendation or offer to sell or recommendation or solicitation of any offer to buy any security or other financial instrument.
Neither CMC Markets nor Spread-Betting.org warrant or represent that the material is accurate, complete, not misleading, or fit for the purpose which it is intended and it should not be relied upon as such.
Strong Asian Session Supports European Spread Betting Indices
Posted on | June 14, 2013 | No Comments
European spread betting indices have bounced higher this morning after a strong US close fed overnight gains in Asian stocks.
Popular opinion seems to be swaying back to the view that Fed tapering will be a drawn out process, and that any knee-jerk withdrawal of stimulus is highly unlikely.
After finding themselves deserted as investors took risk off the table over the past fortnight, mining and property stocks find themselves in a relief rally this morning as bargain hunters step in to pick up the pieces.
Hammerson lead the way, up almost 3% as the stock claws back some of its recent losses.
At the other end of the FTSE, RBS continue to look well offered as the news of Stephen Hester’s imminent departure weighs on the share price in the short term.
Having been hired to run a bank and instead found himself the focus of intense political scrutiny – not to mention the public outcry every time he got paid – the news of Hester’s departure doesn’t come as a huge surprise.
It will take a thick-skinned candidate to fancy taking on his role.
Eurozone CPI at 10:00 and US PPI at 13:30 will give us an insight into the global inflationary backdrop.
Michigan Consumer Sentiment data at 14:55 will come in for added scrutiny, with debate raging over the early release of past numbers to high frequency financial spread betting investors able to act first on the news.
Speculation over next week’s Fed policy meeting is likely to make for an afternoon of gossip-fuelled trading, with last night’s bounce having divided our client base on the direction of equity markets.
Please remember that Spread Betting, FX and CFDs are leveraged products and carry a high level of risk to your capital. It’s possible to lose more than your initial investment. These products may not be suitable for all investors, please ensure you understand the risks involved and seek independent advice if necessary.
Spread Betting, FX and CFD comments by Michael Hewson, Market Analyst, CMC Markets.
The above should not be construed in any circumstances as a recommendation or offer to sell or recommendation or solicitation of any offer to buy any security or other financial instrument.
Neither CMC Markets nor Spread-Betting.org warrant or represent that the material is accurate, complete, not misleading, or fit for the purpose which it is intended and it should not be relied upon as such.
RBS and Asian Declines Weigh on the UK 100 Spread Betting Market
Posted on | June 13, 2013 | No Comments
European markets have plunged on the open following the 6.35% decline in the Nikkei overnight as investors continue to worry about the longevity of central bank stimulus measures.
Meanwhile, another global growth downgrade from a global organisation, this time the World Bank, has prompted investors to question current stock market valuations.
In London, the UK 100 spread betting market has dropped to its lowest levels since late January at 6,204, led by the banking sector.
Not surprisingly, the biggest faller has been RBS in the wake of last night’s news that CEO Stephen Hester has been forced out.
The general consensus is that Mr Hester has done a great job under very trying circumstances having been used as a political punch bag for much of his tenure.
It will certainly be very difficult to find a capable replacement prepared to be subject to the public scrutiny such a high profile role currently entails.
I suspect prospective candidates won’t be queuing up around the block, and if they do they will want certain assurances that they will be allowed to run the bank as they see fit.
Politicians need to learn that you don’t buy a dog and bark yourself, however, I’m not holding my breath on that front.
The bank has also announced another 2,000 job losses as it prepares to slim itself into the best possible shape for a sell-off.
Other big movers include Aberdeen Asset Management on the basis that the current volatility is likely to lead to capital outflows from this particular sector.
CMC Markets client sentiment would appear to suggest that this is no more than a dip with a majority of them carrying long positions. Whether this view changes will depend on whether we can hold above the 6,200 level.
Please remember that Spread Betting, FX and CFDs are leveraged products and carry a high level of risk to your capital. It’s possible to lose more than your initial investment. These products may not be suitable for all investors, please ensure you understand the risks involved and seek independent advice if necessary.
Spread Betting, FX and CFD comments by Michael Hewson, Market Analyst, CMC Markets.
The above should not be construed in any circumstances as a recommendation or offer to sell or recommendation or solicitation of any offer to buy any security or other financial instrument.
Neither CMC Markets nor Spread-Betting.org warrant or represent that the material is accurate, complete, not misleading, or fit for the purpose which it is intended and it should not be relied upon as such.
Shares Spread Betting: Vodafone Softens Despite Confirmed Takeover Talks
Posted on | June 12, 2013 | No Comments
Two major M&A stories are weighing on FTSE constituents this morning as shares spread betting investors digest a deal in the making, and one that appears to have collapsed.
Vodafone‘s confirmation that they have approached Kabel Deutschland with a view to discussing a takeover bid has sent the stock markedly lower.
Apparently, investors are concerned that current market conditions may not be ripe for multi-billion Euro acquisitions.
Obviously KD shareholders are in more celebratory mood, with the stock up over 7%.
Severn Trent are under heavy pressure at the bottom of the FTSE, on news that the consortium led by Borealis Infrastructure Management has walked away from a deal to acquire the utility group.
Hopes that a bid in excess of the latest 2200p per share offer would materialise proved ill-founded, as the board’s valuation of the company stretched beyond that of the would-be suitors.
The stock is down over 7% in morning trade, beneath the levels it was trading when the takeover story first broke.
After their recent pummelling, Aberdeen Asset Management have found some support this morning as bargain hunters saw some value in a forward PE of just 13, pushing the stock 3% higher.
Supermarket giant, Sainsbury’s, maintained their excellent growth record with a 34th consecutive quarter of revenue gains after outperforming their peers over the period. However, a slow-down in their growth trajectory capped trader enthusiasm and the stock is trading flat early on.
UK employment data arrived broadly in line with market expectations at 09:30, and with a quiet macro calendar over the remainder of the day, trading desk talk will likely centre once more on central bank tapering plans.
What started at a tentative nibble at equity indices from our clients has turned into more sustained support, as CMC Markets clients take the view that the correction is nearing its end.
Please remember that Spread Betting, FX and CFDs are leveraged products and carry a high level of risk to your capital. It’s possible to lose more than your initial investment. These products may not be suitable for all investors, please ensure you understand the risks involved and seek independent advice if necessary.
Spread Betting, FX and CFD comments by Michael Hewson, Market Analyst, CMC Markets.
The above should not be construed in any circumstances as a recommendation or offer to sell or recommendation or solicitation of any offer to buy any security or other financial instrument.
Neither CMC Markets nor Spread-Betting.org warrant or represent that the material is accurate, complete, not misleading, or fit for the purpose which it is intended and it should not be relied upon as such.
FTSE Spread Betting Market Pulls Back ahead of US NFP Release
Posted on | June 7, 2013 | No Comments
Equity markets have started the day in a relatively quiet fashion, with everyone’s attention fixed firmly on the payrolls numbers due at 13:30.
The 500 point sell off in the FTSE has been the most orderly I can recall, and reflects general market consensus that the rally needed a breather with the QE outlook unclear.
Today’s number is being relied upon by many as a barometer for the Fed’s likely course of action, but it seems unlikely that one piece of data will inform their decision making process.
We’ll likely see some market volatility on the back of the release, but the notion that we’ll all form a clearer picture of the asset purchase timeframe seems overly optimistic.
As a distraction from the QE chatter, it’s worth taking a look at equity valuations in their own right to weigh where we stand following the pull back in global spread betting indices.
To be honest, UK blue chips aren’t looking unreasonably priced, with the FTSE trading on 16 times earnings, and only 12 time estimated earnings for this year.
In the cyclical space where our clients are currently active, names like Rio Tinto and Barclays, trade on forward P/Es of 8.
Any indication from Bernanke and Co that the QE programme has further legs could well lead to significant growth in those multiples.
Please remember that Spread Betting, FX and CFDs are leveraged products and carry a high level of risk to your capital. It’s possible to lose more than your initial investment. These products may not be suitable for all investors, please ensure you understand the risks involved and seek independent advice if necessary.
Spread Betting, FX and CFD comments by Michael Hewson, Market Analyst, CMC Markets.
The above should not be construed in any circumstances as a recommendation or offer to sell or recommendation or solicitation of any offer to buy any security or other financial instrument.
Neither CMC Markets nor Spread-Betting.org warrant or represent that the material is accurate, complete, not misleading, or fit for the purpose which it is intended and it should not be relied upon as such.
Tesco Shares Trading Market Slumps as Non-Food Revenues Fall
Posted on | June 5, 2013 | No Comments
The FTSE 100 has lost ground in morning trade today 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 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.
Infrastructural issues have weighed on National Grid this morning, with the stock offered over 4% lower as a key power cable is forced to operate at 50% capacity for the next 2 weeks as essential maintenance work is carried out.
Also in shares trading news, Aberdeen Asset Management 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 breather this morning.
With Friday’s key Non-Farm Payrolls data fast approaching, the ADP numbers at 13:15 will obviously make for vital reading as the market seeks a steer on the recovery in the US employment market.
ISM data and Factory orders follow after the open, with crude inventory measures arriving at 15:30 in what could potentially be a volatile afternoon session.
Please remember that Spread Betting, FX and CFDs are leveraged products and carry a high level of risk to your capital. It’s possible to lose more than your initial investment. These products may not be suitable for all investors, please ensure you understand the risks involved and seek independent advice if necessary.
Spread Betting, FX and CFD comments by Michael Hewson, Market Analyst, CMC Markets.
The above should not be construed in any circumstances as a recommendation or offer to sell or recommendation or solicitation of any offer to buy any security or other financial instrument.
Neither CMC Markets nor Spread-Betting.org warrant or represent that the material is accurate, complete, not misleading, or fit for the purpose which it is intended and it should not be relied upon as such.
European Spread Betting Markets Bounce on Hopes for Continued Gains
Posted on | June 4, 2013 | No Comments
European markets have bounced slightly this morning, after a decent close from the US spread betting indices yesterday evening inspired hope that the rally may yet have further to go.
All of the talk is around Friday’s key payrolls data, with the US recovery under the spotlight and speculation rife surrounding Mr Bernanke’s tapering timescale.
Top of the FTSE this morning are component parts manufacturer GKN, after finding themselves on the receiving end of a price upgrade at UBS, who see fair value of 350p per share in the medium term.
Shareholders of plumbing supplies group Wolseley were somewhat less fortunate, seeing their stock fall over 4% as the group reported underwhelming Q3 profits as the result of ‘challenging conditions’ in the their European operations.
Trade Deficit numbers from the US at 13:30 might come in for closer scrutiny from equity traders this afternoon in the context of the QE tapering debate. An update from Dollar General pre-market will also make for interesting insight to the retail backdrop.
The ISM Business Index hits the tapes at 14:45 but is unlikely to cause much of a stir, with most eyes firmly fixed on events to come later in the week.
Please remember that Spread Betting, FX and CFDs are leveraged products and carry a high level of risk to your capital. It’s possible to lose more than your initial investment. These products may not be suitable for all investors, please ensure you understand the risks involved and seek independent advice if necessary.
Spread Betting, FX and CFD comments by Michael Hewson, Market Analyst, CMC Markets.
The above should not be construed in any circumstances as a recommendation or offer to sell or recommendation or solicitation of any offer to buy any security or other financial instrument.
Neither CMC Markets nor Spread-Betting.org warrant or represent that the material is accurate, complete, not misleading, or fit for the purpose which it is intended and it should not be relied upon as such.
Impressive US Housing Data Lifts US and Asian Spread Betting Markets
Posted on | June 3, 2013 | No Comments
With U.S and UK markets closed last Monday, owing to the bank holiday, there was very little market action to report on.
Significantly, ECB member Asmussen assured investors that the bank will keep an accommodative monetary policy for as long as is required.
This reassurance comes following the previous week’s warning from the Fed regarding the tapering of stimulus, initiating a massive sell-off. Almost all of the gains seen erased on Friday 24th were recouped by the markets after investors took advantage of lower prices and bought into the dips.
Sentiment was underpinned by the rise in the Dow Jones to another record high after data showed U.S. home prices accelerated by the most in nearly seven years in March.
Meanwhile, consumer confidence picked up in May to its highest level in more than five years.
The strong U.S data helped Asian stocks climb, with Japanese shares leading the way.
There was some concern in Australia however, with Pacific Investment Management expecting Australia’s central bank to cut borrowing costs as falling mining investment may leave a hole in the economy.
Mining shares have been somewhat unloved by investors since September 2011 when a large number began a lengthy downward trend.
This has left mining stocks relatively cheap and has provided a perfect opportunity for traders to invest in the sector whilst holding back on the market on the whole whilst awaiting a deeper correction.
Meanwhile in Japan, governor Kuroda’s loose monetary policy remains the main bolster for local liquidity.
Additionally, Japan’s public pension fund, a pool of over $1 trillion, is considering a change to its portfolio strategy that could allow its investment in domestic stocks to grow with a rallying market.
However, it wasn’t long before concerns that the Federal Reserve will reduce debt purchases allowed the bears to come into play once again.
European stocks continued their decline as spread betting investors dumped stocks and piled into the dollar. Boston head of Fed, Rosengren, said he is willing to scale back QE sometime soon if the economy continues to recover at its current pace.
Contributing to the worries, growth forecasts for both China and the Eurozone were cut on Friday.
The International Monetary Fund lowered its forecast for China’s growth to 7.75 percent this year whilst the OECD cut growth forecasts for the Eurozone and called for the ECB to consider doing more to boost growth.
Investors had been excitedly awaiting U.S GDP data all week hoping that the figures could give further clues as to when the Fed will begin its stimulus wind down.
Unfortunately the figure came out slightly lower than expected at 2.4 percent (2.5 percent expected), failing to initiate any significant moves.
Jobless claims rose 354k, above the 340k estimated by the market, a sign the labour market in the US remains somewhat fragile.
Whilst the poor data does ease Fed stimulus tapering fears, with the US nonfarm payrolls due this week, Thursday’s jobless claims would suggest that it’s unlikely the unemployment rate will edge lower for the month of April.
Stock of the Week:
In shares spread betting, British engineering company, Smiths Group, have received an approach for its medical division. Sources say the medical division could be worth more than £2billion. Shares have traded up to 7% higher than the last week’s open.
Monday
- GBP – Manufacturing PMI
- USD – ISM Manufacturing PMI
Tuesday
- AUD – Cash Rate
- CAD – Trade Balance
- USD – Trade Balance
Wednesday
- AUD – GDP
- GBP – Services PMI
- USD – ADP Non-Farm Employment Change
Thursday
- AUD – Trade Balance
- CHF – CPI
- EUR – 10-yr Spanish Bond Auction
- GBP – Official Bank Rate
- GBP – MPC Rate Statement
- EUR – Minimum Bid Rate
- EUR – ECB Press Conference
- USD – Unemployment Claims
Friday
- CAD – Unemployment Rate
- USD – Non-Farm Employment Change
- USD – Unemployment Rate
This Week’s Notable UK Earnings:
Wednesday
- RPC Group – Preliminary 2012/13 Earnings Release
- Synergy Health – Preliminary 2012 Earnings Release
Spread betting is a leveraged product. It carries a high level of risk to your capital and, as it is possible to lose more than your initial investment, it may not be suitable for all investors. Therefore, ensure you understand the risks involved and seek independent advice if necessary. The tax treatment of spread bets may be subject to change in the future.
Article by Spreadex.
The above should not be construed in any circumstances as a recommendation or offer to sell or recommendation or solicitation of any offer to buy any security or other financial instrument.