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  1. #271

    Australian stocks descend at close of trade

    Australian stocks descend at close of trade

    On Tuesday, Australian stocks sank after the close because losses in the Consumer Discretionary, Financials as well as Utilities sectors brought stocks down.

    The S&P/ASX 200 edged down 0.80%.

    The best performers of the session on the S&P/ASX 200 included Evolution Mining Ltd, Resolute Mining Ltd and South32 Ltd. They rallied respectively 2.33%, 2.21% and 1.99%.

    The worst performers were represented by GWA Group Ltd, Seven West Media Ltd and Syrah Res F. They dropped 6.97%, 5.59% and 4.86% respectively.

    Dropping stocks outperformed surging ones on the Australia Stock Exchange by 600 to 418, while 340 remained intact.

    The S&P/ASX 200 VIX, which estimates the implied volatility of S&P/ASX 200 options, soared 3.41%, trading at 13.055, a fresh 1-month peak.

    The currency pair AUD/USD surged 0.24%, reaching 0.7373, while AUD/JPY dived 0.23%, being worth 85.14.

    The US Dollar Index headed south 0.28%, trading at 101.63.

    [Only registered and activated users can see links. ]Important Forex News Daily-23-jpg

  2. #272

    Trump attacks private debt to reshape markets

    Trump attacks private debt to reshape markets

    Donald Trump's prospective attacks on private debt actually contrast with his apparent comfort with ascending public indebtedness. If carried out properly, both will have a huge impact on financial as well as asset markets.

    Plans considered by Donald Trump as well as Republican leadership will make mortgage and also corporate debt far less appealing to borrowers, thus hitting house as well as share prices. In addition to this, tax cuts and spending plans are going to inflate the public debt and spur economic growth, pushing yields on Treasuries up.

    Disadvantaging private debt while soaring public borrowing will have a mutually self-reinforcing impact, as ascending interest rates make borrowing less attractive for households and companies and apply the downward pressure on asset prices.

    Like everything Trump offers or considers, it might never take place, and financial markets aren’t certainly trading as if it will.

    [Only registered and activated users can see links. ]Important Forex News Daily-23-jpg

  3. #273

    Risk Takes A Wobble As GBP Pressure Eases Temporarily

    Risk Takes A Wobble As GBP Pressure Eases Temporarily

    Risky assets hit the skids on Monday, as oil, stocks and the dollar all fell in tandem. The notable outperformer was the Nasdaq, the US technology index, which reached a record high at the start of this week. After falling behind the rampant US banking and industrial sectors in the final quarter of 2016, the tech sector could be playing catch up, however, we are on the lookout for a pullback in stocks before Trump’s inauguration in less than 2-weeks’ time, so this could be a last hoorah for the tech sector before it succumbs to the same fate as the broader market.
    Stocks look vulnerable in the short term
    Futures markets point to a lower open for European and US stocks on Tuesday. We have mentioned in earlier notes, that there were some warning signs that the US stock market rally could be taking a pause. Firstly, price movement has been indecisive at these lofty highs, just below 20,000 in the Dow Jones index. Likewise, two lead indicators – the small cap Russell 2000 index and the Dow Jones Transportation index – have fallen in recent sessions, which did not bode well for the broader indices. At this stage this looks like a normal pullback, especially so close to a change to the administration in the US. The market has high expectations for Trump’s economic policy; perhaps they are booking profit just in case he throws in a curve ball at tomorrow’s much anticipated press conference.
    Risk aversion rises as we wait for Trump inauguration
    From a pure market perspective, the dollar and stocks have tended to rise together, on Monday they fell in tandem. Not even a decline in US bond yields, which should be good news for stocks, can push US markets back into record-breaking territory, which is a sign that some nervousness is gripping the markets.
    Questions arise about Trumpenomics
    Trump will give a press conference on Wednesday, to address his business interests. Earlier on Monday he met with the head of Chinese mega brand Alibaba, Jack Ma, who said he was looking into creating 1 million jobs in the US for small US businesses to build exports to Asia. One potential stumbling block for this aim is a rising dollar, even if it has had a weak start to 2017, expectations are for further gains, which could put the brakes on US growth. In fact, some are expecting the US to tacitly try and limit dollar strength if EUR/USD breaches parity in the coming weeks.
    Fed changes could be more than rate deep
    The dollar brushed off relatively hawkish comments from the Boston Fed chief Rosengren, who was speaking on Monday evening. He said that the US could cope with 3 rate hikes, and that the US economy risks running hot. This is nothing too noteworthy, however, what was interesting was his comment that he would urge the Fed to take up the balance sheet timing debate. This is the second stage to normalising US monetary policy, and if the Fed does announce when it will start to sell off some of its mega balance sheet, then this could lead to another leg higher in the USD, as it would put the Fed miles ahead in terms of monetary policy normalisation, compared to the UK and Europe.
    GBP recovery could be futile
    Talking of Europe, the pound was battered on Monday, falling to its lowest level since October. We expect GBP to remain the most volatile of the G10 currencies in the coming months while we wait for the triggering of Article 50. Essentially the market is likely to re-establish shorts in GBP, after a brief respite at the end of last year, until it is quite confident that Brexit won’t be ‘hard’ or disastrous for the UK economy. While Theresa May says that we can’t keep ‘bits of the EU’, sterling isn’t safe from the bears until we know what will replace the single market. We will have to see if today’s industrial and manufacturing data will help the pound to build on its mini recovery overnight; 1.2250 and then 1.2450 – the high from 4th Jan – are key resistance levels in these volatile times. However, heightened levels of political risk for GBP could scupper any potential recovery.
    Watch Czech inflation
    Also worth noting, at 0800 GMT Czech inflation data is out. While not our usual economic point to watch out for, the Czech Republic could drop its peg with the euro in the coming weeks due to rising inflation pressure. The market expects a jump in Dec CPI to 1.9% from 1.5%, anything bigger than this could see CZK bulls come out of the closet and test the Czech authority’s nerve to keep EUR/CZK around 27.

  4. #274

    Asian Equities Retreat As Investors Shift To Cautious Mode

    After a strong start for the year, equity markets started to cool down in the second trading week of 2017. Most Asian major indices are in red today, as Wall Street failed to make new highs and the Dow retreated further from the key psychological 20,000 mark, while oil suffered a steep selloff on Monday.*
    Investors who built their positions based on Trump's victory are likely to start cashing out for the time being and shift their focus on fundamentals with the earning season kicking off later this week when U.S. big banks release their fourth quarter results. I'm not confident to call a correction yet, but certainly many investors got ahead of themselves betting on fiscal stimulus, and while business usually tends to under promise and over deliver, this doesn't seem to be the case with the U.S. new President.***
    Although Kuwait's Oil Minister Essam Al-Marzouk who is chairing the committee to oversee compliance of OPEC's output assured the markets that OPEC and non-OPEC members will abide to the planned cuts, still both oil benchmarks dropped 4% on Monday.* This clearly indicates that it's not just an OPEC game, and the expected increase in U.S. and Canadian supplies are likely to threaten the oil rally. Data from the U.S. on Friday showed rig counts rose for ten consecutive weeks and it's just about some time for this to translate into additional production, suggesting that downside risk may remain in play, and rather than just focusing on implementations of OPEC production cuts, investors should be looking at the bigger picture on whether supply will meet demand in the second half of 2017.
    The U.S. dollar fell for a second day, extending its slide from the 14-year high hit on January 3. The pull back in the dollar came despite hawkish speeches from Fed officials suggesting that the central bank is getting closer to achieving its dual mandate. Both Fed presidents, Charles Evans and Patrick Harker aren't ruling out three rate hikes in 2017, while Eric Rosengren called for stepping up the pace of interest rates hikes to prevent inflation from overshooting. However, traders are still not yet completely convinced and pricing in only two hikes for 2017 according to CME's Fed Watch. With no tier one economic data on the calendar until Friday, U.S. bond yields will remain to be the key driver for the greenback.
    The Pound remainedunder pressure after Monday's steep selloff on comments from UK's Prime Minister Theresa May which intensified fears of “Hard Brexit”. Although the pound looks undervalued, the risk of further selloff may remain in play as we get closer to triggering article 50. Meanwhile comments from Scotland's First Minister on BBC that she's not bluffing about her vow to hold a second referendum on Scottish independence if Britain leaves the single market is another factor to worry about on the medium-term.

  5. #275

    Asian Stocks Struggle Despite Some Data Bright Spots

    Talking Points:

    Asian stocks endured a rather lackluster session Tuesday, with bulls disinclined to press their cases
    The data picture was generally quite encouraging, although Australian consumers were much gloomier than expected
    Sterling got some respite and the Dollar weakened against the other majors

    Asian equity action was really all about Wall Street again on Tuesday, with stocks under some duress thanks to the Dow’s further backdown from that tantalizing 20,000 mark the session before (and apparently ignoring a new record for the Nasdaq). Crude oil prices’ sharp overnight slide didn’t help much either.

    There were some dabs of local colour –notably, a strong sign that China’s economy is looking healthier – but that wasn’t enough to override the overall caution.

    Australia’s benchmark ASX fell nearly 1% at one point, with losses apparent everywhere except for the gold miners, which continued their bullish start to the week. Over in Japan the Nikkei 225 lost a little ground. This was probably due to the slightly weaker overall tone in USD/JPY, something which never gives the exporter-heavy index much cheer.

    The ASX endured a day of general weakness

    [Only registered and activated users can see links. ]Important Forex News Daily-1-png


    Shares in China and South Korea also lacked vigor, in the former case despite a set of official inflation figures which showed that the Chinese economy has banished deflation. They showed factory gate prices moved at their strongest clip since September 2011 in December. Consumer prices weren’t anything like as perky but they were still clearly positive.

    Hong Kong stocks managed to buck the trend, rising in step with local commodity movers, notably coke and rebar (a type of traded steel).

    The rest of the session’s Asian data was a bit of a mixed bag. Australia’s consumers were less-than-enthused in November. That said, the question of whether they were really gloomy or simply drawing in their retail-spending horns before the holiday season will have to be answered by later data.

    Japanese consumer confidence, meanwhile, was revealed to have been as high as its been all year in December. Whether or not that will be enough to break a long slide in household spending must remain unclear until those numbers are released at the end of this month.

    Looking ahead to the European and US session, the markets await news of Canadian building permit levels and, more crucially, US employment levels as measured by the Job Openings and Labour Turnover Survey (JOLTS).

    In the currency markets, the British Pound steadied a little from the hammering it had received on Monday as fears of a “hard Brexit” grew. However, as much of that punishment was meted out in the European session anyway, it would be brave to suggest that sterling was as low as it’s going. The US Dollar was a little weaker against other major peers, with traders seemingly content to bank some profit on the latest gains.

  6. #276

    Euro, Franc Capitalize as Pound Struggles Amid Hard Brexit Fears

    Talking Points:

    Euro, Franc capitalize as Pound struggles to shake off “hard Brexit” fears
    Kiwi Dollar suffers as US bond yields bounce after yesterday’s down swing
    Confirmation hearings for Trump cabinet nominees present headline risk

    The British Pound continued to trade lower overnight in a move that appeared to reflect follow-on momentum after UK Prime Minister Theresa May rekindled “hard Brexit” worries yesterday. The Euro and the Swiss Franc traded higher, seemingly buoyed as the go-to regional alternatives to the UK unit.

    The New Zealand Dollar also declined, trading inversely of benchmark US 10-year Treasury bond yields. The latter’s rebound probably reflects corrective price action after Fed rate hike bets cooled yesterday. As the highest-yielding G10 currency, the Kiwi can be particularly sensitive to shifting rate spreads.

    Looking ahead, a sparse economic data docket overlaps with a pause in the otherwise steady stream of scheduled commentary from Fed officials. This leaves the markets somewhat rudderless, hinting that a consolidative tone may prevail in the near term.

    S&P 500 futures look flat ahead of the opening bell on Wall Street, pointing to a neutral sentiment setting and bolstering the case for a sideways session. Complacency is dangerous however as confirmation hearings begin for nominees to US President-elect Trump’s cabinet, making for elevated headline risk.

    [Only registered and activated users can see links. ]Important Forex News Daily-capture-png

  7. #277

    2017 FOMC Voting Members Cheat Sheet

    The Fed ended 2016 with a bang when it unanimously voted to raise its interest rate range by 25 basis points. What caught the investors’ attention more, however, was the majority of Fed members predicting THREE interest rate hikes in 2017, one more than the 1-2 hikes seen in September.

    The Fed’s dot plot chart featured in our FOMC review shows that at least 6 out of the 17 members are seeing THREE rate hikes or more throughout 2017. Thing is, not all of them are VOTING members. This means that who the voters are matters as much (or maybe more) than the median of the members’ estimates.

    So, does the Fed’s current list of voters have enough hawkish voices in their midst? Here’s a 411.
    Who votes on the policy changes anyway?

    The Federal Open Market Committee (FOMC) has 12 members:

    7 Board of Governors of the Federal Reserve System;
    The president of the Federal Reserve Bank of New York; and
    4 of the 11 regional Reserve Bank presidents.

    The Board of Governors, Chair, Vice Chair, and President of the New York branch ALWAYS get to vote, while regional Fed Presidents rotate each year. Non-voting Reserve Bank presidents attend the meetings of the Committee, participate in the discussions, and contribute to the Committee’s assessment of the economy and policy options.

    The rotating seats are filled from the following four groups of Banks, one Bank president from each group: (Boston, Philadelphia, and Richmond); (Cleveland and Chicago); (Atlanta, St. Louis, and Dallas); and (Minneapolis, Kansas City, and San Francisco).
    Who’s in and who’s out?

    Yellen has expressed her willingness to grin and bear Trump until her term as Chair ends in 2018, so we’ll likely hear more from her. Bullard (St. Louis), George (Kansas City), Mester (Cleveland), and Rosengren (Boston) are out of the clique while Evans (Chicago), Harker (Chicago), Kaplan (Dallas), and Kashkari (Minneapolis) will sit on the cool table this year.

    Here’s a neat cheat sheet (hey, it rhymes!) for ya!

    [Only registered and activated users can see links. ]Important Forex News Daily-33333333-jpg

    Based on the chart above, we can see that the doves are still loosely in control of the group. Their votes are not set in stone though. Dudley, for example, has shown a hawkish feather or two in the last year. Some members are also likely to switch camps depending on how Trump’s policies affect employment, inflation, and financial stability.

    Speaking of Trump, take note that there are two vacant spots in the roster above. Word around the hood is that the future POTUS will likely nominate hawkish members, which could change the tune of the Fed this year.

    So while it looks like the uber hawks who saw aggressive rate hikes in December 2016 are those who are not voting this year, it’s also not too impossible for the Fed to walk the talk and raise its rates thrice in 2017.

    How about you? Do you think that the Fed could become hawkish enough to execute two to three interest rate hikes this year?

  8. #278

    US Dollar Teetering as US Yields Threaten Pullback

    US Dollar Teetering as US Yields Threaten Pullback

    The US Dollar has been struggling to find meaningful traction over the last few days, as a combination of profit taking and speculation over how wage data will influence have led to a choppy trading environment. With a rather dull economic docket the next two days (ahead of the five Fed speakers on Thursday), traders may want to pay attention to the main driver behind the US Dollar rally in the first place: US Treasury yields.

    Both the US Treasury 2-year and 10-year yields have increased significantly over the past two months, starting with the US elections in early-November. The recent pause in the rising yield environment has proven to be a signficant hurdle for the US Dollar to clear; indeed, USD/JPY and EUR/USD have started to back away from their recent bullish-USD tendencies.

    The key question is whether or not market participants feel warranted in maintained their current aggressive outlook. After all, with the CFTC's COT report showing that speculators are the most net-short US Treasuries (long yields) ever, it will only take a small bit of disappointment - on either the data side or from the Fed - before momentum collapses on itself and yields pullback.

    The line in the sand is clear for me: abandon USD-bullishness in the near-term if the US 2-year yield closes its daily 34-EMA or 1.145%; and if the US 10-year yield trades below 2.333% (which would take out the January 2017 and December 2016 lows). If yields maintain these levels, then the US Dollar pullback should be limited. A break higher above 1.255% in the US 2-year yield or above 2.578% in the US 10-year yield would signify strong potential for a further resumption of the US Dollar's recent uptrend.

  9. #279

    Market Morning Briefing Jan 11, 2017

    STOCKS
    Dow, Nikkei and Dax are in a consolidative mode while Nifty is trading near crucial levels. Shanghai may test important resistance from where it may come off soon.
    The Dow Jones (19855.53, -0.16%), Dax (11583.30, +0.17%) and Nikkei (19387.19, +0.44%) are range bound and may continue to move sideways for some more sessions. We continue to look for consolidation within 19720-20000, 11430-11680 and 19257-19870 region respectively for a few more sessions. Dax could test resistance near 11680-11800 levels on the weekly candles on the upside before coming off from there.
    Shanghai (3154.64, -0.22%) could test weekly resistance of 8200 which is likely to hold in the near term, pushing back Shanghai towards 3100 or lower. A break above 8200 could shift our focus to higher levels of 3300-3400 in the medium term.
    Nifty (8288.60, +0.64%) is hanging around the 8300 resistance and has not seen any sharp rejection in the last couple of sessions. This could indicate that if the 8300-level is unable to produce any immediate rejection, we could possibly see a break on the upside in the coming sessions. A break above 8300 could show a possible rally towards 8500 in the near term. We need to keep a close watch at the price action near 8300.
    COMMODITIES
    Gold and Silver looks bullish while Crude may fall in the near term. Copper looks bullish too.
    Gold (1186.82) and Silver (16.78) have risen as expected. We continue to look for an upside of 1190-1200 for Gold and 17.00-17.20 (or even higher) for Silver. Near term looks bullish.
    WTI (50.98) and Brent (53.75) fell sharply, giving an indication of the resistance holding well. We had been waiting to see a sharp fall from resistance levels to confirm the strength of the resistance at 58.50-59.00 and 56 respectively. Now, we could possibly see a test of 50 and 52.50 over today and tomorrow.
    Copper (2.6235) has indeed risen as expected and could continue to move up towards 2.65 before again seeing a short dip towards 2.60 again. Aussie (0.7370) faces resistance near 0.7385-0.7400 which if holds could possibly limit the upside for Copper just now. In case Copper moves above 2.65, it could pull up Aussie above 0.74 in the near term.
    FOREX
    The Dollar Index (102.15) has bounced back ahead of Trump’s first speech as the President-elect but it still requires a break above 102.50 to confirm near term strength.
    The Euro (1.0544) is stable in the 5-week range of 1.0350-1.0700 and with no apparent strength to rise past 1.0700. The near term trend depends on the Trump-speech and we prefer to wait for a day before taking a call but the chances of further sideways movement in the range of 1.0350-1.0700 looks stronger at this moment.
    Dollar-Yen (116.07) is still trading above the support of 115.00 and the trendless oscillation in the range of 115.00-118.00 in the near term makes it difficult to identify the next trend but as long as the support of 115.00 holds, the upside chances of seeing 118.70-119.00 can’t be ruled out.
    The Pound (1.2167) is stabilizing near the lower levels after testing our target zone of 1.2100-2080 but the bulls need an immediate recovery above 1.22 levels followed by a rise above 1.2335. Otherwise, the downside momentum may intensify.
    Aussie (0.7372) has been testing the resistance of 0.7385 for the last 2 sessions as the industrial metals like Copper (2.621) are rising. As noted yesterday, if this Resistance breaks, the focus will shift to 0.7420-40 on the upside for the near term, as against the chances of a fall to 0.7250.
    Dollar-Rupee (68.18) is trading at 68.22 today reflecting the weakness in Crude (Brent 55.05, WTI 52.08) but unless a break above 68.25 materializes in the onshore market, higher levels of 68.35-40 can’t be considered. Till the break, the chances of sideways movement in the range of 68.00-25 remain slightly higher.
    INTEREST RATES
    The 10Yr GOI yields (6.5426%) has been rising gradually over the last 5 sessions but no clear trend is discernible at the moment as both the possibilities of a rise to 6.7% and a decline to 6.3% look equally probable.
    The German-US 10Yr yield differentials (-2.11%) has broken above the resistance at -2.15% levels but that has failed to boost the German-US 2 Yr (-1.93%), which has been struggling to rise above a similar resistance at the current levels for the last 2 days. The near term path of Euro (1.0544) may depend on the success or failure of the 2Yr.
    The US-Japan 10Yr (2.33%) is close to the major support of 2.30%, which must hold if the Dollar Yen (116.07) has to rise towards 118.00-119.00. A break below 2.30% may not only drag the differential to 2.10% but also weaken the Dollar Yen considerably.

  10. #280

    Trump Watch

    Except for some minor commotion here and there as risk sentiment continued to yo-yo, markets have been hushed overnight as caution takes hold, ahead of Donald Trump speech tonight. The US curve closed flat, despite some choppiness at times, but overall US 10Y’s traded in a very narrow range and ended the day unchanged from the previous settlement at 124-25 or 2.38% in yield.
    However, the same cannot be said for the commodity complex, which has seen the WTI plummet due to an increase in US and Canadian drilling, offsetting the planned OPEC production taper. There was also little support for oil prices as API inventory data reported 1.5 million barrel inventory, slightly higher than the consensus of 0.9 million.
    Much of this impact was offset by surging industrial metals on the back of yesterday’s cracker of the China PPI print.
    As for President-elect Trump’s presser tonight, traders will be viewing the speech with a high level of scrutiny, as the market’s exhilaration over “Trumpenomics”. Initially, euphoria gave way to a more calculated approach to the USD as we entered year end, and that has now morphed into a degree scepticism over the proposed US infrastructure spend.
    Trump Watch
    Tonight, President-elect Donald Trump will hold his first news conference since his election win and may shed some light on this trade protectionist stance. The two traditional trade protectionism proxies are MXN-USD and USD-CNY, both of which stand to suffer if Trump’s campaign anti-globalization rhetoric becomes policy.
    Regarding the CNY/CNH, traders will also be on guard for currency manipulation comments. On cue, we have also seen USDMXN jump to a new all-time high of 21.6227 overnight, while USDCNH is on the climb briefly breaking 6.91 level.
    Australian Dollar
    The China reflation theme was front and center, as PPI came in much higher than expected at 5.5% YoY, providing a much welcome inflationary bump in China and the rest of APAC.
    Iron ore prices soared on the print and were the primary driver for the surging AUD, despite weak retail sales print announced earlier in yesterday’s session. Therefore, the tug of war narrative between anticipated narrowing of AUDUSD interest rate differential and surging commodity price story continues to unfold.
    While a tougher slog against the USD, AUD price action is very constructive of late, and provided commodity prices remain on the boil, we may see further momentum in the Aussie, but more so crosses, as I expect the long AUDUSD will continue to be a source of frustration given the Hawkish Fed outlook.
    The reflationary trend continues to drive market sentiment, which is providing a boost to bulk commodity prices. However, if we get any hint or confirmation of the proposed US fiscal and infrastructure spend, I would expect US yields to soar. The prospects of accelerating inflationary pressures in the world’s two largest economies will likely suggest the market is mispricing the Fed with less than four hikes over the next two years, which should cause a sharp move higher on the US STIRT curve and drive the Greenback considerably higher.
    Japanese Yen
    While USDJPY is still the primary focus in G-10, external drivers dominate sentiment and with the USD yield softening, so is the trader’s appetite for dollars. Recent price action indicates that we are in consolidation mode with traders doing little more than trading the edges of the current range. Near term 115.00 offers strong support. I suspect the direction outcome from the eventual retest of the 116.25-75 congested order zone may provide some hint of a trend if all things remain constant. However, given the reluctance for dealers to add to USD longs at current levels, the top side appears capped also.
    Yuan
    Last week’s funding squeeze has done little to dissuade dealers Yuan depreciation expectations, but will likely be viewed as a blight toward China’s ultimate goal for internationalization of the RMB.
    With the ever growing number of restrictions, whether in the form of capital controls, covert intervention in money markets, or direct involvement through state-owned banks, the offshore market is hardly a market-friendly spot to conduct business. Fortunately, tight funding conditions have abated, but all too frequent interventions will sour international investor sentiment.
    Overall, I see a sooner-rather-than-later test of the 7 level, which could occur after the Lunar New Year break, when Interbank dealers will likely stoke their depreciation engines.
    Today the market is in Trump watch mode.
    EUR CZK
    There has been lots of action on the EUR CZK, as sentiment is growing that the Czech National Bank will remove the EUR CZK floor at 27, as a positive domestic outlook all but assures a test of the bank’s 2% target early to mid-2017.
    While some comparisons are being made to the Swiss National Bank moment, the possible market impact could be nothing further from the truth. Market positioning was massively long EURCHF, as there was no forward guidance from the SNB, while in the case of the EURCZK floor, the market is going short, so no SNB meltdown redux is expected.
    The one thing to be cautious of is the crowded trade mentality with everyone going the same way along the interest rate and forward currency curve.

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