Contents This Week:
Economic calendar for week 30th June - 4th July 2008.
Commentary: The week ahead.
Economic Calendar for week 30th June - 4th July 2008
PLEASE NOTE - All times GMT not BST. BST is +1 Hr.
Monday June 30th:
UK - 08:30 - Index of Services Q/Q.
UK - 08:30 - Mortgage Approvals.
UK - 08:30 - Net Lending to Individuals M/M.
EU - 09:00 - CPI Flash Estimate Y/Y.
US - 23:30 - Chicago PMI.
Tuesday July 1st:
GE - 06:00 - Retail Sales M/M.
UK - 06:00 - Nationwide House Prices M/M.
GE - 07:55 - Unemployment Change..
EU - 08:00 - Manufacturing PMI.
UK - 08:30 - Manufacturing PMI.
EU - 09:00 - Unemployment Rate.
US - 14:00 - ISM Manufacturing Index.
US - 14:00 - ISM Manufacturing Prices.
US - 14:00 - Construction Spending M/M.
Wednesday July 2nd:
EU - 07:15 - ECB President Trichet Speaks.
UK - 08:30 - Construction PMI.
UK - 08:30 - Housing Equity Withdrawal Q/Q.
EU - 09:00 - PPI M/M.
US - 11:30 - Challenger Job Cuts Y/Y.
US - 12:15 - ADP Nonfarm Employment Change.
US - 14:00 - Factory Orders M/M.~
US - 14:30 - Crude Oil Inventories.
US - 14:30 - Treasury Sec Paulson Speaks.
US - 16:00 - FOMC Member Mishkin Speaks.
Thursday July 3rd:
US - Tentative - Halifax HPI M/M.
EU - 08:00 - Services PMI.
UK - 08:30 - Services PMI.
UK - 08:30 - Credit Conditions Survey.
EU - 09:00 - Retail Sales M/M.
EU - 11:45 - Minimum Bid Rate.
EU - 12:30 - ECB Press Conference.
US - 12:30 - Nonfarm Employment Change.
US - 12:30 - Unemployment rate.
US - 12:30 - Average Hourly Earnings M/M.
US - 12:30 - Unemployment Claims.
US - 14:00 - ISM Non-Manufacturing Composite.
US - 14:00 - Natural Gas Storage.
Friday July 4tf:
US - All Day - Independence Day US Holiday.
FR - 06:45 - Government Budget Balance.
GE - 10:00 - German Factory Orders M/M.
EU - Europe wide
FR - France
UK - United Kingdom
US - United States
GE - Germany
The week ahead.
Financial markets were a sea of red numbers last week as the classic Fade the Fed trade played out. The initial reaction to Wednesdays US interest rate decision was neutral to positive, then the selling set in and hardly stopped. Thursdays mini rally did a very poor job of papering over the cracks in the global economy. On Friday those cracks were wide open for all to see with housing and financial stocks hit the hardest. Barclays in particular was back to square one, erasing all gains from the start of the week, as investors took a second look at their fund raising plans in light of Goldmans predictions of further write downs for major western banks. Citi Group was also floored on similar sentiment, falling to its lowest level since 1998.
The Dow Jones Industrial average ended the week down 4.2% and nearly 8% down over the last fortnight. The FTSE faired little better, falling 2.88% on the week and 6.26% over the fortnight. The twin evils of Gold and Oil were again the sectors in demand, as investors looked to profit from further economic turmoil, and hedge their bets against inflation. Oil refused to budge below $130 and set a new all time high of $143. $150 a barrel, scoffed at by some just a few months ago, is looking increasingly more likely and is surely now only a matter of time.
Some positive cheer came with US consumer spending rising as Bushs stimulus cheques hit. While this lift at least created a pause from the continuous stream of bad news, market participants were wary of reading too much into what may be a short term patch for the US economy.
Despite a shortened trading week with Independence Day on Friday the 4th of July, it is a very busy week ahead. Currency markets will be eyeing Thursdays ECB interest rate decision and accompanying statement. The European Central Bank is expected to raise rates by a quarter of a percent to 4.25%. With this starting to be priced in already, market participants will be more interested in the prospects of a string of inflation fighting rate rises from the ECB.
Thursday also sees the all important US Non Farm Payroll data brought forward a day because of the holiday on Friday. This more than anything could have the greatest impact on currency and equity markets for the new month of July. The UK certainly doesnt escape without any top tier data with two lots of house price announcements. Nationwide release their data on Tuesday and The Halifax House Price index is tentatively planned for Thursday. The news is expected to be dire from both these announcements with Stephen Nickell, the head of the Prime Ministers housing planning unit predicting that the UK housing market wont boom again until 2015. To make matters worse, recent data shows that British households are more indebted than any other country in recorded history. 173% of household incomes are owed in debts. This is higher even than Japans peak in 1990 that preceded decades of deflation. Barclays added to the gloom by warning their clients to prepare for the financial storm ahead.
While Thursday was an impressive sell off, doubts remain whether the puking point has been reached just yet. Bottom feeders will start to become interested, but the VIX options volatility index is still some way off the January and March spikes. In addition we are not seeing the same flight to safe havens such as short term fixed income, that we saw in the first quarter.
With Gold bottoming around $860 and renewed concern over inflation, it is perhaps time for the precious metal to follow its evil twin, oil higher after a few months in the doldrums. A One Touch trade for Gold to hit $1000 again within the next two months could return 70%.
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Monday, June 30, 2008
Friday, June 27, 2008
BetOnMarkets.com Afternoon Update - 27/06/08
Global stock markets are continuing to trade in a timid fashion this Friday. Traders are understandably nervous about taking on any large positions going into the weekend after such a mauling the previous day. On the positive side, US markets are receiving lift with US consumer spending rising as Bush’s stimulus cheques hit. While this lift is at least creating a pause from the continuous stream of bad news, market participants are wary of reading too much into what may be a short term patch for the US economy. In the UK, Barclays is one of the largest fallers on write down fears, while understandably, energy stocks are the strongest with Tullow Oil up significantly. While Thursday was an impressive sell off, we doubt we’ve reached ‘puking’ point just yet. The VIX options volatility index is still some way off the January and March spikes and we are not seeing the same flight to safe havens such as short term fixed income that we saw in the first quarter. The Dow hit a new low for 2008 yesterday. We don’t think other markets will be long in following suit.
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BetOnMarkets.com Moring Update
The FTSE is currently indicating a sharply lower open, as traders are betting that the UK GDP number will come out weaker then expected. Oil and inflation are being blamed for the slow down in the UK economy. While economists are expecting a modest 0.4% growth, we are betting that the growth will be smaller then that, some traders are actually expecting a contracting number.
Oil is currently trading at an all time high, however this will be short lived. In US congress passed a bill which would require the CFTC to implement position limits, or constraints on the size of the stake each speculative investor can own, and raising margin requirements. Increasing the margins paid by hedge funds, will be a negative move for all the commodities, as traders will move to higher yielding contracts.
BetOnMarkets.com
Oil is currently trading at an all time high, however this will be short lived. In US congress passed a bill which would require the CFTC to implement position limits, or constraints on the size of the stake each speculative investor can own, and raising margin requirements. Increasing the margins paid by hedge funds, will be a negative move for all the commodities, as traders will move to higher yielding contracts.
BetOnMarkets.com
Thursday, June 26, 2008
BetOnMarkets Afternoon Update - 26/06/08
Financial markets are a sea of red numbers today as the classic ‘Fade the Fed’ trade plays out. The initial reaction to last night’s interest rate decision was neutral to positive, then the selling set in and hasn’t stopped since. Yesterday’s rally did a very poor job of papering over the cracks in the global economy. Today those cracks wide open for all to see with housing and financial stocks hit hardest. Barclays in particular is back to square one, erasing all of yesterday’s gains as investors take a second look at their fund raising plans in light of Goldman’s predictions of further write downs for major Western banks. Citi Group has also been floored today on this news, falling to its lowest level since 1998. The twin evils of Gold and Oil are again the sectors in demand as investors seek to profit from further economic turmoil and hedge their bets against inflation. We see no significant change forthcoming until global indices revisit their March lows.
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Wednesday, June 25, 2008
BetOnMarkets.com Morning Update
The FTSE futures are indicating a sharply lower open this morning, as the FTSE is prepared to trade for the first time since the FOMC announcement yesterday. While there was no change in the interest rate, the statement which came out with could have been used for both UK and Europe. Inflation is like the family member nobody likes, it is an embedded part of the economy, and currently its causing havoc around the world. Today traders will spend most of the day trying to position them self ahead of tomorrows UK GDP report and window dressing as we are about to end the 2nd quarter.
Oil fell on the news that US inventories rose for the first time in six weeks. Record high oil prices have forced users to cut back their oil usage. United Arab Emirates helped push oil prices lower when they announced that they will be increasing their output by 200,000 barrels per day next month. Gold joined the commodity losers as the drop in energy prices eased the inflation concern, against which traders use precious metals as a hedge. We are expecting for this to be a very volatile week for gold, with major economic announcements coming up from both sides of the Atlantic.
BetOnMarkets.com
Oil fell on the news that US inventories rose for the first time in six weeks. Record high oil prices have forced users to cut back their oil usage. United Arab Emirates helped push oil prices lower when they announced that they will be increasing their output by 200,000 barrels per day next month. Gold joined the commodity losers as the drop in energy prices eased the inflation concern, against which traders use precious metals as a hedge. We are expecting for this to be a very volatile week for gold, with major economic announcements coming up from both sides of the Atlantic.
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BetOnMarkets Afternoon Update
Fed days are like the proverbial game of two halves. Recently markets have tended to have positive bias going into the meeting, but the reaction the market action post Fed announcement is an entirely different ball game. We usually see some rapid moves and counter moves as traders absorb the decision and the accompanying commentary. US markets have indeed start off higher today as traders speculate that a rate hike is less likely than previously thought. European markets set the tone early this morning, but have made little traction since. Barclays and UBS are posting impressive increases on the day, with Barclays receiving the market’s seal of approval for its plans to raise around $9bn in fresh capital. US markets were also encouraged by economic data that for once didn’t come out as worse than expected. Both Durable goods and US new home sales were roughly in line with expectations.
The FTSE has been range bound for most of the day and we see little chance of this changing between now and the close. With the great unknown of the Fed announcement due after the close, traders don’t want to have their fingers burnt with any large overnight positions.
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The FTSE has been range bound for most of the day and we see little chance of this changing between now and the close. With the great unknown of the Fed announcement due after the close, traders don’t want to have their fingers burnt with any large overnight positions.
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Tuesday, June 24, 2008
BetOnMarkets.com Morning Update
The FTSE is currently indicating a flat open, however this does not meant that it will be an uneventful day. On deck there are a few economic releases from UK which will influence the market during the morning session. The Nation Wide Price index will be release before the FTSE opens, and we believe the number will come below the forecast. This will have a negative effect on the market; as a result we believe the market will open on a weak note. The rest of the day we expect traders to be on the sidelines ahead of the FOMC statement due after the close of FTSE. Our expectations is for no move along with relatively unchanged statement from the Fed, although we expect some note of ??upside risks?? to inflation given that crude oil has risen so much since the last meeting.
Gold was weaker during Tuesdays trading session as traders are paring down their holdings ahead of the FOMC announcement. While inflation is positive for gold prices, the risk that the FOMC will actually raise interest rates and make the US dollar a higher yielding investment has been hurting the precious metal. Oil is continuing its attempt to reach the all time high, ignoring the fact that there is a slowdown in US demand and the restoration of output in Nigeria.
Gold was weaker during Tuesdays trading session as traders are paring down their holdings ahead of the FOMC announcement. While inflation is positive for gold prices, the risk that the FOMC will actually raise interest rates and make the US dollar a higher yielding investment has been hurting the precious metal. Oil is continuing its attempt to reach the all time high, ignoring the fact that there is a slowdown in US demand and the restoration of output in Nigeria.
BetOnMarkets.com Afternoon Update
The same old market evils are back after a brief respite yesterday. There’s pressure on US financial stocks, oil refusing to budge significantly below $130, dramatic drops in US consumer confidence and the US housing collapse showing signs of accelerating not subsiding. Yesterday was the slowest trading day since May 12th, but market makers are certainly earning their crumb today as traders jostled for positions ahead of tomorrow’s FOMC interest rate announcement. Traders are pricing in a 90% probability of a no change verdict and a 10% probability of a hike. Even though a hike is unlikely, the Fed is expected to take a very tough line on inflation with hints of a tightening bias. Just want the market doesn’t want to hear. Without a significant catalyst we cannot see the recent trend reversing until we revisit the March lows. If the Fed is too forceful in their inflation fighting language, we could see those lows before the week is done.
BetOnMarkets.com Moring Update
The FTSE is currently indicating a higher open, as traders are waiting for the release of the BBA loans number. While not the most important of the economic releases, this number helps us see the risk tolerance that banks in UK are willing to take. With the end interest rate cuts in UK a given, banks will think twice to agree to loan money at a fixed rate, while their cost of borrowing goes up. Financials are going to be the focus of all the attention while waiting for the FOMC decision across the ocean.
The rise in output of oil in Saudi Arabia was wiped out by the attacks in Nigeria, helping the price per barrel rise over the 136 dollar mark. This could weigh heavily on the Consumer Confidence which is due to be released today at 14.00GMT. Consumers have been hit on every possible side, with no relief in sight, while the US consumers were given a stimulus package, not many of them spent it as predicted. Most recipients used the extra 600$ to pay for food or catch up on delinquent bills.
The rise in output of oil in Saudi Arabia was wiped out by the attacks in Nigeria, helping the price per barrel rise over the 136 dollar mark. This could weigh heavily on the Consumer Confidence which is due to be released today at 14.00GMT. Consumers have been hit on every possible side, with no relief in sight, while the US consumers were given a stimulus package, not many of them spent it as predicted. Most recipients used the extra 600$ to pay for food or catch up on delinquent bills.
Monday, June 23, 2008
BetOnMarkets.com Weekly Briefing
Contents This Week:
Economic calendar for week 23rd - 27th June 2008.
Commentary: The week ahead.
Economic Calendar for week 23rd - 27th June 2008
PLEASE NOTE - All times GMT not BST. BST is +1 Hr.
Monday June 23rd:
GE - 07:30 - Manufacturing PMI.
GE - 07:30 - Services PMI.
GE - 08:00 - Ifo Business Climate Index.
GE - 08:00 - Ifo Business Expectations Index.
EU - 08:00 - Manufacturing PMI.
EU - 08:00 - Services PMI.
Tuesday June 24th:
GE - 06:00 - Consumer Confidence.
FR - 06:45 - Consumer Spending M/M.
UK - 08:30 - BBA Mortgage Approvals.
US - 13:00 - National HPI Composite-20 Y/Y.
US - 14:00 - Consumer Confidence.
US - 14:00 - House Price Index M/M.
US - 14:00 - Richmond Fed Index.
US - 12:30 - Current Account.
Wednesday June 25th:
GE - 08:00 (Tentative) - Prelim CPI M/M.
EU - Tentative - ECB President Trichet Speaks.
UK - 10:00 - CBI Distributive Trades Realized.
US - 12:30 - Core Durable Goods Orders M/M.
US - 12:30 - Durable Goods Orders M/M.
US - 14:00 - New Home Sales.
US - 14:30 - Crude Oil Inventories.
US - 18:15 - FOMC Statement.
US - 18:15 - Federal Funds Rate.
Thursday June 26th:
EU - 06:00 - German Import Price Index M/M.
EU - 08:00 - M3 Money Supply Y/Y.
UK - 08:30 - Business Investment Q/Q.
UK - 08:45 - MPC Treasury Committee Hearings.
US - 12:30 - Final GDP Q/Q.
US - 12:30 - Unemployment Claims.
US - 12:30 - Final GDP Price Index Q/Q.
US - 14:00 - Existing Home Sales.
US - 14:30 - Natural Gas Storage.
Friday June 27th:
EU - 08:00 - Current Account.
UK - 08:30 - Current Account.
UK - 08:30 - Final GDP Q/Q.
EU - 09:00 - Consumer Confidence.
US - 12:30 - Core PCE Price Index M/M.
US - 12:30 - Personal Spending M/M.
US - 12:30 - Personal Income M/M.
US - 13:55 - Revised Michigan Sentiment.
EU - 16:30 - ECB President Trichet Speaks.
EU - Europe wide
FR - France
UK - United Kingdom
US - United States
GE - Germany
The week ahead.
It was yet another tough week for global stock markets, with the Dow Jones & S&P 500 declining 3.78% on the week and the FTSE down 3.37%. With oil rallying $4, renewed trouble in the financial sector, downgrades to monoline insurers and trouble in the Middle East, markets encountered an ugly storm on Friday.
Crude oil prices continued to hold above the $130 handle after competing news flows kept oil prices within a $10 range over the week. Downside pressure came from the Chinese government stating that it would be putting up energy prices. With China behind a large proportion of crudes bull run, there is the potential for demand to drop significantly on the back of this. China is the second largest fuel consumer after the US, pushing sales in SUVs thanks to fuel subsidies. Now, as in the US, prices are starting to bite and demand could soon subside. The biggest factor in the future price of oil will be the outcome of the Saudi conference on oil this weekend.
Elsewhere, US leading economic indicators came in at slightly better than indicated, but the Philadelphia Fed Manufacturing index registered its worst reading for 20 years. On the company front, there were some disappointing earnings from Fedex. The logistics company has been hit hard by the price of oil and is seen as a bellwether for the global economy.
Banks with the highest exposure to the UK property market such as HBOS led the fallers on the FTSE. An RBS note to clients released previously, gained attention for its stark warning about the potential for a crash between now and September. Goldmans added further gloom to the already dark sentiment by warning that a deep recession is very possible. Next weeks news flow is dominated by the US interest rate announcement on Wednesday. A no change verdict is expected to be the more likely outcome, but aside from the small potential for surprise next week, it is the prospects for the rest of the year that will cause the most excitement. Chatter that US rate hike speculation is overdone caused some initial excitement last week, but this alone wasnt enough to push markets higher in the face of some difficult head winds.
Thursday sees the release of US existing home sales. US Housing starts were down 3.3% last month, falling to a 17 year low. It is little surprise US builders are unwilling to add to their housing inventories in light of recent data. According to the S&P/ Case-Shiller Home price index of 10 major US cities, house prices are now down 15.1% compared to the same month a year ago. In addition, nearly 18.8% of subprime mortgages were past their due in the first quarter of 2008.
There are mixed prospects for the week ahead especially with a US interest rates decision coming up. An interesting sentiment study was highlighted by Jason Goepfert of SentimenTrader.com. His Smart Money/ Dumb money indicator tracks the positions of market timers that have proven to be good or poor at predicting the market in the past. The logic is to follow the smart money and avoid the dumb money. Last week the dumb money confidence dipped below 29%. The last 163 times this has happened, the S&P 500 was positive three months later 100% of the time, with an average gain of 12.3%. If history is anything to go by, it clearly pays to do the opposite of whatever the dumb money is doing.
However, the case for a rally is certainly not clear cut and Mark Hulbert, who tracks the performance of stock pick newsletters believes there is still not enough panic out there for a true contrarian buy signal. According to Hulbert, the bearishness that prevails right now almost seems to be a calm and tranquil form of bearishness, as opposed to the gut-wrenching emotions of despair and gloom that typically is seen when the typical adviser throws in the towel, having given up all hope. When the typical advisor has given up hope, the contrarian investor becomes more interested in the opposite trade.
A Bull bet on the S&P 500 to be higher than Fridays opening value of 1333 in three months time could return 107%. Given recent market trends though, it may be better to wait for signs of further capitulation in the form of a 2.5% daily drop or greater.
Economic calendar for week 23rd - 27th June 2008.
Commentary: The week ahead.
Economic Calendar for week 23rd - 27th June 2008
PLEASE NOTE - All times GMT not BST. BST is +1 Hr.
Monday June 23rd:
GE - 07:30 - Manufacturing PMI.
GE - 07:30 - Services PMI.
GE - 08:00 - Ifo Business Climate Index.
GE - 08:00 - Ifo Business Expectations Index.
EU - 08:00 - Manufacturing PMI.
EU - 08:00 - Services PMI.
Tuesday June 24th:
GE - 06:00 - Consumer Confidence.
FR - 06:45 - Consumer Spending M/M.
UK - 08:30 - BBA Mortgage Approvals.
US - 13:00 - National HPI Composite-20 Y/Y.
US - 14:00 - Consumer Confidence.
US - 14:00 - House Price Index M/M.
US - 14:00 - Richmond Fed Index.
US - 12:30 - Current Account.
Wednesday June 25th:
GE - 08:00 (Tentative) - Prelim CPI M/M.
EU - Tentative - ECB President Trichet Speaks.
UK - 10:00 - CBI Distributive Trades Realized.
US - 12:30 - Core Durable Goods Orders M/M.
US - 12:30 - Durable Goods Orders M/M.
US - 14:00 - New Home Sales.
US - 14:30 - Crude Oil Inventories.
US - 18:15 - FOMC Statement.
US - 18:15 - Federal Funds Rate.
Thursday June 26th:
EU - 06:00 - German Import Price Index M/M.
EU - 08:00 - M3 Money Supply Y/Y.
UK - 08:30 - Business Investment Q/Q.
UK - 08:45 - MPC Treasury Committee Hearings.
US - 12:30 - Final GDP Q/Q.
US - 12:30 - Unemployment Claims.
US - 12:30 - Final GDP Price Index Q/Q.
US - 14:00 - Existing Home Sales.
US - 14:30 - Natural Gas Storage.
Friday June 27th:
EU - 08:00 - Current Account.
UK - 08:30 - Current Account.
UK - 08:30 - Final GDP Q/Q.
EU - 09:00 - Consumer Confidence.
US - 12:30 - Core PCE Price Index M/M.
US - 12:30 - Personal Spending M/M.
US - 12:30 - Personal Income M/M.
US - 13:55 - Revised Michigan Sentiment.
EU - 16:30 - ECB President Trichet Speaks.
EU - Europe wide
FR - France
UK - United Kingdom
US - United States
GE - Germany
The week ahead.
It was yet another tough week for global stock markets, with the Dow Jones & S&P 500 declining 3.78% on the week and the FTSE down 3.37%. With oil rallying $4, renewed trouble in the financial sector, downgrades to monoline insurers and trouble in the Middle East, markets encountered an ugly storm on Friday.
Crude oil prices continued to hold above the $130 handle after competing news flows kept oil prices within a $10 range over the week. Downside pressure came from the Chinese government stating that it would be putting up energy prices. With China behind a large proportion of crudes bull run, there is the potential for demand to drop significantly on the back of this. China is the second largest fuel consumer after the US, pushing sales in SUVs thanks to fuel subsidies. Now, as in the US, prices are starting to bite and demand could soon subside. The biggest factor in the future price of oil will be the outcome of the Saudi conference on oil this weekend.
Elsewhere, US leading economic indicators came in at slightly better than indicated, but the Philadelphia Fed Manufacturing index registered its worst reading for 20 years. On the company front, there were some disappointing earnings from Fedex. The logistics company has been hit hard by the price of oil and is seen as a bellwether for the global economy.
Banks with the highest exposure to the UK property market such as HBOS led the fallers on the FTSE. An RBS note to clients released previously, gained attention for its stark warning about the potential for a crash between now and September. Goldmans added further gloom to the already dark sentiment by warning that a deep recession is very possible. Next weeks news flow is dominated by the US interest rate announcement on Wednesday. A no change verdict is expected to be the more likely outcome, but aside from the small potential for surprise next week, it is the prospects for the rest of the year that will cause the most excitement. Chatter that US rate hike speculation is overdone caused some initial excitement last week, but this alone wasnt enough to push markets higher in the face of some difficult head winds.
Thursday sees the release of US existing home sales. US Housing starts were down 3.3% last month, falling to a 17 year low. It is little surprise US builders are unwilling to add to their housing inventories in light of recent data. According to the S&P/ Case-Shiller Home price index of 10 major US cities, house prices are now down 15.1% compared to the same month a year ago. In addition, nearly 18.8% of subprime mortgages were past their due in the first quarter of 2008.
There are mixed prospects for the week ahead especially with a US interest rates decision coming up. An interesting sentiment study was highlighted by Jason Goepfert of SentimenTrader.com. His Smart Money/ Dumb money indicator tracks the positions of market timers that have proven to be good or poor at predicting the market in the past. The logic is to follow the smart money and avoid the dumb money. Last week the dumb money confidence dipped below 29%. The last 163 times this has happened, the S&P 500 was positive three months later 100% of the time, with an average gain of 12.3%. If history is anything to go by, it clearly pays to do the opposite of whatever the dumb money is doing.
However, the case for a rally is certainly not clear cut and Mark Hulbert, who tracks the performance of stock pick newsletters believes there is still not enough panic out there for a true contrarian buy signal. According to Hulbert, the bearishness that prevails right now almost seems to be a calm and tranquil form of bearishness, as opposed to the gut-wrenching emotions of despair and gloom that typically is seen when the typical adviser throws in the towel, having given up all hope. When the typical advisor has given up hope, the contrarian investor becomes more interested in the opposite trade.
A Bull bet on the S&P 500 to be higher than Fridays opening value of 1333 in three months time could return 107%. Given recent market trends though, it may be better to wait for signs of further capitulation in the form of a 2.5% daily drop or greater.
Sunday, June 22, 2008
BetOnMarkets.com Morning Update
The FTSE is currently indicating a higher open, as traders are coming back from their weekend.
Lower then expected Rightmove house prices could not depress the market, as bad as the Monday blues will. While there is no more economic news out of UK until Tuesday, the FTSE is likely follow the
Nikkei with a negative trading tone.
Oil is trading near the 135 dollars per barrel, as a mix of events over the weekend has resulted in higher prices. While the expected increase in output from Saudi Arabia was already priced in, the attacks on the Chevron pumping stations in Nigeria will cost the world supply almost all of that gain. Gold has been a winner all week, as the weak dollar theme pushed the precious metal back above the 900 level. We believe that gold will continue its rise until the FOMC meeting on Wednesday. While there is no rate cut expected, traders are interested in the language which will come out with the decision. They will be looking for clues if an interest rate increase is in the cards for later in the year.
Lower then expected Rightmove house prices could not depress the market, as bad as the Monday blues will. While there is no more economic news out of UK until Tuesday, the FTSE is likely follow the
Nikkei with a negative trading tone.
Oil is trading near the 135 dollars per barrel, as a mix of events over the weekend has resulted in higher prices. While the expected increase in output from Saudi Arabia was already priced in, the attacks on the Chevron pumping stations in Nigeria will cost the world supply almost all of that gain. Gold has been a winner all week, as the weak dollar theme pushed the precious metal back above the 900 level. We believe that gold will continue its rise until the FOMC meeting on Wednesday. While there is no rate cut expected, traders are interested in the language which will come out with the decision. They will be looking for clues if an interest rate increase is in the cards for later in the year.
Friday, June 20, 2008
BetOnMarkets.com Morning Update
The FTSE is currently indicating a higher open as UK and the European markets are following in the steps of the North American equity markets higher close. Friday is an economically quiet day in UK, however there is some European Union news to keep an eye on. At 6am GMT the German inflation will be released, as one of the biggest economies in the EU, this will influence the trading mood in Europe, and UK. On an off note, today is triple witching Friday, when most hedge fund traders roll over their positions to the next month, this tends to be an equity positive move.
Oil fell for the second day in a row dipping below 132 dollars per barrel. Slow down in the economy around the world, and an increase in output in Saudi Arabia is lowering the risk premium which is priced in the cost of every barrel. Gold was a winner again yesterday, and is being pushed higher, again on the back of a weak US dollar. Since there is no economic news out of US today, its a safe bet that the weak dollar theme will continue into the weekend. Gold could finish the week higher then 905 dollars per ounce.
Wednesday, June 18, 2008
BetOnMarkets.com Morning Update
The FTSE is currently indicating a flat open, as everyone is waiting for the release of the UK retail sales. Consumers are going through a rough time, with high oil prices and falling home values there is not much left for the customer to tap into to keep up with their spending habits. Sadly the Bank of England has announced that they will tolerate the lower standard of living UK citizens will go through while Mervyn King tries to reign in the number one problem: inflation. A strong Retail Sales number will help the FTSE stocks into positive gains.
Dollar weakness has given new life to the precious metal market, as gold has bounced from the 870 area now trading near the 900 dollar level. While the outlook on the US dollar has not changed, more and more traders are forgetting the threat that Mr. Bernanke made a few weeks back regarding a strong dollar intervention which spooked the FX market.
Dollar weakness has given new life to the precious metal market, as gold has bounced from the 870 area now trading near the 900 dollar level. While the outlook on the US dollar has not changed, more and more traders are forgetting the threat that Mr. Bernanke made a few weeks back regarding a strong dollar intervention which spooked the FX market.
Tuesday, June 17, 2008
BetOnMarkets.com Morning Update
The FTSE is currently indicating a lower open, as traders are awaiting the release of the Bank of England minutes from its last meeting. After seeing any hopes for a rate cut dashed yesterday, everyone will be interested to see if there is any indication of a rate hike for the next meeting. While a rate hike would be welcomed by the GBP/USD, it would be a punch in the gut to the FTSE, which already has been dealing with record oil prices and a squeeze in the credit markets.
Oil continues its losing way, bringing the count to four consecutive trading days. The main culprit is the slow down in economic growth, which translates into lower demand for the black gold. Helping push the price lower is the rumoured increase in output by the worlds largest oil producer Saudi Arabia. There may be a glut of oil in US, as slowing demand and increasing output will result in a fall for the price per barrel.
Oil continues its losing way, bringing the count to four consecutive trading days. The main culprit is the slow down in economic growth, which translates into lower demand for the black gold. Helping push the price lower is the rumoured increase in output by the worlds largest oil producer Saudi Arabia. There may be a glut of oil in US, as slowing demand and increasing output will result in a fall for the price per barrel.
Morning Update
The FTSE is currently indicating a flat open, while traders are awaiting the release of UK inflation numbers. After yesterdays stronger then expected CPI numbers in EU, traders are expecting the same results in Britain. This would put the end for any hope of an interest rate cut; in fact some say that it would pressure the BOE to increase rates at the next meeting. We believe that the FTSE will open in negative territory as the threat of an interest rate hike is negative news for equities. Not all is bad, as the rumour of the stronger then expected inflation numbers has boosted the Sterling Pound, from last weeks low of 1.9420 to 1.9675.
Oil was little changed yesterday, and will probably stay that way until the next report out of the US, which is due out Wednesday. Everyone is expecting a build-up in reserves as more and more consumers are moving away from driving big cars, and some are switching to bikes. Gold is back on track, mostly on the weakness of the US dollar, we expect the precious metal to continue its momentum higher as yesterdays US strength was over done.
Oil was little changed yesterday, and will probably stay that way until the next report out of the US, which is due out Wednesday. Everyone is expecting a build-up in reserves as more and more consumers are moving away from driving big cars, and some are switching to bikes. Gold is back on track, mostly on the weakness of the US dollar, we expect the precious metal to continue its momentum higher as yesterdays US strength was over done.
Monday, June 16, 2008
Weekly Briefing
After a rather turbulent week markets ended on a positive note. US markets benefited from a better than expected inflation outlook, following Fridays CPI numbers. The majority of inflation increases were due directly and indirectly to energy costs, so markets were thankful for the fact that oil didnt finish the week on a new record high.
The Energy heavy FTSE trudged behind its European peers and US markets, as oil stocks took a back seat, and domestic inflation fears dampened the buyers enthusiasm. Rumours hit the newswires that UK inflation will be double the expected rate. This news will make it easy for the BOE to make the decision to raise interest rates at the next central bank meeting. This is yet another piece of negative news for the FTSE, which has spent most of the year in the red. The CPI number released next week could add further negative pressure on the UK benchmark index.
Underwriters of the HBOS rights issue breathed a huge sigh of relief as the bank rose above the discount level, which would have caused them to step in and take up the issue at a bad price. The UK banking stocks finished down on the week, but managed to close significantly above the lows as bargain hunters entered the market. At one stage Barclays dipped below £3.00 a share for the first time in a decade before closing the week at £3.23.
Oil dropped slightly at the end of the week as comments from Saudi Arabia reassured investors that supply would be increased. However, this pullback has to be put into the perspective of the rapid price advance over the last few weeks. Just a few weeks ago $133 a barrel would have set headlines blazing; now it is a welcome pullback, with oil still well within the $130 to $139 trading range of the last few days.
On the currency markets, the Euro finished the week well down against the Pound and the Dollar. Sellers were out in force after Irish voters rejected the EU reform treaty by a narrow margin. The Lisbon treaty has to be ratified by every country before coming into effect. Every other country elected to allow their national governments to ratify the treaty, but Irelands democratic vote has thrown the treaty and potentially further EU integration into disarray. With increasing divisions within the Eurozone over rates policy, the single currencies detractors were out in force.
Next week starts off with some heavy data on both sides of the Atlantic, but ends on a quiet note with little data released on Friday. Monday sees the release of Core EU CPI, which could impact on the Euros recent declines. Around midday the US release of TIC net long term transactions will also impact on global currency markets. Tuesday sees the release of a raft of upper and middle tier US data. Top of the list is the Housing Starts and PPI data. On Wednesday we have the release of the minutes from the last MPC meeting. Considering recent developments, these minutes may be slightly obsolete, but will still be scoured for hints of future policy directions. Thursday brings UK retail sales and US unemployment claims.
Although markets ended the week on a positive note, European indices still ended well down. US inflation is still sky high. Everything from hospital services to education is costing more. To make matters worse, recent US home foreclosure data has indicated that one in every 483 US households experienced a foreclosure filing during the Month of May. In some parts of California, this figure stands at an incredible 1 in 66 houses. ECB president Trichet recently commented that much depends on the trajectory of the US housing market. If he is correct then the feared global depression may be more real than people are prepared to believe.
The FTSEs high from last year was 6754; roughly 200 points shy of its peak in 1999. It could be argued that it will be a long time before these levels are seen again. A No Touch bet on the FTSE not to touch 6800 at any time during the next 6 months (180 days) could return 18%.
The Energy heavy FTSE trudged behind its European peers and US markets, as oil stocks took a back seat, and domestic inflation fears dampened the buyers enthusiasm. Rumours hit the newswires that UK inflation will be double the expected rate. This news will make it easy for the BOE to make the decision to raise interest rates at the next central bank meeting. This is yet another piece of negative news for the FTSE, which has spent most of the year in the red. The CPI number released next week could add further negative pressure on the UK benchmark index.
Underwriters of the HBOS rights issue breathed a huge sigh of relief as the bank rose above the discount level, which would have caused them to step in and take up the issue at a bad price. The UK banking stocks finished down on the week, but managed to close significantly above the lows as bargain hunters entered the market. At one stage Barclays dipped below £3.00 a share for the first time in a decade before closing the week at £3.23.
Oil dropped slightly at the end of the week as comments from Saudi Arabia reassured investors that supply would be increased. However, this pullback has to be put into the perspective of the rapid price advance over the last few weeks. Just a few weeks ago $133 a barrel would have set headlines blazing; now it is a welcome pullback, with oil still well within the $130 to $139 trading range of the last few days.
On the currency markets, the Euro finished the week well down against the Pound and the Dollar. Sellers were out in force after Irish voters rejected the EU reform treaty by a narrow margin. The Lisbon treaty has to be ratified by every country before coming into effect. Every other country elected to allow their national governments to ratify the treaty, but Irelands democratic vote has thrown the treaty and potentially further EU integration into disarray. With increasing divisions within the Eurozone over rates policy, the single currencies detractors were out in force.
Next week starts off with some heavy data on both sides of the Atlantic, but ends on a quiet note with little data released on Friday. Monday sees the release of Core EU CPI, which could impact on the Euros recent declines. Around midday the US release of TIC net long term transactions will also impact on global currency markets. Tuesday sees the release of a raft of upper and middle tier US data. Top of the list is the Housing Starts and PPI data. On Wednesday we have the release of the minutes from the last MPC meeting. Considering recent developments, these minutes may be slightly obsolete, but will still be scoured for hints of future policy directions. Thursday brings UK retail sales and US unemployment claims.
Although markets ended the week on a positive note, European indices still ended well down. US inflation is still sky high. Everything from hospital services to education is costing more. To make matters worse, recent US home foreclosure data has indicated that one in every 483 US households experienced a foreclosure filing during the Month of May. In some parts of California, this figure stands at an incredible 1 in 66 houses. ECB president Trichet recently commented that much depends on the trajectory of the US housing market. If he is correct then the feared global depression may be more real than people are prepared to believe.
The FTSEs high from last year was 6754; roughly 200 points shy of its peak in 1999. It could be argued that it will be a long time before these levels are seen again. A No Touch bet on the FTSE not to touch 6800 at any time during the next 6 months (180 days) could return 18%.
Wednesday, June 11, 2008
Morning Update
The FTSE is currently indicating a flat open, mostly because there are no economic news out today in UK. Most traders will be waiting for the US advanced retail sales before deciding the tone for the trading day. A lot has been said over the last few days about the state of the US consumer, and this will be the first inside look into just how the consumer is doing. There is talk that the number will be weaker then expected, which should hurt the US dollar, especially versus the British Pound. Look for the GBP/USD to touch 1.9750 after the number comes out at 12.30pm GMT.
Gold made a small comeback yesterday after weakness in the US dollar. Lately most commodities have abandoned fundamentals and have been trading based on how the US dollar been doing that day. Oil crept back to above 135 dollars per barrel after US inventories fell another week. This started some concerns that the US stockpiles may be strained during the summer driving season
Gold made a small comeback yesterday after weakness in the US dollar. Lately most commodities have abandoned fundamentals and have been trading based on how the US dollar been doing that day. Oil crept back to above 135 dollars per barrel after US inventories fell another week. This started some concerns that the US stockpiles may be strained during the summer driving season
Monday, June 9, 2008
BetOnMarkets Weekly Briefing
Contents This Week:
Economic calendar for week 9th - 13th June 2008.
Commentary: The week ahead.
Economic Calendar for week 9th - 13th June 2008
PLEASE NOTE - All times GMT not BST. BST is +1 Hr.
Monday June 9th:
GE - 06:00 - Trade Balance.
EU - 08:30 - Sentix Investor Confidence.
UK - 08:30 - PPI Input M/M.
UK - 08:30 - PPI Output M/M.
US - 14:00 - Pending Home Sales M/M.
UK - 23:01 - RICS House Price Balance.
UK - 23:01 - BRC Retail Sales Monitor Y/Y.
Tuesday June 10th:
FR - 06:45 - Industrial Production M/M.
UK - 08:30 - Industrial Production M/M.
UK - 08:30 - Manufacturing Production M/M.
US - 08:30 - DCLG House Price Index Y/Y.
US - 12:30 - Trade Balance.
UK - 14:00 - IBD/TIPP Economic Optimism.
UK - 23:01 - NIESR GDP Estimate.
Wednesday June 11th:
FR - 06:45 - CPI M/M.
UK - 08:30 - Claimant Count Change.
UK - 08:30 - Average Earnings Index +Bonus Q/Y.
UK - 08:30 - Trade Balance.
UK - 08:30 - Unemployment Rate.
US - 14:30 - Crude Oil Inventories.
US - 18:00 - Beige Book.
Thursday June 12th:
FR - 06:45 - Final Employment Change Q/Q.
EU - 09:00 - ECB Bulletin.
EU - 09:00 - Industrial Production M/M.
US - 12:30 - Core Retail Sales M/M.
US - 12:30 - Retail Sales M/M.
US - 12:30 - Import Price Index M/M.
US - 12:30 - Unemployment Claims.
US - 14:00 - Business Inventories M/M.
US - 14:30 - Natural Gas Storage.
Friday June 13th:
GE - 06:00 - CPI M/M.
EU - 09:00 - Labor Cost Index Y/Y.
EU - 10:00 - Employment Change Q/Q.
US - 12:30 - Core CPI M/M.
US - 12:30 - CPI M/M.
US - 13:55 - Prelim Michigan Sentiment.
EU - Europe wide
FR - France
UK - United Kingdom
US - United States
GE - Germany
The week ahead.
Three percent may seem an inauspicious number, but it certainly caused some headaches last week. Firstly, UK inflation is running at 3%, over the Bank Of England target of 2% and obliging the Governor of the Bank of England to write a letter of explanation to the Government.
Secondly, on Friday, US markets in unison fell by over 3% as panic once more swept through financial markets. The week ended how it had began with some faltering rallies in between. The main catalyst for the capitulation was the U.S. payrolls decline. The jobless rate of 5.5% was the biggest increase since 1986 and the fifth consecutive month that the US had lost jobs. The no recession consensus that had been building is now under considerable pressure on both sides of the Atlantic.
The final nail in the coffin was the price of oil awaking from its temporary slumber. Crude prices surged over $15 Dollars in the final two days of the week, adding $11.31 on Friday alone to close at a new record high of $139.12. Fears of war in the Middle East and a US recession created the perfect Storm.
Even before equity markets opened for the week June had already started badly for domestic markets. In early trading, the Pound fell sharply against the Dollar on weak manufacturing data. Then equity markets opened to an all out blood bath on shares in Bradford and Bingley. News had already leaked over the weekend that the Bank was in trouble, and so it proved with shares pushed down to 60 pence at one stage. The bank has now fallen an incredible 87% since its peak in 2006. Barclays Bank has fallen less in percentage terms since its peak, but the size of the bank has made its collapse all the more damaging. Last week Barclays closed the week at its lowest level since March 2003 on capital adequacy concerns.
Recently there were signs of a slowing but not capitulating UK economy, now things are looking graver. As house prices inch lower, consumers feel poorer than six months ago. This in itself is not too dramatic, but combined with oil prices not far off record highs and food inflation on the up, consumers not only feel poorer, they actually are.
There was no surprise from the MPC with its rates decision last week, but the ECB ruffled some feathers by indicating that they may have to raise rates as soon as July. The DAX and CAC have lagged behind other markets, as the prospect of higher rates proves unpopular with equity investors. Bernanke dropped some large hints that the Feds bias was moving towards tightening rates after an easing cycle, but the recent payrolls data shows that the Fed like many other central banks, is stuck between a recessionary rock and a inflationary hard place.
Next week has the potential to pour more misery on an already depressed market. The week starts with UK PPI data, and the latest House price balance from RICS. Tuesday sees the release of UK industrial production figures and the US trade balance. The weeks hottest ticket is potentially the US retail sales data on Thursday. If the US consumer starts to seriously tighten their wallet, there could be wide reaching international consequences.
Bespoke Investments have some interesting data on the performance of the Dow Jones following capitulations such as Friday. The average change following a 3% drop has been 0.11% the following day and 0.28% the following week. Over the last decade, the average performance the next day has been 0.63%. In addition when the market rises 1.5% one day then drops 1.5% the next day (as the Dow did on Thursday and Friday), then the following day is up on average 0.14% and 0.56% over the following week. There are certainly wide variations in the making of this average and one must be mindful of Nassim Talebs advice to never cross a river because it is on average 4 feet deep. However, there is at least the potential for upside that may not be currently priced in. The Dow Jones closed on Friday at 12209.81. A 0.5% rise over a week would bring it to 12271.05. Setting a bull bet predicting that The Dow Jones (Wall Street) will be higher than 12271 in 10 days time could return 126%.
Monday, June 2, 2008
BetOnMarkets Weekly Briefing
Contents This Week:
Economic calendar for week 2nd - 6th June 2008.
Commentary: The week ahead.
Economic Calendar for week 2nd - 6th June 2008
PLEASE NOTE - All times GMT not BST. BST is +1 Hr.
Monday June 2nd:
UK - Tentative - Halifax House Price Index M/M.
EU - 08:00 - Manufacturing PMI.
UK - 08:30 - Manufacturing PMI.
UK - 08:30 - Mortgage Approvals.
UK - 08:30 - Net Lending to Individuals M/M.
US - 14:00 - ISM Manufacturing Index & ISM Manufacturing Prices.
US - 14:00 - Construction Spending M/M.
Tuesday June 3rd:
UK - 08:30 - Construction PMI.
EU - 09:00 - PPI M/M.
EU - 09:00 - Revised GDP Q/Q.
US - 14:00 - Trade Balance.
US - 15:00 - Factory Orders M/M.
UK - 23:01 - Consumer Confidence Index.
Wednesday June 4th:
EU - 08:00 - Services PMI.
EU - 09:00 - Retail Sales M/M.
UK - 09:30 - BRC Shop Price Index Y/Y.
US - 11:30 - Challenger Job Cuts Y/Y.
US - 12:15 - ADP Nonfarm Employment Change.
US - 12:30 - Nonfarm Productivity Q/Q.
US - 12:30 - Unit Labor Costs Q/Q.
US - 14:00 - ISM Non-Manufacturing Composite.
US - 14:30 - Crude Oil Inventories.
Thursday June 5th:
UK - Tentative - MPC Rate Statement.
UK - 11:00 - Official Bank Rate.
EU - 11:45 - Minimum Bid Rate.
EU - 12:30 - ECB Press Conference.
US - 12:30 - Unemployment Claims.
US - 14:30 - Natural Gas Storage.
Friday June 6th:
FR - 06:45 - French Government Budget Balance.
FR - 06:45 - French Trade Balance.
GE - 10:00 - German Industrial Production M/M.
US - 12:30 - Nonfarm Employment Change.
US - 12:30 - Unemployment Rate.
US - 12:30 - Average Hourly Earnings M/M.
US - 14:00 - Wholesale Inventories M/M.
US - 19:00 - Consumer Credit M/M.
EU - Europe wide
FR - France
UK - United Kingdom
US - United States
GE - Germany
The week ahead.
US stocks have received a slight boost as oil prices retreat and new home sales unexpectedly rose on a month on month basis. However, we shouldn't really read too much into this, as there is a margin for error in these figures and new home sales in the US are still down 42% year on year. In addition, the Case-Schiller benchmark house price index is now showing a record decline of 14%. During the early 90s housing recession, this figure reached just -2.8%, which is a real indicator of the absolute capitulation in the US housing market. Predictions of double digit losses for the UK housing market may not be far off the mark, especially in light of recent house price data showing record month on month falls.
There isnt the immediate connection between UK house prices and the FTSE as there is with oil and equities at the moment. Before the credit crunch broke, US house prices were on the retreat, yet stock markets continued to rally. Oil currently has a more immediate relationship with equity performance because of its daily volatility and that fact that many traders have already moved to price in a UK housing slump. The banking sector itself however, does have more significant correlation between house prices and share prices. Banks were amongst the worst performing sectors last week as fears of repossessions and negative equity caused many to question the values of their loan books. RBS also dragged the sector down with rumours that its rights issue would fail.
The FTSE finished the week below its European peers and well below US markets, who actually managed a decent gain on the week. In the US, the Nasdaq led the charge with Google up on encouraging pay per click data. Ironically, it may have been lower oil prices that hit the FTSE hardest last week. Oil finished down, around $8 from the peak of $135, sending oil majors such as BP and Shell lower over the reduced trading week. Financial stocks contribute around 25% of the FTSEs total weighting and Oil & Gas stocks arent far behind at just under 20%.
While there is still scope for oil to at least contain its price inflation, there is a long way to go before the impact of high oil prices is nullified. Todays pull back was welcomed in the short term by traders, but the realisation is setting in that sky-rocketing oil prices have left a trail of inflationary destruction in their wake that wont disappear over night, even if prices dip back below $100.
The stand out announcements next week revolve around interest rates. On Thursday, the BoEs Monitory Policy committee will announce the latest headline interest rate decision. A rate cut seems to be off the cards given recent comments from Governor King. The most likely decision will be to keep rates at 5%, there is always a small potential for upside. In Europe, the ECB has been taking a stronger line on inflation for longer with the German central bank calling for rate hikes. Elsewhere we have important employment data from the US on Friday on top of top tier manufacturing data earlier in the week. The Halifax house price index is tentative for some time on Tuesday, an announcement that could cement the UK housing decline.
The GB Pound/ US Dollar exchange rate, known as cable was virtually unchanged over the week, but given the raft of announcements due on both sides of the pond, there could be some significant movement next week. An Up or Down trade wins if either of two barrier levels are hit within the specified time. An Up or Down trade on GBP/ USD to touch either 1.9454 or 1.992 within the next 10 days could return 11%.
Economic calendar for week 2nd - 6th June 2008.
Commentary: The week ahead.
Economic Calendar for week 2nd - 6th June 2008
PLEASE NOTE - All times GMT not BST. BST is +1 Hr.
Monday June 2nd:
UK - Tentative - Halifax House Price Index M/M.
EU - 08:00 - Manufacturing PMI.
UK - 08:30 - Manufacturing PMI.
UK - 08:30 - Mortgage Approvals.
UK - 08:30 - Net Lending to Individuals M/M.
US - 14:00 - ISM Manufacturing Index & ISM Manufacturing Prices.
US - 14:00 - Construction Spending M/M.
Tuesday June 3rd:
UK - 08:30 - Construction PMI.
EU - 09:00 - PPI M/M.
EU - 09:00 - Revised GDP Q/Q.
US - 14:00 - Trade Balance.
US - 15:00 - Factory Orders M/M.
UK - 23:01 - Consumer Confidence Index.
Wednesday June 4th:
EU - 08:00 - Services PMI.
EU - 09:00 - Retail Sales M/M.
UK - 09:30 - BRC Shop Price Index Y/Y.
US - 11:30 - Challenger Job Cuts Y/Y.
US - 12:15 - ADP Nonfarm Employment Change.
US - 12:30 - Nonfarm Productivity Q/Q.
US - 12:30 - Unit Labor Costs Q/Q.
US - 14:00 - ISM Non-Manufacturing Composite.
US - 14:30 - Crude Oil Inventories.
Thursday June 5th:
UK - Tentative - MPC Rate Statement.
UK - 11:00 - Official Bank Rate.
EU - 11:45 - Minimum Bid Rate.
EU - 12:30 - ECB Press Conference.
US - 12:30 - Unemployment Claims.
US - 14:30 - Natural Gas Storage.
Friday June 6th:
FR - 06:45 - French Government Budget Balance.
FR - 06:45 - French Trade Balance.
GE - 10:00 - German Industrial Production M/M.
US - 12:30 - Nonfarm Employment Change.
US - 12:30 - Unemployment Rate.
US - 12:30 - Average Hourly Earnings M/M.
US - 14:00 - Wholesale Inventories M/M.
US - 19:00 - Consumer Credit M/M.
EU - Europe wide
FR - France
UK - United Kingdom
US - United States
GE - Germany
The week ahead.
US stocks have received a slight boost as oil prices retreat and new home sales unexpectedly rose on a month on month basis. However, we shouldn't really read too much into this, as there is a margin for error in these figures and new home sales in the US are still down 42% year on year. In addition, the Case-Schiller benchmark house price index is now showing a record decline of 14%. During the early 90s housing recession, this figure reached just -2.8%, which is a real indicator of the absolute capitulation in the US housing market. Predictions of double digit losses for the UK housing market may not be far off the mark, especially in light of recent house price data showing record month on month falls.
There isnt the immediate connection between UK house prices and the FTSE as there is with oil and equities at the moment. Before the credit crunch broke, US house prices were on the retreat, yet stock markets continued to rally. Oil currently has a more immediate relationship with equity performance because of its daily volatility and that fact that many traders have already moved to price in a UK housing slump. The banking sector itself however, does have more significant correlation between house prices and share prices. Banks were amongst the worst performing sectors last week as fears of repossessions and negative equity caused many to question the values of their loan books. RBS also dragged the sector down with rumours that its rights issue would fail.
The FTSE finished the week below its European peers and well below US markets, who actually managed a decent gain on the week. In the US, the Nasdaq led the charge with Google up on encouraging pay per click data. Ironically, it may have been lower oil prices that hit the FTSE hardest last week. Oil finished down, around $8 from the peak of $135, sending oil majors such as BP and Shell lower over the reduced trading week. Financial stocks contribute around 25% of the FTSEs total weighting and Oil & Gas stocks arent far behind at just under 20%.
While there is still scope for oil to at least contain its price inflation, there is a long way to go before the impact of high oil prices is nullified. Todays pull back was welcomed in the short term by traders, but the realisation is setting in that sky-rocketing oil prices have left a trail of inflationary destruction in their wake that wont disappear over night, even if prices dip back below $100.
The stand out announcements next week revolve around interest rates. On Thursday, the BoEs Monitory Policy committee will announce the latest headline interest rate decision. A rate cut seems to be off the cards given recent comments from Governor King. The most likely decision will be to keep rates at 5%, there is always a small potential for upside. In Europe, the ECB has been taking a stronger line on inflation for longer with the German central bank calling for rate hikes. Elsewhere we have important employment data from the US on Friday on top of top tier manufacturing data earlier in the week. The Halifax house price index is tentative for some time on Tuesday, an announcement that could cement the UK housing decline.
The GB Pound/ US Dollar exchange rate, known as cable was virtually unchanged over the week, but given the raft of announcements due on both sides of the pond, there could be some significant movement next week. An Up or Down trade wins if either of two barrier levels are hit within the specified time. An Up or Down trade on GBP/ USD to touch either 1.9454 or 1.992 within the next 10 days could return 11%.
Morning Update
The week of economic surprises is upon us, and first up is the US ISM manufacturing numbers, set to be released at 14.00 GMT. Economists are expecting another contracting month, however there seems to be indication that the number will be below expectations. From high oil prices, and even lower economic outlook among business owners the risk for the lower then expected number is strong.
The FTSE is currently indicating a lower open, however since its Monday morning, we are not considering them as very accurate. Commodities were on the weak side last week mainly on the strength of the US dollar; however the party might be ending especially will all the economic news on the calendar.
The FTSE is currently indicating a lower open, however since its Monday morning, we are not considering them as very accurate. Commodities were on the weak side last week mainly on the strength of the US dollar; however the party might be ending especially will all the economic news on the calendar.
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