Friday, 29 September 2017
Asian markets mixed; profit taking extends
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Wall Street
Stocks in Asia struggled for a clear direction in early trading hours on Friday in the light of mixed economic reports from Japan and as the US dollar eased overnight on profit taking.
Australia ASX +17.30 +0.30% 5,748.80 OPEN
Shanghai Comp -3.09 -0.09% 3,342.19 OPEN
Hang Seng Index -86.21 -0.31% 27,556.22 OPEN
Nikkei 225 -14.62 -0.07% 20,348.49 OPEN
TSEC 50 Index +37.54 +0.36% 10,333.99 OPEN
Earlier in the Asian session, Japan reported a 0.2 percent increase on household spending for August, outperforming expectations for a 0.2 percent decline.
The jobs/applications ratio for August came in at 1.52, a tick down from an originally estimated 1.53 reading. The ratio did not suffered any changes since last month.
In a separate report, the consumer price index for August met analysts’ predictions at a 0.7 percent growth rate, up from a previous month 0.5 percent build.
Also, Japan’s industrial production grew by 2.1 percent in August, also above a forecasted 1.9 percent increase and correcting a prior 0.8 percent decline. Retail sales rose by 1.7 percent, falling short from a 2.6 percent increase seen and a prior 1.8 percent.
Market players are opting for a cautious position as the weekend gets closer and there are no certainties about how North Korea will behave in regard to its nuclear and ballistic programs.
The American currency gave up some previous gains as investors fixed weekly gains made on the back of higher expectations for further monetary policy adjustments by the end of this year.
Earlier this week, Federal Reserve Chairwoman Janet Yellen reiterated that the regulator plans to raise interest rates one more time in the upcoming months. According to Fed’s chief, adjusting policy “too gradually” could overheat the labor market.
Kansas City Fed President Esther George, a non-voting member of the Federal Open Market Committee, said Thursday that rising benchmark rates is appropriate for economic expansion.
Ahead in the day, attention will be directed to three key publications: Germany’s unemployment change for September, UK’s Q2 GDP final revision and the latest CPI in the euro zone.
As for those interesting in policy matters, ECB President Mario Draghi and BoE Governor Mark Carney are due to speak starting at 14:15 GMT.
What’s next? – USDJPY 29.09.17
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what’s next
USDJPY
The dollar/yen was 0.31 percent up as of 05:30 GMT on Friday to trade at 112.67, with market players digesting mixed economic data from Japan and as the dollar extended gains.
Household spending in Japan increased by 0.2 percent in August, outperforming expectation for a 0.2 percent decline and a prior 1.9 percent draw in monthly terms.
The jobs/applications ratio for August came in at 1.52, a tick down from an originally estimated 1.53 reading, showing no changes from the previous month.
In a separate report, the consumer price index for August met analysts’ predictions at a 0.7 percent growth rate, up from a previous month 0.5 percent build.
Japan’s industrial production grew by 2.1 percent in August, also above a forecasted 1.9 percent increase and correcting a prior 0.8 percent decline. Retail sales for August rose by 1.7 percent, falling short from a 2.6 percent increase seen and a prior 1.8 percent.
The US dollar index, which gauges the greenback against a basket of six major rivals, was trading at 93.05 by the time of this writing, adding 0.13 percent.
The American currency was boosted by the final revision on the second quarter gross domestic product, which exposed a 3.1 percent economic expansion, outperforming a forecasted 3.0 pct.
The goods trade balance for August came in at a $62.94 billion deficit, according to the US Commerce Department. Initial jobless claims rose by 12,000 to a seasonally adjusted 272K.
According to Fed funds tracked by CME Group’s FedWatch tool, traders are currently pricing in a 71.4 percent probability of a 25 basis points rate hike by December.
Ahead in the day, traders will be focusing on the PCE price index, personal spending figures and consumer sentiment from Michigan University.
What’s next? – DAX 29.09.17
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what’s next
DAX
The DAX futures traded 0.45 percent higher at 12,708.5 points as of 05:25 GMT on Friday, with market participants looking ahead to a speech from ECB President Mario Draghi, while continuing to digest up economic reports from Europe.
The GfK consumer climate for October notched down to 10.8, falling short from an initially estimated 11.0 reading. In a separate report, the German consumer price index came in line with market expectations at 0.1 percent.
Ahead in today’s session, attention will be directed to the releases of retail sales for August as of 06:00 GMT, with a 0.5 percent eyed. The unemployment rate is up at 07:55 GMT.
Traders will also be monitoring a conversation between the European Central Bank President Mario Draghi and the Bank of England Governor Mark Carney, which is set at 14:15 GMT.
Draghi is a strong defendant of monetary policy stimulus and it’s expected to channel his rhetoric in that line for the time being. However, the ECB chief has recently shown openness to revise the quantitative easing program as the bloc’s economy continues to improve.
Inflation in the euro zone is scheduled for release at 09:00 GMT. The consumer price index for September is seen showing a 1.6 percent build.
The DAX settled 0.37 percent or 47.24 points higher on Thursday in Frankfurt, closing at 12,704.65 points with basic resources, retail and food & beverages pushing upwards.
The best performers of the session were Deutsche Bank adding 2.68 percent to 14.370, Linde rising 2.37 percent to 174.70 and Fresenius Medical Care up 1.66 percent to 82.670.
The worst performers of the session were Merck easing 2.74 percent to 97.31, Volkswagen falling 1.67 percent to 138.35 and Commerzbank down 1.00 percent to 11.340.
What’s next? – GOLD, OIL 29.09.17
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what’s next
GOLD
Gold prices were showing little changes in Asia as sentiment was affected by mixed data, while cautiousness and profit taking ahead of the weekend offered moderate support.
On the Comex division of the New York Mercantile Exchange, gold futures were trading 0.02 percent lower at $1,288.40 a troy ounce as of 05:20 GMT.
The yellow metal ended Thursday flat, as US dollar corrected downwards on profit taking but with bullion still under pressure amid rising expectations for further monetary tightening.
The US dollar index, which gauges the greenback against a basket of six major rivals, was trading at 93.05 by the time of this writing, adding 0.13 percent.
Gold prices fell below the $1300 mark earlier this week as Federal Reserve Chairwoman Janet Yellen warned about the risks of adjustment monetary policy “too gradually”.
Gold prices fell below the $1300 mark earlier this week as Federal Reserve Chairwoman Janet Yellen warned about the risks of adjustment monetary policy “too gradually”.
Her comments pushed expectations for a third rate hike by the end of this year. A rising rate environment plays out negatively for the metal as investors turn into high yielding assets.
According to Fed funds tracked by CME Group’s FedWatch tool, traders are currently pricing in a 71.4 percent probability of a 25 basis points rate hike by December.
The precious metal also fluctuated on the release of mixed economic reports in the United States. The final revision of the second quarter gross domestic product showed a 3.1 percent economic expansion in the April-June period, according to the Commerce Department.
Meanwhile, the Labor Department said initial jobless claims rose by 12,000 to a seasonally adjusted 272,000 in the week ended September 22. Analyst forecasted a 10,000 build.
Ahead in the day, traders will be paying attention to a batch of key data scheduled for release, including Germany’s employment change and retail sales, UK Q2 GDP, EU’s CPI, the US PCE index, personal spending and consumer sentiment.
Attention will also be directed to remarks from the European Central Bank President Mario Draghi and Bank of England Governor Mark Carney.
OIL
Oil prices were mixed in early trading hours on Friday, as market participants prepared to receive the weekly US rig count later in the session.
The US West Texas Intermediate crude futures were trading 0.19 percent lower at $51.46 per barrel as of 05:20 GMT, while the London-based Brent contracts were up 0.16 percent to trade at $57.50 per barrel on the ICE Futures Exchange.
Crude benchmarks settled in red territory on Thursday as investors opted to take profits in multimonth highs following an upbeat stockpiles report which supported prices earlier this week.
The US Energy Information Administration reported on Wednesday a 1.8 million barrels reduction for the week ended September 22. Analysts had forecasted a 3.4 million barrels build.
Also supporting crude prices were expectations for an extension of OPEC’s production agreement beyond its March 2018 deadline. OPEC and its allies agreed in May to prolong the output deal initially signed in November 2016 for a nine months period.
The political sphere also played its part, with Turkey saying it will only deal with the Iraqi government after Kurdistan voted to move forward with its independence.
Most oil exchange go through a pipeline from northern Iraq to Turkey. The crude comes from Kurdish sources and if Ankara would block such operations, the Kurdish Regional Government might face serious economic challenges in the near future.
Oil prices are on track to mark weekly gains for a fourth consecutive week as the American refining industry continues to stabilize after hurricane Harvey.
Oilfield services Baker Hughes will present its weekly oil rig count as of 17:00 GMT on Friday.
Weekly Outlook: Oct 2 - Oct 6
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weekly outlook
Monday
Europe: Germany’s manufacturing PMI for September is due for release as of 07:55 GMT, with a 60.6 reading eyed. The same report will be published in Europe at 08:00 GMT and in the UK at 09:00 GMT. The EU will also present its unemployment rate for August at 09:00 GMT.
United States: the manufacturing PMI for September is scheduled at 13:45 GMT. The Institute for Supply Management will present its own manufacturing PMI at 14:00 GMT, with 57.5 seen.
Tuesday
Europe: the UK construction PMI for September will be out at 08:30 GMT.
United States: the American Petroleum Institute publishes its weekly crude and refined products stockpiles estimations at 20:35 GMT.
Wednesday
Europe: Markit Economics will be presenting its services PMI indexes for Germany, the euro zone and the United Kingdom at 07:55 GMT, 08:00 GMT and 08:30 GMT respectively. The EU will also show the latest retail sales figures, with a forecasted 0.2 percent decline.
United States: ADP nonfarm employment change for September is set for release at 12:15 GMT, followed by Markit’s composite and services PMI indexes as of 13:45 GMT. The ISM non-manufacturing PMI is due at 14:00 GMT. Also, the Energy Information Administration will release its weekly crude and refined products inventories as of 14:30 GMT
Thursday
Europe: the European Central Bank will publish its Account of Monetary Policy Meeting, an equivalent to Fed’s meeting minutes. Investors will pay close attention to this report as they search for signs of monetary tightening for the upcoming months.
United States: trade balance figures will be out at 12:30 GMT, with a $44.00 billion deficit eyed. Factory orders for August are expected to hit the markets at 14:00 GMT.
Friday
Europe: Germany’s factory orders for August are up at 06:00 GMT. Later on, traders will count on the September Halifax house price index, with a 0.2 percent increase eyed.
United States: strong volatility expected for the US dollar. The latest employment report will be presented at 12:30 GMT, including nonfarm payrolls, average hourly earnings and the unemployment rate. Analysts estimated a 0.2 percent build in earnings, a 130,000 jobs addition and no changes regarding the current 4.4 percent unemployment rate.
Thursday, 28 September 2017
Asian markets mixed; fresh economic data in focus
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Wall Street
Asian markets were mixed on Thursday, with investors turning to fresh followed a strong lead from Wall Street, with American indexes rising as new details on Trump’s tax bill were released.
Australia ASX +10.90 +0.19% 5,736.40 OPEN
Shanghai Comp -3.09 -0.09% 3,342.19 CLOSED
Hang Seng Index -86.21 -0.31% 27,556.22 CLOSED
Nikkei 225 +103.54 +0.51% 20,370.59 OPEN
TSEC 50 Index -5.44 -0.05% 10,321.24 OPEN
The Asian session followed a strong lead from Wall Street, with the top three American indexes closing higher as new details on Trump’s tax bill were released.
The Republican party presented a framework on the new administration’s tax reform on Wednesday. The framework is a result of serious negotiations between the Trump team and the GOP leadership.
The goal of restructuring the tax system is to boost the economy by leaving more cash on the table for businesses and consumers.
On the corporate side, the reform pretends to cut the current tax rate from 35 to 20 percent. According to the document, pass-through businesses would pay a 25 percent tax rate. These terms have been carefully designed to push big companies to bring profits made abroad to the United States.
President Trump promised on Wednesday that this plan is going “to bring back the jobs and wealth that have left our country and most people thought left our country for good".
As for consumers, the plan simplifies the current seven-brackets system by reorganizing taxpayers in only three categories of 12, 25 and 35 percent. Also, the standard deduction would almost be doubled if the bill gets green light.
"Tax reform is the most important thing we can do to restore confidence to this country, to get jobs and prosperity and that's why we are so singularly focused on getting this done this year," said House Speaker Paul Ryan on Tuesday.
On the data front, no relevant data is expected in Asia or Europe. Market players will be paying attention to the releases of second quarter gross domestic product, August’s trade figures and initial jobless claims as of 12:30 GMT. Speeches from FOMC George and Fischer are eyed.
On Wednesday, non-defense capital goods orders for August showed a 0.9 percent increase following a revised 1.1 percent build in July. Meanwhile, The National Association of Realtors said pending home sales dropped by 2.6 percent to 106.3 last month.
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what’s next
What’s next? – USDJPY 28.09.17
The dollar/yen was 0.18 percent up as of 05:05 GMT on Thursday to trade at 113.01, as the American currency continued to strengthen on the back of expectations for further monetary policy adjustments and as the GOP released details of Trump’s tax reform.
The Trump administration and the Republican leadership agreed on a plan to introduce major changes to the US tax system, such reducing the corporate tax rate to 20 percent and simplifying the current seven brackets for individual taxpayers to only three.
The implementation of these reforms could have a serious impact on the economy, as they are meant to leave more cash on the table for spending.
The US dollar index, which gauges the greenback against a basket of six major rivals, was trading at 93.41 by the time of this writing, adding 0.25 percent.
Also supporting the pair were expectations for a third rate hike later this year following Fed Chair Janet Yellen warning about adjusting monetary policy “too gradually”.
According to Fed funds tracked by CME Group’s FedWatch tool, traders are currently pricing in a 76.4 percent probability of a 25 basis points rate hike by December.
On the data front, durable goods orders rose 1.7 percent in August, up from an initially forecasted 1.0 percent. Pending home sales declined by 2.6 percent.
Bank of Japan Governor Haruhiko Kuroda is due to speak as of 06:35 GMT. The BoJ chief has recently expressed that the regulator will continue to support the economy if needed, dissipating rumors about a monetary policy tightening in the upcomings months.
Ahead in today’s session, a fresh reading on the second quarter US gross domestic product is scheduled at 12:30 GMT, along with August trade figures and initial jobless claims.
Attention will also be directed to speeches from FOMC members George and Stanley Fischer as of 13:45 GMT and 14:15 GMT respectively.
What’s next? – DAX 28.09.17
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what’s next
DAX
The DAX futures traded 0.64 percent higher at 12,664.5 points as of 05:05 GMT on Thursday, with market players looking ahead to the release of fresh economic data.
The GfK German consumer climate index for October is due for release as of 06:00 GMT, with a 11.0 reading eyed, a tick higher than the previous month 10.9.
Germany’s consumer price index for September is also on schedule. The index will be out at 12:00 GMT, with a 0.1 percent increase seen.
In the US session, attention will be directed to the second quarter gross domestic product, August’s goods trade figures and initial jobless claims. All of them will be up at 12:30 GMT.
The German benchmark settled in green territory on Wednesday in Frankfurt at 12,657.41, adding 0.41 percent, with industrials, technology and construction pushing upwards, while media, financials and food & beverages capped gains.
The best performers of the session were Lufthansa, which increased 3.30 percent to 23.655, Commerzbank rising 2.92 percent to 11.455 and Deutsche Bank up 2.72 percent to 13.995.
The worst performers of the session were Vonovia, with a 1.52 percent loss to end at 35.70, Beiersdorf falling 1.00 percent to 91.090 and Fresenius easing 0.63 percent to 67.500.
The DAX has broken above the 12,600 mark and there is clear room for growth. However, we could expect short term pullbacks that would allow other investors to increase long positioning.
Eventually we would be facing the 13,000 level, but before there should be a solid movement above the 12,750 level, which at the time serves as a strong resistance zone.
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