Stock Market Trading: 08 November 2013
European equities are set to sink on the open as the uncertainty over global monetary policy clears and traders give a dim verdict.
After Mario Draghi surprised markets by caving in to dovish pressure to ease yesterday, it initially appeared that the bulls had been given the go ahead to continue the rally and plough higher.
However, gains were only brief as an even bigger surprise with bigger consequences for the bulls was about to hit as US GDP surged way above expectations, drastically shortening the expected timescale for Fed tapering.
Markets have decided that the net result of yesterday's news was bearish as the Fed's tightening would be a drag on the global economy whilst the ECB rate cut will merely prop up the struggling Eurozone.
With the bulls looking severely wounded but still standing, all eyes will be on today's Non-Farm Payrolls where a good number could finish them off.
The Dow Jones Industrial Average fell from Wednesday's record highs after official data showed that the US economy grew faster than the expected level of 2% in Q3, rising at a rate of 2.8%.
The positive data was good news for some investors, however, it also rekindled expectations that the Fed may begin to cut back on its $85 billion stimulus package in December.
The trading charts
show the Dow falling 0.97% in its biggest fall since August as traders brace themselves for the upcoming NFP figures.
Stock Market Trading: 07 November 2013
Modest losses are expected at the start of the European session as traders take cover ahead of two days of heavy hitting economic data.
have pretty much gone nowhere in November as traders reach an uneasy truce on equity valuations, however, the upcoming data releases and central bank meetings may finally sway the balance.
The consensus view is that the Fed and ECB are about to embark in opposite directions on the monetary policy spectrum.
This would already be enough to befuddle traders as they struggle to work out which will have more influence on their domestic equities.
However, the possibility of some interesting outlier scenarios is adding to the uncertainty.
In the bullish case, weak US data may prevent the Fed from tapering but the ECB may decide to loosen monetary policy anyway.
For the bears, the Fed may feel that the US can withstand an early start to tapering but the ECB might continue to do nothing.
Either way, the events over the next couple of days should provide a significant catalyst for one of the camps.
Stocks on the Dow continued to climb, pushing the Dow Jones Industrial Average to new all-time closing highs on Wednesday.
The Dow climbed 129 points, rising 0.8%, as US stocks got a boost from solid third quarter earnings, positive economic data from Europe and hope that the Fed will maintain its stimulus package for a while longer.
Despite this, the question remains as to whether these gains can be maintained as all eyes turn to Friday's US employment reports.
Stock Market Trading: 06 November 2013
European shares are set to start with gains on the open today as the bulls regain control.
Although yesterday saw some modest falls, the bear's inability to mount any meaningful sell off has imbued the bulls with a sense of confidence that the path of least resistance is upwards.
US stocks edged slightly lower on Tuesday, with the Dow Jones Industrial Average closing down 0.13%, as markets await Friday's jobs report.
The Dow fell by 90 points during early trading but better-than-expected service sector data helped markets recover some lost of the lost ground.
In addition, today's European open has been buoyed by a significant overnight move higher in Dow futures, with the index up around 54 points already.
Reasons cited for the nocturnal rally have been put down to traditional Republican Bradley Byrne beating Tea Party candidate Dean Young for the candidacy in the House election.
In what was described by some as a proxy battle for the Republican Party, markets may feel that the Tea Party's grip is loosening and future political stalemate may be less likely.
Stock Market Trading: 05 November 2013
A slightly positive start is expected in Europe as hopes of a dovish hand out from the ECB keeps markets drifting higher.
Traders will be focussed on today's European Commission
autumn economic forecast.
In the spring statement, inflation was deemed to be 'well anchored' so traders will want to see whether they now believe that it has become a deflationary risk and warrants some form of pre-emptive action.
In the UK, bulls are also set to bid up equities on expectations of yet more positive data.
Following yesterday's stronger than expected Construction PMI, traders will be looking for the more influential Services PMI to show a similar outperformance and add to the UK economic rebound theme.
It's been a quiet start to the week, with the Dow Jones edging higher on Monday and major indices approaching all-time highs.
Trading volumes remained light, with investors awaiting Friday's job report for any clue as to when the Fed will cut back their $85 billion monthly stimulus package.
The Dow made modest gains of 0.15% to close at 15,639 as more companies rose off the back of strong earnings reports.
Stock Market Trading: 04 November 2013
European equities are set to edge higher on Monday as hopes of loose monetary policy from the ECB keeps the bulls raging.
Although the ECB meeting is still a few days away and expectations are for no change on current policy, traders are eagerly anticipating some form of dovish hint that looser conditions are set to follow.
The recent rally has lost some of its momentum recently as traders start to hesitate around such lofty levels and question whether the economic fundamentals really justify current valuations.
Nevertheless, the highly speculative element of the trading community is nudging stock market indices higher this morning in expectation that the ECB will embark on another loosening cycle and this could be the catalyst for another leg higher.
US stocks finished Friday in positive territory, with the Dow Jones gaining almost 100 points in early trading.
The initial gains were short-lived, however, as the Dow fell sharply after the ISM Manufacturing Index defied expectations by rising to 56.4.
The positive report for the economy raised concerns that the Fed may move closer to cutting back its $85 billion of monthly bond purchases.
The Dow did manage to recover after the initial overreaction to the ISM data to end the day up 0.5% at 15,615.
Stock Market Trading: 01 November 2013
European equities are set to open mixed as traders get themselves into a central bank quandary.
The less dovish FOMC statement naturally put a downer on the taper trade but signs that the Eurozone was hurtling towards deflation and rising unemployment have perked up those calling for the ECB to start enforcing price stability.
With two of the world's major central banks possibly about to go in divergent direction, traders have the difficult task of weighing up which will have the greatest impact on risky assets.
Reading between the lines of the FOMC's rather hawkish statement, investors took the view that scaling back stimulus was still high on the Fed's agenda.
An improvement in business activity as indicated by yesterday's production numbers also fuelled renewed speculation about tapering.
As a result, the Dow Jones
dropped 20 points to 15,585.
Stock Market Trading: 31 October 2013
European equities are set to open lower as the Fed wrong foots the CFD
markets once again.
A run of weak economic data and the fallout from the US shutdown had markets cemented to the idea that tapering wouldn't begin until March next year at the earliest.
However, October's FOMC statement was barley changed from the September meeting.
As a result, traders were perplexed as to why the Fed had not become more bearish on the economy, and thus more dovish on monetary policy, in light of the deterioration of recent data.
The lack of symmetry between how the Fed sees the economy and how markets have interpreted the data has traders concerned that they've pushed out the timeline for tapering too far.
With the foundations of the recent rally built on the idea that tapering was continually being kicked further and further down the road, bulls could be in for a rude awakening.
The Dow Jones initially edged higher in anticipation of continued stimulus, but the statement pointed to 'signs of underlying strength' which would imply tapering might take place sooner rather than later.
This saw the Dow reverse course during the afternoon session, with the index ending the day 78 points lower at 15,606.