Stock Market Trading: 12 July 2013
Marginal gains are expected on the open as Bernanke's comments continue to aid sentiment.
The Fed Chairman appeared to be in favour of loose monetary policy for the foreseeable future, although his comments were at odds with the views expressed by nearly half of FOMC members who wanted tapering by year end.
Market direction is being firmly dictated by Fed policy at the moment but, between the indecisive Fed minutes and Bernanke's flip-flopping, they aren't providing the clear forward guidance that they were hoping to achieve.
Interestingly, the markets took yesterday's increase in US jobless claims in their stride and this may be a sign that the 'bad news is good' phenomenon has returned.
In their renewed optimism, traders pushed the Dow Jones 76 points higher to 15,452, the strongest closing price on record.
The sensible thing to do may be to go with the flow of the last thing Bernanke said, but traders should be wary of any future Fed speak that could spin sentiment around 180 degrees.
Stock Market Trading: 11 July 2013
European indices are set to start on the front foot this morning after Ben Bernanke's comments outweighed the dithering Fed.
In a sign of trepidation ahead of yesterday's June FOMC
minutes, European markets ended rather flat.
When the minutes were finally released, the reaction from US markets was seriously confused, with a sudden rally being gradually beaten back down as traders actually read them.
Following the initial maelstrom, the consensus seems to be that we are seeing a divided and uncertain Fed.
Whilst 'many' on the board are firming up their hawkish stance, wanting to completely withdraw from bond purchases before year end, 'many' also want to see labour gains before tapering begins.
With a complete lack of clarity, US markets joined their European counterparts in closing practically flat.
Nevertheless, later in the evening, Bernanke's conference speech left no confusion about his dovish position on the monetary spectrum.
Bernanke's calls for an extended period of easy monetary policy are well known. However, the real trigger for today's gains was his comment that short-term interest rates won't automatically rise when unemployment hits 6.5%, which the market had previously been led to believe.
That pushed the Dow Jones futures 70 points higher to 15,364, with the rally still underway.
Stock Market Trading: 10 July 2013
This morning, we are expecting European equities to open fairly flat ahead of tonight's taper talk from the Federal Reserve.
The recent rally is set to pause whilst traders listen to the latest FOMC meeting minutes and the subsequent speech from Ben Bernanke.
Although the stock markets have recovered much of the ground lost since Bernanke's initial suggestion that the Fed could end its bond purchases, investors are concerned that a more hawkish tone today could put sentiment back on a downward trajectory.
However, the consensus estimate for the start of any such winding down of bond purchases is September, so it's unlikely that the Fed has any grounds to turn super hawkish before then.
Last night, investors remained fairly optimistic that the US earnings season will bring stronger than expected results.
That fresh confidence sent the Dow Jones
66 points higher to 15,297, discarding the news that the International Monetary Fund had lowered its 2013 US growth projection from 1.9% to 1.7%.
Stock Market Trading: 09 July 2013
Growing optimism seems to be spreading around the markets and eager buyers are set to bid up the indices on the open.
The recent run of good economic data from the UK has not only caused the IMF to capitulate on their negative outlook, but clients are also calling it a day on their shorts and getting long.
Today's Manufacturing Production data is set to show a significant rebound and, although it makes up a small part of the economy, it's likely to have an amplified effect on bullish sentiment.
Also possibly fuelling the quiet but growing confidence are the two GDP forecasts from the IMF and NIESR.
Any upward surprises will get the UK spread betting
bulls roaring ahead in anticipation of the Q2 reading later this month.
Given the result of Gordon Brown's proclamation of ending the 'boom and bust', many politicians would have been scarred for life about prematurely championing their own success.
However, George Osborne must surely be feeling that it is almost time to stand on the steps of No11 and give a defiant, Churchillian two fingers to his naysayers and those who called for a Plan B.
Ahead of the start of second quarter corporate earnings, and following another positive employment report, US investors felt optimistic enough to push the Dow Jones 93 points up to 15,235.5.
After the markets closed, Alcoa managed to post profits of 7¢ per share, beating estimates of 6¢.
As a result, the Dow futures have already made a strong start in overnight trading on hopes that the economy is on the right track.
Stock Market Trading: 08 July 2013
The madness that is the Non-Farm Payrolls indicated that the US economy added 195,000 jobs, against expectations for a 163,000 gain, while the unemployment rate remained at 7.6%.
Equities initially rallied on the figure, only to sell off on increased Fed tapering fears, meaning that European markets closed the day in negative territory.
However, US markets then gave the data a second thought and concluded that it was in fact a good number, subsequently rallying into the close, with the Dow Jones rising 38 points to 15,149.
As a result, European stock markets
are set to open significantly higher this morning as they play catch up with their American counterparts.
Clients seemed quite content to take short positions as we moved into the weekend, given the decline of the indices at the time.
However, the turn around in US sentiment seems to have caught traders off guard and the sharp moves higher expected on the open could be a sign that there will be a mad dash to cover those shorts.
Importantly, the latest US corporate earnings season will kick off today, with bellwether aluminium producer Alcoa
announcing results after the market closes.
Stock Market Trading: 05 July 2013
The bulls sprang back to life yesterday as the Carney/Draghi Double Team jolted markets higher with their forward guidance defibrillators.
With such a dovish backstop in place, it seems that the only possible course of action was to hoover up risky assets.
Nevertheless, questions over whether sentiment has actually turned a corner still need to be answered.
The FTSE, buoyed by this week's data and inspired by doves at the BoE, certainly looks well on the way to taking back a sizable chunk of ground from the late May sell off.
Stock markets across Europe were boosted by the ECB President Mario Draghi's pledge to hold the benchmark rate at 0.5% for a prolonged period of time.
This was seen as a rather bold move and surprised investors by its guidance, sparking a strong rally, particularly in the auto and mining sectors.
Unfortunately for Draghi, although his actions also lifted the markets, it looks more like an act of fire fighting amidst the smouldering political embers on the continent.
As a result, our spread betting
clients used the elevated levels as an opportunity to add to their short positions in European indices.
As is often the case before such a major figure, we are expecting the markets to open fairly flat this morning and drift ahead of the US Non-Farm Payrolls and unemployment data.
With less to do until the figures are released, you can expect much philosophising to be taking place in bars around the city about the 'good is bad' dichotomy on how to interpret the results.
Even without beer goggles on, one can make the argument for every possible combination of results being good or bad, so the only option is to drink up and see how the market votes.
Stock Market Trading: 04 July 2013
With clients short of the FTSE 100
prior to the open yesterday, they were handsomely rewarded for their pessimism, even in the face of better Services PMI data, and have maintained that bearish view.
The US released its weekly jobless claims report a day early due to the Independence Day holiday and the better-than-expected data pushed stocks higher.
On top of that, companies increased employment by 188,000 workers, above expectations of 161,000 which also contributed to a 64 point rally in the Dow Jones to 14,990.
Despite the positive finish in the US overnight, we are only expecting a modest rebound by European markets this morning as investors trim their positions ahead of the risk events over the next two days.
Stock Market Trading: 03 July 2013
Stories abound about 'green shoots' and 'fresh signs of improvement' for the UK economy following some decent construction and manufacturing data.
Preliminary GDP expectations for Q2 are being ramped up and today's services PMI, the most important, is set to either inflate the optimists further or sucker punch those who take such surveys as predictive.
We've had many such false dawns before and our spread trading account
holders are still net short of both the FTSE 100 and FTSE 250
, with their sights firmly set on the 24/25 June lows as the next test.
Despite being in a relatively 'cheap' place compared to where we were in late May, clients are still leaning to the bearish side and have used the recent rebound to add to their short positions.
Reticence on behalf of our clients to join in with the excitement may come from their own anecdotal evidence.
Whilst the BCC cheered the surge in export sales from the services sector, the man in the street is just seeing low paid, part-time work whose rewards are being continually eroded by the unprecedented squeeze on living standards.
If the plan to get the UK out of its hole is to turn it into the services sweatshop of the world, you can count me out.
However, I suspect that this may be just the crest of another wave as we continue to bump along the bottom.
The Dow Jones edged higher during the first part of yesterday's trading session, largely on the back of better-than-expected factory orders data.
However, the index reversed course in late afternoon, ending 27 points lower at 14,927.5, as investors went into standby mode ahead of Friday's Non-Farm Payrolls report.
This caution was also exaggerated as US traders await the second quarter corporate earnings season.
Stock Market Trading: 02 July 2013
In Europe, indices are set to open lower as the bulls struggle to maintain their momentum.
Despite yesterday's gains, US markets closed well off their highs and Asian markets are trading mixed overnight as conviction remains weak.
Have spread betting
markets found a solid area of support to bounce off or is this merely a dead cat?
Although the raft of data out of Europe and the US came in slightly better-than-expected, traders are still treating this rebound rally with suspicion as the wounds from the 22 May sell off haven't healed.
In addition, the start of the US earnings season has invited a rather cautious approach.
The Dow Jones initially managed to rise above the 15,000 mark, with good US manufacturing data providing the boost, but investors became uneasy towards the close and the index ended 11 points in the red at 14,969.
There is still a smorgasbord of economic data, central bank meetings and speeches to digest this week, culminating with the big NFP figure on Friday.
Traders may decide to keep their powder dry until the latter part of the week before deciding what the net effect of all the data is on the economic outlook.
Stock Market Trading: 01 July 2013
As Friday's weakness begins to accelerate, we are expecting European stock markets to open lower this morning.
Despite multiple days of gains seen last week, markets couldn't quite notch up a positive close on Friday, with US and European indices closing lower.
Although the Fed's members do not have a common voice regarding the scaling back of stimulus, it seems that the market has not made up its mind either, taking direction from whoever speaks on the day.
This was certainly the case on Friday, as Fed Governor Stein said that the central bank should provide details of how it plans to wind down its asset buying. Also see our Live Trading News Feed
The comments spurred profit taking in stocks, pushing the Dow Jones 109 points down to 14,899.
For many, this was also a case of choosing to get out of the market ahead of a busy week for the economic calendar, which is certain to drive sentiment one way of the other.
Those that did jump ship may have been the wise ones as the first batch of today's manufacturing PMI data from China has already dragged sentiment lower by stoking concerns over the health of their economy.
Later today, we are scheduled for similar data from Europe, the UK and the US, and expectations are for them to be either flat or a miniscule improvement.
However, the decline seen in the Chinese data has already got traders braced for some downside surprises.
Even if the PMI data doesn't disappoint, the EU unemployment rate can be relied upon to darken the mood, with another all-time high expected.