Stock Markets: 14 September 2012
After a fairly gentle day during UK trading hours, the US markets opened and Fed Chairman Ben Bernanke took to the stand to bring some relief to the market bulls.
This relief came in the form of QE3
, with the Fed promising to buy $40 billion worth of assets a month until the economy picks up and jobs figures return to normal.
Mr Bernanke will also keep extending the average maturity of his asset holdings for the remainder of this year, and vowed to keep interest rates at their lows until at least 2015.
All of this was music to the ears of concerned market participants and spurred a rally in stock market indices. However, the Fed Chairman also stated that this will not mark the end of the financial crisis, with help needed from politicians to get people back into employment again.
Here in the UK, yesterday's session saw the FTSE 100 rise by 37.8 points to close at 5819.9, the highest close in 3 weeks.
This came on optimism over the upcoming Fed stimulus and the possibility of increased merger and acquisition activity.
As far as macroeconomic data goes, there's little-to-nothing from this side of the Atlantic today. As a result, all eyes will be focussed on the United States once again, where August's inflation and retail sales data are due out at 13:30 BST.
The final bit of data for the week is the US consumer sentiment data, which is being released at 14:55 BST.
Stock Markets: 13 September 2012
The FTSE 100 is holding steady ahead of today's session, trading at 5785 at the time of writing.
The index has stubbornly failed to break above the 5800/25 area, which is the nearest major resistance. To the downside, support is seen at 5745/20/00.
At the moment, clients have positioned themselves for the markets to be disappointed by the FOMC; they remain short of not just the FTSE 100, but all the major indices.
Also see today's report - Financial Spread Trading and More US Stimulus
Stock Markets: 12 September 2012
Today sees one of September's major risk events take place, with the German Constitutional Court looking likely to announce that the ESM is legal after all.
Investors in German shares certainly seem to think that the decision is a done deal, as the DAX 30
has seen considerable strength in the past couple of days.
In fact, even this morning, we have been calling the index to open higher by some 30 points.
For German law makers, the question of whether or not the ESM is actually legal may be less important than the potential repercussions of throwing it out. A negative result could easily send the Eurozone crisis into a new phase of uncertainty.
Considering that German politicians gave their approval a while ago, and that the ECB has now announced its so called OMT, today's result should be little more than a formality.
Across the pond, investors continue to push US stocks to highs not seen for almost five years. The bulls seem to have set their eyes on the record highs for the Dow from back in October 2007.
This bullishness was assisted by better-than-expected trade balance figures, but it's the prospect of more stimulus from the Fed tomorrow that is really getting them excited.
We have seen these expectations built into the price of commodities
like gold and silver, which tend to be direct beneficiaries of any announcements of money printing.
As well as today's court ruling and tomorrow's FOMC meeting, there are plenty of other events to keep investors on their toes this week.
Dutch voters will go to the polls today in a bid to try and form a new government, something they've been without for a few months. Whoever wins, they will have to come up with a way to balance their books.
In the UK, unemployment figures are due to be released this morning. These have been surprisingly resilient of late, as the last couple of months have seen the number of unemployed actually fall.
Today is expected to see a small rise in the number of job seekers, whilst the overall rate of unemployment is due to stay the same at 8%.
Thankfully, the fallout from the 2008 recession has not led to unemployment rising as much as it did in the early nineties. However, with government job cuts underway, it is still possible that we could hit the big 3 million mark.
This morning, the FTSE is a few points in the red at 5780. Our spread trading account
holders have continued to remain sceptical, currently holding a largely short view of the UK index.
It also seems that they are particularly bearish when it comes to the US indices, despite their recent march higher.
With lots of new information/events expected today and tomorrow, holding short positions would seem to be pretty brave. However, perhaps clients are of the opinion that it's better to ''sell the fact'' since it's possible that a lot of hype has been priced in.
Stock Markets: 11 September 2012
The stock markets
are just in negative territory this morning, following a mildly weak session from the US and earlier concerns that tomorrow's German constitutional court ruling might be delayed.
Initially, we had been expecting the FTSE 100
to open 30 points lower, however, confirmation that the German ruling will go ahead encouraged the FTSE futures to pick up a little.
As a result, the index is only 10 points lower at the open, currently trading at 5780.
Also see today's report - Burberry Shares Drop 18% and the Chinese Stock Market Continues to Suffer
Stock Markets: 10 September 2012
After last week's euphoric buying spree, global indices
are taking a rest this morning.
Investors seem to be considering whether the Federal Reserve will take similar action to the ECB and add more stimulus.
There's no question that the US economy is slowing; Friday's Non-Farm Payrolls proved that once again, with a much lower-than-expected result.
The fact that the figure came in below 100k was as a disappointment, and there were also downgrades to previous employment figures. However, rather than attracting sellers, US indices remained well supported as investors looked to this week's Federal Reserve meeting.
There was also a big spike in the price of gold
, which rallied immediately after the release. If ever there was a market that measured sentiment towards more or less stimulus, this is it.
Nevertheless, there was some good news for the US, and President Obama in particular, as the unemployment rate fell to 8.1%.
Ben Bernanke has been consistent in telling us that he will flick the switch for QE3 if the situation requires it. However, his comments at Jackson Hole suggest that things haven't quite got to the point where he will throw the kitchen sink at the problem.
US retail sales remain pretty strong, particularly when compared to this side of the pond, and the fortunes of the US housing market are changing for the better.
In addition, with the recent surge in commodities, the threat of deflation simply isn't as great as it was, at least in the short-term.
The poor US employment number from did not prevent the Dow Jones from reaching its highest level since December 2007.
The index managed to close just above the 13,300 level, although this was a mere 17 point gain for the session.
This week's main risk event is Thursday's FOMC meeting. This will undoubtedly be the main focus for any hints on easing monetary policy and additional stimulus.
On Wednesday, we are also expecting the German constitutional court ruling on whether the European bailouts are legal.
This will be an important event for investors, but the decision is unlikely go against the euro project. A positive result could easily add further fuel to the bulls' fire.
This morning, the FTSE is a few points in the red, after having been in positive territory early on. Traders have been caught off balance by some disappointing Chinese data overnight.
' clients remain short overall, expecting the current strength to fizzle out soon. However, considering the strength behind last week's rally, this would seem like a brave position to hold.
Stock Markets: 07 September 2012
Today, the focus is on the monthly Non-Farm Payrolls report, which is expected to show that 125k new jobs have been added.
Not only will market participants be watching closely, but American voters will be keeping a close eye as we near the US Presidential elections.
The FTSE has opened in a pensive mood following yesterday's bonanza.
Financial Spreads clients
had a tough time of it yesterday. Rather surprisingly, considering that the markets had been trending lower, many investors were short ahead of the ECB announcement, and some even sold further going into it.
Unfortunately, 'short and caught' was the order of the day for many people.
The FTSE is trading at 5784 at the time of writing, with the next bullish targets being the resistances seen around 5800, 5845 and 5880. To the downside support is seen at 5620 and 5580.
Also see today's report - Super Mario's Bond Buying Proposal Gave Investors What They Wanted
Stock Markets: 06 September 2012
The FTSE 100 Index
is edging higher, having opened in positive territory, and is trading at 5680 at the time of writing.
Before the ECB rate decision, we also have the Bank of England meeting, although this has been rather sidelined of late.
For the UK at least, this week has shown a rare degree of economic strength, both manufacturing and services PMI surveys have come in better-than-expected. As a result, we can't expect to see any major shift in policy from the MPC.
This afternoon will see the US ADP payroll figure be released a day later than usual due to Monday's bank holiday across the pond. Forecasts are for 140k new private jobs to have been added in August.
Also see today's report - Investors Have Very Low Expectations of ECB MOT
Stock Markets: 05 September 2012
Markets suffered a bit of a blow yesterday, sending the FTSE down by almost three digits.
In addition, the losses elsewhere on the continent were probably enough to catch Mario Draghi's attention.
This morning, things are a little more sanguine, with the FTSE trading roughly flat at 5670.
Having made this little move to the downside, through the support around 5730/00, the break now puts support at 5640. To the upside, resistance is seen at 5730.
Bizarrely, the UK services PMI data, which was due to be released today, was actually revealed yesterday and came in with a far better-than-expected figure.
This data shows that the overall UK economy might be in a recession, but the services sector continues to remain in expansion territory.
This could lead to another upwards revision of Q2 GDP, although it will not be enough to bring us back to positive growth.
Also see today's report - European Situation vs Economic Reasoning - Part 2
Stock Markets: 04 September 2012
Earlier this morning we had been calling the FTSE
to open flat-to-higher, but as soon as the session got underway the sellers sent us lower.
The headlines about Spain have not exactly been conducive to going 'long of risk'.
We started with Moody's putting the whole of the EU on negative watch for a credit rating downgrade.
This move complements their recent actions over Germany, France, Holland and the UK, and means that it probably won't be too long before the EU loses its triple A credit rating.
On top of this, Spain has been getting it in the neck today. We now have both Catalonia and Andalucia calling for bailout funds from the sovereign, and the state has just had to pump another €4.5 billion into Bankia.
Slowly but surely we are seeing Spain edge closer towards a full blown bailout. Even their finance minister seems to be paving the way, as he has said that any conditions tied to aid must be made clear.
So the Eurozone crisis continues to unravel, hampering the prospects of higher stock prices, but there has yet still to be a significant follow through or major sell off. This is largely due to building expectations for some sort of action from the central banks.
Here in the UK, things aren't much better. The British Retail Consortium has said that retail sales for August saw absolutely no uplift from the Olympics, and even saw the reverse effect. As a result, retail stocks are struggling somewhat today.
Nevertheless, the focus is really on the ECB. Investors are waiting to hear what Mario Draghi has been doing rather than attending Ben Bernanke's get together at Jackson Hole.
The market was uninspired by his comments yesterday, where he mentioned that buying short dated bonds would not be outside the ECB's mandate, and clearly investors demand more.
Yesterday's session was understandably quiet, as the US had a day off for their Labor Day holiday, and so the European rally was built on low volumes.
At the time of writing, we are calling the Dow Jones
to open 30 points higher, at around 13,120, so the Americans won't miss out completely on any strength in European indices.
However, the FTSE has got off to a weak start this morning, currently trading at 5730, and today might also prove to be fairly quiet as there's little in the way of economic data.
UK construction PMI figures are out this morning, followed by US manufacturing numbers this afternoon.
Stock Markets: 03 September 2012
So it's back to school for most, and politicians return to Parliament, as the summer draws to a close and September gets under way.
September is a month that historically brings declines for the FTSE 100 index and it will be interesting to see how the autumn months pan out this year.
Expectations for central bank stimulus continue to build, even if Bernanke refused to add and fuel to the fire at Jackson Hole on Friday.
This week will see David Cameron try to reinvigorate the Coalition, whilst also attempting to quash what looks like the start of some direct attacks on his leadership.
Some big decisions need to be made in order to revive the British economy. We have been pinning our hopes on the Jubilee weekend and Olympic Games to drag us out of recession as things aren't getting any better on the continent.
In order to prevent unemployment from getting any worse, confidence needs a boost and the government plays a big part in that.
Of course, it doesn't help when your biggest trading partner is dire straits. However, as many people return to school or work, it is the political leaders, both domestically and in Europe, to whom they turn for clear direction. They cannot rely purely on central banks to spur growth.
Nevertheless, the financial markets will be focussing on the central banks this week, as we look to the ECB meeting on Thursday. Investors will be hoping for some sort of announcement of a plan to rein in peripheral bond yields.
The Fed and ECB have been playing a game of poker as neither one wants to move before the other. In the case of the Fed, they are not currently presiding over an economy that is in recession or a sovereign debt crisis, so there is less urgency to act.
With nothing more that consistent rhetoric from Ben Bernanke, all eyes are on Mario Draghi this week, especially since he stayed in Europe to thrash out his plans.
Spain have also got a big calendar date ahead, with the redemption of €15 billion worth of bonds next month. This could prove to be the deciding factor as to whether they get a full blown bailout or not.
This morning, European markets are taking a bit of a contrarian view, with the start of this September seeing investors buy back into shares that have been languishing over the last couple of weeks.
The FTSE 100 is in much better shape that we had been previously calling, with the index opening higher by some 30 points at 5745.
Clearly spread trading
investors are getting into buying mode ahead of Thursday's ECB meeting, where the hope is that Draghi will deliver something special to prevent the Eurozone crisis from escalating further.