Top Things to Know Today - page 6
You are missing trading opportunities:
- Free trading apps
- Over 8,000 signals for copying
- Economic news for exploring financial markets
Registration
Log in
You agree to website policy and terms of use
If you do not have an account, please register
BoJ's Move To Fuel Currency Wars: Trade Opportunities In a surprise move, the BoJ cut to -0.1% the rate applied to a portion of the Japanese banks' current accounts. In theory, the policy should boost the effectiveness of its QE program by encouraging the banks to spend rather than save the cash they receive in exchange for their JGB holdings. In reality, the measure is aimed at cheapening JPY. Indeed, as in the case of EUR, the negative rates could encourage portfolio and FX reserve diversification out of JPY and boost its attractiveness as a funding currency.
The BoJ actions should lead to further intensification of global currency wars with central banks around the world trying to engineer sustained competitive devaluation against the background of slowing global trade and growth as well as persistent commodity price disinflation. With its latest measures the BoJ will allow Japan to borrow more growth from its trading partners and limit the severity of the imported disinflation. At the same time, the negative deposit rates could weigh on domestic demand and hurt the economy's growth prospects. This is because almost 60% of the households' financial assets are held in deposits. If indeed, the Japanese banks pass on some of the costs from the BoJ’s penalty rate to their depositors, this will result in a negative wealth effect, reducing the purchasing power of the Japanese consumers. Domestic demand should suffer and Japan's contribution to global growth could decrease further. The BoJ's measures thus should result in more currency wars and continuing slowdown in global trade and growth.
JPY depreciated sharply in the wake of the BoJ decision and the downside pressure could persist for now. That said, given that the rate cut could fuel more global currency wars and global growth uncertainty, it need not necessarily support investors’ risk appetite. The risk aversion we had since the start of the year could therefore persist and limit the JPY-losses to a degree.
We think that other Asian currencies should remain vulnerable and we like to fade the latest bounce in both NZD and AUD especially given the slew of Chinese data next week. We also think that currencies that are vulnerable to more central bank easing and/ or FX intervention like EUR and CHF should remain attractive selling opportunities.
Against the background of raging currency wars, we remain constructive on USD and believe that GBP could be in for a short squeeze ahead of the BoE IR next week.
source
5 Things to Watch on the Economic Calendar This Week In the week ahead, investors will be focusing on Friday’s U.S. nonfarm payrolls report for January to gauge if the world's largest economy is strong enough to withstand further rate hikes in 2016.
Market players will also be looking out for data on China's manufacturing sector due on Monday, amid ongoing concerns over the health of the world's second biggest economy.
Central bank meetings in the U.K. and Australia will also be in focus.
1. U.S. nonfarm payrolls report
The U.S. Labor Department will release its highly-anticipated report on January nonfarm payrolls at 13:30GMT, or 8:30AM ET, on Friday.
The consensus forecast is that the data will show jobs growth of 190,000 last month, following an increase of 292,000 in December, while the unemployment rate is forecast to hold steady at 5.0%.
Monthly jobs gains above 200,000 are seen by economists as consistent with strong employment growth.
2. China manufacturing PMIs
The China Federation of Logistics and Purchasing is to release data on January manufacturing sector activity at 1:00GMT on Monday, or 8:00PM ET Sunday, followed by the Caixin manufacturing index at 1:45GMT, or 8:45PM ET.
The official China's manufacturing purchasing managers' index is forecast to inch down 0.1 points to a three-year of 49.6 in January, while the Caixin survey is expected to dip to 48.0 from 48.2 in the preceding month.
A reading below 50.0 indicates industry contraction.
3. Bank of England "Super Thursday"
The Bank of England will release its rate decision and minutes of its Monetary Policy Committee meeting at 12:00GMT, or 7:00AM ET, on Thursday. Last month, the Monetary Policy Committee voted 8-1 to keep rates on hold at a record low 0.5%.
Expectations for a rate hike by the Bank of England have been pushed back to late-2016 due to a recent spate of weaker than expected data and amid uncertainty over a referendum on whether or not Britain should stay in the European Union.
4. Reserve Bank of Australia policy meeting
The RBA's latest interest rate decision is due on Tuesday at 3:30GMT, or 10:30PM ET Monday. Most economists expect no policy change, while some believe the central bank can surprise with a 25 basis point rate cut in an effort to boost inflation and spur economic activity.
5. U.S. ISM PMI surveys
The U.S. Institute of Supply Management is to release data on January manufacturing activity at 15:00GMT, or 10:00AM ET, on Monday. The gauge is expected to ease down 0.2 points to 48.0, which would be the lowest reading since July 2009.
Meanwhile, the ISM is to report on January service sector activity on Wednesday, amid expectations for a modest decline. Service sector activity in the U.S. grew at the slowest pace in almost two years in December.
source
EU says progress has been made on reform talks with UK Latest bulletin from the Cameron-Tusk talks in London
Jeeze. What political piffle-speak.
At the week-end I reported increased demands from Cameron and Eamonn reported on the subsequent lack of agreement.
The circus and political peacock-suiting continues. No doubt at large expense to the taxpayer.
US NFP Preview: When Will the Phillips Curve Rush to Yellen's Rescue? A common trope in action-driven narrative is that the sidekick rushes to the aid of the protagonist just as things start to look desperate. Judging from the tone of their recent remarks, policymakers at the Federal Reserve feel that the plot is thickening.
After much debate and hesitation, they agreed in December that the economy was ready to handle the lift-off in short-term interest rates. But what was meant to be the climactic success of seven years of unprecedented stimulus is turning into a catastrophe - talk of a policy error is growing louder and indicators of recession risks such as the yield curve are at dangerous levels.
According to storytelling convention, everything works out well in the end for the protagonist and her sidekick, but economic realities seldom seem to unfold according to neat plot lines and happy endings are in scarce supply.
Thus we find Fed Chair Janet Yellen and her colleagues awaiting the arrival of reinforcements that are supposed to aid them in their battle against the demon of deflation. The mechanics of this battle are described in an economic model known as the Phillips curve which says there is an inverse relationship between economic slack and inflation.
Put simply, when the number of unemployed workers gets so low that hiring new ones becomes a challenge, the only way for businesses to lure in skilled labor is to raise wages. With bigger paychecks in their hands, households can then go out and spend more, which is a force to be reckoned with, as personal spending equals about 70% of GDP.
read more
The top 5 events for next week's trading: Feb 8-12 What are the key economic events for the week starting February 8, 2016
Other things:
source
China's FX Reserves Fall to Lowest In 34 Months The total volume of China's foreign exchange reserves fell to $3.23 trillion in January as the People's Bank of China (PBoC), country's central bank, has been stepping into the market with the foreign exchange market intervenmtion to support its currency, renminbi.
China's foreign exchange reserves fell for the lowest level in 34 months in January, althought coming in slightly higher than the median forecast of the market the has predicted reserves to fall as low as $3.21 trillion.
The foreign curency fall for January reflects increased activity of China's monetary authorities that supported market liquidity throughout the January in an effort to keep its currency steady.
At the same time, China's equity market has experience a massive fall during January with Shanghain stock exchange losing as much as 22.6% in January.
The foreign exchange market activity was related partly related to the stock market fall as many Chinese cashed in before one week long Spring festival and Chinese Lunar New Year that falls on February 8th this year.
read more
YELLEN SPEAKS: Your complete preview of this week's big economic events What a week!
The first full week of February saw the release of the January jobs report — a mixed report that "confused" some economists but did see the unemployment rate fall to a new eight-year low — as well as less-than-encouraging data from the services sector of the economy, which accounts for the vast majority of GDP growth.
All in all, though, the first week in February more or less affirmed the consensus narrative about the US economy: things might not be great, but a recession isn't imminent.
We also heard from quite a few Federal Reserve officials this week, with the week's biggest market-moving speech coming from Kansas City Fed president Esther George. In a speech on Tuesday, George — who is a voting member on the FOMC this year — argued that the market volatility we've seen in the wake of the Fed's December rate hike wasn't unexpected and can't be the guidepost for Fed decisions going forward.
"While taking a signal from such volatility is warranted, monetary policy cannot respond to every blip in financial markets," George said. "Instead, a focus on economic fundamentals, such as labor markets and inflation, can help guard against monetary policy over- or under-reacting to swings in financial conditions."
This week, Federal Reserve Chair Janet Yellen will be on Capitol Hill for two days of testimony, appearing before the House Financial Services Committee on Wednesday and the Senate Committee on Banking, Housing, and Urban Affairs on Thursday.
read more
Top 5 Things to Know In the Market on Monday 1. China FX reserves drop to 4-year low
China's foreign reserves fell for a third straight month in January to hit the lowest level in four years, as the nation’s central bank sold dollars to defend the yuan and prevent an increase in capital outflows.
The country's foreign reserves plummeted $99.5 billion last month to $3.23 trillion, the lowest level since May 2012, central bank data showed.
The drop, which was slightly more modest than expected, means reserves have shrunk by 19% from the peak in June 2014 as authorities seek to prevent a disorderly slide in the yuan.
Markets in China will be closed for the entire week due to the Lunar New Year holiday.
2. Oil prices reverse gains in volatile trade
Oil prices reversed earlier gains on Monday, amid doubts over the likelihood of a deal between OPEC and on-OPEC producers to cut output happening anytime soon.
U.S. crude was down 62 cents, or 1.99%, at $30.27 a barrel by 10:30GMT, or 5:30AM ET, while Brent slumped 72 cents, or 2.1%, to $33.34.
Saudi Arabia's oil minister Ali al-Naimi discussed cooperation between OPEC members and other oil producers to stabilize the global oil market with his Venezuelan counterpart, Eulogio Del Pino, on Sunday, but it ended with few signs there would be steps taken to boost prices.
3. European stocks tumble to 15-month low
European stock markets sank to their lowest level since October 2014 on Monday, as concerns surrounding global growth and weak oil prices continued to grip markets.
Germany’s DAX 30 plunged 2.8%, France’s CAC 40 lost 2.6%, while London’s FTSE 100 dropped 1.95%.
4. Wall Street points to more losses
U.S. stock markets pointed to heavy losses at the open on Monday, as a brief rally in oil prices faded, prompting investors to dump risky assets such as equities.
The blue-chip Dow futures fell 197 points, or 1.22%, the S&P 500 futures slumped 24 points, or 1.28%, while the Nasdaq 100 futures dropped 68 points, or 1.72%.
The losses come on the heels of the biggest weekly drop in a month for U.S. equities, with a 3.3% drop for the hard-hit Nasdaq Composite on Friday.
Investors will be looking ahead to comments from Federal Reserve Chair Janet Yellen on Wednesday and Thursday, when she testifies to Congress about the economy and monetary policy.
5. Gold rallies to 15-week high
Gold futures jumped to a three-month high on Monday, as retreating oil prices and losses in global equity markets underpinned demand for assets perceived as safer.
Gold for April delivery rallied $16.10, or 1.39%, to trade at $1,173.80 a troy ounce, after rising to $1,175.60, the most since October 28.
The dollar index inched down 0.1% to 96.88, not far from last week’s three-month lows, amid growing uncertainty over the Federal Reserve's ability to raise interest rates as much as it would like this year.
source
Top 5 Things to Know In the Market on Tuesday 1. IEA warns oil surplus will be worse than expected
The surplus of supply over demand at the start of the year is "even greater" than initially expected, the International Energy Agency said in its latest monthly report.
Supply may exceed consumption by an average of 1.75 million barrels per day in the first half of 2016, compared with last month’s estimate of 1.5 million, and the excess could swell if OPEC members bolster production.
"With the market already awash in oil, it is very hard to see how oil prices can rise significantly in the short term," the Paris-based organization said.
2. Oil rises back above $30
Despite the bearish comments from the IEA, oil prices pushed back above the $30-level on Tuesday, drawing support from a broadly weaker U.S. dollar.
Dollar-denominated oil futures contracts tend to rise when the dollar falls, as this makes oil cheaper for buyers in other currencies.
U.S. crude was up 87 cents, or 2.95%, at $30.56 a barrel by 10:50GMT, or 5:50AM ET, while Brent rose 49 cents, or 1.49%, to $33.37.
3. U.S. dollar collapses to 15-month low versus yen
The greenback briefly collapsed below the 115-level against the yen to its lowest since November 2014 during Asian hours Tuesday, as steep declines in global equity markets supported demand for safe-haven assets.
USD/JPY hit lows of 114.23, a level not seen in 15 months, before pulling back to trade at 115.39, off 0.39% for the day.
Japan’s Nikkei 225 closed down 5.4% overnight, while yields on Japan's 10-year government bond fell below zero for the first time in history, amid mounting fears over the health of the global economy and the financial sector.
4. European stocks stabilize after Tokyo selloff
European stock markets showed signs of stability after a six-day selloff, as sentiment improved after oil prices pushed higher, global bonds pared gains and the yen trimmed its advance against the greenback.
Germany’s DAX 30 tacked on 0.15%, France’s CAC 40 lost 0.15%, while London’s FTSE 100 rose 0.3%.
In individual stock news, Deutsche Bank (DE:DBKGn) shares added 1.3% after plunging 9.5% on Monday amid renewed jitters over the health of the European banking sector.
5. Wall Street erases triple-digit decline as sentiment improves
U.S. stock market futures trimmed losses in early trading on Tuesday, as appetite for riskier assets improved.
From a triple-digit loss, the blue-chip Dow futures were down just 14 points, or 0.09% by 5:50AM, the S&P 500 futures slumped 1 point, or 0.05%, while the Nasdaq 100 futures inched up 2 points, or 0.05%.
Wall Street pared losses but still ended deep in the red on Monday. The Dow lost 1.1%, while the S&P 500 fell 1.4% and the Nasdaq Composite 1.8%.
Investors will be looking ahead to comments from Federal Reserve Chair Janet Yellen on Wednesday and Thursday, when she testifies to Congress about the economy and monetary policy.
source