Economic events of this week

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Monday: October’s Pending Home Sales will be published in the U.S., following a nosedive recorded last month. The Dallas Fed Manufacturing Outlook will also be published. 

Tuesday: The Consumer Confidence Index will be published in Italy, the current analyst estimation is that data will not prove optimistic. In the U.S., Housing starts and the Consumer Confidence Index are due. 

Wednesday: Retail Sales data will be published in unemployment-struck Spain. Third quarter’s preliminary GDP data will be published in the U.K., where analyst predict a nearly continent-leading 1.5% year over year growth. MBA Mortgage Applications are due in the U.S. Initial Jobless claims will also make their weekly appearance, in yet another attempt to revert to pre-shutdown levels. U.S. Durable Goods New Orders and the University of Michigan’s Consumer Confidence Index will also be published.

Thursday: The final figure of Spain’s 3Q GDP data will be published. Preliminary inflation figures are also due, as the weak local demand makes analysts predict only a 0.2% annual increase of prices. Unemployment will be published in Germany, following a 6.9% figure recorded during last month. 

Friday: Jobless Rate and Consumer Price Index will be published in Japan. Preliminary Industrial Production figures are also due. Nationwide House Prices will be published in the U.K., while anticipation is for the continued surge of house prices as analysts predict the figure to present a 6.2% annual growth of prices in November, versus 5.8% in Oct. Later that day, the U.K. Mortgage Approvals will be published. The Eurostat will publish its flash estimate for the Eurozone’s Consumer Price Index. 

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Growing debate over QE

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David Stockman, budget director of former U.S. President Ronald Reagan, appeared on FoxTV last week and said that the Fed's expansionary policy is again leading to the inflation of asset prices, similar to what occurred prior to the Great Recession. Stockman said that “It's 2007-2008 all over again”, adding different statistics to support this premise. For instance, Stockman noted that the Small Cap Russel 2,000 index went up 43% during the recent year, while the earnings of the firms in it did not increased, and that junk bond issuances are far greater now than they were in 2007. When confronted with the claim that major aggregates are only 15-16 times earnings to equity Stockman replied that bubbles don't form in the heart of the Dow, but rather out on the specular periphery, giving the real estate as an example for speculative assets.

More QE talks came from a nontrivial source, the former Governor Candidate Larry Summers. In a Bloomberg interview, Summers initially supported the easing by noting: “on the question on whether the Fed stepping up and providing liquidity when no one else would was the right thing to do? I think historians are going to judge that about 98 to 2”. On the other hand, Summers also advocated the use of fiscal rather than monetary actions such as in fixing Kennedy Airport “which is in a shambles”, or "doing something about 25,000 schools across the country, where paint is chipping off the walls". 

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When rumors appear brighter than the news

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EUR/USD trading last week was subject to breaking events from both sides of the Atlantic. New York Fed President Dudley, who is considered a member of the dovish set among FOMC members, expressed his hope that the U.S. economy had reached a turning point, hopefully leading to more substantial improvement in labor market conditions. Such thinking among FOMC doves was not evident in previous FOMC discussions. However, Dudley’s words did not convince markets of an imminent taper, as the USD traded mixed to lower against most major currencies.
Most of the weekly drama revolving the Euro was rumor-based. Rumors started surfacing on Wednesday and suggested that the ECB is considering a lower of deposit rates from what currently is zero to a negative -0.1%. The ECB did not confirm any of it, yet the rumor sufficed to see the EUR/USD immediately losing close to a cent. The rest of the day saw the release of the Fed’s October minutes. However, it is advocating the idea that advances in the job market would lead to tapering was already priced in the markets as those saw little change.
On Thursday, the EUR/USD has retracted from the previous day’s drop, as ECB President Mario Draghi attempted to slow down the rumor mill. At a speech in Berlin, when explaining what led the ECB to cut its main policy rates two weeks before, Draghi asked that the audience will not try to infer from his words on the possibility of negative rates on the deposit facility. Draghi added: “As I said in the press conference this was discussed in the last monetary policy meeting, and there are no news since then… because people tend to put things together and create their own dreams". 

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Economic events of the week

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Monday: The Rightmove House Prices data will shed light on the U.K. real estate sector, amid growing concerns regarding the developing housing price bubble. Tuesday: ZEW Surveys will be published in Germany, revealing financial market experts’ view on the local economy. Wednesday: The Fed and the BoE are releasing their Minutes report. Japanese Trade Balance data will be published, current analyst expectations are for a slight improvement to a -851 billion Yens trade deficit. This will be followed by the Japanese All Industry Activity Index, which analysts predict to slightly improve. U.S. Mortgage Applications data will also be published, after growing mortgage rates set October’s applications to a monthly -1.8% decrease. Advance Retail Sales are due, as well as the Consumer Price Index, which is analyst surveyed to present no monthly change. Unemployment data will be published in Russia, which continued to present a strong economy with only a 5.3% datum last month. Thursday: The day will reveal expectations for future economic recovery for the Eurozone, as Purchasing Managers’ Indices will be published in France, Germany, and the Eurozone’s aggregate. U.S. Jobless claims will make their weekly appearance, and the Bank of Japan will publish its target rate. Friday: GDP data and the IFO surveys will be published in Germany. ECB’s Draghi will speak in Frankfurt and the Eurogroup will hold a meeting. Register at ANYOPTION and start trading TODAY!

Global perspective

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The world slowly continues its exit from the great recession. However, the global zero rate policies shave their mark in too many financial figures. Japan published a rather impressive Current Account Balance on Monday, presenting an increase to ¥ 587.3 billion. This seems to be the result of an increase at the value of Japanese foreign investment’s income rather than an actual increase of export value. Later that day, China published its Money Supply statistics, indicating a 14.3% annual increase, not highly unusual given the 7.8% GDP increase presented last month.

Unlike monetary data, which are quite volatile nowadays due to the globally low interest rates, tangible indicators appeared much more moderate. The Italian Industrial Production index presented only a 0.2% monthly increase on Monday. A monthly decrease of the same magnitude was presented on Tuesday at the Japanese Tertiary Industry Index of September.

Tuesday also revealed mild price increases throughout the Eurozone. Germany’s CPI presented an annual 1.2% increase. A muted 0.8% increase was recorded in Italy. The U.K., with its relatively upbeat growth compared to the rest of the Eurozone, presented a 2.2% annual increase. Spanish CPI, on the other hand, presented a -0.1% annual decrease on Wednesday.

On Thursday, Japanese GDP presented a 0.5% seasonally adjusted quarterly increase, higher than that of Germany which had only a 0.3% increase, and both were higher than the Eurozone’s 0.1% quarterly increase. U.S. Initial Jobless Claims continued their slow recovery as 339K claims were submitted during the previous week.
The week concluded with the Eurozone’s aggregated price index recording a 0.7% annual increase, and U.S. Industrial Production recording a monthly -0.1% decrease. 

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Yellen’s market confirmation

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Professor Janet Yellen testified before the Senate on Thursday, after being nominated the next head of the Fed. Yellen, 67, provided markets with an impressive presentation, in spite of difficult questions hammered by senators from all sides of the political arena. Yellen reaffirmed her reputation as a dovish Governor. When asked by Senator Tim Johnson about the Future of the Quantitative Easing amid slowly recovering job markets, her response was that she “would be strongly committed to working with the Federal Open Market Committee to continue promoting robust economic recovery”. Yellen continued stressing this dovish line when she later commented that it is “important not to remove the support when the recovery remains fragile”. Yellen’s words contributed a positive tone at equity markets, however, unlike the optimism we are used to from Bernanke’s comments in the past, markets seem to grasp that QE cannot last indefinitely. In addition to volatile increases throughout the testimony, the S&P 500 index saw an approximate 1.2% increase throughout the trading day. A more moderate tone was recorded at the Dow index, which gained only a 0.3% over the previous day and the NASDAQ composite index, which recorded only about a 0.2% increase. Yellen also said that the quantitative easing could not go on forever, as it created “potential risks for financial stability”. With an annual Consumer Price Index increase of 1.2%, it is unclear what could stop the fed from printing more cash and infusing that into the economy. As the Fed’s purchases already contributed to the 36% U.S. Monetary Base growth throughout the year, it would be difficult for Yellen to fend off critics arguing that inflation would pick up when interest rates finally return to pre-crisis levels. Register at ANYOPTION and start trading TODAY!

Economic events of this week

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Monday: Japan’s Balance of Payment Current Account Balance will be published. Industrial Production is due to be released in Italy, with analyst expectations for a Seasonally Adjusted Month over Month 0.2% increase, following two negative figures. 

Tuesday: The M2 Money Stock Index will be released in Japan, in addition to the Tertiary Industry Index. October’s Producer and Consumer Price Indices will see light in the U.K.

Wednesday: Jobless Claims and the ILO Unemployment rate will be released in the U.K. MBA Mortgage Applications will be published in the U.S., in hopes of recovering from the -7.0% decrease of last week.

Thursday: The Preliminary figure for Japan’s Q3 GDP is due, as well as September’s Industrial Production. France, Germany, Italy, and the Eurozone Aggregate will also follow with their Q3 GDP figures, while the latter is still surveyed to present an annually shrinking economy at a rate of -0.3%. Russia is due to publish its Gold and Forex Reserve. In the U.S., Initial Jobless Claims and the U.S.’s Trade Balance will be published. Fed’s Governor Bernanke is scheduled to speak.

Friday: The Eurozone’s Consumer Price Index will be published. In the U.S., the Empire Manufacturing Survey and Industrial Production will see light. 

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French socialist revolution faces hardships

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It has been a year and a half since François Hollande was elected president in France. Upon entering his position, Hollande made a rather brave set of economic reforms, as he favored the increase of income tax over the prior plan to increase Value Added Tax. However, the decreased incentive to conduct business in the country had its toll on the country's bottom line. Half a year later, Hollande was forced to increase VAT, while providing corporations with tax benefits.

Last week marked a new low for the French socialist revolution, as rating agency Standard & Poor's announced cutting France's sovereign credit rating to "AA". S&P's announcement criticized Hollande's Government for incompetence of reducing its spending and supporting economic growth. Specifically, S&P called France's "fiscal stability" constrained by too high tax levels on one hand, and inflated Government expenditure on the other hand, which S&P believes to be out of control.

Adding insult to injury, France's Industrial Production output was published on Friday, revealing only a -0.5% Month over Month decrease in September, in addition to a worsening trade deficit. Pierre Moscovici, the French finance minister, commented in a statement that he regrets what he referred to as S&P's “critical and inaccurate judgment", while adding that “Never has a government carried out so many reforms in such a short time and in such a difficult economic environment”. Moscovici concluded that in spite of the rating cut, France's rating remains high compared to other world nations. Markets apparently shared the same view with as Moscovici, as France’s sovereign bonds continue trading at roughly the same prices throughout the day. 

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Pessimism, responsible monetarism & other spinoffs

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Last week kicked off with Fed Governor Jim Bullard trying to fan rising concerns about the Fed's Treasury holdings of the U.S. Government debt being too big. Bullard said that he does not want to support "fiscal recklessness", and that the Fed's holdings of debt (relatively to the U.S. Gross Domestic Product), is no larger than it was in historical periods. Bullard added: "We are going to target inflation and be held accountable for it", implying that the Fed will not let its money printing push prices upwards beyond control. 

In China, however, there were concerns of a possible inflation. Chinese Premier Li Keqiang noted in a speech recently that "our outstanding M2 money supply has at the end of March exceeded 100 trillion Yuan, and that is already twice the size of our Gross Domestic Product… there is already a lot of money in the 'pool'; to print more money may lead to inflation".

Meanwhile in Europe, the European Commission grew a tad pessimistic over exiting the recession. On Tuesday, the Commission cut the Eurozone's 2014 growth prospects from 1.2% to 1.1%. This growing pessimism must have had a significant effect on the European Central Bank, as two days later it decided to join the monetary party by announcing a 25 basis points cut of its main refinancing rate to 0.25%. Needless to mention, the effect on the EUR/USD was quite massive.

Now with global rates set ultra-low and equity markets past impressive gains, vacant capital naturally seeks new lucrative investment ventures. One of these seems to have been Bitcoin, as the crypto currency surged to an all-time high and passed the $300 mark on Thursday. Other capital rushed to the very successful Initial Public Offering of the popular Twitter microblogging service, on the same day. 

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Twitter’s IPO goes live in the USA this Wednesday, Normal Trading starts tomorrow, Thursday 7th, 2013

The San Francisco social media company has raised its debut price per share from an initial $17 to $20 to between $23 and $25.

The increase doesn't come as a big surprise. Many observers considered the previous pricing to be relatively conservative, given that Twitter's market value was appraised at $20.62 per share in an assessment done by Duff & Phelps Corp. in early August. Twitter's earlier decision to begin the IPO pricing below its recently appraised value was seen as a way to contain expectations while leaving room to raise the target and build more buzz about its stock market debut planned for later this week.

Inside Twitter Headquarters in San Francisco

With this, Twitter intends to raise between $1.6 billion and $1.8 billion when its stocks starts trading on Thursday.

The number of shares the company intends to sell is 70 million. At the new price, the company will be valued at between $12.8 billion to $13.9 billion.

Twitter co-founder Evan Williams is the company's largest individual shareholder with a 10.4% stake, which would be worth between $1.3 billion to $1.4 billion. CEO Dick Costolo's stake would be worth as much as $191.9 million.

The second largest individual shareholder is Peter Fenton -- a Twitter board director and an early investor in the company -- whose stake would be worth as much as $789 million.

Twitter's IPO is being underwritten by Goldman Sach (GS, Fortune 500) and Morgan Stanley (MS, Fortune 500) and is expected to be priced on Wednesday.

Regular investors will get their first chance to buy Twitter the day after, when shares will begin trading on the New York Stock Exchange under the ticker "TWTR."

Meanwhile the company disclosed that International Business Machines Corp. (IBM) sent a letter  alleging that they infringed on at least three U.S. patents held by IBM. The patents relate to a networking technique based on common contacts, a way to show advertisements without interfering with an interactive site, and using interconnected computers to reduce Web traffic.

Well, just log in to your favourite trading platform and start trading. 

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Economic events of this week

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Monday: The Purchasing Manager’s Index for the Manufacturing sector will be published in Italy, France, Germany and the Eurozone. Factory orders will be published in the U.S. 

Tuesday: The annual growth of the Japanese Monetary Base will be published, while the last figure indicated no less than a 46.1% annual growth since last year. The BoJ Governor Kuroda will hold a speech in Osaka in a Business Leaders meeting. The Royal Bank of Australia will announce its rate decision. Net change in Unemployment will also be published in Spain, with analysts expecting no less than 82K employees entering the economy. The Troika is scheduled to return to Greece for a bailout review. Halifax House Price indices will be published and shed further light on the magnitude of the suspected U.K. housing bubble.

Wednesday: A lot of second-third tier data will be published, including European PMI indices for the service sectors, Industrial and Manufacturing Production in the U.K., Retail Sales across the Eurozone and German Factory Orders. The Leading Index will also be published in the U.S.

Thursday: Iran is set to convene with the P5+1 and discuss the former's nuclear program. Industrial Production will be published in Germany. The Bank of England will announce its official rate, and the ECB is set to do the same for the Eurozone, followed with Draghi holding a post rate decision press conference. Initial Jobless Claims will be published in the U.S., with analysts expecting further decreases towards pre-shutdown levels. Additionally in the U.S., advanced GDP levels will be published, and in the equity front, the Initial Public Offering of Twitter will take place.

Friday: French Industrial Production data will be published, as well as U.S. change in Nonfarm payrolls and Canadian and U.S. Unemployment. U.S. consumer statistics will conclude the week, namely U.S. Personal Income and Spending, and the University of Michigan’s Consumer Confidence. 

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Positive indications from the east

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The Fed’s statement from Wednesday insinuated that tapering could be around the corner, while the Bank of Japan policy board statement, released hours later, declared this is clearly not the case for the Japanese economy. The BoJ announced it would continue to increase the monetary base by an annual 60 to 70 trillion Yens.


The monetary base increases had been so far responsible for the Yen being widely considered the world’s worst performing major currency, as it slid about 20% versus the Dollar and about 25% versus the Euro since late 2012. Evidently, the BoJ’s announcement on expansionary action was already encapsulated into market prices, as it made only a minor impact on USD/JPY spot prices. Things appeared better in China, as optimism regarding the Chinese economy spread – the Chinese Purchasing Managers’ Index presented a noteworthy increase to 51.4 points on Friday. 

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Assessing the wind’s direction

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The U.S. economy showed mixed signs at the beginning of last week. Industrial Production data for September presented an impressive 0.6% increase. Manufacturing Production, on the other hand, presented only a negligible 0.1% increase, versus expectations for 0.3%. This was the result of increases in carmakers' output withheld by declines in furniture, appliances and computers.

Wednesday presented growing anticipation to the publishing of Fed’s rate decision. As expected, the announcement did not suggest tapering is imminent by any means, yet noted that the U.S. economy is expanding at a moderate pace. As monthly purchases were kept at the usual 85 billion Dollars a month, the statement did suggest that the Government shutdown did not cause major damage to the economy. While in the September announcement the Fed was concerned that the higher market rates could lead to slower improvement in the economy, the same was not mentioned in Wednesday’s announcement.

Thursday was probably the surprise of the week. In Chicago, it seems that no bad impact was recorded from the government shutdown, as the Chicago Purchasing Managers’ Index surged to a 31-month high. However, it was interpreted as bad news by equity markets, which saw the good figure as something that could induce a sooner QE3 tapering by the Fed. Whether Chicago is the prophet for an emerging U.S. economy or whether we are just going to see a surge of inventories next month, is yet to be seen.

The hectic week concluded on Friday with the publishing of the ISM manufacturing survey. Similar to the Fed’s announcement, survey participants did not identify impact on their business from the Government’s shutdown as the survey presented an impressive figure of 56.4, beating expectations for a 55.0 print, with exports surging 5 points to 57. However, unlike Thursday’s equity pessimism due to concerns of resulting tapering, Friday marked quite a positive day for equities with the Dow presenting a 0.45% daily increase, and the S&P 500 index with a 0.29% increase.

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Arsenal beats Liverpool 2 – 0 to extend their Lead at the top to five points as Man City thrash Norwich 7 - 0.

It was yet another exciting and busy weekend in the English Premier League with a clash of titans in the late kick off on Saturday involving league leaders Arsenal and third placed Liverpool at the Emirates.

Ramsey scores the second for Arsenal from 25 yards.

Arsenal showed resilience and quality to maintain their fine start to the season and stretch their advantage by beating Liverpool 2 – nil. Santi Cazorla gave Arsenal the lead with a fine first-half strike after his header struck the post and Aaron Ramsey scored his 10th goal of this campaign with a spectacular long-range effort on the hour. It can be argued that the win was down to Cazorla and Ramsey for their goals but captain Mikel Arteta gave a midfield masterclass which overshadowed his Livepool counterparts, setting the platform for a crucial win. The defensive discipline of Arsenal’s back four also contributed significantly to the win because Sturridge and Suarez were kept quite the whole game and had very few chances. Arsenal’s advanced midfielders; Carzola, Ozil and Ramsey roamed the field with such worrying ease that resulted in a comfortable win to push the Gunners five points clear at the top.

In the early kick off Chelsea were away to Newcastle United at St James Pack and what was thought to be a routine three points in the bag and a chance to move to the top of the league’s standings turned horribly wrong. Newcastle who have had a bad start to this campaign turned the heat on Chelsea and beat them by two goals to nil. They grew in confidence from a solid defensive first half and their offensive play in the second half paid off when Gouffran headed home Yohan Cabaye's free-kick. The final nail on Chelsea’s coffin came when Roic Remy curled in a shot from Vurnon Anita's pass. Apparently Mourinho has never won a single game at the Magpies home ground.

Manchester United who were away to Fulham continued their resurgence with a 3 – 1 win over Fulham. They scored three goals in a span of 13 minutes to pile pressure on Martin Jol. Antonio Valencia gave the defending champions the lead with an easy finish while Robin van Persie scored the second by rifling in at the near post before Rooney tapped in after 22 minutes. Fulham responded through Alex Kacanilic’s deflected shot with Darren Bent hitting the bar.

Sunderland suffered their eighth defeat in 10 premier league games after Lee Cattermole and Andre Dossena were sent off in the first half at Hull. An own goal by Carlos Cuellar earned Hull manager Steve Bruce victory over his former club at the KC Stadium. The result means Sunderland remain at second last with only 4 points.

Manchester City highlighted their credentials as title contenders with an emphatic win over jaded Norwich. City’s attacking took centre stage as the thrashed their opponents 7 – 0. Bradley Johnson’s own goal put City ahead before David Silva, Matija Nastasic and Alvaro Negredo struck. Yaya toure scored a free-kick, Sergio Aguero fired in before substitute Edin Dzeko swept home a seventh. This win is City’s biggest in the EPL. Norwish dropped into the bottom three. City are now fifth after Totenham’s goal les draw with Everton on Sunday.

Stoke who were playing Southampton at Britannia Stadium earned a one all draw courtesy of a goal from their goalkeeper Asmir Begovic. It was a bizarre goal which came from a long kick 97.5 yards away from goal. The kick cleared Southampton’s defence before bouncing over visiting goalkeeper Artur Boruc. Southampton restored parity when Jay Rodriguez scored the equalizer.

West Brom who were at home beat Crystal Palace 2 – 0 thanks to goals from Saido Berahino and Gareth McAuley.

West Ham drew 0 - 0 with Aston Villa. This ended a run of three home premier league deafeats. Christian Benteke came closest to scoring for the visitors when he headed Matthew Lowton's deep cross against the crossbar from six yards out.

Everton and Tottenham both passed up the chance to go second in the Premier Laegue after a frustrating standoff. Roberto Soldado missed with a header from Aaron Lennon’s cross. Hosts Everton improved after the interval ans they saw a penalty appeal rejected when Seamus Coleman went down under Jan Vertonghen’s challenge. Tottenham keeper Hugo Lloris played on despite suffering a heavy knock to the head from Romelu Lukaku.

In the Welsh Derby, Cardiff City beat Swansea 1 nil to move above them in 12^th place with 12 points while Swansea moved down one position to 13^th with 11 points from ten games. Steven Caulker’s towering header gave Cardiff victory. He rose above visiting defender Chico Flores after 62 minutes to direct Craig Bellamy’s corner past goalkeeper Michel Vorm.