Tuesday, 26 November 2013
Economic events of this week
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
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
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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Wednesday, 20 November 2013
Economic events of the week
| 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
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! |
Monday, 11 November 2013
Economic events of this week
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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