Global market recap

Global recap

Equity markets, particularly in Asia, continued to be volatile during last week. Investors also to keep an eye on china as a round of new measures were announced to attempt to stabilize the equity markets and manage the swings in the price of the Yuan.

Opinions about whether the Federal Reserve should begin raising short-term interest rates have come from multiple of sources, these include the World Bank and the International Monetary Fund. And both have urged the Fed not to act given market turmoil.

It was a quiet week for economic data. European and Asian data were mixed. Japan’s data disappointed with signs that deflation has not yet been slain while machine the data present the Bank of Japan with major problems at its upcoming meeting.

The UK and Europe

European equities were up for the first three days of the week but closed lower for the last two days. Despite the retreat, only the IBEX (Spain’s stock market) declined on the week. The losses at the end of the week were blamed to investor uncertainty before the release of the Chinese data over the weekend and the Federal Reserve meeting on the 16th and 17th. The FTSE added 1.2 percent, the DAC was up 0.6 percent, the DAX advanced 0.9 percent and the SMI gained 1.4 percent.

Economic data was on the light side last week and what was realised, came out mixed. In the UK, industrial production slipped 0.4 percent in July as declines in manufacturing and oil/gas sectors stayed in a down trend.  Manufacturing output fell 0.8 percent, the third decline in the last four months and the lowest level since May 2014.

In the Eurozone, the output data was mixed. German industrial production stayed steady YoY, it rose 0.7 percent in the latest month, but that followed a 0.9 percent decline in June and leaves output at approximately the same level as last December. French industrial production fell 0.8 percent, the third decline in the last four months and the lowest level since last November. Manufacturing output dropped 1.0 percent. However, the Italian. Industrial production jumped 1.1 percent after sliding 1.0 percent in June. It was the fourth solid gain in the last six months and leaves industrial production in an uptrend.

Bank of England

As expected the Bank of England’s monetary policy committee left monetary policy on hold. The Bank Rate remains at 0.5 percent. There was again only one objector, Ian McCafferty who, as in August, wanted an immediate 25 basis point tightening.

The minutes of the meeting, which were released at the same time as the announcement showed concern about the slowdown in the global economy, particularly in China. However, while also acknowledging some recent softening in the UK labour market data, in general, the BOE saw output growth and productivity on the rise.

Asia Pacific

Despite the week’s volatility, most equity indexes ended up on the week. The week ended on an uninspired note, as uncertainty in the run-up to the Federal Reserve’s meeting killed the positive sentiment that was generated from signs of stability in Chinese stock markets. The Nikkei added 2.7 percent on the week while the Shanghai Composite was 1.3 percent higher.

Chinese Premier Li Keqiang tried to reassure investors over the health of China’s economy, telling the World Economic Forum last Thursday that his country’s economy is not heading for a hard landing, recent volatility will not affect its economic path and reforms are on track.

While expectations regarding the Fed interest rate increase continue to stay in the air, more stimulus measures and calm words from China have helped stabilize their stock markets.

The Nikkei added 2.7 percent this week after declining the previous four weeks this is due to a 7.7 percent increase last Wednesday. The rise was the index’s biggest daily gain since October 2008. The Nikkei had been down for four straight weeks prior to this week.

However, equities ended on a cautious note as investors remained cautious ahead of the Bank of Japan’s monetary policy meeting scheduled for Monday and Tuesday and the Federal Reserve’s FOMC meeting Wednesday and Thursday. Although Japan’s second quarter GDP was revised upward to a decline of 0.3 percent for the second quarter.

Reserve Bank of New Zealand

As expected, the Reserve Bank of New Zealand cut rates by 0.25 percent to 2.75 percent. This was the third 0.25 percent this year. The RBNZ said the cut was due to the softening of the economy and the need to keep inflation near the 2 percent target. It said that some future easing seemed likely but will be data dependent.

They stated that global economic growth remains moderate, but the outlook has been revised down due mainly to weaker activity in the developing economies. “Concerns about softer growth, particularly in China and East Asia, have led to elevated volatility in financial markets and renewed falls in commodity prices.”

The Bank noted that the economy was adjusting to the sharp decline in export prices and the decline in the exchange rate. The economy is now growing at an annual rate of around 2 percent. However, several factors continue to support growth, including robust tourism, strong net immigration, the large pipeline of construction activity in Auckland and other regions, and, importantly, lower interest rates and the depreciation of the New Zealand dollar.


The U.S. dollar was mixed last week, declining against the euro, pound, Swiss franc and Australian dollar but up against the yen. The dollar was unchanged against the CAD. The dollar remained volatile due to market feelings about what the Federal Reserve will do on September 17th. Trading has been choppy.

The Australian dollar continues to retreat as declining commodity prices hit the country’s economy. It should be noted that earlier complaints by the Reserve Bank of Australia that the currency was too strong were mellowed out in its last statement, the RBA noted that the currency is adjusting to the significant declines in key commodity prices


According to the International Energy Agency (IEA), Non-OPEC production is expected to record its biggest decline in more than two decades in 2016 as low oil prices drive demand for crude from OPEC countries. The agency noted that the oil price collapse is closing down high-cost production in the UK, U.S., and Russia. The Saudi-led OPEC strategy to defend market share regardless of price appears to be having the intended effect of driving out costly ‘inefficient’ production according to the IEA. The lower price environment is forcing the market to “behave as it should” by shutting in production and inducing demand. The IEA said. Producers outside the U.S. are also adjusting to lower oil prices.

Morning report- Eurozone Q2 GDP release recap

The Eurozone’s estimate of second growth has been revised higher after the first full look into all the regions national accounts, Quarterly expansion was up 0.4% for the second quarter versus the first estimate of 0.3%. Annual growth was up 1.5% its best performance since the second quarter 2011.

While the boost to the headline number is good news, sadly majority of the contribution came from oversea demand. While household consumption also rose 0.4% on the quarter, gross fixed capital contracted 0.5% which, with government consumption up 0.3%, meant that domestic final sales added a just 0.2% to the quarterly change in output. Inventories contracted by 0.1%

The largest positive impact came from exports where a 1.6% quarterly bounce lifted GDP economic growth by 0.7% points. Imports were up 1.0 percent which left a contribution of 0.3%

Among the individual member states:
• Latvia (1.2 percent)
• Malta (1.1 percent)
• Spain (1.0 percent)
• Slovakia (0.8 percent)
• Germany (0.4 percent)
• Italy (0.3 percent)
• France (0.0 percent)
So overall we can see Eurozone growth had to rely heavily on the smaller countries.

If not for the help of exports the Eurozone economy would have been close to stagnation. Household consumption slowed for a second consecutive quarter and we also had a renewed fall in investment.

Morning Report

We are still seeing wild swings in the market on the back of wild swings in prices of global equity and commodity markets. The JPY gained over 1% on the dollar yesterday. The EUR broke the short term resistance level of 12.500 and found new resistance at 13.000.

Theses price movement where set of overnight after the realise of Chinese manufacturing PMI data which came in at 47.8 the main take away from the report was August data signalled a second successive monthly decline in total new work placed at Chinese goods producers, with the rate of contraction quickening to a 17-month record. New export business declined at the steepest rate in just over two years. Softer client demand led manufacturers to scale back their production again in August, with the latest reduction in output the quickest seen since November 2011.

This led the sentiment for the day and forced investors to bid safe havens assets hence yen strength and sell stocks which is why we’re seeing equity markets crashing.

The ISM index, at a lower-than-expected 51.1, is signalling the slowest rate of growth for the factory sector since May 2013. And the key details are uniformly weak.

New orders, at 51.7, are at one of the slowest rates of monthly growth of the recovery, since April 2013. Backlog orders, at 46.5, are in a third month of contraction. New export orders, at 46.5, are also in their third straight month of contraction and are at the lowest rate since July 2012.

ISM’s sample wasn’t hiring much in August, at 51.2 for a 1.5 point decline from July and the weakest reading since April. Production slowed and prices paid, at only a 39.0 level last since in March, points to deflationary pressures.

This data realise was overlooked by the market due to the main theme being set for the day (China slowdown)

Also we had construction spending rising by 0.7 percent in July while an upward revision to single-family homes added to a sharp upward revision to June, up 0.6% and also at plus 0.7 percent. Year-on-year, total construction spending was up 13.7 percent in July.

Private residential construction rose 1.3 percent in July with construction spending on single-family homes up 2.1 percent vs a 0.5 percent gain in June that was initially reported at a 0.3 percent contraction. Spending on the more volatile multi-family category, which is much smaller in scale, fell 2.2 percent after spiking 5.5 percent in June. Year-on-year, both categories show robust gains, at 15.8 percent for single-family homes and 21.2 percent for multi-family.

So overall the first data realises for the month of July have been mediocre and showing growth but nothing great.

Looking forward we have non-manufacturing data and the ADP employment report today. Last month the ISM non-manufacturing surges to all highs reaching a level of 60.


Morning Report by Junaid Wilson

After a bank holiday in the UK we will start off with a recap of the European trading and US trading session for Monday. Then look forward to the week ahead.


In mainland Europe, we had the latest inflation figures realised which came in at 0.2%mom. Vs. a consensus of 0.0%. We had a stronger outcome but it still dangerously close to 0. Tumbling oil prices were seen as the biggest contributors to the headline number with energy prices falling just over 7% this year.  This is ahead of Thursday’s council meeting and today’s update should keep President Draghi sounding both more cautious and a little more dovish in his post-meeting press conference.

In Germany, retail sales rebounded rather more strongly than expected in July and that’s following a significantly smaller revised drop in June. This data suggests a good start to third quarter growth from the retail sector. However, the latest GfK survey found consumers’ willingness to buy falling for a third consecutive month in August so prospects for the rest of the quarter are somewhat clouded.

The euro edged up higher on the data realise but found resistance at 12.500 vs. USD may be due to investors being hesitant to taken long positions in the EUR because of current global market volatility and we also have a fair amount of data being realised from the US later in the week.

Morning report 26/08/2015


Service-sector growth is solid this month, well over the 50 level at 55.2 for the August flash report. The bad take away is marked in slowing in new orders where growth is below average and the slowest since January this year, hiring in remains steady in the services sectors and business outlook improved vs last month.

New home sales rose in July from a downturn in June, up 5.4 percent YoY.

Improvement in the assessment of the labour market drove the consumer confidence index beyond expectations, to 101.5 in August for a more than 10 point surge from July. A rare 6.5 percentage point drop to 21.9 percent in those describing jobs as currently hard to get points to outsized gains for the August employment report. This reading will have forecasters scratching their heads. The gain for this reading lifts the present situation component to 115.1 for a more than 11 point increase from July that points to consumer power for August. Buying plans, however, are downbeat with fewer planning to buy a vehicle and, in what could be an ominous indication for housing, many fewer planning to buy a house. Inflation expectations are dormant, down 2 tenths to only 4.9 percent which is very low for this reading. The Fed has put great emphasis on the importance on consumer confidence readings and this report points to job-driven strength ahead for household spending.


August’s Ifo survey was slightly more better than anticipated. Economic sentiment edged up just 0.3 points to 108.3, its second consecutive rise and its best reading since May. The uptick here was attributable to a 0.9 point gain in current conditions which, at 114.8, posted their strongest level in more than a year.

Second quarter economic growth was unrevised from its first estimate. Real GDP expanded 0.4 percent versus the first quarter. The former was up just 0.2 percent, or half the rate achieved at the start of the year, while the latter fell 0.4 percent, its first decline since the third quarter of 2014. Construction investment grew only 0.1 percent after a 1.9 percent spurt and construction spending slumped 1.2 percent following a 1.8 percent gain last time.

The dollar held higher against the other major currencies on Tuesday, after upbeat U.S. economic reports and after China’s central bank cut interest rates to help economic growth after a plunge in the country’s stock market.
The People’s Bank of China cut interest rates by 25 basis points to 4.6%. The bank also cut the reserve requirement ratio for large lenders to 18.0%.
Fears over a global economic downturn, led by a slowdown in China’s economy have intensified in recent days, accelerating a selloff across global markets.

Morning analysis 21/08/2015

In Global markets we have seen global equity markets crashing, oil is still trending down and the USD is also trending down.

-Investors have slightly price out the risk of the FED raising rates in September
-Oil is trading lower fear of a global slowdown
-The USD has seen long positions being cut on the fear of the FED not hiking in this year after the minutes from the July meeting where realise yesterday.
-JPY has found strength as a safe haven. We have tensions in between North and South Korea, a re-election in Greece fear of a global slowdown.

In Europe- UK retail sales inched up less than expected just 0.1 percent. Analysts expected a 0.4 percent monthly increase. On the year, sales were up 4.2 percent, slightly below the 4.4 percent expected. Sales were lifted by gains in household goods stores, but failed to rebound sharply from a setback in June.

Sales at household goods stores jumped 3.6 percent in July, boosted by in-store promotions. Volumes of electrical & household appliances increased by 5.1 percent between on the month while sales of furniture & lighting products improved 3.8 percent. Household goods vendors account for 8.3 percent of total retail sales volumes.

Excluding fuel, sales were up 0.4 percent last month and 4.3 percent when compared with the year before. Automotive fuel sales volumes slumped 2.6 percent, possibly due to a decline in driving over the school holidays. Activity at predominantly food retailers, which comprises 42 percent of total sales, declined 0.2 percent last month, for a 1.3 percent annual increase.
On this data we saw the GBP trading much lower in the European session, this data also suggest a very weak start to the third quarter.

In the US we had Jobless claims data holding at lows and seem to be pointing to continuing improvement on the unemployment side of the labor market (which is good for a rate hike). Initial claims came in at 277,000 in the August 15 week, up 4,000 from the prior week.

On the housing data in the housing sector with existing home sales up a stronger-than-expected 2.0 percent in July to a 5.59 million annual rate. And demand is well ahead of supply which is very thin, at 4.8 months at the current sales rate vs 4.9 and 5.1 in the two prior months and 5.6 months in July last year.

Single-family homes lead the report, up 2.7 percent in the month at a 4.960 million annual rate. Condos, where demand on the new home side is gaining, actually fell 3.1 percent in the month to a 630,000 rate. Year-on-year, sales of single-family homes are up 11.0 percent with condos at plus 5.0 percent.

There was hardly any market reaction to this data the USD closed much lower on the day especially against the EUR. Which has found a lot of strength this week. On the back of a weaker USD. I except EUR/USD to remain in the range between 1.1400 and 1.08


Morning analysis 20/08/2015

Yesterday we had the FOMC minutes published from the July meeting. We saw from the statement realised on the 29th July that the committee is satisfied with the labor market – ‘The labor market had also continued to improve, with solid job gains and declining unemployment. A range of labor market indicators, on balance, suggested that underutilization of labor resources had diminished since early this year.’

In the minutes we saw that some members have not yet see evidence that inflation would move to the Fed’s 2 percent policy target which will justify a rate hike this year. – ‘Some participants cited downside risks to inflation, pointing to the absence of any noticeable response of inflation to the reduction in resource slack over the past several years, risks of further declines in oil and commodity prices, and the possibility of further appreciation in the dollar.’

From these two main takeaway from the minutes we feel this has left the market confused, on one hand we have a strong labour market but on the other we there is subdued inflation. On the realise we saw immediate volatility across markets with Gold rising as a hedge against low inflation risks the US 2Y yield the best indicator of expected expectations fell slightly lower on the risk of the Federal Reserve not hiking in rates in September. The Fed funds futures fell from 50% to 39%

Inflation wasn’t great in July and with oil prices moving currently moving lower, inflation may not show much pressure in August either. The consumer price index rose only 0.1 percent in July as did the core, both under expectations. Year-on-year rates show slightly more pressure. Overall inflation is up 0.2 percent, which is very low but up from 0.1 percent in the prior month and the second positive reading of the year. The core is steady at plus 1.8 percent which is just under the Fed’s 2 percent target.

Today we have Initial jobless claims data which will give us a further look into the labour market and we also have data realised on the housing market. In Europe we have UK retail sales and the Swiss trade balance. We expect global markets to remain range bound until September.

Morning analysis 19/08/2015

Yesterday’s inflation numbers from the UK were a positive surprise for the pound but a 0.1% YoY CPI does not takeaway that the BOE stated in their latest inflation report that they expect the UK to be in deflation in the coming months. But the fact is that inflation is positive in the UK and that is positive for the UK

Yesterday, housing starts & permits were mixed with starts solid but not permits which lead starts. Still, given the strength in starts, the immediate outlook for the new home market remains solid if not, because of the weakness in permits (the longer term outlook).

Those looking for the Federal Reserve to lift interest rates in September will be hoping for inflationary pressures to be seen to be building with a core CPI coming in better than estimates the Federal Reserve will likely look through low headline numbers given the falls in energy and food prices.

This evening we also get the minutes from the latest federal reserve meeting and we will be looking for further signals as to the timing of the first rate hike through changes in the language surrounding the labour market, inflation and global risk.

I expect markets to stay in a range for another two weeks.

Morning report 18/08/2015

Yesterday was a light trading day the only key movers where selling in the GBP and EUR. Both currencies hit strong resistance levels and this triggered an intra-day sell off. On the data side we had no realises in the EA and in the US we had NAHB Housing Market Index coming in line with expectations.

The housing market index rose 1 point to a very strong 61 in August with the future sales component leading the way at 70. Current sales are at 66 with traffic continuing to lag but less so, at 45 for a 2 point gain in the month. Strength in the labour market is the driving force behind strength for new homes where lack of supply continues to motivate builders

Today, we have important inflation data from the UK. The data is forecasted to come in MoM at -0.3%. If this happens I will expect to see a wave of selling in the GBP across the board as they will have entered into a deflationary environment. Anything better in forecasts expect to see a rise in the GBP

Traders were jolted out of their mid-summer reverie when the People’s Bank of China devalued its currency the renminbi (yuan) on Tuesday. The move dominated markets globally for the week, sending (most) equities tumbling along with emerging market countries’ currencies.

Finance ministers from the Eurozone met in Brussels on Friday and as expected gave their final blessing to lending Greece up to €85.5 billion after the parliament in Athens agreed to stiff conditions overnight. However, some issues still need to be ironed out following a deal struck with Greece on Tuesday by the European Commission, European Central Bank and International Monetary Fund.

The Eurozone’s modest economic recovery suffered a setback in the second quarter as France stagnated and Germany posted a tepid expansion, underscoring the deep-rooted fragility in the region. The data came amid heightened concerns in financial markets about China’s economy, which has been an engine of growth for global activity over the past decade. The results put greater pressure on the U.S. to generate output for both itself and its trading partners, and suggests the European Central Bank will keep its aggressive stimulus measures in place at least through next autumn as planned. Gross domestic product growth in the eurozone slowed to 0.3 percent from 0.4 percent in the first quarter, falling short of forecasts of a 0.4 percent gain. Although Germany’s quarterly growth rate quickened to 0.4 percent from 0.3 percent in the first, it fell short of forecasts of 0.5 percent growth.

The U.S. dollar was pummeled last week — it was down against all of its major counterparts including the euro, yen, pound, Swiss franc and the Canadian dollar. However, it was up against the Australian dollar

I expect the market to be range bound until september, when traders come back from there break.