EurGbp long 0.7857
YELLEN’S CAUTIOUS TONE ON RATES LIFTS GLOBAL STOCKS
30 March 2016, 19:32
By Riva Gold and Saumya Vaishampayan
Stocks rallied while the dollar extended losses Wednesday as expectations that U.S. interest rates will stay low propelled risky assets around the world.
The Dow industrials were on track for their fourth consecutive session of gains, following comments Tuesday from Federal Reserve Chairwoman Janet Yellen that global and financial uncertainties justified a slower path for rate increases.
The blue-chip index has rallied roughly 13% since Feb. 11, which marked its low for the year, and has gained 1.8% so far this year. The advance has been driven by a rebound in oil prices and a receding of fears about a U.S. recession.
But the pace of gains has diminished in recent sessions. The S&P 500 hasn’t moved 1% on a closing basis since March 11 and trading volumes have declined.
The CBOE Volatility Index, which gauges expectations for stock swings over the next 30 days, fell 1.8% to 13.57 Wednesday, hitting its lowest level since August.
“There’s this big sense of calm again,” said Brett Mock, managing director at brokerage JonesTrading Institutional Services LLC.
The Dow Jones Industrial Average added 88 points, or 0.5%, to 17721. The S&P 500 gained 0.4%, and the Nasdaq Composite advanced 0.4%.
The dollar continued to decline. The euro gained 0.4% to $1.1331, while the dollar slipped 0.2% against Japan’s yen to Yen112.56.
“The primary driver for the dollar will be the speed at which Janet Yellen conveys the Fed is likely to raise rates,” said Brett Wander, chief investment officer of fixed income at Charles Schwab Investment Management.
Treasurys fell as the 10-year yield rose to 1.840% from 1.814% on Tuesday.
Many investors are now turning their attention to Friday’s employment report and the upcoming earnings season, which begins in earnest in mid-April, as they try to figure out where stocks will go next. Data released Wednesday showed that private-sector hiring continued at a solid pace in March.
“We’ve rallied a lot, and we’ve done it quickly,” said Jack Caffrey, equity portfolio manager at J.P. Morgan Private Bank. “Over the next few weeks, all attention will start to turn to earnings and what companies are able to tell us about what they are seeing in terms of underlying actual demand,” he added.
Oil prices rose, but pared earlier gains. U.S. crude oil added 0.8% to $38.57 a barrel.
In corporate news, shares of MetLife rose 4.1% the insurance company won a bid to get rid of its designation as a systemically important financial institution that should be subject to stricter regulations.
The Stoxx Europe 600 rallied 1.3%.
Earlier, shares in Asia mostly climbed and emerging market currencies rallied as investors welcomed Ms. Yellen’s stance on rates. The Shanghai Composite Index rose 2.8%.
Japan’s Nikkei Stock Average fell 1.3% as a stronger yen weighed on shares of exporters. Data also showed a sharp drop in Japanese industrial output, adding to worries over the country’s slow start to the year.
Write to Riva Gold at <[email protected]> and Saumya Vaishampayan at <[email protected]>
(END) Dow Jones Newswires
Great article, Eddie, thanks!
Smaller Trade Sizes
For anyone wondering why reducing your trade size makes these pairs easier to trade…
If you usually trade, say EurUsd for ease if maths.
A standard lot trade (1.00) will earn or cost you $10.00 per pip movement, so if you only want to risk $50 you have to place your stop at 5 pips.
A 0.10 lot trade gives $1.00 per pip, so you can have 50 pips before you lose your $50
A 0.01 lot trade gives $0.10 per pip, so 500 pips before you lose $50
Using the smaller lots allows you to enter a trade and then sit back and relax, no need to constantly monitor your trade as you are unlikely to get stopped out in minutes. Once you’ve got used to the idea of allowing your trade to takes its own course, you can get on with the non-forex aspects of your life that you used to enjoy before forex took over
Read more: 301 Moved Permanently
“You can get on with the non-forex aspects of your life that you used to enjoy before forex took over”
Haha Great turn of phrase, Eddie 
Out for -41 pips…
Currently up +70 pips
Good call, it is just bleeding like a giant wound, we are nearly at those 2.06 lows (February 2016)…
Did you get your trade opened?
UK VOTE HAS EU ON EDGE – MARKETS REVIEW & OUTLOOK: FIRST QUARTER
1 April 2016, 09:36
(FROM THE WALL STREET JOURNAL 4/1/16)
By Riva Gold and Christopher Whittall
Politics have been a major risk for European investors over the past several years. The U.K.'s coming vote on whether it should leave the European Union means 2016 will be no different.
Uncertainty over the outcome of the bitterly contested June 23 referendum has investors on edge. That unease is showing up in swooning sterling markets, weakness in U.K-focused stocks and a slowdown in companies raising money in capital markets.
The uncertainty also is deterring some investors from making big bets on eurozone stocks, as many remain cautious about the potential impact of a British exit, or “Brexit,” on the rest of the trading bloc.
“When we talk to companies, one of our first questions now is what plans are they making for a Brexit,” said Alan Custis, head of U.K. equities at Lazard Asset Management.
Opinion polls have narrowed in recent weeks but still suggest Britons will vote to remain in the EU. Investors are bracing for market volatility, which they expect to rise as the vote approaches. Many investors have scaled back bets on small, domestically oriented U.K. companies, which they view as likely to suffer the most in the immediate aftermath of a Brexit.
Lazard, for example, has moved into more internationally diverse U.K. businesses, such as food and tobacco companies, which the firm believes should be comparatively insulated.
London’s FTSE AIM 100 index, composed of small-cap companies, has fallen 5.2% this year, while the large-cap FTSE 100 index is down 1.1%.
A British exit also could boost euroskeptic parties across Europe, possibly encouraging other nations, such as the Netherlands, to leave the EU, strategists say.
The possibility of Brexit has been even more pronounced in currency markets. Investor selling has pushed the pound 2.5% lower against the U.S. dollar and nearly 7% lower against the euro since the start of the year.
Many investors have turned to options markets to guard against a potential sharp fall in the pound following the vote. The implied volatility of three-month currency options on the pound-dollar exchange rate – which is closely linked to the price of such contracts – is hovering at nearly a six-year high of around 15%, according to Thomson Reuters. That is up from around 8% in early January.
“The general consensus is that in the very near term a vote to leave would create a fair degree of volatility, and people want to do something to hedge,” said Daniel Loughney, a portfolio manager at AllianceBernstein.
Some believe the euro could be affected, too. Brexit-related uncertainty won’t only affect the U.K. but the eurozone, said currency strategists at Bank of America Corp., who suggested shorting the euro as a hedge.
U.K. government bonds, usually viewed as a haven asset, haven’t been immune from anticipation of Brexit, either. In January, foreign investors reduced their exposure to U.K. gilts by GBP 6.3 billion ($9.1 billion), the biggest monthly fall in nearly two years, according to the Bank of England.
Still, yields on 10-year gilts are down by more than half a percentage point this year, as domestic buying has more than offset this outflow so far. Yields fall as prices rise.
There are signs that the coming vote has cast a chill over capital markets as well. Equity bankers say initial public offerings, which have been depressed across developed markets, have taken a knock in the U.K. because of the referendum. Year-to-date IPO volume in the U.K. is just $2.1 billion, compared with $4.9 billion for the same period last year, according to data provider Dealogic.
Meanwhile, sales of new sterling-denominated corporate bonds have had their the slowest start to a year since 2003, according to Dealogic.
To be sure, investors say the vote also is providing moneymaking opportunities. Betting against the pound was a profitable trade for many in early 2016.
The weaker currency also has been a boon for U.K. companies that sell the bulk of their goods abroad, as it makes their products more competitive there.
British American Tobacco PLC, for example, is one company that benefits from a falling pound, said Carl Auffret, a portfolio manager at DNCA Investments.
Currency moves knocked 6.2% off the company’s earnings in 2015 as the pound on average gained against the currencies of the U.K.'s trading partners. This year, as the pound has fallen, shares in British American Tobacco are up 5.8%.
Companies with a large cost base in pounds and revenue in other currencies will be the winners, Mr. Auffret said.
(END) Dow Jones Newswires
Great article, Eddie…
Part of me thinks this is a done deal already as the case to leave has not been made enough to convince enough people … Remember the scares about the Scottish referendum? It all came to nothing, yet the tones were almost biblical:
Wonder if there’ll be a cull of disloyal tories should Cameron win
You know, speaking of culls… Bye bye Badger Gove…
and a few others…
This whole circus will come to an end soon…
Happy April’s Fool
Currently only in 2 trades;
Short GbpUsd @ 1.4384 (currently 1.4327)
Short GbpAud @ 1.8733 (currently 1.8664)
finding it very difficult to be positive about Sterling, there are probably just enough idiots out there to vote for a Brexit because Boris says so
Out for total +144 pips
Short EurUsd 1.1378
Big increase in volume across most of my favourite pairs in the last 2 hours. GbpNzd, EurUsd, and GbpAud all pushing downwards.
Pleased to say I’m short in all 3, with SL in profit on 2 of them
I’m long DAX from 9710. Finally managed to catch something half-decent this week instead of scraps here and there. Going to close it out shortly though as not planning to hold over the weekend.
Closed at 9810 for +100. Almost hit my weekly target so that’ll do.
Nice way to end the week