Craig Erlam talks about the PMI’s out of the eurozone and the UK this morning. He then talks about the US jobs report out this afternoon, what it means for the economy and what impact in could have on the presidential election. Finally he takes a look at the currency charts.
Forex research: Global markets daily
[B]US takes centre stage ahead of the presidential election[/B]
Today’s UK opening call provides an update on:
* Stock markets expected to be slow ahead of election in the US;
* Earnings season continues to disappoint;
* No progress expected in eurozone before year end;
* Spanish unemployment expected to continue to grow.
All eyes are on the US ahead of the presidential election tomorrow.
The US has become the main focus for traders in recent weeks, taking the baton from the eurozone which has driven the markets for a long time now. Corporate earnings season has gone generally as most people expected with companies struggling in the third quarter.
Earnings have so far been slightly better than expected, mainly due to companies cutting costs. The most concerning thing has been the lower revenues and forecasts for the quarters ahead, both of which have been poor. Cost cutting can only support earnings for so long, eventually they are going to fall unless the companies find a way to drive revenues higher.
Next on the agenda in the US is the presidential election. Given the position of the US as the worlds largest economy, the result of this is likely to impact most countries across the world so we can expect markets to be very cautious in the lead up to this. I don’t expect to see much volume now until Wednesday.
It remains unclear how the results of this will impact the markets in the shorter term, especially with the biggest threat to the global recovery now being the fiscal cliff. We may see little reaction to this straight away but…
Craig Erlam talks about the US presidential elections and the key economic data releases today. He then takes a look at the currency charts.
Forex research: Global markets daily
[B]RBA keeps rates on hold at 3.25%[/B]
Today’s UK opening call provides an update on:
* Presidential election prompts uncertainty in the markets;
* Eurozone services PMI’s expected to remain deep in contraction;
* UK manufacturing expecting a return to growth;
* Eurozone austerity hits German growth;
* RBA keeps rates at 3.25%.
Stock markets are expected to open slightly higher this morning.
The presidential election is likely to dominate the news again today. The US go to the polls tonight and the race is still too tight to call. The uncertainty surrounding this is likely to show in the markets again today, as investors seek safe havens ahead of the results.
Barack Obama appears to be a slight favourite at the moment which in terms of the markets would probably be the best outcome. The fiscal cliff remains the greatest threat to the US recovery and there has been questions raised over what Obama would do to avoid it if the Republicans won the election. It would not be surprising if he left it to the new president to deal with it when sworn in at the end of January, which could cause an element of panic in the markets until then.
In Europe, the services PMI’s will be released this morning. Once again these are expected to remain deep in contraction territory, with many countries in the region continuing to implement harsh austerity in order to meet their fiscal targets. With the elections being at the forefront of people’s minds today, unless the figures completely miss expectations, they are likely to be largely ignored.
UK manufacturing production is expected to have rebounded in September from a month earlier. An increase of 0.3% is expected, however…
Craig Erlam takes a look a the presidential election with people in the US going to the polls today. He then talks about the RBA’s decision to keep the cash rate at 3.25% before looking at the currency charts.
Forex research: Global markets daily
[B]Focus turns to the fiscal cliff as Obama seals re-election[/B]
Today’s daily wrap provides an update on:
* Barack Obama to be re-elected for second term;
* Fiscal cliff remains huge concern as congress remains split;
* Stock markets expected to struggle in final months of the year;
* Greek vote on austerity to take place today.
As the final votes are counted, Barack Obama looks certain to be re-elected as president for a second term.
In a close fought race which has been neck and neck since the first presidential debate, Obama has surpassed the critical 270 electoral votes needed to achieve re-election. On top of this, he also looks likely to win the popular vote as well, however this is by a much finer margin.
Already the focus has turned back to the fiscal cliff, with $600 billion in tax hikes and spending cuts threatening to knock 4% off US GDP, essentially plunging them heavily into recession. This would not only affect the US over the next couple of years, it would probably send many other countries into recession as well, making the fiscal cliff a global concern.
As a result, aside from the presidential election, a lot more focus has been drawn to the votes for Senate and the House of Representatives. If congress remains split, which looks certain, we’re likely to see a repeat of the debt ceiling issues earlier in the year, with cross party bickering taking the decision right down to the wire.
This is going to create a huge amount of uncertainty…
“This is going to create a huge amount of uncertainty…” From all I read I expect some correction on markets…
Craig Erlam talks about the results from the US elections and what they mean for the markets over the coming months. He then talks about the Greek vote on austerity in parliament and finally looks at the currency charts.
Forex research: Global markets daily
[B]Greece takes big step towards remaining in the eurozone[/B]
Today’s UK opening call provides an update on:
* Drama continues with central banks drawing the attention;
* BoE expected to keep rates and QE on hold;
* Nothing new expected from ECB;
* Greece passes new austerity measures in parliament;
* Australian employment figures reduce chances of rate cut next month.
The drama continues today following the elections in the US, with the BoE and ECB both set to speak following their monthly meetings.
It all kicks off around midday in the UK when the Bank of England will announce its decision on interest rates and the asset purchase facility. Interest rates are widely expected to remain at 0.5%, while there has been much debate over what decision they will make regarding QE.
The current round of asset purchases expires this month, which up to last month meant an increase of £50 billion looked a certainty. However, since then data has shown the UK moved out of recession in the third quarter with an impressive growth figure that beat even the most optimistic expectations and we’ve also seen a big improvement in areas such as retail sales.
This has led many to believe that they will hold off on further QE for now, instead keeping both the interest rate and asset purchase program as they are. In my opinion this would be a big mistake…
Craig Erlam talks about the Greek vote on austerity in parliament last night and the central bank meetings today. He then takes a look at the currency charts.
Forex research: Global markets daily
[B]Drop in Chinese inflation paves the way for further easing[/B]
Today’s UK opening call provides an update on:
* EU official claims Greek decision will be delayed until days before the country runs out of cash;
* Chinese inflation data paves the way for further stimulus;
* Australia growth forecast lowered despite decision not to cut rates;
* UK trade balance data expected to improve in September.
Stock markets are trading flat this morning ahead of the open as concerns over Greece’s bailout rise.
Last night, an EU official claimed the decision on whether Greece will receive the next bailout payment will be made at the end of the month. Following this, the markets fell rapidly reflecting people’s frustration at the eurozone’s inability to do anything quickly.
There is no viable reason to delay making the decision until days before Greece essentially goes bankrupt. When are they going to learn that in order to gain the confidence of the markets they need to be seen to be acting quickly and decisively. Instead they are creating uncertainty at a time when it’s not needed or wanted, which could result in more indecisive markets as we wait to hear a decision.
Chinese data released over night paved the way for further easing in the country, as it showed inflation of only 1.7% last month from a year earlier. The economy has reaped the benefits of the PBOC’s stimulus measures recently, so this is going to be viewed as very positive news in the markets.
A strong China is essential for…
Craig Erlam talks about Greece, Chinese data and the outlook for the next couple of months. He then takes a look at the currency charts.
Forex research: Global markets daily
[B]Ball in Germany’s court as Greece passes austerity budget[/B]
Today’s UK opening call provides an update on:
* Asian markets lower as Japanese output falls heavily in Q3;
* Europe more concerned with fiscal cliff in the US;
* Greece passes 2013 budget.
Asian markets kicked the week off lower over night as data showed Japan contracted by 0.9% in the third quarter.
Japan’s economy has been clearly suffering in recent months, with the global economic slowdown hitting exports, along with a stronger yen that doesn’t look like weakening any time soon. Exports have also fallen dramatically to China since the dispute began over a small group of islands. Japan is now expected to fall into recession in the final quarter with the economy showing no signs of picking up.
The Bank of Japan has undertaken monetary easing in the last few months, increasing its asset purchases by 21 trillion yen in total. However this is seen as a feeble attempt by the central bank, especially when compared to the unlimited asset purchases in the US and the unlimited bond buying program offered by the ECB. I expect we’ll now see more aggressive easing before the end of the year.
The data doesn’t appear to be impacting the European indices though, which are expected to open relatively flat. The last week was quite downbeat in the markets, as people quickly moved on from the presidential elections and looked ahead to the fiscal cliff at the end of the year. This is now the greatest threat to the fragile global recovery and has little chance of being resolved early due to a split congress.
Greece went some way to securing the final tranche of the bailout over the weekend, passing its 2013 budget in parliament, which contained a selection of new austerity measures. The €31.5 billion payment was expected to be signed of by the finance ministers at the eurogroup meeting today, however this has been delayed until the end of the month, creating further uncertainty in the markets.
The decision to wait until the end of the month has caused confusion in the markets. This was a great opportunity to ease some of the uncertainty and show that the eurozone can act quickly and decisively. The decision to delay it until days before Greece runs out of cash says the opposite and unnecessarily creates uncertainty.
One sticking point that may be causing the delay is…
Craig Erlam talks about the Greek deal yesterday, Chinese exports and Japan ailing economy. He then takes a look at the currency charts.
Forex research: Global markets daily
[B]Greek delay fuels market uncertainty[/B]
Today’s UK opening call provides an update on:
* Markets lower on Greek uncertainty;
* Decision unlikely before meeting on 20 November;
* UK CPI figure could provide insight into BoE decision on QE.
The stock markets are expected to open lower this morning as finance ministers failed to sign off Greece’s bailout payment.
Greece is due to run out of money this month, potentially as early as next week. There will be a Greek auction of one and three month debt later today which should raise €5 billion to help Greece stay afloat, however this is only a very short term solution to roll over some debt that is due to expire on Friday.
Finance ministers will now meet next week to discuss how they can reduce Greece’s debt in the long term and who will fund the shortfall that has arisen as a result of Greece requesting two extra years to hit its fiscal target. That means at least seven more days of uncertainty in the markets and therefore more choppy markets with no real direction.
There remains very little chance that Greece will be left to default on its debt but the fact that it has been left until days before Greece runs out of cash shows that nothing has changed in the eurozone. There is still the same lack of urgency that has sent the markets into a frenzy on numerous occasions in the past few years.
We’ve known for a long time that Greece would request two extra years to hit its fiscal target, so this could have been discussed months ago. Instead, the eurozone leaders have shown themselves to be incompetent once again, burying their heads in the sand for as long as they can and hoping the problem will go away.
While Greece remains the key concern this week, there is a few pieces of economic data due to be released that…
Joshua Mahony talks about the Eurozone Financial Ministers meeting with Christine Lagarde, the German ZEW sentiment figure along with the headline inflation numbers for the UK. He then takes a look at the currency charts – EURGBP & USDJPY.
Forex research: Global markets daily
[B]UK employment data could be key for further stimulus[/B]
Today’s UK opening call provides an update on:
* Spanish rumours buoy European stocks;
* Greek talks ongoing, payment expected at the end of the month;
* UK employment data expected to show gradual improvement;
* Eurozone sentiment tested at Italian bond auction.
European markets closed higher yesterday after rumours emerged that Spain is close to requesting a bailout.
If true, this would be very well received in the markets as the long running saga surrounding Spain has dragged equity markets lower on numerous occasions this year. A bailout request would indicate that Spain is committed to reducing its deficit and regaining competitiveness.
The only problem with this is that it is not the first time this has been “leaked”. In the past few months this has been rumoured and denied repeatedly. If this is the case again, we should see stocks reverse these gains just as quickly as they made them.
Greece is continuing to be the main talking point in the markets this week. In a bid to raise €5 billion to temporarily roll over its debt which expires on Friday, Greece successfully auctioned more than €4 billion yesterday and look set to raise the final bit in a non-competitive auction on Thursday. This should keep Greece afloat until the end of the month, when they will almost certainly receive the next tranche of the bailout.
This gives the IMF and EU finance ministers more time to bicker over how to fill the funding gap, thought to be around €33 billion, created as a result of Greece being given two extra years to hit its fiscal targets. They are also in disagreement about how long Greece should be given to bring its debt down to 120% of GDP.
Irrespective of how these talks go, the Greek coalition government has scored a major win in getting the finance ministers to agree to a two year extension. This was one of their aims when they came into office earlier this year and will help ease some of the pain that the brutal austerity measures will bring.
The UK will be back in focus again this morning when the jobless claims and unemployment data will be released. The reaction to this is…
Craig Erlam talks about the UK employment data this morning and the comments by BoE Governor Sir Mervyn King. He then talks about the anti-austerity protests in the eurozone and the FOMC meeting minutes which will be released later today. Finally he takes a look at the currency charts.
Forex research: Global markets daily
[B]Eurozone to be confirmed as in technical recession this morning[/B]
Today’s UK opening call provides an update on:
* Stocks lower on fiscal cliff uncertainty;
* Both parties agree to negotiate but hold firm stance;
* Eurozone expected to be confirmed as in recession;
* France could enter recession in fourth quarter.
Stock markets are lower this morning as the fiscal cliff continues to be priced into the markets.
Stock indices have been edging lower for a few weeks now as a result of the uncertainty surrounding the fiscal cliff, which has the potential to cause a global recession, just as we saw in 2008. Talks are due to begin between the Democrats and the Republicans however expectations will remain low until we see some real progress.
While both parties have expressed their desire to work together and come to a solution, they have also both began to adopt a firmer stance on how to deal with the fiscal cliff, which will delay any agreement being made. There’s a very real chance that negotiations will carry on into the start of next year which would create panic in the markets.
What is more likely though is that we’ll see the can kicked down the road once again as both parties fail to come to an agreement. This would provide temporary relief for the markets, but it doesn’t resolve the problem of future tax hikes and spending cuts that are needed to reduces the country’s fiscal deficit.
Preliminary GDP figures will be released in the eurozone today and are likely to show a significant reduction in third quarter output. Of particular interest will be France’s GDP figure this morning.
The eurozone’s second largest economy is expected to stagnate for a third consecutive quarter, however any contraction is likely to lead to recession, following the central banks warning earlier this month that France is likely to contract in the final quarter of the year.
There is also the prospect that France could have entered recession in the third quarter. Past figures have been prone to downward revisions, so any revision lower in the second quarter combined with a contraction figure in the third quarter would put France in recession.
The eurozone as a whole is expected to be confirmed as in recession shortly after…