Forex research

Forex research: Global markets daily

[B]Fiscal cliff concerns keeps pressure on stocks[/B]

Today’s UK opening call provides an update on:

* Stock markets down on fiscal cliff uncertainty;
* Similarities between fiscal cliff and eurozone debt crisis;
* US indices trade at four month lows;
* Oil prices higher as issues in Israel escalate quickly.

Stock markets are expected to continue their decline this morning as concerns over the fiscal cliff grow.

European stock indices are nearing multi-month lows today, with the FTSE hovering above a key support level around 5650. The fiscal cliff continues to be the main reason behind the rapidly declining global sentiment and has taken over the eurozone as the greatest threat to the fragile global recovery.

What we’re seeing at the moment is very similar to what we’ve seen in the eurozone in the past few years. As no one knows exactly what the cost of going over the cliff will be its very difficult to put a contingency plan in place.

From a business perspective that basically means things stand still for a couple of months, while from an investor perspective that makes it very difficult to put your money in stocks as it’s difficult to ascertain the true value of a company who’s can’t accurately predict what conditions will be like in six months time. As a result, I expect stock indices to remain in free fall until we see a decision in the US.

While this does not only impact the US, the stock markets there have been the hardest hit at the moment, with the S&P, Dow and Nasdaq all trading near four month lows.

The price of oil is continuing to rise in recent days as the conflict in Israel continues. Any troubles in the middle east tends to push oil prices higher and this is only showing signs of escalating, therefore the increases here are likely to continue in the short term at least. We also have the continuing issues in Syria and the sanctions on Iran keeping prices higher.

Looking at Europe today and there’s not going to be too much moving the markets. We have some trade balance figures out early in the session which are unlikely to have any impact on the markets, aside from this…

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Craig Erlam talks about Obama’s discussions with congressional leaders over the fiscal cliff, the Japanese elections next month and what they mean for the yen and the eurogroup meeting next week. He then takes a look at the currency charts.

Forex research: Global markets daily

[B]Markets set for gains as traders concentrate on positive outlook for Fiscal Cliff resolution[/B]

Today’s US opening call provides an update on:

* Stock markets set to open higher amid growing sentiment that fiscal cliff concerns were overplayed.
* Fiscal cliff looks increasingly likely to be avoided given bipartisan efforts to resolve crisis ahead of deadline.
* Minimal economic data provides increased emphasis upon the housing sector.
* European worries persist ahead of meeting to resolve Greek debt.

The S&P500 is expected to open 43 points higher amid increased market sentiment that the impending fiscal cliff is set to be averted prior to the 1 January deadline. A series of announcements by Barack Obama has served to push the owness towards the Republican controlled House of Representatives to help find a resolution to the issue. Friday marked the first official cross-party discussions between key members of the congress which served to provide a boost to the markets as discussions were classed as ‘constructive’.

The crux to where compromise is required between the two parties is that Democrats favour lapsing tax breaks for those earning above $250k, whilst maintaining those for individuals earning less than $250k; thus making the system more progressive. On the other hand, Republicans are not in favour of increased taxation for the rich, instead pointing to the closing of financial loopholes to generate an increased federal budget. Republican suggestions of adjusting this rule to set the threshold at $500k have been dismissed as diminishing the impact sought out by Democrats.

In the coming weeks it is highly likely that we should see some form of development with regards to those areas of the fiscal cliff which both parties share common ground on. This would typically involve the middle class, who have been widely regarded as guaranteed recipients of continued tax breaks.

Today has very little in terms of economic data to be announced, making for a market largely driven by underlying economic and geo-political factors. The key release today relates to…

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Forex research: Global markets daily

[B]D-day for Greece as Eurozone leaders discuss aid amid calls for further concessions[/B]

Today’s UK opening call provides an update on:

  • Day looks set to be dominated by Eurozone finance ministers meeting, seeking to find answers relating to the current Greek crisis.
  • Rumours of a potential break-through on the next tranche of Greek aid point to a ‘tentative deal’ on the issue. Yet how reliable are the rumours?
  • Japanese markets calmer after two day BoJ policy meeting leads to continuation of current QE and interest rate levels.
  • US markets look at the housing market again after a strong Monday existing home sales figure.
  • Ben Bernanke provides an opportunity to move markets yet again with a speech later in the day.
  • Equities markets set for a more muted tone off the back of significant gains across the board yesterday.
  • Conflict in the Middle east persists as a worrying backdrop to the already troubled global economy.

Today is set to be dominated by discussions relating to the meeting amongst Eurozone financial ministers who seek to find an answer regarding the provision of another tranche of Greek bailout funds. The expectation is that the funds will be provided, yet until it is confirmed, European markets are somewhat constrained. Rumours on Monday of a ‘tentative’ deal being agreed has been indirectly refuted by leading Eurozone ministers and therefore this uncertainly is sure to create an enhanced jump in the market regardless of the end result.

Overnight, statements coming out of the Eurozone indicate that the ECB creditors seem to be requesting a number of further concessions from Greece as a potential prerequisite towards obtaining the next tranche of aid. The Troika called for Greece to sack 20,000 public sector workers in 2014, yet this has been met with disdain and Greek officials are unwilling to accept any further requests at such a late point.

It has also been discussed that the ESM/EFSF could play an ongoing audit and overseeing role in Greek expenditures, ensuring that money provided is spent in the correct and desired manner. This ‘joint account’ is partly aimed at encouraging the IMF to continue to fund the indebted nation amid lowered willingness to help Greece and an increasing likeliness that the IMF will leave the Troika.

French bond credit rating was cut by Moody’s from AAA to aa1 overnight. This has seen the Euro fall in early trading to 1.279, whilst the CAC is expected to open down 14 points.

Today’s US data again brings the housing sector into play, with the annualized number of US Building Permits for residential construction expected to reach 870,000. This would represent a fall from September, yet annually shows an almost 34% improvement from the same time last year. Later, the emphasis will be upon Ben Bernanke’s speech which has the propensity to bring about increased volatility in the markets due to statements in relation to monetary loosening policies being utilised.

Given Obama has retained the presidency, Bernanke could see this as a confirmation of the strength of his ultra-easy monetary policy. Whilst a detailed statement regarding the purchase of $45bn of treasuries to replace the outgoing Operation Twist is not expected, ratification of the notion is a distinct possibility.

The Japanese Yen has strengthened for the first time in…

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Forex research: Global markets daily

[B]Eurozone leaders fail to reach conclusion, pushing equity markets lower[/B]

Today’s UK opening call provides an update on:

  • European policy makers failed to agree on Greek deal resolution, sending European indices lower.
  • Ben Bernanke provides little to markets in first speech post Barack Obama’s re-election.
  • Japanese trade balance deficit figure shows drop in exports; Asian markets rally.
  • Public sector net borrowing figure expected to fall dramatically for October,
  • UK MPC meeting minutes expected to reiterate BoE view that economy exhibits slow growth and above target inflation going forward.
  • Israeli-Gaza conflict continues as calls a temporary ceasefire fell on deaf ears.

Eurozone leaders finally revealed that they have failed to find any full resolution with regards to the Greek debt issue as reports purport that the IMF have provided opposition to a number of issues required to take the talks forwards. Stock markets have tumbled on the news that Eurozone finance ministers will once again reconvene on 26 November to attempt to finalise this financing accord. Overall this serves to raise global uncertainty and the resolution to kick the can so to speak will be viewed negatively across global markets in the time to come.

The noises coming out of the Eurozone point to a attempt to put together a fully comprehensive solution to the Greek problem as opposed to simply granting the required funds and leaving it to the Greek government. Previous noises coming out of the area indicated that there may be a number of additional measures which ministers are attempting to put into place to better enable the economy to recover, whilst also providing creditors with sufficient safety stops. It has been suggested that the Eurozone would ratify a plan to allow the Greek government to purchase debt back from private investors at a €0.25 per €1 discount. This would se investors take further cuts to their already depleted holdings, whilst leaving Eurozone creditors without any debt write-down whatsoever.

Ben Bernanke spoke yesterday for the first time since Barack Obama was re-elected as President of the US. He was expected to have quite a bearish tone, ratifying the current measures of open-ended QE. However, the speech provided little for the markets, instead focusing on the value of fiscal expansion by the government, insisting that monetary policy is not the be all and end all of growth. This does not change the outlook for QE going forward, but instead supports the President’s view that the Federal budget should be expanded to ensure the economic recovery does not falter.

The Japanese released their Trade balance figure last night, indicating that their trade deficit has been reduced by a third from -0.96T to -0.62T. This figure shows a less than expected improvement, associated no doubt with the deteriorating relationship with the Chinese export market. Within this figure, it is interesting to note that exports to China y/y fell by -11.6%, whilst exports to EU countries fell by a whopping -20.1%. The Japanese economy has been running a trade deficit since March 2011 now. Asian stock indices are trading higher this morning off the back of this news, with the Nikkei up 60 points.

Some of the key data releases today include the October Public sector net borrowing level for the UK, which is expected to…

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Forex research: Global markets daily

[B]EU Summit on the cards as Thanksgiving brings a sense of calm to the markets[/B]

Today’s UK opening call provides an update on:

  • EU leaders begin negotiations today with a view to securing a potential EUR1bn budget through to 2020 as the 27 member states seek to find a common resolution.
  • Eurozone finance ministers have failed to agree on a position with regards to the Greek aid provision, pushing it through to a meeting on Monday.
  • Thanksgiving in the US means markets will be expecting low volumes and the potential for higher volatility.
  • Upcoming French, German and Eurozone PMI figures provide an insight into the health of the manufacturing and services sectors.
  • Israel and Hamas have finally agreed to a ceasefire off the back of talks in Cairo
  • Improved Chinese PMI figure coupled with devalued Yen leads Asian markets higher

Today marks the start of an EU Economic Summit where leaders of the 27 member states are brought together with a view to agreeing a 6 year budget spanning 2014-2020. This has a propensity to create headlines globally as leaders use this forum as a means to appease domestic voters with regards to the strength of their leadership and their potential opposition to EU spending. With previous vetoes from the likes of David Cameron in the back of mind it is clear that we may not find a resolution to this problem today.

Angela Merkel has pre-empted this issue by declaring that there is likely going to be a need for further talks in the new year on the issue. This stems from the mixed views amongst the EU leaders, ranging from those who believe the budget should be increased, to those who want a freeze, and those who wish for a reduction to the funds at the EU’s disposal. Expect this meeting to further marginalise the UK from EU due to a general lack of concessions from the Conservative leader. Also expect a general lack of end product owing to the opposing views clearly apparent within the 27 member states.

Yesterday’s failure to come to an agreement on the Greek aid tranche by Eurozone finance ministers is still fresh in the minds of traders today and the EU summit will serve to further bring about a feeling of disconnect within the European community as a whole. Should a resolution be found in today’s meeting then this could bring a feeling of increased cooperation but in all likeliness it will work the opposite way and this meeting will simply bring about increased pessimism in the markets.

The Thanksgiving holiday is today, which is a public holiday for all Americans. This as with every main holiday brings an expectation of increased volatility due to the lower volume associated with lower market participants.

Today we see the manufacturing and services PMI figures for the French, German and Eurozone economies around 8-9am GMT. The figures are expected to be similar to the October number, however…

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Forex research: Global markets daily

[B]EU Summit moves closer to the end, yet no end is in sight[/B]

Today’s UK opening call provides an update on:

* EU summit concludes today as outcome is expected
* Discussions persist regarding a potential Greek deal on Monday
* November Germany Ifo index figure expected to fall to lowest level in over two years
* Holidays in US and Japan bring about lower trade volume
* Black Friday marks biggest retail day of the year in US market

The European Union will resume discussions with a summit called to resolve the issue of setting a new long term budget for the 2014-2020 period. The problems associated with this are well advertised and expectations of a conflict are high given the existence of varying points of view amongst participants. Those 27 EU leaders are expected to provide an end product to this issue today, yet ongoing indications indicate that the resolution of this issue may not be as easy as one would like. Chief amongst the problems being approached is whether the budget should be maintained, increased or reduced. The UK stance that no increase should be allowed is by no means an unpopular one. However the confrontational approach previously employed by David Cameron in the December 2011 veto to the EU treaty is expected to persist, pushing the Britain closer towards the margins.

At midnight last night, Herman Van Rompuy, President of the European Council, tabled a revised budget for the 27 leaders to pour over. However, it is highly unlikely that this will be fully agreed upon for a number of reasons. The proposal raises the spend on farm subsidies to EUR7.7bn, whilst attempting to reduce the UK compensation for the CAP (Common Agricultural Policy). Francois Hollande claim he will not be willing to be the main payer of this UK rebate, yet the French are the main recipient of this CAP fund. The debate resumes at midday today and is sure to be hotly contested.

Statements from both Angela Merkel and Mariano Rajoy prior to commencement of negotiations lead us to believe that it is likely we should not be provided with an end agreement today, instead pushing further talks in through early 2013. The likeliness of upside momentum in markets associated with this meeting is negligible, however there could be considerable downside should markets construe an action such as a delay in proceedings in a similar manner to the Greek aid discussions.

Away from the main summit, Angela Merkel and Francois Hollande have been discussing the ongoing Greek crisis and both agreed that a resolution must be found to this on Monday. Key to the current thinking is whether they could provide funding to Greece at a lowered rate of interest. However the problems associated with providing one Eurozone country with a lower rate of interest than others is controversial Rumours have also surfaced that the debt/GDP 2020 target of 120% as suggested by the IMF could be revised upwardly to 124% to increase the likeliness that Greece can reach the goal.

Today we will await the German Ifo business climate index figure for November. This is predicted to fall below 100 for the first time since March 2010, putting further downward pressure on the European economy. The survey acts as a key indicator owing to the size and breadth of the sample size, given that approximately 7,000 businesses are involved. Any increase in this figure will be seen as a strong indication that perhaps the German economy is in a stronger position than previously thought. However, a fall below the 100 mark will do doubt bring about an influx of negative headlines and could produce a bearish approach to Euro trading.

After the Turkey and pumpkin pie has been digested, the US go back to work today. However…

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Forex research: Global markets daily

[B]Greek deal close as attention turns to today’s eurogroup meeting[/B]

Today’s UK opening call provides an update on:

* European markets expected to open lower as caution returns ahead of eurogroup meeting;
* Greek deal expected today, however traders prepare for further delays;
* Fiscal cliff remains greatest threat to the global economy, as deal remains weeks away.

European stock markets are expected to open lower this morning ahead of the eurogroup meeting of finance ministers.

Today’s meeting should confirm whether Greece’s future remains in the eurozone or not, with the latter having the potential to cause severe damage to the global economy. The only thing standing in the way of Greece receiving the next tranche of its bailout at the moment appears to be an agreement on its funding targets, however this is expected to be resolved in today’s discussions.

However, given the fact that we have expected this to be resolved on several occasions previously, it is no surprise that the markets are preparing for further delays and more eurogroup meetings. This, along with the fiscal cliff in the US and ongoing tensions in the middle east, continues to be the greatest threat to the global economy at this moment in time, which is why volatility remains so low.

An agreement here today would go some way to easing this uncertainty, potentially even causing a brief rally in the markets. However, the main concern continues to be the fiscal cliff in the US, with the two main parties appearing far from an agreement on how to avoid the $600 billion of spending cuts and tax hikes that would send them into recession next year.

There is no significant data due out today, meaning the market is going to be driven solely by the eurogroup meeting. This makes for a very slow start to the week but…

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Today Joshua Mahony discusses the impending decision within the Eurozone regarding the Greek aid package, along with thoughts regarding the US fiscal cliff & BoJ minutes. The charts being reviewed are EUR/USD and USD/JPY.

Forex research: Global markets daily

[B]Greek deal paves the way for future debt forgiveness[/B]

Today’s UK opening call provides an update on:

* Greek deal completed overnight;
* Greek debt to fall well below 110% of GDP by 2022;
* Markets jump on completion of the deal;
* Revised UK GDP figure due this morning.

Greece’s creditors reached a deal last night on how to make its debt more sustainable following weeks of negotiations.

The agreement will see Greece receive almost €44 billion of financial aid, starting with a payment on 13 December of €23.8 billion to recapitalise its banks and €10.6 billion for budget finances. This will follow a debt buy by Greece which will also be funded by its lenders.

On top of this, interest on Greece’s official loans will drop from 150 basis points over financing costs, to 50 basis points and is likely to fall again to 0 basis points above once Greece completes its adjustment program. There was also an agreement to extend the loan maturities by 15 years and defer its interest payments by 10 years.

Altogether, this should reduce Greece’s debt to GDP ratio to 124% by 2020, slightly above target, and then well below 110% by 2022, which suggests there will be some forgiveness on loans. These commitments by the Troika is what the markets have been waiting for over the last three years. This almost certainly closes the door to a Greek exit now and removes the uncertainty surrounding the issue.

The reaction to the deal has been minor so far but I expect it will pick up once the European and US markets open. This may suggest that a deal has already been priced in however we should still see more of a reaction throughout the day. As it stands, European stock market indices look like opening almost 1% higher.

This is also a major coup for the Greek government, led by Antonis Samaras, who have become very unpopular on home soil since coming into power earlier this year. However you can’t underestimate how significant this is for them.

The country was on the verge of collapse when they came to power. Now they have agreed on a large number of reforms and budget cuts in order to receive the backing of the Troika, which should lead to them regaining access to the debt markets in the future. There’s still a lot of pain ahead for Greece, but it has come a long way in a very short period of time.

The economic data out this morning focuses around the UK. Last month, the preliminary GDP figure beat even the most optimistic expectations, showing growth at 1% in the third quarter. The revised figure today is expected to…

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Craig Erlam talks about the Greek deal that was agreed between the IMF and the finance ministers over night, Mark Carney’s appointment at the BoE and the OECD’s growth forecasts for the UK. Finally he takes a look at the charts.

Forex research: Global markets daily

[B]Stocks markets under pressure as fiscal cliff talks stagnate[/B]

Today’s UK opening call provides an update on:

* European markets lower on fiscal cliff concerns;
* Senate Majority Leader Harry Reid claims little progress in fiscal cliff talks;
* Stocks remain under pressure but losses are likely to be limited;
* Economic calendar relatively quiet today.

European stock markets are expected to open lower this morning as attention shifts back to the fiscal cliff in the US.

Yesterday there was an initial relief rally following the conclusion of talks between the IMF and the eurozone finance ministers, who agreed on a deal to make Greece’s debt more sustainable. The rally was short lived though, with most gains priced into the market during discussions the week before.

From now until the end of the year, everything is likely to revolve around the fiscal cliff. Greece is temporarily safe, Spain has completed its funding needs for the year and already started raising funds for next and the Chinese slow down appears to have bottomed out.

Last night, Senate Majority Leader Harry Reid put pressure on stocks claiming there had been little progress in dealing with the fiscal cliff. This is hardly surprising giving Congresses previous attempts to agree on the debt ceiling last year, however it is concerning given the potential consequences of going over the cliff and the impending deadline.

We can expect to see stock markets remain under pressure between now and when the deal is brokered, however that isn’t to say that we’ll see significant losses. In much the same way that a Greek deal was expected at some point, the same is true of the fiscal cliff.

If investors are expecting a deal they may continue to act with caution, however a deal would prompt a stock market rally and everyone is very aware of that. It is less a case of if the markets will rally and more a case of when.

Looking ahead to today and it is expected to be…

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Craig Erlam talks about the comments made by Harry Reid on the progress being made over the fiscal cliff, Greece and the key events this afternoon. He then takes a look at the currency charts.

Forex research: Global markets daily

[B]Europe to open higher as Obama sets ambitious deadline for fiscal cliff talks[/B]

Today’s UK opening call provides an update on:

• Stock markets expected to open higher following Obama comments;
• UK housing data expected to highlight lack of improvement in economic conditions;
• German unemployment spikes for a second month as eurozone’s strongest economy is gripped by the debt crisis.
European markets are expected to open higher this morning after Barack Obama delivered some encouraging words in the US last night.

Stock indices are expected to follow the lead from the US, where the S&P, Nasdaq and Dow all ended the session almost 1% higher. The change came after Barack Obama claimed he wanted a deal to be reached by Christmas,the first time anyone has seriously talked about resolving this before the 1 January 2013 deadline.

This is only a week before however it does indicate a willingness to get it resolved as quickly as possible and lot leave it until the last minute, as we saw last year which ultimately cost the US its triple A rating. It also came after House Speaker John Boehner stated that he believed a deal would be agreed, so all in all, the comments on the day all looked positive.

Of course, this doesn’t actually change anything and in no way guarantees a deal by Christmas. In fact, a deal probably won’t be done by Christmas, this is more likely an attempt by Barack Obama to put pressure on the Republicans to soften their stance, however as long as these comments continue to be reported, the markets will react to them.

There is plenty of economic data out today that could produce some volatility, however just as with the last couple of months, no big swings are likely until we see some progress in the fiscal cliff talks.

Early this morning, the UK Nationwide HPI figure for November is expected to show a 0.2% increase in house prices. These figures have been mixed in recent years which suggests we’re not seeing the improvement in the housing market that would indicate anything more than marginal economic growth in the UK, which is largely in line with other economic data.

German unemployment is expected to have increased by 15,000 in October following a surprisingly large jump the month before, highlighting again that Germany is suffering as a result of…

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