Market Review, July 13, 2016

Yesterday’s most significant move in the market was that of the yen.

USD/JPY surged completing a massive two-day rally, upon confirmation that former Federal Reserve chair Ben Bernanke met with Japan prime minister Shinzo Abe to discuss ways to help one pf the world’s top economies avoid deflation.

The currency pair soared and settled at 104.75 after the close of the U.S. afternoon trading, up 1.89% on the day. Since Abe’s Liberal Democratic Party (LDP) triumphed in a landslide upper house election over the weekend, the U.S. Dollar has soared more than 4% against the Yen, nearly returning to pre-Brexit levels from late last month.

GBP/USD advanced 1.24% to 1.3151, rebounding from the post-Brexit 31-year low of 1.2794 set last Wednesday. Sterling found support as investors reacted to the news that Britain’s home secretary Theresa May would soon replace David Cameron as prime minister, removing some of the political uncertainty that has hit the currency in the wake of the June 23 vote to leave the European Union.

Bank of England Governor Mark Carney said Tuesday there will be no “credit crunch” after Brexit, because banks will have funds available to lend. The BoE is to hold its next monthly Monetary Policy Committee meeting on Thursday amid some expectations for a rate cut, but most analysts are expecting a first rate cut only in August.

Gold fell 1.55% on the session yesterday in broad risk-on trade damping the precious metal’s demand as a safe-haven asset. Since opening the year around $1,075 an ounce, Gold has surged more than 27% over the first seven months of 2016.

Crude surged more than 4%, bouncing from the recent losses, after OPEC predicted in its first 2017 forecast that the demand for global oil will exceed production levels of crude next year, helping ease investors’ sentiment regarding the long-term implications of a massive supply glut on worldwide energy markets. During the Asian trade curde prices dropped due to weak API report showing a surprise build, dropping 0.56%.

Dow and S&P 500 hit all-time closing high, completing post Brexit rally.

Market Review, July 12, 2016

Yesterday the dollar trimmed gains but remained broadly supported against the major currencies as Friday’s strong U.S. employment data continued to boost optimism over the strenght of the economy.

GBP/USD held steady, still close to last week’s fresh 31-year lows. The pound briefly rose above the 1.30 level against the dollar on Monday, boosted by prospects that Theresa May will become the next U.K. prime minster much earlier than had been anticipated. But sterling remained under pressure amid mounting expectations for a rate cut from the Bank of England at the conclusion of its policy meeting on Thursday.

USD/JPY rallied 2.05%, the yen weakened after Prime Minister Shinzo Abe’s ordered a new round of fiscal stimulus spending.

Gold closed virtually flat, as Shinzo Abe’s landslide victory in Japan and the likelihood of Theresa May’s appointment as David Cameron’s replacement in the U.K. helped reduce global political uncertainty, offsetting the rising probability of further easing measures by top central banks worldwide.
The precious metal settled at $1,356.95 down 0.11% on the session.

Crude continued to test two-month lows after falling considerably yesterday, as long-term concerns related to global oversupply and the ramifications of the U.K.’s decisions to leave the European union remained in focus.
WTI closed at $44.79, down 1.38%.
Brent settled at $46.26, down 1.05%.

U.S. stocks rose sharply as the S&P 50 Composite index hit all-time intraday and closing high, after global equities received a boost from broad indications that Japan could approve fresh stimulus measures following a resounding victory from Shinzo Abe’s party in upper house elections over the weekend. Stocks in the Basic Materials, Consumer Services and Financial sectors led, each gaining more than 0.50%.

 

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Market Review, July 11, 2016

FRIDAY SUM-UP

CURRENCIES

Friday we had the U.S. jobs reports and initially we saw the dollar slip against most major currencies as investors were awaiting the reports to see if the labor market is stronger than previous surveys indicated.

Investors’ risk sentiment also slipped with the safe-haven yen firmer after news that four police officers were fatally shot and seven wounded by snipers who targeted them during rallies in Dallas to protest against the fatal shootings of two black men by police this week.

The perceived safe-haven yen firmed, indicating that investors remained wary ahead of the payrolls report.

A report Thursday night showed U.S. private payrolls rose more than expected in June and jobless claims were lower than forecast.

As investors attention turned to the employment reports – the pound rose against the U.S. dollar, despite the release of disappointing trade data from the U.K.

Once the data was announced, the dollar erased losses and moved higher against the major currencies, after data showed that the U.S. created far more jobs than expected last month, adding to optimism over the strength of the job market.

NFP report was above expectations with 172K instead of just 159K.

GBP/USD posted modest gains to post a rare winning session. The pair settled at 1.2952, up 0.36% on the session

 

COMMODITIES

Gold pared considerable losses amid high volatility in credit and currency markets, as the prospects for a 2016 interest rate hike from the Federal Reserve increased on Friday following reports of robust domestic job gains last month.

The precious metal settled at $1,358.10, down 0.29% on the session. Gold closed lower for the second consecutive session, retreating from 28-month highs of $1,374.90 earlier in the week. Since opening the year around $1,075 an ounce, Gold has surged more than 28% amid indications of a potential global recession.

Crude priced inched higher but overall, Brent notched its largest weekly drop in nearly 6-months.
Oversupply concerns resurfaced with the data showing the U.S. oil rig count rose by 10 last week as drillers added rigs for a fifth week in six.
WTI settled at $45.41, up 27 cents.
Brent closed at $46.76, up 0.8% on the session.

 

STOCKS

U.S. stocks rose sharply after robust job gains last month bolstered investor sentiment on the strength of the economy, while financial stocks remained supported by an uncertain interest rate outlook amid widespread concerns abroad.

The Dow Jones Industrial Average gained 1.40%, erasing all of its post-Brexit losses.
The NASDAQ added 1.64%, while the S&P 500 gained 1.53%, moving fractions from its all-time record closing highs.

 

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Market Review, July 8, 2016

Yesterday we saw the dollar hold steady against other major currencies, after the release of upbeat U.S. employment data as investors turned their attention to today’s U.S. NFP.

ADP Nonfarm employment change showed a rise of 127K, above forecast for an increase of 159K. Also the Initial Jobless Claims were below the 270K expected (onlt 254K).

But the greenback’s gains were capped after the minutes of the Fed’s June policy meeting released on Wednesday showed that policymakers decided to keep interest rate hikes on hold as they assessed the Brexit impact.

The pound is still around its lows as investors were now looking ahead to the Bank of England’s policy meeting next week, after BoE Governor Mark Carney signaled last week that more stimulus may be needed over the summer, sparking expectations for an upcoming rate cut.

EUR/USD slipped, and EUR/GBP dropped as well following the release of the minutes of the European Central Bank’s last policy meeting on Thursday, showed that the Brexit vote could have significant negative repercussions for euro zone growth.

Gold fell slightly yesterday, taking a brief pause from its post-Brexit winning streak, as a favorable payroll indicator sent a strong harbinger for a critical U.S. jobs report at week’s end.
If the NFP shows strong numbers, we can expect for gold prices to drop further on the day as dollar denominated commodities such as gold become more expensive for foreign purchasers when the dollar appreciates.

Crude futures fell to near 2-month lows, after lower than expected U.S. inventory draw last week provided a stark reminder that the conclusion of prolonged downturn in oil prices is nowhere in sight.
WTI closed at $45.17, down 4.79% on the session.
Brent settled at $46.45, down 4.82%.

The sharp decline in oil prices dragged the U.S. stocks lower.

 

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Market Review, July 7, 2016

Yesterday during the first half of the trading day we saw the dollar hold steady near one week highs againt the other major currencies in a risk-off trade. After some downbeat U.S. trade data, the dollar started to slip.

Market participants were also looking ahead to the minutes of the Federal Reserve’s most recent policy meeting, that was due later in the day, for possible hints on the central bank’s next policy moves.

After the release of strong ISM data the dollarwas able to recover.

Yen soared further as Brexit jitters boosted safe-haven assets. GBP/JPY was down 1.8%, hitting the lowest level since late 2012. The risk sentimemnt is really bad and that is to be seen by the strong yen. This makes the momentum to push towards an even lower USD/JPY given the on going Brexit worries.

Expectations that the Federal Reserve will keep U.S. rates lower for longer was also weighing on the dollar, especially against the yen. Influential Fed policymaker William Dudley suggested on Tuesday that broad contagion through financial markets was a risk, particularly if the vote leads to instability in the European Union.

It was just not the British pound that was struggling, with the euro also under pressure as investors worried that a Brexit would dampen fledging growth prospects in the euro zone.
Adding to a growing sense of market instability, shares in Italian banks, which are suffocating under a pile of non-performing loans, extended losses. Other European bank shares also fell, pulling down the broader stock index.

Yesterday German Chancellor Angela Merkel said that Britons’ vote to leave the European Union will lead to only limited economic uncertainty in Germany.

Gold surged further yesterday, settling at $1,367, up 0.63% on the session. Silver gained 1.21% to $20.148 and ounce.

Crude futures recovered from Tuesdays losses and today we will be looking at the inventory count for further indication on the supply glut.

Wall Street rallied after dovish Fed minutes.
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Market Review, July 6, 2016

Dollar edged higher yesterday, as the risk-off sentiment following the Brexit vote still dominates.

The Bank of England warned of challenging risks to financial stability following the Brexit vote and eased regulatory requirements on the banking secotor.
BoE Governor Carney said the move of a Brexit represented a “major” change that would help the economy to cope with the Brexit consequences.

GBP/USD tumbled to a fresh low during the trading session and finally settled at 1.3028, 1.89% on the session.

EUR/USD closed another day relatively flat.

As global growth concerns fester, gold hovered near 27-month highs, surging more than 1% in spite of a broadly stronger dollar.
This just shows that the widespread concerns of a global economic slowdown is pushing investors to pile into the safe-haven assets. Gold closed at $1,358.35 up 1.45% on the session.

Crude futures fell sharply yesterday (4%) suffering its worst one-day decline in a month, as investors responded to reports of an unexpected build at the Cushing in Oklahoma.

U.S. stocks fell sharply,  erasing some of the gains from last week, as widespread concerns related to the viability of banking stocks in the euro area and a continued global yield rout served as a drag on equities on Wall Street.

 

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Market Review, July 5, 2016

Yesterday the dollar was little changed against the other major currencies in subdued trade, as caution resumed after fears sparked by Britain’s vote to leave the European Union had slightly eased last week.

Trading volumes were very thin, as expected with U.S. markets closed for Independece Day.

GBP/USD edged up, though still close to the 31-year low.
EUR/USD held steady and USD/JPY added 0.12%.
USD/CAD dropped as rising oil prices lent support to the commodity-related Canadian currency, although ongoing concerns over the global consequences of the Brexit vote still lent some support to the dollar.

Silver futures spiked to levels not seen since July 2014, while gold stayed near the strongest level in more than two years, as bullish momentum in the precious metals remains intact.
Silver spiked by more than 6%, before giving back some gains – up 5.32%.
Gold also rose to an intraday peak of $1,360.30 before falling back to $1,354, up 1.15%. Gold jumped $16.70, or 1.27%, last week, the fifth straight weekly gain. The precious metal rose almost 9% in June, its biggest monthly increase since February. Prices are up nearly 25% so far this year, completing one of its strongest first halves on record.

The growing expectations that central banks around the world will step up monetary stimulus in the near-term to counteract the negative economic shock from the Brexit vote is causing investors to shift to safe-havens such as gold.

Oil prices struggled yesterday in finding their direction as market players monitored supply disruptions across the world for further indications on the rebalancing of the market.
Signs of a potential recovery in U.S. drilling activity remained in focus. According to oilfield services provider Baker Hughes, the number of rigs drilling for oil in the U.S. rose by 11 last week to 341, marking the fourth increase in five weeks. The renewed gain in U.S. drilling activity fueled speculation that domestic production could be on the verge of rebounding in the weeks ahead, underlining worries over a supply glut.

We will all be looking at today’s and tommorow’s supply data for further indication on the current situtation of inventories.

In the week ahead, market players will be shifting their attention slightly away from Brexit-related headlines and more towards economic fundamentals and U.S. monetary policy, with the June nonfarm payrolls report and FOMC meeting minutes in the spotlight. There is also ISM services data on Wednesday.

 

Weekly Bulletin, July 4, 2016

The financial markets were hit hard by the outcome of the U.K.’s referendum on EU membership.

Following the unprecedented U.K. vote, global financial markets have largely calmed during the second half of last week; the London Stock Exchange enjoyed a nice recovery (the FTSE 100 currently trading at 6,580). But the political turmoil in the UK could drag on severl more months, heightening uncertainty, at least until negotiations between the U.K. and the EU are finalized.

Post-Brexit challenges could cause U.K. house prices to fall, unemployment to rise and corporate insolvencies to increase, all contributing to asset wuality deterioration. In response, the BoE may reduce its itnerest rates, which would increase pressure on bank margins.

The pound remains under a lot of pressure, with GBP/USD still around Brexit lows.

U.S. economy activity apears to be on solid footing, Real DFI growth was revised to a solid reading in Q1, the trend in initial jobless claims remains favorable and manufacturing activity rebounded during the month. Q2 consumer spending is also on track to strengthen.

Although numbers show a solid improvement, with the great uncertainty in the global financial markets, it is highly unlikely the Federal Reserve will approve a rate hike any time soon. Actua;;y, we can even expect for the opposite to happen, a rate cut. If Yellen had a hard time approving a rate hike when everything was somewhat “chill”, it is hard to believe she will approve a rate hike with the current outlook.

This week we will be looking for the NFP data to shed some further light on the US economy.

Given heightened global and financial market uncertainty, the demand for safe-have assets has spiked, in particular the yen.

Things just seem to be going from bad to worse for Japan. The consequences for the U.S. following the UK vote, in turn will likely weigh in Japanese exports.
The Japanese currency is now trading at 102.600 against the greenback, last week it was very close to 101, its lowest level since 2014. BoJ policymakers were indeed clearly aback by this result, which is now threatening the effieciency of the current monetary policy.

The demand for safe-haven assets has also pushed precious metals prices up, with gold reaching 2-year highs.

The risk-off trend in bond yields with US and UK 10-year government bond yields remain near historical lows as low sentiment and volatility remain a key theme for the struggling markets.

 

Key international data for the week ahead:

Australia trade balance, May, 05/07

Australia retail trade, May,  05/07

RBA Interest Rate Decision,  05/07

UK Services PMI, June, Index 05/07

Bank of England Financial Stability Report 05/07

US FOMC Meeting Minutes 07/07

ECB Meeting Accounts 07/07

US Non-farm Payrolls, June, 07/07

China CPI, June, 10/07

Market Review, July 7, 2016

On Friday we saw the dollar drop against the yen and gain ground against the euro, as ongoing uncertainty following the Brexit vote and disappointing Chinese manufacturing activity data fuelled safe-haven demand.

GBP/USD was almost unchanged, remaining near 31-year lows, despite the release of upbeat U.K. manufacturing data as the Brexit and news of a potential U.K. rate cut this summer limited sterling’s gains.

Gold rose sharply as sof manufacturing data in China and further indications of delayed interest rate hike by the Federal Reserve bolstered the yellow metal.
Gold for August delivery traded between $1,323 and $1,344.25 an ounce, up 1.39% on the session.

Silver for August delivery soared 5.52% to $19.600.

Copper for September delivert gained 1.12% to $2.22 a pound.

Crude futures inched up as the U.S. oil rig count rose sharply last week.
WTI crude closed at $49.02, up 1.43% on the session.
Brent crude settled at $50.39, up 1.37% on the day.

U.S. stocks closed higher at close of trade, as gains in the Healthcare, Telecoms and Consumer Services sectors led shares higher.

 

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Market Review, July 1, 2016

Dollar showed some strength yesterday in post-Brexit recovery and after U.S. Chicago PMI data showed promising numbers.

GBP/USD edged down 1.02%. The pound was still recovering from record losses posted amid fears that a Brexit could hit investment in the U.K. economy, threaten London’s role as a global financial capital and usher in a period of slower global economic growth. In the later trade the pair dropped re-tested 31-year lows as Bank of England governor Mark Carney sent strong hints that the Bank of England could ease monetary policy later this summer to help prevent irreparable harm to the British economy in the wake of last week’s Brexit decision.

During the Asian session, the yen gained on a strong momentum following data.

Gold settled at $1,320.25, slightly down but ended June with one of its strongest first halves on record, after Mark Carney strongly hinted that the Bank of England could ease monetary policy later this summer sending the Pound lower versus the dollar.

Crude futures retreated from 2-week highs, amid heavy profit taking, but still ended the second quarter with one of its strongest 3-month rallies in seven years, amid a host of global supply disruptions in recent weeks.

Wall Street rallied for a third consecutive dat, closing June higher, recouping nearly all its losses from last week’s surprising U.K. referendum to leave the European Union.

 

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