Overnight Points of Interest
2012 April 30 by Graham Parlane
Overnight
# Global equity markets were weaker with the Eurostoxx 600 down 0.7% and the S&P500 down 0.4%
# The NZD/USD was a touch weaker despite yesterday’s generally robust data. The NBNZ business survey showed net confidence in the economy’s outlook was +35.8 in April, from +33.8 in March, while own-activity expectations were +36.1, from +38.8. In the past these results would have been consistent with GDP growth heading toward a 4-5% annual rate, however since the GFC the results have tended to overshoot outcomes because of the suspicion that there is a degree of “well, it can’t get much worse”. Further building consents rose by a whopping 19.8%m/m. On the negative side of the ledger the trade balance underwhelmed at +207mln v 501 mln expected.
# USD/JPY fell below 80.00 for the first time since Feb. 24 despite further easing programs announced by the BOJ on Friday (classic buy the rumour, sell the fact?)
# Spain was confirmed as entering recession in Q1.Spain suffered its second consecutive quarter of negative growth contracting 0.3% v expectations of -0.4%
# Surprisingly, Canada too posted a negative first quarter of 2012, their economy contracting 0.2% v +0.2% expected.
# U.S. data showed personal spending slowed in March, rising 0.3% v 0.4% forecast. This followed an upwardly revised February increase of 0.9%, the biggest gain in over two and a half years.
# U.S. personal incomes rose 0.4%, topping expectations for a 0.2% advance.
# The Institute for Supply Management-Chicago business barometer fell to 56.2 in April from last month’s 62.2, hitting a 29-month low.
# The Federal Reserve Bank of Dallas Texas manufacturing production index fell to 5.6 this month from 11.1 in March. The Dallas Fed’s reading on April business activity swung to a -3.4 from March’s 10.8 score. A negative reading means firms reporting a decrease in activity outnumber those reporting an increase.
Ahead
# N.Z. Labour Cost Index/Quarterly Employment Survey
# RBA rate decision
# China PMI
Edge Capital Markets Limited, a specialist advisor in Futures – FX – CFD – Options – Shares – Gold – Silver – Commodities
Overnight Points of Interest
2012 April 29 by Graham Parlane
Overnight
# The Eurostoxx 50 ended Friday up 0.9% whilst U.S. markets were up about 0.25%.
# U.S GDP came in well below expectations at 2.2% v 2.5% (and whispers earlier in the week of something nearer 3%). The data was seen as making another round of stimulus more likely.
# Once again, Italy was seen to have ‘successfully’ sold bonds on Friday night, in the wake of rating agency S&Ps downgrade of Spain’s sovereign rating from A to BBB+. Italy sold €5.95b of bonds, but at 60bps higher yields than a month ago.
# Noted RBA watcher McCrann “there is a better than even chance” the RBA will deliver a 50 BP cut in the official cash rate from 4.25 to 3.75% when they meet in Tuesday”
# Hedge funds bet against core-Eurozone bonds – Financial Times. An article in Saturday’s FT highlights that large macro hedge-funds are placing big bets against “core Eurozone countries” such as France, the Netherlands and even Germany – through shorting their bonds. A number of them feel that a victory by socialist candidate Hollande in the upcoming French run-off election (May 6) will bring with it a sharp deterioration of France’s creditworthiness.
Ahead this week – Large!
# A big week data wise. Locally we have two reports on the state of the labour market. Tuesday is the Labour Cost Index and then Thursday see’s the HLFS (unemployment change). Today sees the NBNZ Business Confidence Survey, Building Consents and Trade Balance. Also look out for Wednesday’s Fonterra Milk Price auction following the massive 9.9% drop a fortnight ago.
# RBA announce on interest rates Tuesday. The ECB on Friday.
# Elsewhere we have a raft of PMI data from around the world including the closely watched Chinese figure on Tuesday.
# To round out the week we have the U.S. non-farm payrolls report.
Ahead today
# N.Z. Building Consents, Trade balance and NBNZ Business Confidence Survey
# U.S. Core PCE Price Index (the FED’s favourite inflation indicator)
Edge Capital Markets Limited, a specialist advisor in Futures – FX – CFD – Options – Shares – Gold – Silver – Commodities
Overnight Points of Interest
2012 April 26 by Graham Parlane
Overnight
# The market for NZ bank bill futures moved into pricing a small chance of an interest rate cut following the RBNZ statement
# European equities were flat whilst U.S. equity markets finished up about 0.7% on average
# U.S. Pending Home Sales surprised positively, rising 4.1% y/y versus 1.0% expected.
# Eurozone confidence readings for April disappointed expectations as economic confidence fell to 92.8 vs. an expected 94.2.
# Rumours swirled that U.S. GDP, due for release tonight, would print much larger than previously expected
# S&P downgraded Spain’s sovereign debt rating 2 notches from A to BBB+ and kept the outlook ‘negative’. Whilst the downgrade won’t come as a huge surprise it is often the outlook which is the biggest factor. This move means a) some investment firms can now no longer invest in Spain and b) those that do will demand a higher return for the extra risk as perceived by S&P. Not a good event for a country already in dire straits. Italy has a debt auction tonight and by association I’d expect them to face higher funding costs.
Ahead
# Japan Monetary Policy Statement
# Japan CPI, Industrial Production, Retail Sales
# U.S. GDP
# University of Michigan survey
Edge Capital Markets Limited, a specialist advisor in Futures – FX – CFD – Options – Shares – Gold – Silver – Commodities
Overnight Points of Interest
2012 April 25 by Graham Parlane
Over the ANZAC break
# The UK moved into recession as Q1 GDP data revealed the economy shrank 0.2% (exp +0.1%).
# Apple Inc. produced a stellar Q1 earnings result. Profits at the tech giant nearly doubled while revenue easily topped estimates. Apple shares jumped a whopping 9% on the result.
# U.S equity markets are up strongly on the result with the Nasdaq leading bourses higher (Apple is about 20% of the Nasdaq weighting). Nasdaq +2.3%, S&P +1.4% and the Dow +0.7%. The Eurostoxx 50 had already managed a strong close, up 1.7%.
# U.S durable goods orders tumbled by the most in three years in March and businesses cut back on spending plans, suggesting the economy slowed as the first quarter drew to a close. Orders dropped 4.2 %, the largest decline since January 2009 when the economy was nose-diving. Economists had expected a drop of just 1.7 %. Further cementing the weakness February orders were revised to show only a 1.9 % increase instead of the previously reported 2.4 % rise.
# In FOMC statement the FED increased its economic growth forecast for 2012, but a dropped its forecasts for the next two years. Also the projections saw a mild increase in inflationary expectations. Whilst no further easing programs were announced, the Fed chairman said he wouldn’t hesitate to support the economy with more easing, if need be.
# The RBNZ left rates on hold at 2.5% noting that the domestic economy showed signs of recovery whilst the international scene was still a concern. The RB fretted that the currency remained high despite lower commodity prices adding “should the exchange rate remain strong without anything else changing, the Bank would need to reassess the outlook for monetary policy settings”.
Ahead
# U.S Unemployment Claims
# Italian 10 year bond auction
Edge Capital Markets Limited, a specialist advisor in Futures – FX – CFD – Options – Shares – Gold – Silver – Commodities
NZD and AUD – Key Levels
2012 April 23 by Graham Parlane
All
The NZD and AUD have proved amazingly robust overnight in the face of a significant downturn in global sentiment. The overnight price action looks to have created corresponding CRITICAL levels in both pairs.
NZD/USD – Classic ‘uncertainty’ Doji yesterday. The pair had a wide range overnight effectively finishing mid-range near its open. A break of the low at 0.8085 would likely confirm the end of the range (particularly if the AUD/USD confirms as per below).
NZDUSD – Click here to view chart
AUD/USD – The overnight ACTION seemingly confirms the 7 month uptrend boundary.
AUDUSD – Click here to view chart
Whilst I remain bearish, the collective price action is supportive for now and not confirming of my view.
Regards G.
Edge Capital Markets Limited, a specialist advisor in Futures – FX – CFD – Options – Shares – Gold – Silver – Commodities
Overnight Points of Interest
2012 April 23 by Graham Parlane
Overnight
# European equity markets took a hammering on the back of a mix of increased political risk and lacklustre PMI reports. The French CAC plunged 2.8% and the German DAX slid 3.4%.
# U.S equities fared somewhat better with indices down about 0.8% on average
# Alarmingly, investors fretted that economic weakness could be spreading from southern Europe to the ‘core’ as German manufacturing PMI dived to 46.3 versus an expected 49.0 and a previous 48.4 and French services PMI came in similarly depressed at 46.4 (above 50 = expansion, below = contraction)
# Politically the strong showing of the Socialists under Presidential candidate Hollande coupled with the Dutch government seemingly on the verge of collapse further unnerved markets
# Spanish Q1 GDP contracted 0.4% as the economy officially entered recession
# German benchmark 10 year bonds fell to a new record low of 1.56%, U.S. 10 years fell as well, to 1.90%
# Wal-Mart slumped 4.7 % after the New York Times reported Wal-Mart officials stymied an internal investigation into bribery allegations at its Mexican unit, Walmart de Mexico. Those shares dropped 12 %.
Ahead (Through ANZAC Day)
# N.Z. Credit Card spending
# Australian Q1 CPI
# G-7 meetings
# U.S. Consumer Confidence, New Home Sales, Durable Goods
# U.S FOMC Statement
# RBNZ OCR Decision (first thing Thursday)
Edge Capital Markets Limited, a specialist advisor in Futures – FX – CFD – Options – Shares – Gold – Silver – Commodities
NZD/USD – The standstill provides opportunity
2012 April 23 by Graham Parlane
All
The NZD/USD pair has been in a particularly tight range for the last 7 weeks. This lack of direction in the pair is presumably down to conflicting forces competing but no one factor prevailing.
NZDUSD – click here to view chart
Whilst this activity can frustrate the active trader it does present significant opportunity for those with a longer term horizon in mind. You see, as the ranges dwindle, the core input for pricing options, the volatility measure, declines accordingly. This phenomenon provides scope to prepare break out strategies at very good prices.
This is nothing other than abiding to the No1 core trading rule………………………. ‘BUY LOW, SELL HIGH’.
In this case we are buying FX options very cheaply and when inevitably, volatility returns to the NZD, the options increase in value.
Whilst I have a very downbeat view of global economic prospects (and thus the NZD) I cannot, as a trader, sit here arrogantly suggesting that the range breakout will certainly occur to the downside. Thus a simple two-directional break out strategy is suggested (there are many but I profile the most simple of them here – the Straddle).
I am going to buy both ‘the right to buy’ and ‘the right to sell’ NZD/USD at 0.8165 (current market rate) into the future.
1 month – Cost is 0.0199 points. So I need the pair to be above or below 0.8364/0.7966 in 1 month
2 month – Cost is 0.0291 points. I need above/below 0.8456/00.7874
3 month – Cost is 0.0376 points. I need above/below 0.8541/0.7789
Now invariably options look expensive on the day you look at them but the number of times my clients have thanked me only a matter of days after we’ve written them is significant.
Obviously for those traders that do have a strong directional bias, the low volatility measure will have a beneficial effect on those wishing to buy one directional options.
Regards G.
Edge Capital Markets Limited, a specialist advisor in Futures – FX – CFD – Options – Shares – Gold – Silver – Commodities
Overnight Points of Interest
2012 April 22 by Graham Parlane
Over the weekend
# The Eurostoxx 50 was up 1.2% whilst U.S. bourses were mixed, the Dow was up 0.5%, the broader S&P500 only up 0.1% whilst the Nasdaq was down 0.25%
# The German IFO business survey surprised to the upside with the headline climate indicator at 109.9 versus 109.5 expected.
# The IMF increased its war-chest by US$420 BLN more than doubling funds at its disposal to US$820 BLN - the US didn’t participate due largely to politics in the lead up to the Presidential election.
# The Dutch were unable to agree on a necessary austerity program heightening uncertaintay in the Eurozone and increasing the prospect of a downgrade of Holland’s Triple A rating.
# The GBP continued its giant killing run on the back of more positive news. March Retail Sales rose a strong 1.8%m/m vs. 0.5% expected.
# Former MPC member says UK rates to rise soon – UK Telegraph. Andrew Sentence (former MPC voter) says last week’s CPI data a game-changer and that evidence of Q1 growth in UK economy means rising rates back on agenda
# French elections -Opinion polls also show that Hollande will easily defeat Sarkozy in the May 6 ballot. French voters are warming to Hollande’s call for renegotiating the EU Fiscal Pact and the imposition of a 75% tax on those earning more than EUR 1 MLN per annum. Also Hollande threw down the gauntlet to Germany and the ECB by declaring the ECB should do more to fix the Eurozone crisis by cutting official interest rates and lend directly to Eurozone governments rather than supplying cheap credit to banks. Furthermore a Hollande victory will mean the end of the close “Merkozy” alliance with Germany’s Merkel.
Big week ahead
# HSBC China Flash Manufacturing PMI
# French and German Manufacturing/Services PMI
# Australian Q1 CPI (Crucial to the rate cut debate. A 0.25% rate cut for Tuesday week is 95% priced in so only a wide miss to the topside will likely prevent the RBA).
# N.Z. Credit Card Spending
# G-7 Meetings
# FOMC Fed Funds Rate decision
# RBNZ OCR decision
# U.S Consumer Confidence, New Home sales, Durable Goods Orders, Unemployment Claims, Advance GDP and University of Michigan Survey
Today
# HSBC China Flash Manufacturing PMI
# French and German Manufacturing/Services PMI
Edge Capital Markets Limited, a specialist advisor in Futures – FX – CFD – Options – Shares – Gold – Silver – Commodities
Overnight Points of Interest
2012 April 19 by Graham Parlane
Overnight
# Global equity markets were again in the red, the Eurostoxx50 down 1.85% and the Dow down 0.55%
# Spain sold €2.54b of bonds, slightly higher than its initial target of €2.50b. Bid-cover ratios were solid, but the yield paid on the 2022 bonds was again elevated at 5.74% somewhat higher than the 5.40% paid at the previous auction in January. France’s bond auction went without hitch.
# Treasury markets remained glum however with German “safe haven” 10-year bond yields falling to 1.69% which is a new low. Likewise U.S. 10 year yields also fell.
# U.S weekly jobless claims remained elevated at 386k v exp 370k
# US April Philadelphia Fed Business Conditions were also weaker at 8.5 vs. 12.5 a month ago and against an expected 12.0
# US Mar Existing Home Sales disappointed coming in at 4.48mln vs. 4.60mln a month ago and against an expected 4.62mln
# Rumours did the rounds again of an imminent French sovereign ratings downgrade before ratings agency Fitch later came out reaffirming France’s AAA rating
# IMF’s LaGarde: Expects IMF firepower to be “significantly” increased at weekend meetings
Ahead
# U.K. Retail Sales
# G20/IMF/World Bank meetings.
# HSBC’s Flash Chinese PMI.
Edge Capital Markets Limited, a specialist advisor in Futures – FX – CFD – Options – Shares – Gold – Silver – Commodities
GBP/AUD – Divergent central banks
2012 April 19 by Graham Parlane
Hi all
The minutes from both the RBA and the BOE have been released this week and the circumstances of the two central bank are startlingly different.
The RBA stated “a case could be made for further easing” and clearly identified the Q1 inflation data due on the 24th as a likely catalyst for such action. The market expects an outcome close to the bottom of the RBA’s 2-3% inflation band whereas only 2 quarters ago the rate was above the top of the band.
The BOE in contrast admitted “ inflation was not falling as quickly as policymakers had hoped” and that “inflation could stay above 3pc into the second half of this year”
With the range bound nature of the USD pairs this divergence in central bank expectations makes this a lovely diversification trade.
A look at the charts is very enlightening. The pattern in GBP/AUD terms is what in classical charting is called a ‘cup and saucer’. In effect what you are looking at is a tea cup with handle. I don’t think I can recall ever seeing one so perfect.
GBPAUD – click here to view chart
Now for a bit of perspective this is happening at the (potential) end of a massive 10 year range making this a great trade for the value investor.
GBPAUD 10 Year Range – click here to view chart
Identifying trades is only one part towards the successful business of trading. Call in to discuss strategies and position sizing to benefit from this circumstance.
Regards Graham
Edge Capital Markets Limited, a specialist advisor in Futures – FX – CFD – Options – Shares – Gold – Silver – Commodities