Tag Archives: China

U.S. Dollar Falls After Fed More Dovish Than Expected; NZ Dollar Soars

Here’s today’s ‘Just A Minute’ bringing you a 60 second summary of what’s happening in the financial markets:

Main Trading Event Of The Day: UK Retail Sales @ 08.30 GMT

WHAT WE’RE WATCHING TODAY

U.S. Dollar Falls After Fed More Dovish Than Expected; NZ Dollar Soars

The U.S. dollar fell to its lowest in nearly two weeks against a basket of major currencies after the Federal Reserve hinted at yesterday’s meetings that U.S. interest rates will stay low for a while. The latest economic projections suggested that the Fed sees rates rising more in 2015 and 2016 than it had previously forecast, but officials lowered their long-term rate target. The Fed also sounded comfortable with the inflation outlook despite recent signs of a pick-up in price pressure. After the meetings, the dollar slipped 0.3 percent on the day to 80.378, and fell as far as 80.353, a level not seen since June 9. Against the yen, the greenback was almost flat on the day at 101.91 JPY, down from a one-week high of 102.38 yen hit on Wednesday before the Fed’s announcement, while the euro was slightly lower at $1.3589 after it touched $1.3600 EUR on Wednesday. The Fed cut its monthly bond buying program by a further $10 billion to $35 billion in a widely expected move and expressed confidence that the economic recovery remained on track.

The New Zealand dollar soared to a record high against a basket of currencies after the Fed’s dovish stance, rallying nearly 1 percent to hover around six-week highs of $0.8736 NZD. The outlook for higher New Zealand interest rates was reinforced by data showing the economy grew a solid 1.0 percent in the first quarter from the previous quarter, a result that cemented New Zealand as one of the fastest-growing developed economies. The Australian dollar was steady on the day at $0.9404 AUD, having gained 0.7 percent on Wednesday.

Eurozone: Is Deflation On The Horizon?

Professional services firm EY has warned that although the euro zone economy is set to grow in 2014, the threat of looming deflation in the region persists. The region will grow 1.1 percent this year, according to EY’s forecasts, followed by expansion of 1.5 percent in 2015. Growth is seen picking up pace between 2016 and 2018. Strengthening exports and a pickup in domestic demand will drive a return to modest investment growth but the recovery is likely to be felt more in some countries than others. The threat of deflation has been a key issue in European policymakers’ minds in recent months. The European Central Bank (ECB) announced measures to tackle the issue at its most recent policy meeting, including imposing a negative interest rates on banks for their deposits. Inflation in the euro zone rose by just 0.5 percent in the year in May, significantly below the ECB’s target of 2 percent. The inflation slowdown has been due to lower energy costs and increasing euro strength and there are now real concerns that inflation could turn to deflation, as firms start to bid down prices and wages in order to compete for orders. Deflationary pressures could have a knock on effect on consumer spending, just as confidence was starting to build. Exporters may also be in for another tough year as the euro remains stubbornly strong. The euro is currently trading around $1.35 against the dollar, down from peaks of $1.39 earlier in the year.

Emerging Markets: The Asset Class Of Choice?

Analysts are predicting that increasing comfort with the outlook for China’s economy will make emerging market equities the best performing asset class in the second half of 2014. Recent Chinese economic data indicates a stabilisation in the world’s second-largest economy, assisted by targeted stimulus measures. This is positive for emerging markets, many of which are dependent on exports to the mainland. May retail sales, for example, rose 12.5 percent on year, above analyst expectations for a 12.1 percent increase. While fixed asset investment rose 17.2 percent on year for the January-to-May period, just above expectations for a 17.1 percent rise. Emerging markets equities are up 3.9 percent year to date, slightly underperforming global stocks which have risen 4.1 percent, according to the MSCI Emerging Markets and MSCI World indices. India and Southeast Asian markets have been the biggest beneficiaries. Markets that were battered into 2013 are seeing a revival because of good policy from the central banks and economic momentum is not as poor as initially thought. Strategists at Coutts Investment Office, agree that emerging markets are the place to be.

That sums up today’s highlights! Remember you can keep in touch with us throughout the day via Facebook, Twitter, Google+ and LinkedIn for all the latest trading news. We hope you have a profitable day on the markets.

China & Japan Data In Focus

Welcome to Monday’s ‘Just A Minute!’ bringing you a 60 second summary of what’s happening in the markets:

Main Trading Event Of The Day: EUR German Flash Manufacturing PMI @ 08.30 GMT

Trading Event Of The Week: Key global leaders are meeting in the Hague this week for scheduled nuclear talks, however, the current Crimean crisis will provide the basis for major discussion and global focus. There is potential for Russia to be removed from the G8, furthering the geopolitical tensions and humiliating president Putin. If such a move is made, there will be significant reaction in the global financial markets.

WHAT WE’RE WATCHING TODAY

China & Japan Data In Focus This Week

In the markets this week, much of the focus will be on data from China and Japan for the latest insight on the health of Asia’s two biggest economies. China’s HSBC’s flash purchasing managers’ index (PMI) for March is released on Monday, followed by industrial profit data on Thursday. The HSBC PMI fell to 48.1 in March, compared with a final reading of 48.5 in February, staying below the 50-mark that divides contraction from expansion in the sector. It is the latest sign of weakness in the world’s second biggest economy. Favourability towards investing in Chinese stocks has diminished over the past four years among market analysts, leading almost every previous bull to lose interest. Analysts are now calling for deflation in the country where they once could only see unstoppable growth. Focus is now on a credit bubble and efforts by the PBOC to deleverage in order to reign in shadow-banking. The deflationary pressures China is experiencing are also linked to commodity prices. Despite the pessimism, some analysts believe that the four-year downtrend in the Shanghai Composite Index is coming to an end, rather than getting ready to accelerate, suggesting that fundamentals almost always look the worst before price turns.

In Japan, economic data at the end of the week will provide a snapshot of the economy and is likely to show continued reasonable growth albeit distorted by the pull forward associated with the coming sales-tax hike. Data is expected to show inflation in Japan rose an annual 1.3 percent in February, after a 1.3 percent rise in January. Retail sales are forecast to rise 3.2 percent in February from a year earlier, while February household spending is seen up 0.1 percent from a year earlier versus a 1.1 percent rise in January.

U.S. Dollar Needs Fresh Impetus To Continue Rally

The U.S. dollar held on to last week’s gains on Monday although there appears to be a lack of any impetus to extend them. The dollar index stood at 80.143, little changed from late New York levels on Friday, not far off a three-week peak of 80.354 set on Thursday. Investors snapped up the dollar last week as they swiftly brought forward the risk of a U.S. interest rate hike early in 2015 after Fed Chair Janet Yellen surprised markets by raising the prospect of such a move. Traders said further gains for the dollar now depend on the strength of coming data, with any acceleration in the U.S. economic recovery likely to bolster expectations of an earlier normalisation of Fed policy. A broader based rally in the USD requires validation of the Fed’s more aggressive interest rate forecasts from a continued step-up in U.S. data according to analysts.

Gold Extends Weekly Loss On Speculation Of Interest Rate Hike

Gold extended the biggest weekly retreat since November, falling half a percent on Monday on speculation that U.S. interest rates will increase next year, further denting the metal’s appeal as a hedge against inflation. A lack of activity in the physical sector also raised some concerns, with demand from China likely to be subdued because of a weak yuan and the discounted prices on the Shanghai Gold Exchange, which discourage imports. Gold eased $7.14 an ounce to $1,326.80 down from a six-month high of $1,391.76 hit early last week. Gold remains under pressure from the U.S. dollar as the U.S. Federal Reserve scales back its quantitative easing program and has suggested a rise in interest rates earlier than expected. The Federal Reserve announced its third $10 billion cut in monthly bond purchases last week as Chair Janet Yellen said benchmark interest rates may rise about six months after the asset buying ends, expected later this year. Investors are less concerned about the tapering part but more about rising U.S. interest rates with Yellen’s comments now at the back of investors’ minds until as 2015 approaches.

That sums up today’s highlights! As usual, you can keep up with events, news and trading tips on our Facebook, Twitter, Google+ and LinkedIn pages.

We hope you have a profitable day on the markets!

Just A Minute!

Here’s today’s ‘Just A Minute’ bringing you a 60 second summary of what’s happening in the markets:

Main Trading Event Of The Day: USD JOLTS Job Openings @ 14.00 GMT

WHAT WE’RE WATCHING TODAY

Signs Of A Global Recovery But Economy Going Nowhere Says Top Forecaster

Companies across the globe are increasingly confident about the economic recovery and their own finances for the coming quarter, which shows more countries are planning to increase their staffing in almost six years, according to a survey. The quarterly employment outlook survey by Manpower Group showed that companies in 38 out 42 countries indicated plans to hire more workers in the second quarter, the largest number since the third quarter of 2008. The mildly positive tone of the quarterly survey suggests the global economic recovery will continue with higher rates of employment helping to boost business output and consumer spending. The second-quarter survey results don’t exactly point to a turnaround in Europe, but there are several indications that employer optimism is gradually improving.

While the Federal Reserve, the White House and many private-sector economists support these predictions for stronger growth in 2014, one of the most accurate forecasters in the business, Stephen Stanley, chief economist for Pierpont Securities, disagrees saying that he doesn’t see the impetus for 3% growth. He believes the economy will be satisfactory, with growth in the 2% to 2.5% range, but below the 2.7% to 3.3% expected by the Fed, the White House, the Congressional Budget Office and private forecasters. The recent spate of unseasonably cold and snowy weather has upset the usual tools for forecasting the near-term trajectory of the economy. There’s no doubt that many of the economic indicators of job growth, factory production, retail sales and housing have been massively distorted by the effects of the weather but we are unlikely to really know what the underlying strength of the economy is until the April and May data come in. Stanley is also skeptical that the relaxation in fiscal policy this year will have any meaningful impact on growth or give any support to the economy.

Oil Prices Drop After Data From China & Japan Show Weak Trade

The price of oil fell below $102 on Monday after an unexpected drop in China’s exports and weaker economic growth in Japan showed demand for crude could weaken. Benchmark U.S. crude for April delivery was down $1.18 to $101.40 per barrel. On Friday, the contract rose $1.02 to close at $102.58 after strong U.S. employment figures for February. Brent crude was down 90 cents to $108.11. China’s customs data showed over the weekend that exports plunged by an unexpectedly large 18 per cent last month. Robust trade is crucial in helping China achieve its official economic growth target of 7.5 per cent for this year. However, exports in February last year might have been overstated by exporters inflating sales figures as an excuse to evade currency controls and bring extra money into China. Japan revised down its growth estimate for the final three months of last year after announcing a record current account deficit for January. Oil prices surged last week due to severe winter in the U.S. that raised demand for oil and tensions over Russia/Ukraine political situation.

Stocks Update: Facebook, Rio Tinto

Facebook shares have jumped 32 percent so far this year, compared with a 1.6 percent gain for the Standard & Poor’s 500 Index. The surge has left the 49 analysts who cover Facebook divided. 38 of them recommend the company with the equivalent of a buy rating but 21 of the total now have share-price targets below where Facebook is trading. That translates to an average 12-month price target of $72.46 for Facebook, less than 1 percent above the company’s closing price of $72.03 yesterday. With the stock advancing more rapidly than anticipated, the price targets suggest that analysts on average see little upside to the stock which may force some of the bulls to adjust their projections. Facebook’s rally to $72.03 a share has already left it trading at 122 times trailing 12-month earnings, making it more expensive than 98 percent of all companies in the S&P 500.

Meanwhile, Rio Tinto Group, the world’s second-biggest iron ore shipper, said short-term price fluctuations will continue after a credit squeeze in China and high stockpiles plunged the commodity into a bear market. Proof of short-term volatility is being seen this week whilst the market is continuing to see an attractive longer term demand for iron ore, driven particularly by China. Iron ore this week extended its decline, slumping by the most since August 2009, amid concern that demand in China is slowing just as rising output signals a global glut. The Chinese government’s credit squeeze and high stockpiles are driving the rapid change of sentiment.

That sums up today’s highlights! Keep in touch with all the latest market events via our Facebook, Google+, Twitter & LinkedIn pages. We hope you have a profitable day on the markets.

Just A Minute!

Here’s today’s ‘Just A Minute’ bringing you a 60 second summary of what’s happening in the markets:

Main Trading Events Of The Day: USD Existing Home Sales @ 15.00 GMT

Earnings Reports: N/A

WHAT WE’RE WATCHING TODAY

U.S. New Home Building Plunges As Existing Home Sales Due To Disappoint

U.S. new home construction - housing starts - recorded their biggest drop in almost three years in January, probably weighed down by harsh weather, but the third month of declines in permits pointed to some underlying weakness in the housing market. The Commerce Department said starts plunged 16% to a seasonally adjusted annual rate of 880,000 units, the lowest level since September. The percentage drop was the largest since February 2011. Starts for December were revised up to a 1.05 million-unit pace from the previously reported 999,000-unit rate. Economists had expected starts to fall to a 950,000-unit rate in January. Freezing temperatures have been blamed for the sharp slowdown in hiring in December and January although there is evidence that the economy was already losing momentum towards the end of the fourth quarter.

Meanwhile, January’s existing home sales are due to be reported today are expected to show a decline of 3.5 percent to 4.7 million. Stocks rallied Thursday and bonds fell, as investors ignored a weak report from the Philadelphia Fed, which showed a plunge in new orders and a surprise contraction in manufacturing activity. Analysts believe that there is a choppy picture in the very short term but housing is basically in good, solid shape from an intermediate point of view, and that with fairly moderate mortgage rates – assuming the economy starts to come back in the spring, a lot of the pent up demand for housing may get stronger as hiring picks up.

China’s Stocks Fall as Yuan Weakens

China’s stocks fell the most in six weeks, while the yuan headed for its biggest weekly slide since 2011 as a manufacturing slowdown fuelled concerns the economic expansion is weakening. Analysts believe the market is worried that the government may tolerate a bigger decline in economic growth amid the restructuring of the economy. The yuan dropped 0.3 percent today to 6.0837 per dollar, extending this week’s loss to 0.8 percent. The currency fell 0.1 percent to 6.089.

In the meantime, as finance ministers and central bank chiefs from the Group of 20 (G20) gather ahead of a weekend meeting in Sydney, the world’s rich nations pushed back against emerging market complaints about the spillover effects of their monetary policies, saying that they had to get their own houses in order and get on with the agenda of lifting global growth. Emerging nations want the U.S. Federal Reserve to calibrate its winding down of stimulus so as to mitigate the impact on their economies. Developed members reply that the troubles in the emerging world are mostly homegrown and domestic interest rates have to be set with domestic recoveries in mind. That was a sentiment very much echoed by the finance ministers of Japan, Britain and Germany. The head of the U.S. Treasury called on China, Japan and Europe to make domestic demand the engine room of growth.

Google Announces Project Tango, A Smartphone That Can Map The World Around It

Google has just announced, under a new initiative called Project Tango, a prototype Android smartphone that can learn and map the world around it. Google says that the phone will learn the dimension of rooms and spaces just by being moved around inside of them. Walking around your bedroom, for example, would help the phone learn the shape of your home. Google hopes that by creating a robust map of the world, the phone could eventually give precise directions to any given point that needs to be reached. The goal of Project Tango is to give mobile devices a human-scale understanding of space and motion. Google has 200 devices that it’s preparing to give out to developers who want to build mapping tools, games, and new algorithms that take advantage of the phone’s sensors, and it expects to send them all out by March 14th. Google stresses that the technology is still in early stages, but it still sees it as on the way to reaching millions of people down the road. Watch out for a major rollout in the future!

That sums up today’s highlights! We hope you have a profitable day on the markets.

Who Is The World’s Biggest Red Wine Consumer?

Time for a coffee? Better make it a glass of red wine this time because unless you live in China, we’ve all got some catching up to do! The time has come for France and Italy to step aside as China has pipped these famous wine producers to the post to become the world’s biggest consumer of red wine, according to a study by International Wine & Spirit Research.

The survey revealed that Chinese consumers downed 1.865 billion bottles of red wine last year, contributing to a 136 percent rise in consumption over the past five years. The biggest consumers of all types of wine does, however, remain the U.S. As far as red wine goes, the latest data on red wine consumption shows that China has pushed traditional wine-drinking countries France and Italy into second and third place respectively. China consumed 155 million nine-litre cases of red wine in 2013. France consumed 150 million cases and Italy consumed 141 million cases. Consumption of wine and spirits in China, the world’s second biggest economy, has risen sharply in recent years alongside an increasingly affluent consumer society. This reflects a similar situation with the increase in consumable commodities in general as those who follow the markets will be aware.

Apart from the fact that China’s taste for luxury goods is increasing, the Chinese view the colour red as a lucky colour and to some extent this may help explain their preference for red over white wine. The situation has led industry insider,s including Morgan Stanley, to question whether China is actually fueling a global wine shortage. We’ll certainly be keeping an eye on those prices. In the meantime, have a glass of red wine on us…cheers!

Indonesia’s Nickel Ban Sends China Scrambling for Supplies

Indonesia’s recent ban on exports of raw nickel in an attempt to boost the nation’s refineries, has left China, the biggest importer scrambling to find alternative solutions. According to a Bloomsberg News survey, Chinese mills that import Indonesian raw material for the production of nickel pig iron, a substitute of the refined metal, have amassed stockpiles to last them half a year.

The 29 million metric tons that have been inventoried at warehouses and ports around the country, provide enough supplies to sustain production until July based on last year’s pace. But not all manufacturers are in the same boat. Small and medium-sized factories expect to have enough supplies only for the next three to four months.

The possibility of a deficit in the global nickel market seems highly probable with Indonesia, the largest producer of the metal worldwide, put its ban in effect on 12th January. Chinese NPI only covers about a quarter of the global nickel supply, and its ore and refined metal prices are expected to rise as demand will surge.

On the markets, the metal ended a five-day rally with a drop of 0.8 percent.

Emerging Markets In The New Year

The topic of emerging markets is always interesting, but it is one which is notoriously riddled with uncertainty. As developing economies have begun to emerge from the recession, this has quite often been at the mercy of emerging markets. China’s growth is expected to slow and economies with current account deficits such as Brazil and India are also vulnerable. There are, however, some specific markets which are thriving and which may present opportunities for investors. This article takes an overview of what happened with emerging economies in 2013 and what the future holds for the year ahead. Read more…

Advancing Market Slump to Be Decade-Long According to Wall Street Banks

Advancing markets are not likely to recover quickly from the asset slump of last year that has left behind advanced-nation shares by the most since 1998, according to the biggest banks of Wall Street.

Goldman Sachs Group Inc. has been advising cuts as high as a third in developing nations investments, predicting “significant underperformance” for stocks, bonds, and currencies for the next decade. JPMorgan Chase & Co anticipates that local-currency bonds will post 10 percent of their average returns over a 10-year period, while Morgan Stanley expects the Brazilian real, Turkish lira, and Russian ruble will continue their decline after falling as much as 17 percent last year.

During the worst periods of the latest global financial crisis, the developing economies of Brazil, Russia, India, and China indicated their increasing power by delivering outsized returns, but as the U.S. Federal Reserve reduces its stimulus and allows interest rates to rise, Morgan Stanley expects some of the same developing nations to now prove laaggard. The MSCI Emerging Markets Index has dropped 3.2 percent this year, compared to the 1.3 percent decline of the developed-market index, and reached a four-month low yesterday as Chinese data indicated a weakness in manufacturing and services.

Chinese Consumerism Props Up Gold Prices

Despite fears of commodities losing value this year and investor hesitation in buying into gold, the precious metal climbed to its highest level in three weeks on increased consumption in Asia, despite the lack of investing demand.

Last year, gold dropped 28 percent of its values, the most since 1981, as investors fled to rising equities and dampened inflation for store value. The Fed’s highly publicised talks regarding economic stimulus and last month’s decision to cut funds for bond purchasing from $85 billion to $75 billion played a big role in the market sentiment towards gold.

Despite investors’ hesitation, however, Chinese consumers are certainly taking advantage of the lower prices as shipments of gold to China more that doubled in the first eleven months of the year, as data from the Hong Kong Census and Statistics Department. The title of the world’s biggest bullion consumer has probably shifted from India to China, the World Gold Council said.

SPDR Gold Trust, the biggest gold-backed exchange-traded product, saw its holding deplete to 794.62 tons yesterday, the lowest since January 2009, according to reports published on the fund’s website. A sum of 552.6 tons was taken out in the past year.

Other metals have been showing upward movement as well. Silver for immediate delivery rose 0.2 percent, its fourth consecutive day of advancement. Platinum also climbed 0.2 percent, while Palladium fell 0.1 percent.

Copper Prices Rise with Chinese Imports

Manufacturing expansion in China, the world’s biggest metal consumer, has sent the price of copper to a six-month high with inventories shrinking.

The HSBC Holdings Plc and Markit Economics got a Chinese factory measure for December of 50.5 while the statistics bureau and logistics federations put the number at 51, both of the indicating a clear expansion on Chinese manufacturing. At the same time, Copper piles on the London Metal Exchange dropped for the 41st consecutive season in a row, the longest running streak in almost a decade.

But the rise in the metal’s price seems precarious as the whole business depends mostly on China. As Herwig Schmidt, head of sales at Triland Metals Ltd. in London, put it: “If China suddenly catches a cold, we will see everything go somewhere quite a bit lower.”

Although Chinese exports experienced a drop last month, the country’s imports of refined copper increased in November while shipments were at their highest in 19 months in September.

The inventories of copper at the LME fell to their lowest lever since last January to 365,700 tons, while stockpiles on the Shanghai Futures Exchange are the lowest in nearly one year.

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