Tag Archives: Interest Rates

morning-coffee

Twitter Earnings: Investors Focusing On User Growth

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: U.S. CB Consumer Confidence @ 14.00 GMT

WHAT WE’RE WATCHING TODAY

Dollar Touches Highest in Six Weeks Ahead Of Fed Meeting

The U.S. dollar touched its strongest in 6 weeks against a basket of major currencies today as investors await a policy review by the Federal Reserve. The Fed is almost certain to cut its monthly bond-buying program by another $10 billion as it looks to wind up the scheme later in the year, but the focus for markets is on any clues to the timing of the first interest rate hike. The dollar index, which measures the greenback’s value against a basket of major currencies, held steady at 81.029 having risen to 81.084 late last week, its highest level since early February. The euro remained pinned near an eight-month trough of $1.3421 set on Friday. It last traded at $1.3435, little changed on the day. In a sign of the increasingly bearish market sentiment toward the euro, data from a U.S. financial watchdog late last week showed that speculators increased their net short position in the euro to 88,823 contracts in the week to July 22, the most bearish positioning against the single currency since late November 2012.

dollar fed

Fed To Raise Rates Sooner Rather Than Later?

According to some market-watchers, an improving economy could force the Fed to shift into rate hiking gear sooner than it had anticipated. While this is not a majority view, it is one that has been picking up momentum. Others see the Fed holding off on rate hikes until late next year, but then hiking much more aggressively than expected. The Fed meets for two days starting Tuesday and is widely expected to taper back its monthly bond buying program by another $10 billion to $25 billion. While the Fed is not likely to reveal any more about the timing of rate hikes or how it will unwind its more than $4 trillion balance, it is likely to be discussed at this week ‘s meeting. Traders will be watching for clues on Fed timing in its statement, particularly around the Fed’s dual mandates of helping employment and fighting inflation. Fed chair Janet Yellen last said unemployment “remains elevated,” and described inflation as running below its objective of 2 percent. Economists expect the Fed’s more hawkish members to ramp up their calls for ending easy policy, if economic data improves. Amid concerns that the Fed has stayed easy for too long, there are the opposite fears that it is unwinding easing before the economy has picked up real traction, and that higher rates could harm critical parts of the economy, like housing. The economy is still growing at a sluggish speed which could show up Wednesday when second-quarter GDP is released, and economists are forecasting growth of just 2.9 percent. At that pace, it does not show much spring back from the 2.9 percent contraction in the first quarter.

Fed watchers are looking as much to the data this week as the Fed statement for clues on its policy path. The July employment report on Friday is expected to show the economy added more than 200,000 jobs for a sixth month, and the unemployment rate is expected to drop to 6 percent. The Fed has stepped back from its target of 6 percent unemployment as a pivot point for considering rate hikes, but the market remains fixated on the number.

Twitter Earnings: Investors Focusing On User Growth

Twitter is due to report its second-quarter results after the market closes today. A surge in sales is expected but investors are more concerned with seeing signs of growth in the social-network’s user base. The social media giant is forecast to post a loss of a penny a share, compared with a loss of 12 cents a share in the year earlier period. Twitter’s revenue is expected to more than double to $283.4 million from $139.3 million in the year ago quarter. Twitter shares have fallen 8% in the last three months and are down 40% year-to-date, mainly due to investor worries that the company’s user base isn’t growing fast enough, but is reportedly planning to introduce new user metrics to show investors that it has a growing reach even though its base is expanding at a slower rate. It remains to be seen whether it can convince Wall Street that it can create value even without robust growth in monthly active users. Twitter inevitably faces comparisons to social media giant Facebook. Last quarter, Twitter reported that it had 255 million monthly active users, which pales in comparison to Facebook, which just reported 1.3 billion monthly users in the second quarter. Twitter is nonetheless considered a key player in the social networking market.

Twitter Shares

That sums up today’s highlights! As always, you can stay in touch via our Facebook, Twitter, Google+ & LinkedIn pages for all the latest trading updates. We hope you have a profitable day on the markets.

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Economic Events Shaping Up Currencies

Global economic events have affected major currencies around the globe as investors look to central banks and the employment market to gauge the health of national economies amidst last months talks and predictions regarding the future of easy monetary policy around the globe.

The Bank of England will announce its monthly official bank rate at 12:00 noon GMT, followed by the European Central Bank at 12:45 p.m. GMT. Both currencies gained today, with the euro lingering just below 0.3 percent of its highest level in a month as European official are not expected to cut interest rates, and the British Pound hitting its highest level since 2011 with data showing the construction industry expanding at the fastest pace in six years. As concerns about disinflation have abated since November, the ECB no longer appears under pressure to cut interest rates.

Down Under things turned out differently, and the Australian dollar slid when this morning’s data slowed that the country’s economy grew less than forecast in the third quarter. Australia’s growth slowed its annual pace to 2.3 percent in the three months through September.

In the U.S. reports are expected to show a boost in hiring and services numbers sending the dollar on the rebound against the yen after its greatest fall in almost a month.

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Unemployment

Index Bull Rallies On With Job Market’s Slow Recovery

Over the last five years the job market has been on its slowest recovery in decades, but it has kept share prices into an extended bull run with $14 trillion having been restored to the market.

Big companies’ reluctance to hire new staff is expected to propel the Standard and Poor’s 500 Index into its highest profits margins ever next year, surpassing the 10 percent mark. Investors, moreover, do not expect to see the market bull slow down its pace any time soon after Fed Chairman nominee Janet Yellen identified the staggering employment market as the greatest hindrance to reducing bond purchase.

Even as American employees have been battling with salary cuts and job losses ever since recession hit in 2008, the last 57 months have recorded phenomenal performances for investors who have benefited by companies’ reductions in expenses and record-low borrowing costs that have pushed the S&P 500 into a 167 percent climb. The great market bulls, moreover, foresee that for as long as the Fed keeps its focus on unemployment rather than inflation equities will keep advancing.

With worker compensation on the slide as companies and the ratio of U.S. salaries to earning having fallen to 3.2, its slowest since 1996, S&P 500 companies have seen their profitability rise increasing the profitability of each dollar of sale to a remarkable 9.9 cents this year.

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U.S. Indices Rise with Improved Job Market

The Dow Jones Industrial Average had its first close over 16,000 as U.S. stocks rose on data showing an improved job market causing some companies to announce a repurchase of shares.

More specifically, Union Pacific, Johnson Controls and Ace gained at least 1.4 percent. Micron Technology Inc. jumped 6.3 percent, the most since August. General Motors Co. (GM) rallied 1.1 percent following the announcement of the U.S. Treasury Department to sell its remaining stake in the company. Target Corp. (TGT) fell 3.5 percent after reporting lower-than anticipated yield due to losses in its Canadian branch.

The Standard & Poor’s 500 Index gained 0.8 percent to 1,795.85 at 4 p.m. in New York, nearly eliminating the drop of the last three day. The Dow average climbed 109.17 points, or 0.7 percent, to a record 16,009.60.

The near record-high mutual-fund market and the deepening bond losses that threaten to fall even more on increasing interest rates have sent U.S. investors to stock mutual funds spending more money on them than they have in the past 13 years. So far this year sock funds earned $172 billion, the most since the 2000 overall of $272 billion, according to the estimates of Morningstar Inc.

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Is The Euro Doomed?

Has the euro been a disaster, or what? It seems pretty self-evident that it has been. Unemployment is 27.6 percent in Greece, 26.2 percent in Spain, 16.5 percent in Portugal, and 13.6 percent in Ireland, which, remember, is supposed to be the austerity success story. What’s happened? Well, exactly what euro-skeptics feared would happen from the time the common currency was just an idea: a shock hit some parts of Europe worse than others, and there hasn’t been any easy way to adjust. The ECB’s one-size-fits-Germany policy has left crisis countries no choice but to try to pay-cut their way to prosperity which would be painful enough if it were even possible. But it’s really not when interest rates are all but at zero. The euro has turned a recession into a depression. Countries can’t devalue their currency or cut interest rates or even run bigger deficits when they get into trouble, so their trouble gets worse. It goes against all intuition that a less flexible monetary would work as well as a more flexible one during a global financial crisis….and against all evidence too. Fixed exchange rates work until they don’t. But when they don’t, they really don’t, like the Great Depression ‘don’t’! So it would be strange to say the gold standard had worked as well as other monetary regimes if you just disregard the 1930s. It’s equally strange to say fixed exchange rates are working today if you just disregard the countries where they aren’t. Because there are plenty of those. Half a continent of them, in fact!

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