Archive for Economics & Fundamentals – Page 134

27 Oct

The US Real Estate market continues to decline. ECB to raise interest rate today

By JustMarkets

The US stock indices were trading yesterday without a single trend. By the close of trading, the Dow Jones Index (US30) gained 0.01%, while the S&P 500 Index (US500) decreased by 0.74%. The NASDAQ Technology Index (US100) fell by 2.04% on Wednesday.

The US economic data released by the US Commerce Department showed that home sales in September fell by 10.9% from the previous month, while August’s 685,000 unit figure was revised downward to 677,000, indicating that the Federal Reserve’s aggressive policies continue to hold back the real estate market.

Shares of Meta Platforms Inc (Facebook) fell more than 20% on the report after third-quarter earnings missed Wall Street estimates.

Visa, meanwhile, closed 5% higher after posting quarterly results that beat net income estimates, driven by continued consumer spending and a recovery in activity.

Equity markets in Europe were mostly up yesterday. Germany’s DAX (DE30) gained 1.09%, France’s CAC 40 (FR40) added 0.41%, Spain’s IBEX 35 (ES35) increased by 0.97%, and the British FTSE 100 (UK100) closed by 0.61% on Wednesday.

The euro weakness may lead to a further rise in consumer prices at the expense of imports, said German Deputy Finance Minister Florian Toncar. Toncar’s remarks contrast with recent comments from other European leaders, who stressed the risk of recession and suggested that the cost of borrowing in the eurozone should not increase too sharply.

The European Central Bank will raise interest rates again today and likely provide a subsidy to commercial banks, taking another important step in tightening policy (QT) to combat a historic spike in inflation. The ECB will almost certainly raise its deposit rate by 75 basis points to 2% and make clear that the size of the next steps remains open for discussion. The central bank is also likely to take the first steps to reduce its balance sheet of €8.8 trillion. Signaling that future steps will be more difficult, ECB President Christine Lagarde is likely to give only vague guidance, arguing that additional increases are needed, but incoming data and new economic forecasts in December will be the key.

According to the World Bank, a sharp slowdown in global growth and restrictions imposed because of the coronavirus pandemic in China are key downside risks to oil consumption. But with OPEC+ countries limiting oil production starting in November, the medium-term outlook for oil remains upward.

Shell company on Thursday reported third-quarter earnings of $9.45 billion, down from the previous quarter. But the company announced plans to increase its dividend by 15% by the end of the year. Shell also expanded its stock buyback program, announcing plans to buy $4 billion worth of stock over the next three months.

Asian markets closed in positive territory yesterday. Japan’s Nikkei 225 (JP225) jumped by 0.67%, Hong Kong’s Hang Seng (HK50) ended the day up by 1.00%, and Australia’s S&P/ASX 200 (AU200) increased by 0.18%.

Solid wage growth is likely to be the trigger that will push the Bank of Japan away from ultra-low interest rates. With Japan’s economy still weak, the Bank of Japan is not expected to raise interest rates soon, even if it means increasing downward pressure on the yen, which has fallen to a 32-year low against the dollar. Analysts say that Governor Haruhiko Kuroda’s second five-year term ends in April, opening the prospect of a gradual withdrawal of his radical economic stimulus program.

S&P 500 (F) (US500) 3,830.60 −28.51 (−0.74%)

Dow Jones (US30) 31,839.11 +2.37 (+0.01%)

DAX (DE40) 13,195.81 +142.85 (+1.09%)

FTSE 100 (UK100)  7,056.07 −0.51 (+0.61%)

USD Index 109.71 −1.24 (−1.14%)

Important events for today:
  • – Eurozone Monetary Policy Statement at 15:15 (GMT+3);
  • – Eurozone Interest Rate Decision at 15:15 (GMT+3);
  • – US Initial Jobless Claims (w/w) at 15:30 (GMT+3);
  • – US GDP (q/q) at 15:30 (GMT+3);
  • – US Durable Goods Orders (m/m) at 15:30 (GMT+3);
  • – Eurozone ECB Press Conference at 15:45 (GMT+3);
  • – US Natural Gas Storage (w/w) at 17:30 (GMT+3).

By JustMarkets

 

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

Economics & Fundamentals Financial News
26 Oct

Reports from Google and Microsoft disappointed investors. Inflation in Australia reached a 32-year-high

By JustMarkets

At yesterday’s close of the stock market, the Dow Jones Index (US30) increased by 1.07%, and the S&P 500 Index (US500) added 1.63%. Technology Index NASDAQ (US100) gained 2.25% on Tuesday. Investor sentiment improved amid growing expectations that the high-interest rate damage to the US economy may prompt the Federal Reserve to soften its hawkish stance. Also, a positive for the market is the reporting season, but tech giants were disappointing yesterday.

Google Inc (GOOGL) failed to beat quarterly earnings estimates Tuesday as advertisers cut back in the face of the economic downturn. As a result, the company’s stock plummeted nearly 7% on the report release.

Microsoft (MSFT) shares also fell more than 6% in after-hours trading after the software giant disappointed in its revenue growth forecast for its Azure cloud computing business.

On Tuesday, Spotify Technology SA (SPOT) beat Wall Street estimates for third-quarter revenue and subscriber growth but said harsh economic conditions led to slower-than-forecast advertising growth.

The US consumer confidence fell more than expected in October to a three-month low as high inflation, and growing concerns about the economic outlook put pressure on Americans. The drop in confidence shows that the Federal Reserve’s aggressive interest rate hikes are taking a toll on consumers. And with the midterm elections just two weeks away, this is a worrying sign for President Joe Biden and the Democrats, who are trying to maintain their slim majority in Congress. In the future, inflationary pressures will continue to pose strong obstacles to consumer confidence and spending, leading to a difficult holiday season for retailers.

Equity markets in Europe were mostly up yesterday. Germany’s DAX (DE30) gained 0.94%, France’s CAC 40 (FR40) added 1.94%, Spain’s IBEX 35 (ES35) increased by 1.49%, Britain’s FTSE 100 (UK100) closed down slightly by 0.01% on Tuesday.

Deutsche Bank reported a significant jump in earnings in the third quarter despite a downturn in deal-making. UniCredit raised its 2022 earnings target, with the second-largest Italian bank supported by higher interest rates and lower loan loss reserves.

Financial markets are convinced that tomorrow’s ECB meeting will include another significant increase in key interest rates. In line with the last move in September, the only uncertainty concerns the step of raising. The 75-basis-point hike that ECB officials have been talking about in recent weeks is still an unresolved issue since last month, and several Governing Council members demanded only a 50-basis-point increase on the grounds that a possible recession would itself reduce inflationary pressures. And more and more members are now talking about the likelihood of a limited recession in 2023. This week’s meeting will almost certainly also include a discussion of quantitative tightening (QT). But even without QT, financial markets are increasingly convinced that key interest rates are far from their peak. From the current level of 1.25%, analysts are predicting a rate hike to 2.25% by the end of the year.

New Prime Minister Rishi Sunak promises to lead the UK out of its economic crisis. Sunak reappointed Jeremy Hunt as his finance minister to appease markets that had abandoned his predecessor’s debt-driven economic plans. Sunak also warned that difficult decisions lie ahead as he hopes to cut government spending.

Asian markets traded flat yesterday. Japan’s Nikkei 225 (JP225) jumped by 1.02%, Hong Kong’s Hang Seng (HK50) ended the day down by 0.10%, and Australia’s S&P/ASX 200 (AU200) was up by 0.28%. But since the market opened today, Hong Kong’s and China’s shares are showing the best dynamics of the day. Hong Kong’s Hang Seng Index (HK50) jumped by 2% from a 13-year low, while China’s Shanghai Shenzhen CSI 300 blue-chip index increased by 1.4%.

Inflation in Australia has jumped to a 32-year high. The reason for this is a sharp rise in home construction costs and rising gas prices. Data from the Australian Bureau of Statistics showed Wednesday that the consumer price index (CPI) jumped by 1.8% over the last quarter. On an annualized basis, the inflation rate rose from 6.1% to 7.3%. This is negative data that will push the Reserve Bank of Australia (RBA) to resume raising interest rates more aggressively. Initially, the RBA wanted to slow growth so that rising interest rates would not affect consumer spending too much, but that plan has not been successful.

S&P 500 (F) (US500) 3,859.11 +61.77 (+1.63%)

Dow Jones (US30) 31,836.74 +337.12 (+1.07%)

DAX (DE40) 13,052.96 +121.51 (+0.94%)

FTSE 100 (UK100) 7,013.48 −0.51 (−0.01%)

USD Index 110.88 −1.11 (−0.99%)

Important events for today:
  • – Australia Consumer Price Index (m/m) at 03:30 (GMT+3);
  • – US New Home Sales (m/m) at 17:00 (GMT+3);
  • – Canada BoC Monetary Policy Report at 17:00 (GMT+3);
  • – Canada BoC Interest Rate Decision at 17:00 (GMT+3);
  • – US Crude Oil Reserves (w/w) at 17:30 (GMT+3);
  • – Canada BoC Press Conference at 18:00 (GMT+3).

By JustMarkets

 

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

Economics & Fundamentals Financial News
26 Oct

Is This the Vaunted Fed Pivot?

Source: Clive Maund  (10/24/22)

Expert Clive Maund believes the Fed may pivot soon. Read to find out why he believes this is true and where he thinks the market is heading.

The stock market was at a critical juncture by late last week, and without Fed intervention, or at least the talk of Fed intervention, it would have plunged, so right on cue, it was put about that the Fed would “pivot” soon, meaning abandon its policy of jacking up interest rates to battle inflation (a battle it cannot win, by the way).

This was, of course, what the oversold market wanted to hear, and the effect was immediate, with early losses being reversed and the Dow closing up almost 750 points on the day as yields started to drop and the dollar took a hit.

It hardly looks like the time has arrived to start cracking open the champagne, for overall, the setup remains incredibly dangerous, so if the Fed doesn’t deliver with a “pivot,” or even if it does and it has little effect, the market could yet turn tail and plunge.

If the Fed (and other central banks) keep creating money at an exponentially faster rate than they are now to stop the debt markets from imploding, the result will be hyperinflation, and we are heading in that direction already.

In the writer’s view (that is to say me), this way of carrying on suits the Globalists or New World Order just fine.

After all, they have already had the effrontery to put up loads of adverts saying, “You will own nothing and be happy,” and a policy of continually expanding the money supply will enable them to buy up everything and, at the same time exterminate the population at large by creating hyperinflation that renders them destitute so that they end up going “cap in hand” for their universal-basic-income subsistence handouts which they will have to qualify for by being fully vaxxed and not visiting websites that their Masters don’t approve of, etc.

Clearly, if this is the approach they adopt, it could have a stabilizing effect on the markets regardless of the economy being in terminal decline.

Thus it was that the mere hint yesterday of the Fed going easy caused a dramatic reversal in markets back to risk-on, and the S&P500 index (and other índices) finished the day with a nice big white candle on their charts, as we can see on the latest 6-month chart for the S&P500 index below.

If the Fed takes the easy way out, which is to keep creating money until it leads to hyperinflation, then the precious metals (and many other commodities) should soar.

Incidentally, this positive candle builds on the impressive “bullish engulfing pattern” reversal that appeared the week before last, which involved an impressive large white candle, so it is looking increasingly like the market has put in an intermediate low for now.

However, that said, it hardly looks like the time has arrived to start cracking open the champagne, for overall, the setup remains incredibly dangerous, so if the Fed doesn’t deliver with a “pivot,” or even if it does and it has little effect, the market could yet turn tail and plunge.

We can see the horribly bearish setup on the latest 5-year chart for the S&P500 index, which would not be changed by a rally in the coming weeks back up to the Dome boundary.

What could be going on now is that the Fed is complicit in massaging sentiment to keep the market propped up until the mid-terms, after which they may permit it to drop like a rock. Therefore a good tactic may be to see if the market can make it up to or near to the Dome boundary, at which point it will be time to thin positions or lay on more hedges, buy tranches of Puts at good prices, etc.

We will be on the lookout for this.

The chart for the 2008 crash is shown below to enable you to see the uncanny similarity between then and now.

The difference is that if the markets do crash soon, they won’t bounce back afterward as in 2008 and 2009.

This is because the bond market will be crashing, too, as there will be no QE card to play, unlike last time, as the entire system flies apart.

On the 6-month chart for the S&P500 index, we can see the large bullish engulfing pattern that appeared the week before last, which marked the turn, and the impressive white candle that occurred yesterday as the Fed leaked out hints that it will “pivot.”

We will be turning our attention to the precious metals sector tomorrow since clearly, if the Fed takes the easy way out, which is to keep creating money until it leads to hyperinflation, then the precious metals (and many other commodities) should soar, so it’s no wonder we saw impressive action in many PM stocks yesterday. Keep in mind the political motivations for keeping the markets propped up until the mid-terms.

CliveMaund.com Disclosures

The above represents the opinion and analysis of Mr. Maund, based on data available to him, at the time of writing. Mr. Maund’s opinions are his own, and are not a recommendation or an offer to buy or sell securities. Mr. Maund is an independent analyst who receives no compensation of any kind from any groups, individuals or corporations mentioned in his reports. As trading and investing in any financial markets may involve serious risk of loss, Mr. Maund recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction and do your own due diligence and research when making any kind of a transaction with financial ramifications. Although a qualified and experienced stock market analyst, Clive Maund is not a Registered Securities Advisor. Therefore Mr. Maund’s opinions on the market and stocks can only be construed as a solicitation to buy and sell securities when they are subject to the prior approval and endorsement of a Registered Securities Advisor operating in accordance with the appropriate regulations in your area of jurisdiction.

Disclosures:
1) Statements and opinions expressed are the opinions of Clive Maund and not of Streetwise Reports or its officers. The author is wholly responsible for the validity of the statements. Streetwise Reports was not involved in any aspect of the article preparation. The author was not paid by Streetwise Reports LLC for this article. Streetwise Reports was not paid by the author to publish or syndicate this article.

2) This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.

3) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the decision to publish an article until three business days after the publication of the article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases.

Economics & Fundamentals Opinions
25 Oct

US economic indicators continue to fall. Investors’ attention is focused on tech giants’ reports

By JustMarkets

The US stocks continued to rise on Monday. Weaker economic data on business activity caused Treasury yields to fall slightly and pushed stocks higher on the background that the Federal Reserve may consider a less aggressive monetary policy after a 75 basis point rate hike next month. Stocks also rallied ahead of a wave of quarterly results from major tech companies.

As the stock market closed yesterday, the Dow Jones Index (US30) increased by 1.34%, and the S&P 500 Index (US500) added 1.19%. The NASDAQ Technology Index (US100) closed by 0.86% on Monday.

Forecasts from HSBC Holdings Plc suggest markets are still underestimating the likelihood of a return to ultra-low US interest rates as the Federal Reserve’s hawkish stance risks bringing down the economy. There is a “fairly high” probability that the US Central Bank will need to cut rates near zero over the next three to five years.

The US Treasury is taking steps to make the Treasury debt market, the private money market, and bond funds more resilient, but according to US Treasury Secretary Janet Yellen, the US financial system is functioning well despite the heightened global volatility.

Companies reporting today include Alphabet (GOOGL), Visa (V), Coca-Cola (KO), Texas Instruments (TXN), United Parcel Service (UPS), NextEra Energy (NEE), Lockheed Martin (LMT), HSBC ADR (HSBC), General Electric (GE) and 3M (MMM).

Equity markets in Europe were mostly up yesterday. Germany’s DAX (DE30) gained 1.58%, France’s CAC 40 (FR40) added 1.59%, Spain’s IBEX 35 (ES35) increased by 1.79%, and the British FTSE 100 (UK100) closed Monday with 0.64%.

In the UK, heightened political and economic uncertainty has led to a drop in business activity to 2009 crisis levels. A government report released Friday showed that retail sales fell by 1.4% in September, and consumer confidence is near its worst level ever, as inflation returned to a 40-year high. And all of these problems will now have to be addressed by the new Prime Minister Rishi Sunak. Financial experts believe the new prime minister’s key focus should be a credible fiscal responsibility plan that can guarantee that the national debt will shrink in the medium term.

Oil declined Monday as data showed Chinese demand remained sluggish in September, while weak US business data eased expectations for more aggressive interest rate hikes and limited price cuts.

Asian markets traded flat on Monday. Japan’s Nikkei 225 (JP225) jumped by 0.31% on the day, Hong Kong’s Hang Seng (HK50) ended the day sharply down by 6.36%, and Australia’s S&P/ASX 200 (AU200) was up by 1.54%.

Shares of Chinese technology companies fell sharply on Monday after Chinese President Xi Jinping’s leadership reshuffle raised fears of increased regulatory scrutiny of tech stocks. Investor sentiment also remains tense as markets fear further disruptions to the economy by the government, especially after Beijing reiterated its commitment to its strict zero COVID policy. Concerns about US restrictions on semiconductor exports to China are also having an impact.

S&P 500 (F) (US500) 3,797.34 +44.59 (+1.19%)

Dow Jones (US30) 31,499.62 +417.06 (+1.34%)

DAX (DE40) 12,931.45 +200.55 (+1.58%)

FTSE 100 (UK100) 7,013.99 +44.26 (+0.64%)

USD Index 112.01 0.00 (0.00%)

Important events for today:
  • – Singapore Consumer Price Index (m/m) at 08:00 (GMT+3);
  • – German Ifo Business Climate (m/m) at 11:00 (GMT+3);
  • – US CB Consumer Confidence (m/m) at 17:00 (GMT+3);
  • – FOMC Member Waller Speaks at 20:55 (GMT+3).

By JustMarkets

 

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

Economics & Fundamentals Financial News
25 Oct

Markets Steady As Investors Eye Earnings & ECB

By ForexTime 

European markets edged cautiously higher on Tuesday as investors digested upbeat corporate earnings and news that Rishi Sunak would replace Liz Truss as U.K. prime minister.

The latest German IFO Business Climate Index supported sentiment by showing some signs of stabilisation, albeit at low levels. Most Asian shares staged a sharp rebound during early trade, tracking the recovery from Wall Street as soft economic data fueled bets around the Fed softening its hawkish stance. Interestingly, some stability returned to Chinese markets following Monday’s historic selloff as traders weighed bargain prices against China’s uncertain political landscape and economic outlook.

In the currency space, the offshore Yuan has weakened past the psychological 7.30 level following the party congress, while dollar bulls are taking a pause amid expectations around a potential Fed pivot. Sterling has appreciated against every G10 currency this morning ahead of Rishi Sunak’s meeting with King Charles and his first public address later this morning. The euro seems to be on standby and is likely to remain trapped within a range until the European Central Bank (ECB) meeting on Thursday.

Will the ECB come to the Euro’s rescue?

Markets widely expect the central bank to raise interest rates by another 75 basis points on Thursday, in a move to contain inflation which is well above the 2% target. Given how this has already been priced in, this may offer little support to euro bulls that have been beaten black and blue by a stronger dollar over the past few months. Much attention will be directed towards President Christine Lagarde’s press conference which will be closely scrutinised by investors for clues on the central bank’s next policy move. If policymakers move ahead with a 75bp hike and open the door for more jumbo hikes in the future, this could provide some support to the euro. A shock 100bp rate hike would inject euro bulls with fresh inspiration to break decisively out of the current range. Should the central bank surprise markets with a smaller than expected 50bp hike, the EURUSD could tumble back to 0.9700 and lower. Whatever the outcome of the ECB meeting, it is likely to set the tone for the euro over the next few weeks.

Currency spotlight – Time for king dollar to rest?

The dollar has weakened against most G10 currencies since the start of the fourth quarter thanks to the improving market mood and expectations around the Fed dialing back on its hawkish stance. As economic data in the United States continues to illustrate a gloomy picture, this could fuel speculation around the jumbo-sized rate hikes coming to an end. Throughout 2022, dollar bulls have derived strength from safe-haven flows, optimism over the US economy, and Fed rate hike expectations. As some positivity returns to global markets amid robust earnings, and shaky US data prompts the Fed to drop its aggressive approach towards rates, this could hit dollar bulls hard.

Looking at the technical picture, DXY bulls look exhausted on the daily charts with prices back within a range. A breakdown below the 111.50 support level could trigger a decline toward 110.00 and 109.00, respectively. If prices can break out above 113.50, the DXY could retest its 20-year high at 114.78.

Oil prices wait for fresh catalyst

Oil prices are likely to swing between losses and gains as fears over a global economic slowdown collide with caution over tightening supply. Brent remains under pressure this morning, trading around $90.25 as of writing. As investors juggle with slowdown concerns, sharp changes in risk sentiment, dollar volatility, and other themes impacting the supply/demand dynamics, this could result in more choppy price action into year end.

Looking at the technical picture, Brent remains under pressure on the daily charts. Prices are trading below the 50-, 100- and 200-day Simple Moving Average. A breakdown below $90.00 could open a path toward $87.00 and $82.50. Should prices push back above $92.00, the next key level of interest can be found at $95.00.

Commodity spotlight – Gold

After staging a stunning rebound last Friday, gold has found itself under pressure thanks to the improving market mood and rising Treasury yields. Appetite towards the precious metal is likely to remain shaky as investors evaluate whether the Fed will indicate next week if it will remain hawkish after raising interest rates by another 75 basis points in November. In the meantime, gold could trend lower until a fresh directional catalyst is brought into the picture. Talking technicals, sustained weakness below $1655 could open the doors towards $1615 and $1600 respectively. A breakout above $1655 may trigger an incline towards $1670 and $1680.

Forex-Time-LogoArticle by ForexTime

ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC 185/12 www.forextime.com

Economics & Fundamentals Financial News
24 Oct

Rugby union’s financial crisis: why the sport’s model is ‘broken’

By Christina Philippou, University of Portsmouth 

As athletes, rugby union players are notoriously robust. But in England, the finances behind the sport are looking far from healthy. In the space of a few weeks, two of its most famous club teams, Worcester (founded 1871) and Wasps (1866), have gone into administration.

Bill Sweeney, chief-executive of the Rugby Football Union (RFU) which governs the English game, said the financial model of the sport is “broken”. He added: “Two professional clubs facing financial difficulties is a clear barometer of the challenges being felt by the economy, sport and rugby union specifically.”

A parliamentary inquiry has now been launched over “serious concerns about the future of the sport”.

For Wasps and Worcester, those concerns are immediate. Both clubs will be relegated from the top tier of English rugby, and hundreds of staff have lost their jobs. Fans of the clubs will miss out too of course, as will local businesses who rely on match-day spending by large numbers of supporters.

In the case of Wasps, there is a knock-on effect on its affiliated netball team, whose players and staff have also been made redundant, and its close relationship with Coventry City, the football club which shares use of its stadium.

That said, going into administration need not be fatal, and is a way of trying to save a business from disappearing completely (liquidation).

The running of the business is passed on to an external team of specialists who try to negotiate with creditors and typically attempt to find new investors while also cutting costs. Administration has been commonly used in sport, particularly football, to keep clubs in existence, and has touched rugby union’s top tier of clubs before.

Two years after the top professional league (Premiership) was established in 1997, two long-standing clubs (London Scottish and Richmond) went into administration. Both now play in the league’s second tier, the RFU Championship.

But a broader fear remains over the financial sustainability of the sport. Former Wasps and England player Rob Andrew said recently that governance of the game was due an overhaul, adding: “The game has not been on a solid footing for quite some time.”

He’s right. Rugby union was the last of all the main team sports in the UK to turn professional when the Premiership was established. This put it at a significant financial disadvantage right from the start, as the likes of football, cricket and rugby league had already negotiated commercial deals with sponsors and broadcasters.

Rugby union had to try to muscle in and make up for the delay, facing what the business world calls “last mover disadvantage” in the market – arriving late to a limited pot of cash.

As a sport, it is heavily dependent on ticket sales for revenue. Part of Wasps’ decision to move to Coventry from London (for a time the club had been known as London Wasps) was an attempt to drive up attendances in a less saturated market than the capital.

But, as with so many decisions associated with sport, that was a gamble. Investors being repaid for helping finance the move to Coventry is part of the reason money is needed so desperately now.

COVID didn’t help either. In common with other sports (and industries), the closure of stadiums during the pandemic drastically affected income. Such reduced capacity in the stands meant match-day income was zero (or extremely low) for most of the 2020-21 season.

Must try harder

But perhaps the key issue comes from the wider difficulty of governing and regulating what are essentially private businesses. The agility and strength demanded from players on the pitch is not always matched by those responsible for running these business behind the scenes.

And as with other sports (like football) that are struggling with financial sustainability, keeping control of expenses is a major problem.

To that end, the Premiership introduced a salary cap in 1999. This was designed to put a limit on how much clubs are allowed to spend on wages, the largest costs they face (although there have been instances of breaches by teams such as Leicester Tigers and Saracens).

The salary cap is a “hard” cap, which means it is a set value for all clubs, rather than a percentage of revenue. The trouble with this system is that clubs can still try to spend as much as the salary limit allows, even if their income cannot cover it.

As a result, research into Premiership rugby clubs found imbalances in their financial status had increased between 2006 and 2015, and that there were issues around wage costs and how these compared with turnover.

Wasps, for example, spent 103% of its income on wages in 2014. Three years later, the club’s 2017 accounts were already highlighting a “material uncertainty to continue as a going concern” – that is, a risk that the club wouldn’t be able to pay its debts.

It seems, then, that the warning signs were there some time ago. Perhaps the time has finally come for the sport to submit itself to a serious financial health check.The Conversation

About the Author:

Christina Philippou, Principal Lecturer, Accounting and Financial Management, University of Portsmouth

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Economics & Fundamentals Opinions
24 Oct

The US Federal Reserve is discussing a less aggressive policy. Xi Jinping was re-elected president of China.

By JustMarkets

The US stock indexes rose Friday after news that US Federal Reserve officials are discussing a 0.5% interest rate hike in November, raising hopes that the central bank may adopt a less aggressive policy. As the stock market closed on Friday, the Dow Jones Index (US30) increased by 2.47% (3.48% for the week), and the S&P 500 Index (US500) added 2.37% (2.93% for the week). The NASDAQ Technology Index (US100) jumped by 2.31% on Friday (2.69% for the week).

According to a Wall Street Journal report, some Fed officials have begun stating their desire to slow the pace of the increase soon. On Friday, San Francisco Federal Reserve President Mary Daly said it was time to start talking about slowing the pace of borrowing costs and that the Fed should be less aggressive in its rate hike cycle. Charles Evans, president of the Federal Reserve Bank of Chicago, also cited similar statements. According to Reuters calculations, speculators’ net long rates on the US dollar rose last week.

The four largest US companies by market capitalization are due to report this week. Investors are filled with optimism as corporate earnings help keep the stock market from falling amid soaring inflation and an aggressive Federal Reserve rate hike.

Stock markets in Europe were mostly down Friday, but all closed the week in positive territory. German DAX (DE30) decreased by 0.29% on Friday (+2.11% for the week), French CAC 40 (FR40) lost 0.85% (+1.44% for the week), Spanish IBEX 35 (ES35) fell by 1.29% (+1.72% for the week), British FTSE 100 (UK100) was up by 0.15% (+1.62% for the week).

Boris Johnson announced that he would not run for the Conservative Party leader and British Prime Minister post. Johnson’s announcement will pave the way for Rishi Sunak, who will likely become the next prime minister. Liz Truss was forced to resign after she launched an economic program that caused turmoil in the financial markets. Former Finance Minister Rishi Sunak earlier confirmed that he would be on the ballot, promising to handle the country’s “deep economic crisis” with “honesty, professionalism, and accountability.” Chancellor Jeremy Hunt, who is expected to remain in office under the new prime minister, said Friday that he would do “whatever is necessary” to reduce the national debt ahead of his new budget, to be announced on October 31.

Oil prices rebounded Friday as hopes for stronger demand in China and a weaker US dollar outweighed concerns about the global economic slowdown and the impact of higher interest rates. Overall, the oil market remains uncertain as, on the one hand, OPEC+ production cuts and European sanctions against Russia for its invasion of Ukraine are keeping oil prices from falling. On the other hand, falling oil demand in the largest importer China, along with the release of strategic reserves by the US, are keeping the price down.

Chinese President Xi Jinping secured an unprecedented third presidential term and introduced a top governing body made up of loyalists, cementing his place as the country’s most powerful ruler since Mao Zedong. On Monday, China released a slew of macroeconomic statistics, the publication of which was delayed by a week because of the presidential re-election. The data indicated that China’s GDP grew by 3.9% in the last quarter, but analysts believe the numbers do not correspond to reality. China now faces a host of economic challenges, and China’s biggest concerns remain the real estate market and falling manufacturing numbers due to the new Covid lockdowns.

Japan’s promised economic stimulus should be big enough to overcome the economy’s manufacturing deficit of about 15 trillion yen ($100 billion), a top ruling party official said Sunday. On Friday, Japan’s Finance Ministry held another intervention to protect the yen from falling further. The background to such price movement is the continuing unequal monetary policy between the Bank of Japan and the Federal Reserve.

At the commodities market, futures on lumber (+8.36%), silver (+7.35%), platinum (+4.44%), and Brent oil (+2.15%) showed the biggest gains over the week. Futures on natural gas (-22.64%), cotton (-4.51%), coffee (-3.94%), cocoa (-3.2%) and sugar (-2.49%) showed the biggest drop.

S&P 500 (F) (US500) 3,752.75  +86.97 (+2.37%)

Dow Jones (US30) 31,082.56 +748.97 (+2.47%)

DAX (DE40) 12,730.90 −36.51 (−0.29%)

FTSE 100 (UK100) 6,969.73 +25.82 (+0.37%)

USD Index 111.18 −0.14 (−0.12%)

Important events for today:
  • – Australia Manufacturing PMI (m/m) at 01:00 (GMT+3);
  • – Australia Services PMI (m/m) at 01:00 (GMT+3);
  • – Japan Manufacturing PMI (m/m) at 03:30 (GMT+3);
  • – Japan Services PMI (m/m) at 03:30 (GMT+3);
  • – China GDP (q/q) at 05:00 (GMT+3);
  • – China Retail Sales (m/m) at 05:00 (GMT+3);
  • – China Industrial Production (m/m) at 05:00 (GMT+3);
  • – China Unemployment Rate (m/m) at 05:00 (GMT+3);
  • – China Exports (m/m) at 06:00 (GMT+3);
  • – China Imports (m/m) at 06:00 (GMT+3);
  • – French Manufacturing PMI (m/m) at 10:15 (GMT+3);
  • – French Services PMI (m/m) at 10:15 (GMT+3);
  • – German Manufacturing PMI (m/m) at 10:30 (GMT+3);
  • – German Services PMI (m/m) at 10:30 (GMT+3);
  • – Eurozone Manufacturing PMI (m/m) at 11:00 (GMT+3);
  • – Eurozone Services PMI (m/m) at 11:00 (GMT+3);
  • – UK Manufacturing PMI (m/m) at 11:30 (GMT+3);
  • – UK Services PMI (m/m) at 11:30 (GMT+3);
  • – US Manufacturing PMI (m/m) at 16:45 (GMT+3);
  • – US Services PMI (m/m) at 16:45 (GMT+3);
  • – US Treasury Secretary Yellen Speaks at 18:00 (GMT+3).

By JustMarkets

 

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

Economics & Fundamentals Financial News
21 Oct

Liz Truss resigned as prime minister of Great Britain. Inflation in Japan is at an 8-year-high.

By JustMarkets

The US indices were down on Thursday as rising Treasury yields hit 14-year highs, negatively impacting investor sentiment, even though the bulk of quarterly results still indicated that corporate earnings were posting better than expected. As the stock market closed yesterday, the Dow Jones Index (US30) decreased by 0.30%, and the S&P 500 Index (US500) fell by 0.80%. The NASDAQ Technology Index (US100) lost 0.61%.

Citing a “disappointing lack of progress in curbing inflation,” Philadelphia Federal Reserve President Patrick Harker said yesterday that he expects interest rates to be “well above 4% by the end of the year.” Also, Harker doesn’t expect rates to fall next year.

Shares of Tesla fell more than 7% after mixed third-quarter results, although experts remain optimistic about the electric-car maker. Shares of Snap fell by 26% due to slow revenue growth in the third quarter.

Stock markets in Europe mostly rose yesterday. Germany’s DAX (DE30) increased by 0.20%, France’s CAC 40 (FR40) gained 0.76%, Spain’s IBEX 35 (ES35) jumped by 0.80%, Britain’s FTSE 100 (UK100) closed up by 0.27% on Thursday.

Unexpected events took place in the UK. Liz Truss announced her resignation as prime minister after just 45 days in office, the shortest term ever. Truss faced calls to leave because of the disastrous effects of her mini-budget. The prime minister’s departure provoked a struggle among conservative lawmakers to find a successor. Because of the uncertainty, investors are now advised to avoid speculating on any British assets.

Oil prices were little changed during Thursday’s trading session, as concerns over inflation dragging down oil demand were contradicted by the news that China is considering reducing the quarantine period for visitors to 7 days from 10 days. This is seen as a positive indicator of demand in the market, as China is the largest oil importer. But investors should not forget that, on the other hand, the looming European Union ban on Russian oil and oil products, as well as production cuts by the Organization of Petroleum Exporting Countries and its allies, known as OPEC+, are supporting prices.

The US is exploring new sanctions against Russia and Iran because of their military and technical cooperation. White House National Security Council Coordinator John Kirby also said that the US confirms the presence of Iranian military personnel in the occupied territories of Ukraine to help Russia.

Asian stock indices were mostly down yesterday. Japan’s Nikkei 225 (JP225) decreased by 0.92%, Hong Kong’s Hang Seng (HK50) fell by 1.40%, while Australia’s S&P/ASX 200 (AU200) was down by 1.02%.

The Japanese yen hit a 32-year low versus the dollar after data showed that Japanese consumer price inflation in September was 3% y/y, the highest in 8 years. The data points to increased pressure on the world’s third-largest economy in the coming months and will also create obstacles for the Bank of Japan, which is struggling to maintain its adaptive stance. Analysts expect that the government may intervene in the currency again.

S&P 500 (F) (US500) 3,665.78 −29.38 (−0.80%)

Dow Jones (US30) 30,333.59 −90.22 (−0.30%)

DAX (DE40) 12,767.41 +26.00 (+0.20%)

FTSE 100 (UK100) 6,943.91 +18.92 (+0.27%)

USD Index 112.90 0.0 (0.0%)

Important events for today:
  • – Japan National Consumer Price Index (m/m) at 02:30 (GMT+3);
  • – UK Retail Sales (m/m) at 09:00 (GMT+3);
  • – Eurozone EU Leaders Summit (m/m) at 13:00 (GMT+3);
  • – Canada Retail Sales (m/m) at 15:30 (GMT+3);
  • – US FOMC Member Williams Speaks (m/m) at 16:10 (GMT+3).

By JustMarkets

 

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

Economics & Fundamentals Financial News
21 Oct

Week Ahead: Will ECB Hawks Trigger EURUSD Breakout?

By ForexTime 

The week ahead promises to be incredibly eventful for financial markets thanks to a potent cocktail of corporate earnings, central bank meetings, and key economic reports.

In the United States, earnings season kicks into higher gear with tech heavyweights under the spotlight while some central banks are expected to continue their fierce battle against inflation. Investors will also receive the US government’s first estimate of Q3 growth which could provide fresh insight into the health of the economy as the Fed continues super-sized rate hikes to tame rising prices. With so much going on and the economic calendar packed with key economic releases, volatility could be name of the game.

However, our focus will be directed on the European Central Bank meeting on Thursday which could inject fresh life into the EURUSD. Before we discuss what to expect from the central bank, here are the scheduled economic data releases/events in the coming week:

Monday, 24 October 

  • EUR: S&P Global manufacturing PMI
  • GBP: S&P Global manufacturing PMI
  • USD: S&P Global manufacturing PMI

Tuesday, 25 October

  • EUR: Germany IFO business climate
  • GBP: BOE Chief Economist Huw Pill’s speech
  • USD: US Conference Board consumer confidence

Wednesday, 26 October

  • AUD: Australia inflation
  • CAD: Bank of Canada rate decision
  • USD: US new home sales
  • Oil: EIA crude inventory report

Thursday, 27 October

  • CNH: China Industrial profits
  • GBP: BOE Deputy Governor Sam Wood’s speech
  • ECB: European Central Bank rate decision
  • USD: Q3 GDP, Initial jobless claims

Friday, 28 October

  • NZD: Consumer confidence
  • EUR: Germany inflation & GDP, Eurozone economic & consumer confidence
  • JPY: Bank of Japan rate decision, Tokyo CPI, unemployment
  • USD: US PCE Deflator, University of Michigan consumer sentiment

The ECB is widely expected to launch another monetary policy bazooka when it meets on Thursday 27th October in a move to contain inflation which is well above the 2% target.

Eurozone inflation is at its highest rate since the measurement began in 1991 at 9.9% thanks to soaring energy prices and disruptions in supply chains due to ongoing geopolitical tensions. Given how inflation remains at such elevated levels, traders are projecting a 90% probability of a 75bp rate hike in November and a 56% probability of another jumbo-sized hike in December.

Putting rates aside, much attention will be directed toward any discussion on quantitative tightening (QT) and new terms for the targeted longer-term refinancing operations (TLTRO). Given the uncertain outlook of the Eurozone economy, geopolitical tensions, and recession risks, it may be too early to consider QT. Besides, Christine Lagarde has repeatedly stated that interest rates would first have to be brought to their normal or neutral levels before this is rolled out.

Should the central bank raise rates as expected and strike a hawkish tone that opens the doors to further aggressive hikes, this could pump euro bulls with renewed strength. Such an outcome may push the EURUSD above the 0.9900 resistance with parity acting as the first level of interest.

Alternatively, if the ECB surprises markets with a smaller rate hike and expresses concern over the outlook for the Eurozone, this could hit rate hike bets beyond November – weakening the euro and encouraging a move below 0.9700 on the EURUSD.

Keep an eye on USD

Although our focus falls on the ECB meeting in the week ahead, we will still pay attention to other key economic reports and events across the globe. In the United States, corporate earnings should keep investors occupied while the preliminary US Q3 GDP figures and the latest consumer confidence could spark dollar volatility. It may be wise to watch out for the PCE Deflator which is the Fed’s preferred measure of inflation. If the dollar can draw renewed strength from encouraging economic data and Fed hike bets, this could clash with euro bulls – resulting in more volatility.

Talking technicals, the Dollar Index (DXY) is currently trading within a symmetric wedge formation on the H4 timeframe. A breakout higher or lower could be on the horizon but this could need a fresh fundamental spark. The key levels of interest can be found at 113.80 and 111.70.

Forex-Time-LogoArticle by ForexTime

ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC 185/12 www.forextime.com

Economics & Fundamentals Financial News
20 Oct

Stock indices decline amid rising government bond yields

By JustMarkets

“The Beige Book” showed a slowing US economy, declining consumer sentiment, and slowing demand. Real estate market data showed a decline in new home construction in the US, and the real estate market is likely to continue its downward trend amid rising interest rates.

Fed spokesman Kashkari said yesterday that the Fed would raise interest rates as long as core inflation (excluding food and fuel prices) begins to cool.

US stock indices fell yesterday as Treasury yields rose. Quarterly reports, which were mostly better than expected, did not help the indices either. At the close of trading yesterday, Dow Jones (US30) decreased by 0.33%, S&P 500 (US500) lost 0.67%. The NASDAQ Technology Index (US100) was down by 0.85%.

“Despite persistent underlying inflation pressures, the Fed will continue tightening at a faster pace than originally anticipated,” Morgan Stanley said in a note predicting that the Fed will raise rates by 75 basis points in November, 50 basis points in December, and 25 basis points in January.

On the other hand, the US midterm elections on November 8 are just three weeks away. Analysts believe the stock market will show optimism by that date, and oil prices will decline. Otherwise, with a recession looming, confidence in the current government might fall even more.

Equity markets in Europe were mostly down yesterday. German DAX (DE30) fell by 0.19%, French CAC 40 (FR40) was 0.43% lower, Spanish IBEX 35 (ES35) decreased by 0.36%, British FTSE 100 (UK100) closed by 0.17% lower on Wednesday.

The annual inflation rate in the Eurozone rose to 9.9% in September 2022, up from 9.1% in August. Core inflation, which excludes food and energy prices, increased to 4.8% from 4.3%. The lowest annual rates were registered in France (6.2%), Malta (7.4%), and Finland (8.4%). The highest annual rates were registered in Estonia (24.1%), Lithuania (22.5%), and Latvia (22.0%). According to a report released by Eurostat, inflation remains high in almost all categories. Amid this jump in consumer prices, ECB spokesman Vasle indicated yesterday that the Central Bank should raise the interest rate by 75 basis points at the next two meetings.

EU countries are planning to impose sanctions against Iran for supplying military drones to Russia, which the latter is using in the war against Ukraine.

The US Department of Energy will sell another 15 million barrels of oil from the US strategic reserve and plans to resume oil purchases to replenish its strategic oil reserve at an oil price of less than $70. The administration sees the need to ramp up US oil production, with a peak in 2023. But oil bears hoping for a new price drop on this news have failed, as weekly crude and fuel inventories have fallen significantly over the past week.

Asian stock indexes were trading yesterday without a single trend. Japan’s Nikkei 225 (JP225) gained 0.37% yesterday, Hong Kong’s Hang Seng (HK50) lost 2.38%, and Australia’s S&P/ASX 200 (AU200) added 0.31%.

Japan’s imports rose for the fifth straight month in September, reaching an all-time high, as the falling yen exacerbated already high fuel import costs, fueling fears of cost inflation. Import growth outpaced export growth, leading to a 2 trillion yen ($13.3 billion) trade deficit and extending the deficit to 14 months, adding downward pressure on the Japanese currency.

The NBK’s benchmark lending rate remained at 3.65%, but China indefinitely postponed the release of other key trade and economic growth data this week. President Xi Jinping also said China has no plans to soften its strict zero COVID policy, which has caused severe economic turmoil in the country this year. Deteriorating economic trends in China have undermined attitudes toward most Asian markets, given the country’s role as a major trading partner in the region.

S&P 500 (F) (US500) 3,695.16 −24.82 (−0.67%)

Dow Jones (US30) 30,423.81 −99.99 (−0.33%)

DAX (DE40) 12,741.41 −24.20 (−0.19%)

FTSE 100 (UK100) 6,924.99 −11.75 (−0.17%)

USD Index 112.90 +0.77 (+0.69%)

Important events for today:
  • – US FOMC Member Bullard Speaks at 01:30 (GMT+3).
  • – Australia Unemployment Rate (m/m) at 03:30 (GMT+3);
  • – China PBoC Loan Prime Rate (m/m) at 04:15 (GMT+3);
  • – Germany Producer Price Index (m/m) at 09:00 (GMT+3);
  • – Eurozone EU Leaders Summit (m/m) at 13:00 (GMT+3);
  • – US Initial Jobless Claims (w/w) at 15:30 (GMT+3);
  • – US Philadelphia Fed Manufacturing Index (m/m) at 15:30 (GMT+3);
  • – US Existing Home Sales (m/m) at 17:00 (GMT+3);
  • – US Natural Gas Storage (w/w) at 17:30 (GMT+3).

By JustMarkets

 

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

Economics & Fundamentals Financial News
← Previous Page
Next Page →