Archive for Economics & Fundamentals – Page 95

20 Jul

China’s Central Bank left the interest rate unchanged. Australia’s labor market remains resilient

By JustMarkets

As of Wednesday’s stock market close, the Dow Jones Index (US30) increased by 0.31%, while the S&P 500 Index (US500) added 0.24%. The NASDAQ Technology Index (US100) closed positive by 0.03% yesterday.

Investment bank Credit Suisse raised its year-end growth target for the S&P 500 (US500) from 4050 to 4700 points as the risk of a near-term recession in the US declines and forecasts larger earnings for major technology companies. The Index is now at 4545 points.

Netflix’s (NFLX) quarterly report disappointed investors – revenue in the second quarter fell short of analysts’ expectations. Tesla (TSLA) reported quarterly gross profit in line with Wall Street estimates. NFLX and NFLX prices were little changed on the report’s release. Tesla CEO Elon Musk has signaled that he will cut electric car prices again, even as his all-out price war with rivals cuts into the company’s own margins.

Equity markets in Europe traded flat on Wednesday. Germany’s DAX (DE40) decreased by 0.10%, France’s CAC 40 (FR40) added 0.11% yesterday, Spain’s IBEX 35 (ES35) closed negative by 0.08%, and the UK’s FTSE 100 (UK100) closed up by 1.80%.

Bank of England Deputy Governor Dave Ramsden said he sees room to increase the pace of the central bank’s balance sheet reduction by accelerating the so-called quantitative tightening program. Ramsden said the Bank of England would reduce its holdings of bonds and corporate loans by a total of 100 billion pounds by October. The Bank of England is currently reducing its securities portfolio at a rate of about £80 billion a year as assets mature, and it is actively selling debt. It has about £802 billion of debt left.

Oil prices fell on Wednesday even as government data showed US crude stockpiles last week fell by only a third of expected levels. Gasoline consumption also came in below expectations for mid-July.

Asian markets traded flat yesterday. Japan’s Nikkei 225 (JP225) gained 1.24% for the day, China’s FTSE China A50 (CHA50) fell by 0.13%, Hong Kong’s Hang Seng (HK50) declined by 0.33%, and Australia’s S&P/ASX 200 (AU200) ended the day 0.55% positive.

Bank of Japan Governor Kazuo Ueda said yesterday that there is still some way to go before the central bank’s 2% inflation target is reached in a sustainable and stable manner, dampening speculation of a hawkish policy shift next week.

In Australia, the unemployment rate remained at 3.5%. The economy added 32,600 jobs over the past month, above the forecast of 15,000. Job growth in June left the employment-to-population ratio at a record high of 64.5%, reflecting resilience in the labor market. This is not good news for the RBA as the RBA’s goal now is to increase unemployment to reduce inflation.

China kept its benchmark lending rates unchanged in July at 3.55%. The five-year LPR, on which many lenders base their mortgage rates, was also unchanged from the previous reading of 4.2%. BofA Global Research on Thursday cut China’s economic growth forecast for this year to 5.1% from 5.7% due to disappointing gross domestic product (GDP) growth and a lack of response from the People’s Bank of China.

S&P 500 (F)(US500) 4,565.72 +10.74 (+0.24%)

Dow Jones (US30) 35,061.21 +109.28 (+0.31%)

DAX (DE40)  16,108.93 −16.56 (−0.10%)

FTSE 100 (UK100) 7,588.20 +134.51 (+1.80%)

USD Index  100.28 +0.34 (+0.34%)

Important events for today:
  • – Japan Trade Balance (m/m) at 02:50 (GMT+3);
  • – China PBoC Loan Prime Rate at 04:15 (GMT+3);
  • – Australia Unemployment Rate (m/m) at 04:30 (GMT+3);
  • – Switzerland Trade Balance (m/m) at 09:00 (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
20 Jul

Spanish election: How it could impact the SPN35

By ForexTime 

Spain goes to the polls on Sunday in a snap national election that will most likely shape its economic and political outlook.

With this big risk event around the corner, you may be wondering what exactly is going on.

Here, we’ll unpack the developments in Spain and look at how they could impact your trading.

What is happening?

On Sunday 23rd July, Spaniards will vote for a new parliament.

Polls open at 07:00 GMT and close at 18:00 GMT in mainland Spain.

Why is this happening?

A national election was due by December, but Spain’s incumbent Prime Minister Pedro Sanchez unexpectedly called a snap ballot after his Socialist party suffered a painful defeat in local elections back in May.

Who are the major players?

  • Pedro Sanchez: Spanish Socialist Workers Party (PSOE) – Centre-left
  • Alberto Nunez Feijoo: People’s Party (PP) – Centre-right
  • Santiago Abascal: (VOX) – Far-right
  • Yolanda Diaz: Sumar (“UNITE”) – Far-left

Crunching the numbers 

No party is expected to secure an outright majority in the 350-seat parliament.

According to the final opinion polls allowed under Spanish law before Sunday’s election, the conservative People’s Party (PP) is ahead of the ruling Socialist Workers Party (PSOE). However, to govern PP would most likely require the support of the far-right VOX party.

  • PP: 140 seats
  • PSOE: 108 seats
  • Vox: 36 seats
  • Sumar: 33 seats
  • Others: 33 seats

What does this mean?

Ultimately, it means Spain could see a far-right party back in power for the first time since the country’s dictatorship ended in 1975.

How might this impact Spain?

The fourth-largest economy in the euro area is facing headwinds in the form of sticky food inflation, lagging growth compared to its European peers and falling disposable income among households.

Should a new right-wing government come into power, it could change the course of Spain’s economic policy. Without digging too deep, this represents some element of uncertainty that could influence confidence over the country’s economic outlook.

What could go wrong?

After Sunday’s election, a new parliament must be established by 17th August. However, there is no deadline for the candidates’ negotiations to form a government.

Taking a trip back memory lane, Spain faced months of uncertainty back in 2019 after it took Sanchez two elections to form a government.

Should PP and Vox fail to cut a deal despite gaining the majority, this could result in another election.

How may this move the SPN35? 

Broadly speaking, the market-friendly outcome appears to be a right-wing majority.

This is because last year, the incumbent Sanchez administration unleashed a windfall tax on banks. While the tax was due to expire by 2024, the current government has considered making it permanent.

It is worth keeping in mind that financial stocks account for 28.5% of the IBEX 35, and are the largest sector represented.

Market optimism over the new government removing this tax by 2024 could inject IBEX 35 bulls with renewed confidence.

  • An outcome that results in the far-right party back in power may propel the SPN35 back towards the 9650 resistance level and beyond.
  • A hung parliament scenario that results in fresh uncertainty could hit appetite for Spanish stocks, dragging the index back towards 9000 and possibly lower.

Taking a deeper dive into the technicals, the SPN35 remains in a wide range on the weekly charts with support at 9000 and resistance at 9650. A breakout could be on the horizon, but this is likely to be heavily influenced by Sunday’s election result.

A breakout above 9650 may see prices test levels not seen since February 2020 at 10000. Should prices tumble and experience a break below 9000, this may open a path back toward 8540.

A special message for FXTM clients:

Due to the Spanish General Election on Sunday 23rd July, we’ll be temporarily changing our margin requirement for the Spain 35 Index (SPN35 & SPN35_m) from 1:200 to 1:50.

This change will be effective from Friday, 21st July (before market open) to Monday, 24th July. However, we may extend this depending on market conditions.

If you have any open positions on the Spain 35 Index, please consider your trading strategy and make sure you have enough funds in your account to cover the new margin requirements.

If you have any questions about this or need help with your account, please do not hesitate to contact us.

Kind regards,

FXTM Team

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
19 Jul

Using green banks to solve America’s affordable housing crisis – and climate change at the same time

By Tarun Gopalakrishnan, Tufts University; Bethany Tietjen, Tufts University, and Seth Owusu-Mante, Tufts University 

Green banks are starting to draw attention in the U.S., particularly since the federal government announced its first grant competitions under a national green bank program to bring clean technology and more affordable energy to low-income communities.

But installing more solar and wind electricity generation isn’t the only way green banks can help.

Massachusetts is launching an innovative new green bank that could become a model as states try to manage two crises at once: lack of affordable housing and climate change.

While most green banks focus on clean energy, the Massachusetts Community Climate Bank is specifically designed to boost the state’s stock of sustainable, affordable housing. It comes at an opportune time: States can now tap into billions of dollars in new federal funding for green banks under the Inflation Reduction Act.

So what exactly is a green bank, and how might it work for sustainable housing?

What is a green bank?

Despite the name, green banks aren’t traditional banks. They function more like investment funds with a mission to promote sustainability.

Green banks are public, quasi-public or nonprofit entities that use public funds to encourage private investment in low-carbon, climate-resilient infrastructure.

By using innovative financing strategies, green banks can lower the risks for private investors to support projects, which reduces the amount of public money needed to reach government goals like expanding renewable energy or, in this case, affordable housing.

Green banks across the US

The U.S. had about two dozen green banks operating in early 2023 in at least 18 states and the District of Columbia – most of them focused on accelerating the transition from fossil fuel use to clean energy. And more were being developed.

In 2022, those banks used US$1.51 billion of public money to mobilize $3.12 billion in private investment. Since 2011, they have brought in a total of $14.8 billion.

Each bank is slightly different. Connecticut’s was the first state-run green bank in the U.S. It started with a renewable energy focus but expanded to include sustainable infrastructure, climate resilience, water, waste and recycling projects. Michigan created a nonprofit green bank called Michigan Saves that provides financing for energy efficiency. Hawaii’s state-run green bank boosts solar energy use.

At the local level, Maryland’s Montgomery County has been financing rooftop and community solar, energy efficiency and electric vehicle charging infrastructure through a green bank since 2016.

Finance New Orleans is a particularly instructive comparison – the 40-year-old housing finance agency recently transitioned to a climate-oriented business model to finance energy efficiency, stormwater management and green infrastructure projects for homeowners, businesses and local governments.

A green bank for sustainable housing

The new Massachusetts Community Climate Bank is solely dedicated to climate-friendly and resilient affordable housing to meet the goals of the state’s Climate Plan for 2050.

That might include upgrading insulation and windows in older housing complexes to make them less leaky on hot and cold days, transitioning to electric household appliances such as heat pumps or adding solar panels and electric vehicle chargers.

Residential buildings are one of Massachusetts’ largest sources of greenhouse emissions, accounting for 19% of the total. Making housing more sustainable would cut those emissions and also help cut emissions in other sectors. For example, rooftop solar panels can reduce the demand for electricity from natural gas-fired power plants, allowing the state to close the plants or run them less often.

The challenge is that the finance industry tends to view new technology and low-income households as risks.

Green banks are able to use public money to “de-risk” such investments. For example, they can lend at low rates to private or local lenders on the condition that they lend money at affordable rates for customers to electrify their heating. Other financial instruments include loan guarantees, securitization and co-investment.

Massachusetts’ green bank started with an initial $50 million in state funds, but it expects to grow by attracting both private investors and federal funding.

The timing is strategic. The Inflation Reduction Act, passed by Congress in 2022, includes funding for green banks. Among other commitments, it creates a $27 billion Greenhouse Gas Reduction Fund, $20 billion of which is earmarked to be awarded to nonprofits to invest indirectly in green projects through other local financing entities – including green banks.

Lessons from green banks around the world

The Climate Policy Lab at Tufts University, where we work as researchers, studies green banks around the world.

We have found that by following a few foundational principles, green banks can increase financing for climate priorities while remaining financially viable and without creating housing debt that owners can’t pay back. These organizations should:

  1. Have a clear, well-defined mission.
  2. Be profit-making, but not profit-maximizing.
  3. Address market gaps rather than competing with private investment.
  4. Be flexible enough to use a variety of financial instruments.
  5. Have an independent, stable and nonpartisan governance structure to ensure stability.

The Massachusetts green bank has a sector-focused mission that targets a market gap. Its focus on affordable housing could be clarified even more by tying it to the state definition of disadvantaged communities. The New York Green Bank does this by aiming to have $100 million – about 35% of its total – invested in green housing to benefit disadvantaged communities by 2025.

Focusing the Massachusetts bank’s climate mission will involve some tough decisions. For example, Connecticut’s Green Bank supports gas appliances above defined energy efficiency thresholds, but there is an argument for leapfrogging gas entirely to support the electrification of heating and cooking instead.

What else should green banks prioritize?

Reducing greenhouse gas emissions is important for curbing future climate change, but communities will also have to adapt to the climate impacts ahead.

The fact that the Massachusetts green bank is dedicated to affordable housing is already one adaptation. People who have homes are far more protected from climate impacts than those who do not. And if those homes are powered by clean energy with lower utility bills, low-income residents can more easily afford to cool their homes in extreme heat waves.

Green banks could also fund climate resilience, such as adding green spaces around buildings for natural cooling. Research shows that affordable housing in the United States is often in highly vulnerable locations, such as those at risk of flooding.

The Connecticut Green Bank, for example, is piloting “Property Assessed Resilience,” which allows homeowners to borrow for flood protection upgrades and benefit immediately from increased property valuations and reduced insurance premiums. They can repay over decades through modest increases in their property tax bills.

Focusing on the scarcity of affordable housing can reduce both emissions and socioeconomic inequity simultaneously. In our view, that is the holy grail of climate policy.The Conversation

About the Authors:

Tarun Gopalakrishnan, Research Fellow, Climate Policy Lab, Tufts University; Bethany Tietjen, Research Fellow in Climate Policy, The Fletcher School, Tufts University, and Seth Owusu-Mante, Research Fellow in International Development, Tufts University

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

Economics & Fundamentals Opinions
19 Jul

Bank of England will STILL RAISE interest rates despite cooling inflation: deVere CEO

By George Prior

The Bank of England will raise interest rates again next month despite UK inflation cooling, predicts the CEO of one of the world’s largest independent financial advisory, asset management and fintech organizations.

The warning from deVere Group’s Nigel Green comes as fresh figures reveal that UK inflation fell to 7.9% in June, from 8.7% the month before.

He says: “Despite the data showing that the battle against inflation in the UK is being won, we expect the Bank of England will confirm it’ll continue with its aggressive interest rate hiking agenda at the monetary policy meeting on August 1.

“Although the consumer price index fell to 7.9% last month, amid lower petrol prices and a slowdown in the pace of growth for food, beverages and other basics, the central bank officials will likely argue that there is still work to be done.

“We believe the Bank will insist that although inflation is certainly coming down, it is doing so very, very gradually. It remains sticky – still the highest in the G7 – and a long way from the 2% target.

“They will say prices are still far too high and rising at a quicker pace than they have done in the past. In addition, they are likely to cite strong wage growth in the three months to May.”

He continues: “Against this backdrop, we expect the Bank of England to increase interest rates for a 14th consecutive time at its next policy meeting – and we wouldn’t be surprised if there were a second consecutive 50 basis point hike.”

Another interest rate hike could “pile on more misery” for households, homeowners, and businesses.

Higher interest rates lead to increased borrowing costs, making mortgages more expensive. Homeowners with variable-rate mortgages are likely to face higher monthly payments. Rising interest rates will also reduce disposable income as loan repayments increase, affecting household spending and overall economic activity.

Businesses reliant on borrowing may face higher interest expenses, which can affect their profitability and ability to expand or invest. In addition, higher interest rates can reduce consumer spending, affecting businesses dependent on consumer demand.

Hiked interest rates typically negatively impact the value of existing fixed-income investments, such as bonds, as newer issuances offer higher yields.

The higher rates also historically lead to stock market uncertainty and increase volatility, as investors reassess the attractiveness of different investments. Sectors sensitive to interest rates, such as housing, cars, and financial sectors, could experience greater impacts than others.

Nigel Green concludes: “We believe that although the battle to tame inflation seems to be being won, with the lowest reading in 16 months, the Bank of England is highly unlikely to be dissuaded from its course of rate hiking action for the time being.”

About:

deVere Group is one of the world’s largest independent advisors of specialist global financial solutions to international, local mass affluent, and high-net-worth clients.  It has a network of more than 70 offices across the world, over 80,000 clients and $12bn under advisement.

Economics & Fundamentals Financial News
19 Jul

Global inflationary pressures continue to decline. Today, investors’ focus is on the quarterly reports of Tesla and Netflix

By JustMarkets

At Tuesday’s stock market close, the Dow Jones Index (US30) increased by 1.06%, while the S&P 500 Index (US500) added 0.71%. The NASDAQ Technology Index (US100) closed positive by 0.76% yesterday. On Tuesday, stock indices posted strong gains as investors welcomed positive quarterly results from a number of major corporations, including Wall Street banks. At the same time, weaker-than-expected US retail sales data raised the stakes for weakening inflation in the country, which in turn should prompt the Federal Reserve to take a less hawkish stance in the coming months. There is a high probability that the US Fed will end its tightening cycle as early as its July meeting.

Morgan Stanley (MS) jumped by 6% after second-quarter results beat both top and bottom lines forecasts. Charles Schwab Corp (SCHW) topped the growth leaderboard, up more than 12% after posting better-than-expected quarterly results. Quarterly results from companies like Tesla (TSLA) and Netflix (NFLX) are expected today. Tesla’s quarterly results will likely focus on margins following the electric carmaker’s recent price cuts, while Netflix’s quarterly results will focus investor attention on subscriber growth.

Canada’s inflation rate fell to 2.8% from 3.4% year-over-year. Core inflation (which excludes food and energy prices) fell from 3.7% to 3.2% y/y. The sharp decline in inflationary pressures precludes further policy tightening by the Bank of Canada.

Equity markets in Europe were mostly up on Tuesday. Germany’s DAX (DE30) increased by 0.35%, France’s CAC 40 (FR40) gained 0.38% yesterday, Spain’s IBEX 35 (ES35) closed positive by 0.19%, and the UK’s FTSE 100 (UK100) closed up by 0.64%.

ECB officials are becoming less hawkish in their statements. If earlier almost all officials in one voice said about at least two rate hikes of 0.25% at each of them, now the tone of speech has changed, and now some politicians expect one rate hike of 0.25%, and the September decision will depend on incoming data. Apparently, the decline in global inflation, along with weak Eurozone GDP reports, made the officials reconsider their plans for further policy tightening.

Gold rose sharply yesterday after US retail sales rose less than expected in June, putting pressure on US Treasury yields and the US dollar. The US dollar’s overreaction to lower inflation and retail sales suggests that the market is in no mood to buy the dollar amid a growing view that the Fed is close to ending its tightening cycle. The market expects rate cuts from around mid-2024, with nearly five rate cuts by the end of next year. For gold and silver, this is a fundamental strengthening factor for the coming months.

Crude oil prices rose sharply on Tuesday after Chinese officials said the government would soon implement more pro-consumption policies, as data this week showed the country’s economy barely grew in the second quarter.

Asian markets traded flat yesterday. Japan’s Nikkei 225 (JP225) was up by 1.16% for the day, China’s FTSE China A50 (CHA50) decreased by 0.29%, Hong Kong’s Hang Seng (HK50) fell by 1.21%, and Australia’s S&P/ASX 200 (AU200) ended Tuesday positive by 0.42%.

New Zealand’s inflation rate fell from 6.7% to 6% on an annualized basis. Over the last quarter, the consumer price index posted a 1.1% increase, the lowest since the first quarter of 2021. The RBNZ said in its monetary policy review last week that it expects core inflation to fall, although it did not comment on when this might happen. Nevertheless, there will be additional inflationary pressures in the next quarter as the government’s fuel tax and public transport subsidy exemptions expire on July 1.

S&P 500 (F)(US500) 4,554.98 +32.19 (+0.71%)

Dow Jones (US30) 34,951.93 +366.58 (+1.06%)

DAX (DE40)  16,125.49 +56.84 (+0.35%)

FTSE 100 (UK100) 7,453.69 +47.27 (+0.64%)

USD Index  100.04 +0.10 (+0.10%)

Important events for today:
  • – New Zealand Consumer Price Index (q/q) at 01:45 (GMT+3);
  • – UK Consumer Price Index (m/m) at 09:00 (GMT+3);
  • – Eurozone Consumer Price Index (m/m) at 12:00 (GMT+3);
  • – US Building Permits (m/m) at 15:30 (GMT+3);
  • – US Crude Oil Reserves (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
18 Jul

The US reporting season is heating up. The People’s Bank of China may cut rates to support the economy

By RoboForex.com

At Monday’s stock market close, the Dow Jones Index (US30) increased by 0.22%, while the S&P 500 Index (US500) added 0.39%. The NASDAQ Technology Index (US100) closed positive by 0.93%.

The Business Activity Index of New York State companies fell slightly in July, despite rising orders and easing inflationary pressures. The Federal Reserve Bank of New York’s General Business Conditions Index fell by 1.1 to 5.5 points. A value above zero indicates growth. The median forecast in a survey of economists suggested a drop of 3.5.

Investors are awaiting quarterly results from Bank of America (BAC) and Morgan Stanley (MS) today. Sentiment toward the biggest banks strengthened last week after JPMorgan Chase & Co (JPM) and Wells Fargo (WFC) reported better-than-expected quarterly results, though Citi was among those whose earnings fell short of analysts’ expectations. Tesla (TSLA ) is up more than 3% after starting production of its Cybertruck in Texas, with the electric vehicle maker expected to ship about 2,000 units this year. Tesla’s quarterly report is expected this Wednesday. Ford Motor (F) shares, meanwhile, fell more than -5% after the F-150 Lightning suffered a $10,000 price cut amid increased competition from Rivian Automotive Inc (RIVN) and Tesla Cybertruck. Shares of telecom giant AT&T (T) fell by -6% after banks Citi and JPMorgan downgraded them to “neutral” from “buy” amid concerns that the company and others will have to incur significant costs to remove old copper cables used for telephony and other related purposes, which some say could pose an environmental hazard.

Equity markets in Europe were mostly down on Monday. Germany’s DAX (DE30) decreased by 0.23%, France’s CAC 40 (FR40) lost 1.12% yesterday, Spain’s IBEX 35 (ES35) closed at its opening price, and the UK’s FTSE 100 (UK100) closed down by 0.38%. Sentiment in Europe was affected by data indicating a significant slowdown in economic growth in China, which is the main export market for major European companies. A number of speeches by ECB officials are expected this week. The comments will show what the central bank is thinking ahead of its next policy-setting meeting later this month.

Asian markets were mostly falling yesterday. Japan’s Nikkei 225 (JP225) was down by 0.09% for the day, China’s FTSE China A50 (CHA50) fell by 1.25%, Hong Kong’s Hang Seng (HK50) was not trading yesterday due to Typhoon Talim, and Australia’s S&P/ASX 200 (AU200) ended Monday negative 0.06%. Hong Kong’s Hang Seng Index fell sharply on Tuesday, catching up with the losses of its Asian peers after data showed a significant slowdown in China’s economic growth in the second quarter. Shares of major technology companies also suffered losses after strong gains last week. Baidu Inc (BIDU), Alibaba Group Holding Ltd (BABA), and Tencent Holdings Ltd – China’s BAT trio – lost between 1.8% and 3% drop. The weak economic data also raised the likelihood of additional stimulus measures from Beijing. There is information that the People’s Bank of China (RBA) may cut interest rates further and reduce its bank reserve requirements in the third quarter in an attempt to boost growth.

The RBA’s June monetary policy report showed that Australia’s central bank decided to leave interest rates unchanged because the policy was clearly restrictive, and there was a risk that a contraction in household finances could lead to a sharp downturn and higher unemployment. However, the bank maintained a warning that some tightening may be needed to contain inflation. The board considered raising the money rate by 25 basis points to 4.35% but then decided to pause

S&P 500 (F)(US500) 4,522.79 +17.37 (+0.39%)

Dow Jones (US30) 34,585.35 +76.32 (+0.22%)

DAX (DE40)  16,068.65 −36.42 (−0.23%)

FTSE 100 (UK100) 7,406.42 −28.15 (−0.38%)

USD Index  99.89 −0.02 (−0.02%)

Important events for today:
  • – Australia RBA Meeting Minutes (m/m) at 04:30 (GMT+3);
  • – Canada Consumer Price Index (m/m) at 15:30 (GMT+3);
  • – US Retail Sales (m/m) at 15:30 (GMT+3);
  • – US Industrial Production (m/m) at 16:15 (GMT+3).

Article By RoboForex.com

Attention!
Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex LP bears no responsibility for trading results based on trading recommendations described in these analytical reviews.

Economics & Fundamentals Financial News
18 Jul

Caution Lingers On China Fears, Earnings Take Centre Stage

By JustMarkets

Asian shares flashed red on Tuesday as concerns over China’s sluggish economic recovery weighed on sentiment.

The disappointing GDP data published in the previous session along with the hefty losses posted by China’s Evergrande over two years sapped investor confidence in the world’s second-largest economy. Interestingly, European futures are pointing to a flat open, shrugging off the caution from Asia with investors focusing on key economic data and corporate earnings. On Wall Street, the S&P 500 closed at 15-month highs yesterday and could be injected with more volatility as earnings season switches into higher gear. The likes of Bank of America, Morgan Stanley, Goldman Sachs, Netflix, and Tesla among others will announce their quarterly results this week.

In the currency arena, the dollar slightly weakened against other G10 currencies ahead of the U.S. retail sales and industrial production data released later today. Looking at commodities, oil bulls were able to draw strength from Russia’s plans to cut crude exports while gold prices nudged higher, supported by China growth fears and expectations around the Fed ending its rate hike cycle.

Dollar shaky ahead of key US data 

The pending U.S. retail sales and industrial production figures could influence monetary policy expectations before the Fed meeting next week. After the June US CPI report cooled more than expected, investors are searching for more signs of inflation slowing in the world’s largest economy. Markets are forecasting retail sales to rise 0.5% in June, marking an increase from 0.3% in the prior month. The industrial production figures are expected to hold steady in June after falling 0.2% in May. Should the incoming US data bring a positive surprise, this could refuel speculation around the Fed keeping interest rates higher for longer.

Commodity Spotlight – Gold 

Gold flirted around the $1960 level this morning as market players evaluated China’s sluggish growth and speculation around the Fed ending its rate hike campaign.

The precious metal is likely to remain supported by a weaker dollar and subdued Treasury yields ahead of another busy week for financial markets. Fresh volatility could be on the cards for gold over the next few days as investors focus not only on US economic data but corporate earnings which could influence overall sentiment. Should gold experience a clean breakout and solid close above $1960, this may encourage a move towards $1985 and $2000 respectively. But if $1960 proves to be a tough resistance, prices may slip back towards $1940 and $1932.

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
17 Jul

China is experiencing a slowdown in economic growth. In the US, the reporting period for the second quarter has started

By JustMarkets

At Friday’s close, the Dow Jones Index (US30) increased by 0.33% (+2.38% for the week), while the S&P 500 Index (US500) was down by 0.10% (+2.53% for the week). The NASDAQ Technology Index (US100) closed negative by 0.18% (+3.43% for the week) on Friday.

Rising interest rates, which surprised many US banks, proved to be a boon for the nation’s largest banks. JPMorgan Chase (JPM) posted record profits, and some of its major competitors reported better-than-expected loan income. Shares of JPMorgan Chase (JPM) rose by 0.6%, while Wells Fargo (WFC) fell by 0.3%. Both major banks reported higher quarterly earnings but said they set aside more funds to cover expected losses on commercial real estate loans. Friday’s quarterly reports unofficially opened the second quarter in the US. According to Refintiiv, analysts expect S&P 500 earnings for the quarter to be down by 8.1% compared with a year ago result, but most companies are expected to beat expectations.

The US consumer sentiment jumped to a near two-year high. The University of Michigan’s preliminary index rose by 8.2 points to 72.6, the highest level since September 2021. The index beat all forecasts. The surge in sentiment was largely attributed to a continued slowdown in inflation along with stability in the labor market. Friday’s report also showed that consumers expect low unemployment over the next year, and most believe their incomes will rise by at least as much as inflation rises. While longer-term inflation expectations appear reasonable, minutes from the Fed’s June meeting showed that some officials remain concerned that these expectations may become unreasonable, especially in light of stronger-than-expected consumer demand and a robust labor market.

Equity markets in Europe were mostly down on Friday, but all closed in positive territory at the end of the week. Germany’s DAX (DE30) decreased by 0.22% (+3.33% for the week), France’s CAC 40 (FR40) added 0.06% on Friday (+4.12% for the week), Spain’s IBEX 35 (ES35) was down by 0.43% (+2.47% for the week), and the UK’s FTSE 100 (UK100) closed negative by 0.08% (+2.45% for the week).

US Treasury bond yields have fallen sharply over the past week as traders raised bets that the US Federal Reserve’s monetary tightening program is coming to an end. Rate-sensitive UST 2 yields are down 50 basis points since last Thursday, while UST 10 yields are down about 30 basis points, and UST 30 yields are down about 18 basis points over the same time period. Since gold and silver have an inverse correlation to US government bond yields, there is a high probability of continued uptrends in the precious metals.

Despite a slight decline in oil prices on Friday, oil prices posted their third consecutive weekly gain last week, and the potential for further gains remains as weakening inflation, plans to replenish the US strategic reserve, supply cuts, and production disruptions in some OPEC countries support black gold prices.

Asian markets were mostly on the rise last week. Japan’s Nikkei 225 (JP225) was little changed for the week, China’s FTSE China A50 (CHA50) gained 2.20%, Hong Kong’s Hang Seng (HK50) ended the week up by 3.55%, and Australia’s S&P/ASX 200 (AU200) ended the week positive by 3.70%.

Chinese indices fell sharply on Monday after data showed a significant slowdown in the country’s economic growth in the second quarter. China’s gross domestic product (GDP) grew by 0.8% in the second quarter. The figure was above expectations of 0.5% growth but significantly weaker than the 2.2% jump recorded in the first quarter. The annualized GDP figure fell short of expectations, showing growth of 6.5% vs. the expected 7.3%. China’s manufacturing sector also came under pressure due to sluggish overseas demand for Chinese exports amid deteriorating economic conditions globally. The data suggest that the economic recovery in Asia’s largest country is decreasing and that the government will likely have to consider additional stimulus measures in the coming months.

S&P 500 (F)(US500) 4,505.42 −4.62 (−0.10%)

Dow Jones (US30) 34,509.03 +113.89 (+0.33%)

DAX (DE40)  16,105.07 −35.96 (−0.22%)

FTSE 100 (UK100) 7,434.57 −5.64 (−0.076%)

USD Index  99.96 +0.19 (−0.19%)

Important events for today:
  • – China GDP (q/q) at 05:00 (GMT+3);
  • – China Industrial Production (m/m) at 05:00 (GMT+3);
  • – China Retail Sales (m/m) at 05:00 (GMT+3);
  • – China Unemployment Rate (m/m) at 05:00 (GMT+3);
  • – Eurozone ECB President Lagarde Speaks at 11:15 (GMT+3);
  • – US NY Empire State Manufacturing Index (m/m) at 15:30 (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
14 Jul

Global inflationary pressures continue to ease. The RBA will have a new governor

By JustMarkets

At yesterday’s stock market close, the Dow Jones Index (US30) increased by 0.14%, while the S&P 500 Index (US500) added 0.85%. The NASDAQ Technology Index (US100) closed positive by 1.58% on Thursday.

Factory inflation (PPI) in the US declined over the past month, another sign that overall inflationary pressures are cooling. But the labor market remains resilient, and this could be a trigger for the US Fed to raise rates even higher. The US jobless claims fell by 12,000 to 237,000 over the past week.

Federal Reserve Bank of San Francisco President Mary Daly said it was too early for policymakers to say they had done enough to bring US inflation back to target levels. The policymaker added that although the consumer price data released on Wednesday was “very positive,” she would take a “wait-and-see stance” as the Fed remains firmly committed to bringing inflation down to 2%.

Federal Reserve Bank of St. Louis President James Bullard, an influential US Fed official who called for aggressive interest rate hikes to combat the recent spike in inflation, has stepped down after 15 years in office. Bullard, 62, will step down completely on August 14 to become dean of the School of Business.

Equity markets in Europe were mostly up yesterday. Germany’s DAX (DE30) increased by 0.74%, France’s CAC 40 (FR40) gained 0.52%, Spain’s IBEX 35 (ES35) added 0.33%, and the UK’s FTSE 100 (UK100) closed up by 0.32%.

The ECB’s monetary policy report from its June meeting confirmed that the ECB still believes policy tightening is necessary. As a result, another 25bp rate hike in July is a done deal. For the ECB to stop after that, it needs to see a further improvement in inflation dynamics, a transmission of monetary tightening to the real economy, including the labor market, and a downward revision of inflation forecasts. Committee officials do not consider a decline in inflation to be a sufficient condition for ending the tightening cycle if a robust labor market and strong wage growth prevail at the same time.

Oil prices rose in Asian trading on Friday and traded near 10-week highs on prospects of supply cuts amid disruptions in Libya and Nigeria. Oil markets rose sharply this week, following a decline in the dollar, as softer-than-expected US inflation data spurred bets that the Federal Reserve is close to peaking interest rates. In addition, the Organization of the Petroleum Exporting Countries (OPEC) highlighted rising global oil demand in 2023 in its monthly report released on Thursday.

Asian markets traded higher on Thursday. Japan’s Nikkei 225 (JP225) increased by 1.00% for the day yesterday, China’s FTSE China A50 (CHA50) jumped by 1.58%, Hong Kong’s Hang Seng (HK50) was up by 2.81%, and Australia’s S&P/ASX 200 (AU200) closed positive by 1.08%. On Friday, most Asian stocks continued to rise, ending a positive week amid signs of slowing inflation in the US. Hong Kong’s Hang Seng Index had its best weekly performance, rising nearly 6% as big tech stocks benefited from bets that the Chinese government will loosen its grip on the country’s largest internet companies.

Singapore’s economy grew slightly more than expected in the second quarter. GDP grew by 0.3% in the latest quarter, with Singapore avoiding a technical recession after GDP contracted by 0.4% last quarter. Singapore’s export sector is suffering badly due to slowing demand in China, a major trading partner.

Philip Lowe will not be reappointed as governor of the Reserve Bank of Australia (RBA). Michelle Bullock will take over as RBA governor in September. Ms. Bullock has been deputy governor of the bank since April 2022, having served since 1985.

S&P 500 (F)(US500) 4,510.04 +37.88 (+0.85%)

Dow Jones (US30) 34,395.14 +47.71 (+0.14%)

DAX (DE40)  16,141.03 +118.03 (+0.74%)

FTSE 100 (UK100) 7,440.21 +24.10 (+0.32%)

USD Index  99.43 −0.85 (−0.85%)

Important events for today:
  • – US FOMC Member Waller Speaks at 01:45 (GMT+3);
  • – Japan Industrial Production (m/m) at 07:30 (GMT+3);
  • – Switzerland Producer Price Index (m/m) at 09:30 (GMT+3);
  • – Eurozone Trade Balance (m/m) at 12:00 (GMT+3);
  • – US Michigan Consumer Sentiment (m/m) at 17:00 (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
13 Jul

US inflation is falling sharply. China’s trade balance points to a slowing economy

By JustMarkets

Stock indices closed higher on Wednesday due to cooling inflation in the United States. The consumer price level fell from 4% to 3% (3.1% expected) on an annualized basis. Core inflation (excludes food and energy prices) fell from 5.3% to 4.8% (5.0% expected). The sharp drop in inflation caused the dollar to fall to a 15-month low. Dollar weakness led most risk currencies, gold, and stock indices to rally. At yesterday’s stock market close, the Dow Jones (US30) Index was up by 0.25%, and the S&P 500 Index (US500) increased by 0.74%. The NASDAQ Technology Index (US100) closed positive 1.15% on Wednesday.

The US Treasury yields also declined following a weak inflation reading, as the data combined with signs of a cooling labor market spurred bets that the Fed is likely to soften its hawkish stance in the coming months. The probability of a rate hike at the July West meeting is 92%, while the probability of a hike at the September and November meetings is 14% and 26%, respectively.

On Wednesday, the Bank of Canada raised the overnight interest rate by 25 basis points to 5.00% and also extended its projected timetable for lowering Canada’s inflation rate to its 2% target by mid-2025. The Bank of Canada left little guidance on the way forward. At the press conference, the Bank of Canada Governor indicated that the improvement in overall momentum was largely due to lower energy prices rather than underlying pressures, hinting that restrictive policies will be in place for longer.

Equity markets in Europe were predominantly up yesterday. Germany’s DAX (DE30) jumped by 1.47%, France’s CAC 40 (FR40) gained 1.57%, Spain’s IBEX 35 (ES35) added 1.37%, and the UK’s FTSE 100 (UK100) closed positive by 1.83%.

UK GDP showed no growth for the second quarter of 2023. On an annualized basis, the economy contracted by 0.4%. Manufacturing fell by 0.6% in May 2023 after falling by 0.2% in April 2023. The construction sector fell by 0.2% in May 2023 after falling by 0.9% in April 2023. Services output showed no growth in May 2023 after rising by 0.3% in April 2023. Overall, economic conditions continue to deteriorate, which could pose a challenge for the Bank of England to further fight inflation.

Gold rose sharply yesterday amid a falling dollar and government bond yields. There are good growth prospects for gold as the US Fed is at the end of its tightening cycle. At the same time, silver shows better performance among precious metals.

Asian markets mostly traded higher on Wednesday. Japan’s Nikkei 225 (JP225) decreased by 1.04% yesterday, China’s FTSE China A50 (CHA50) was up by 0.15%, Hong Kong’s Hang Seng (HK50) added 1.14%, and Australia’s S&P/ASX 200 (AU200) closed positive 0.81% for the day.

In Japan, conditions for rising inflation are emerging, which puts pressure on the Bank of Japan to abandon its multi-year soft monetary policy. Markets are already betting on the Bank of Japan’s policy adjustment, which is reflected in the strengthening of the Japanese yen.

Last month, China’s exports contracted at the fastest pace since the COVID-19 pandemic began. Exports contracted by 12.4% year-on-year in June after falling by 7.5% in May. Imports fell by 6.8%, which was stronger than the 4.0% decline expected and the 4.5% drop in the previous month. The data indicate that China’s economic recovery has slowed after a strong first quarter, and analysts are now downgrading their forecasts for the economy for the rest of the year as factory output slows amid continued weak global demand.

S&P 500 (F) (US500) 4,472.16 +32.90 (+0.74%)

Dow Jones (US30) 34,347.43 +86.01 (+0.25%)

DAX (DE40)  16,023.00 +232.66 (+1.47%)

FTSE 100 (UK100) 7,416.11 +133.59 (+1.83%)

USD Index  100.28 −1.08 (−1.07%)

Important events for today:
  • – China Trade Balance (m/m) at 06:00 (GMT+3);
  • – UK GDP (m/m) at 09:00 (GMT+3);
  • – UK Industrial Production (m/m) at 09:00 (GMT+3);
  • – UK Manufacturing Production (m/m) at 09:00 (GMT+3);
  • – UK Trade Balance (m/m) at 09:00 (GMT+3);
  • – Eurozone Industrial Production (m/m) at 12:00 (GMT+3);
  • – Eurozone ECB Monetary Policy Meeting Accounts at 14:30 (GMT+3);
  • – US Initial Jobless Claims (w/w) at 15:30 (GMT+3);
  • – US Producer Price Index (m/m) at 15:30 (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
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