Lackluster Global Data Weighs On Crude Oil

Lackluster Global Data Weighs On Crude Oil
Lackluster Global Data Weighs On Crude Oil
Crude oil eased a bit more this morning trading at 91.87 as lackluster global data continues to weigh on the commodity. Chinese (HSBC) data missed targets this weekend weighing heavily on crude oil with China the leading energy user in the world. The official PMI data showed manufacturing in expansion and a slight improvement, while the HSBC data, which tends to be more reliable showed manufacturing in contraction and below expectations. The divergence is the main topic of market conversation today. Especially after last month’s trade balance data showed numerous fictitious orders in the totals.

Crude oil prices declined on Friday, suffering losses for the week and month, as pessimism among traders over the outlook for energy demand pushed prices below $92 per barrel. Organization Petroleum Exporting Countries’ has kept its oil production target unchanged at 30mn barrels per day, despite worries about energy demand and rising US output.

Over the week comments from the ECB could support a slight bump in prices.  The recent flood of money pumped into markets by the world’s major central banks to boost growth must not lead to a rise in protectionism, European Central Bank Executive Board member Benoit Coeure said. While Mr. Draghi seemed to indicate that a rate cut was not on the table but stabilization would be the main goal of the bank. The euro zone economy is on track for a recovery later this year driven by the European Central Bank’s loose monetary policy and demand from abroad, the bank’s President Mario Draghi said.

Today, Germany and the eurozone will release their PMI data, which are likely to improve. These factors should support the euro and pressurize the dollar and could have an effect on energy prices.. In the North American session, a few key economic releases from the US are expected. These are expected to decline and may have a negative impact on the dollar and oil.

Natural gas declined below the key $4 per mmbtu level, on concerns that mild weather to start the summer will lower US fuel demand. Natural gas is trading at 3.958 in the red this morning, down by 29 points. The demand for natural gas in the residential/commercial sector tumbled down in recent weeks as the weather is heating up. On the other hand, consumption in power sector rose as leading utilities companies continue to use their natural gas stockpiles for electricity. But as their stockpiles will dwindle in the coming weeks, they are likely to shift back to coal. Considering the high price of natural gas, compared to last year, it’s more likely that utility companies will turn back to coal. In such a case, the demand for natural gas in the power sector is also expected to fall. On the other hand, natural gas production continues to slowly rise. If these trends will persist in the coming weeks, they could lead to a further drop in prices.

Currency Markets Kick Off The Month After Lackluster Chinese Data

Currency Markets Kick Off The Month After Lackluster Chinese Data
Currency Markets Kick Off The Month After Lackluster Chinese Data

As the month of June opens traders will be turning up volume and volatility this week. There are several important events on the calendar along with two major events at the end of the week. Traders will get a snapshot of US manufacturing activity from the Institute for Supply Management, which releases its May index on Monday. Monday’s economic agenda also calls for April construction spending – forecast up 0.8 percent after a drop of 1.7 percent in March. Domestic car and truck sales for May, also expected on Monday, are projected to have increased to 15.1 million units from April sales of about 14.9 million units, the Reuters Poll showed. The US international trade deficit, set for release on Tuesday, is forecast to have widened slightly to USD 41 billion in April from USD 38.8 billion in March. A preview of the jobs picture will come on Wednesday with the release of a report from payrolls processor ADP. The Fed’s Beige Book is expected on Wednesday afternoon. That report will give a look at the economy in 12 regional Federal Reserve Bank districts. On Thursday, initial claims for unemployment benefits will grab attention after markets hear from the ECB and Mr. Draghi’s press conference. Initial jobless claims are projected to have slipped to 345,000 in the week ended June 1 from 354,000 in the previous week. The marquee event will be Friday’s nonfarm payroll report, which will be watched intently for hopes of insight into the FOMC decision due later this month.

The month ended with a whimper on Friday, the euro could not close the month in the 1.30 level and ended at 1.299 while the US dollar which had hit a high of 84.40 mid-week ended the month at 83.18 on confusing signals from the Fed and disappointing data at the end of the week. GDP and unemployment missed forecast although consumer confidence skyrocketed. European shares closed lower on Friday after disappointing German and Italian data was released. In addition, markets continued to see selling on fears that the U.S. Federal Reserve could begin to taper its asset-purchasing program. US Stocks ended the month of May with big losses, with the Dow and S&P 500 posting their worst one-day drops since mid-April, but major averages still logged monthly gains.

This morning Chinese data is dominating the markets attention. China’s government indicated a slowdown in the world’s second-largest economy is bottoming out, underscoring forecasts for policy makers to avoid cutting interest rates this year. China’s manufacturing unexpectedly accelerated in May, indicating that a slowdown in economic growth in the first quarter may be stabilizing. The Purchasing Managers’ Index rose to 50.8 from 50.6 in April.

Although the AUD and NZD shook off the bad news out of China, as traders are now hoping for some stimulus from the Chinese government to get the economy back in line with projections. If the PBOC loosens its monetary policy, it would be a boom for Australia and New Zealand. The AUD is trading at 0.9626 adding 50 points while the kiwi is at 0.7968 up by 21 pips.

Japanese companies’ capital spending fell 5.2 percent in the first quarter from a year earlier, underscoring the challenge the government faces in sustaining momentum in the world’s third biggest economy. Japanese Prime Minister Shinzo Abe pledged 3.2 trillion yen ($32 billion) to Africa as his government seeks to catch up with China in pursuing resources, markets and influence on the continent. Abe announced the five-year commitment of public and private support in a speech at the Tokyo International Conference on African Development. Data in Japan are starting to show improvements due to the government’s stimulus plans. The JPY is trading at 100.56 this morning.

 

Strong U.S. Data Sinks Euro

A combination of events helped drive the EUR/USD lower on Friday. Firstly, the Euro fell against the dollar as demand dropped for the single-currency after a decline in German retail sales and a rise in unemployment. Both reports suggest the Euro Zone economy is struggling.

Technically, the EUR/USD broke after spending some time inside of a major retracement zone at 1.3019 to 1.3072. Although the main trend is up, the chart indicates that it could retrace to 1.2941 before attracting buyers.

eur 2

An early session rally in the GBP/USD came to a halt this morning following the release of better-than-expected U.S. economic data. Sterling traders are still concerned about a weak economy and the possibility of additional stimulus from the Bank of England. Today’s U.S. economic news is strong evidence that the economy is doing better than the U.K. This should keep the pressure on the British Pound over the long-run.

August Gold eked out a small gain earlier in the session even entering a key retracement zone at $1413.25 to $1431.01. The test of this zone likely drew the attention of short-sellers, but the stronger dollar was probably the main catalyst behind the sell-off.

Since the main trend is down on the daily chart, traders are likely to continue to sell rallies until a change in the fundamentals warrant a shift in sentiment. Stronger equity markets should continue to keep the pressure on gold also.

Despite news of an improving economy, July crude oil remained under pressure on Friday. Yesterday’s rally appears to have been a knee-jerk reaction to a successful test of a 50% level at $91.77. Since the main trend is down, traders are likely to continue to sell rallies. Fundamentally, the supply/demand situation is still bearish.

The direction of the U.S. Dollar is likely to continue to be the biggest influence on crude oil. Technically, a break under $91.65 could trigger a move to the Fibonacci level at $90.45. 

The Yen, Pound, Kiwi, Aussie and Euro Climb Vs Weak USD

24The euro climbed above 1.30 to trade at 1.3048 at the close on Thursday supported by weak US data, which weighed heavily on the US dollar along with stronger data from the eurozone. The European Commission reported that the Economic Sentiment Indicator that aggregates surveys of businesses and consumers across the eurozone rose to 89.4 in May from 88.6 in April.

Along with recent surveys of purchasing managers, it suggests that the euro zone may not have contracted as much in the second quarter. If sustained, the pickup in confidence would lead to higher spending by consumers and businesses, and contribute to a return to growth later in the year. But the ESI remains below the 100.00 average level dating back to 1990, and a number of problems still confront consumers and businesses.

Investors ignored a sharp sell-off in Japanese stocks and a string of so-so economic reports on Thursday. The Dow Jones, the S&P 500 and the NASDAQ ended the day with gains between 0.2% to 0.7%. The Fed Reserve said it plans to continue its epic bond-buying program, but has hinted at factors that could lead the central bank to pull back. The European markets ended higher on Thursday. FTSE ended higher by 0.5%, while CAC and DAX gained 0.6% & 0.8% respectively.

Lackluster unemployment and housing data compounded by a slip in GDP helped move traders off the US dollar as it gives a fairly good indication that the FOMC will continue its money printing program to support the economic recovery in the US. The dollar tumbled from the upper 83 range to trade at 83.05 at the close.

The drop in the dollar helped support a climb in most of its crosses. The pound climbed to trade at 1.5225 after trading in the low 1.51 range for the past week. The GBP rose to its highest in more than a week against a broadly weaker dollar on Thursday but its gains were limited because of uncertainty over the outlook for UK monetary policy. Weak equity markets caused the dollar to fall sharply against the yen and pushed the U.S. currency lower across the board, including against sterling, as investors took profit on their previous long dollar positions.

The Aussie kept two-day gain versus the greenback as Asian shares rallied and before U.S. data that may add to the case for the Federal Reserve to maintain stimulus. The Aussie strengthened against most of its 16 major peers after report showed that private sector credit increased in April. The AUD is trading at 0.9638. Interest-rate swaps data compiled signaled an 81 percent chance the Reserve Bank of Australia will hold its benchmark interest rate at 2.75 percent next week. The New Zealand dollar maintained gains after the nation’s terms of trade rose more than economists estimated. The NZD is trading at 0.8077.

The Japanese yen climbed yesterday against the weak US dollar to trade in the 100 range, which weighed heavily on the equities market with Tokyo giving up 5% on the day. This morning the US dollar recovered slightly pushing the pair to 101.01

 

Gold, Silver and Copper Climb On Weak US Dollar

Asia Pacific ChartGold continues to climb to 1418.85 gaining 6.85 in the Asian trading session after climbing on Thursday after lackluster US data helped traders send the US dollar tumbling as the data will help the Fed continue their ongoing asset purchase program. Gold futures scored to their highest close in more than 2-weeks as a weaker dollar, disappointing US economic data and strong physical demand in Asia pushed prices above $1,400 per ounce. Gold holdings of SPDR gold trust, the largest ETF backed by the precious metal, increased to 1,013.15 tons, as on May 29.  A rise in gold-backed exchange-traded fund holdings for the first time in three weeks also underpinned the precious metal, typically seen as a hedge against inflation. But physical demand softened with gold set to log its second straight week of gains. 

Centerra Gold Inc. said operations at its flagship mine in Kyrgyzstan have been suspended, after villagers have blocked the only road to the mine since Tuesday disrupted the power supply. The US dollar slumped broadly, as US Treasury yields eased from multi-month highs and as some investors booked profits from its recent rally.

Gold prices plunged to a 2-year low April 15 in their biggest one day sell-off in decades. The culprit? Worries about China growth. Those worries haven’t gone away but for now, they seem to have shifted to the back burner as investors watch the market gyrations and look for a place to park off until things settle down.

Rising gold prices, up more than 4 percent in two weeks, have deterred buyers in India and China, the top two consumers of bullion. There was a mad rush for gold in April when prices sank to a two-year low of $1,321.35. Most Asian countries saw premiums for gold bars ease as spot prices rose but some like Singapore continued to see high premiums due to a supply shortage, traders said earlier this week.

Traders said Gold prices rose on fresh buying by retailers and stockists, driven by a firming global trend, where the metal rose as lower prices lured some investors. Traders said silver remained weak on lack of necessary follow up support from industrial units and coin makers as the metal in overseas markets recorded its fourth consecutive monthly loss, the worst run since June.

Silver is trading at 22.775 adding 85 points today after precious metals soared and the US dollar declined. Silver holdings of ishares silver trust, the largest ETF backed by the metal, declined to 9,992.92 tons, as on May 29.

Copper rose almost 1% on Thursday, as investors bet on improved imports by the biggest consumer China and as data from top producer Chile showed April output fell from a year earlier due to strikes and production problems. Copper futures for July delivery closed up by 0.6% at $3.32 on the COMEX division of the NYMEX.

EIA Inventory Shakes Up Crude Oil and Natural Gas

EIA Inventory Shakes Up Crude Oil and Natural Gas
EIA Inventory Shakes Up Crude Oil and Natural Gas
Crude oil is trading at 93.68 this morning gaining 7 cents as the US dollar weakened yesterday after a rash of economic data printed under forecast, giving traders hopes that the Federal Reserve would continue its current money printing program unabated. The dollar which had been trading close to 84 tumbled to trade this morning at 83.05, a weak dollar helps make dollar denominated commodities less expensive for foreign investors.

U.S. crude oil supplies increased 3 million barrels (0.76%) for the week ending May 24, according to an Energy Information Administration report released on Thursday a day later than usual due to the US Memorial Day holiday. After dropping 300,000 barrels the previous week, weaker refinery input (down 220,000 barrels per day) and a decline in imports (down 313,000 barrels per day) pushed oil supplies up to a new all-time high of 397.6 million barrels.

While oil inventories headed higher, gasoline supplies fell 1.5 million barrels and remain “in the upper half of the average range,” according to the EIA. Demand remains weak, down a seasonally adjusted 2.4% over the past four weeks. Weaker demand helped push pump prices down to a national average of $3.645 per gallon for May 27. That’s $0.028 per gallon less than the previous week and $0.025 less than May 27, 2012.

Crude oil fell below $93 per barrel in the early session, amid concerns about global economic growth and as traders awaited the latest US crude inventories data. However, prices later recovered to close in positive on upbeat economic data. US crude oil inventories posted a surprise 3mn barrel rise last week, pushing inventories to their highest level since May 1931.

OPEC will begin its production meeting later today. Analysts expect that OPEC will leave its oil output ceiling at 30 million barrels per day, where it has stood since the end of 2011, despite actual output running above this target level. The oil ministers of Iraq, Venezuela and Angola on Thursday indicated support to keep the cartel’s output unchanged.

Natural gas tumbled to trade at the $4.00 price level. Yesterday natural-gas tumbled almost 4% on NYMEX, after a report on US gas stockpiles spurred concerns that weaker fuel demand this summer will send supplies higher. The US Energy Information Administration said domestic inventories of natural gas rose by 88bn cubic feet to 2.141 trillion cubic feet in the week ended May 24. Crude oil is expected to hold close to the $4.00 level, as future demand keeps markets interested in the commodity. Foreign investments in natural gas development continue in the headlines.

 

 

Weak U.S. Data Pushes Gold to 2-Week High

August Gold reached a two-week high after weaker-than-expected U.S. economic news helped drive the U.S. Dollar lower. The metal was trading firmer before the release of the Preliminary U.S. GDP and Weekly Unemployment Claims due to the volatility in the Japanese markets, but it was the economic data which gave it its biggest boost.

The news that the U.S. economy expanded only at a 2.4 percent annual rate in the first quarter, missed pre-report estimates of 2.5 percent. Initial claims increased 10,000 to a seasonally adjusted 354,000 from 340,000 previously. Traders went into the report looking for 342,000.

Gold Bars

The weak data drove investors out of the U.S. Dollar because it probably means the Fed will maintain the current pace of its asset-purchasing program. Since gold is priced in dollars, the break in the Greenback made gold more attractive to foreign investors.

Although the main trend is down, its looks as if gold has enough upside momentum to challenge a minor retracement zone at $1413.25 to $1431.01.

A combination of the weaker dollar and a Euro Zone report showing that confidence in the area’s economy improved more than anticipated in May helped drive up the EUR/USD. The poor U.S. economic reports helped weaken the dollar against the Euro because it likely means the Fed will refrain from tapering its aggressive asset-purchasing program.

Technically, the EUR/USD challenged a major retracement zone at 1.3019 to 1.3072 before selling off slightly. The main trend also turned up on the daily chart when the market crossed the swing top at 1.2997.

The GBP/USD turned its main trend to up to up on the daily chart this morning when the Forex pair took out a swing top at 1.5156. The current upside momentum suggests the market is poised to test a major retracement zone at 1.5307 to 1.5377.

Fundamentally, the Sterling found support earlier in the session following the release of a report that showed U.K. house prices rose at the fastest annual rate since November 2011. The mortgage lender Nationwide reported that house prices rose by 1.1% in May from a year earlier.

July Crude Oil weakened early in the session, but found support when it briefly pierced a major 50% level at $91.77. The actual low was $91.65. Profit-taking and bottom-picking helped turn crude oil to the upside, however, the main trend remains down.

Fundamentally, U.S. inventories rose unexpectedly last month. This likely means crude oil will remain range bound over the near-term. Along as the tops at $97.38 and $97.35 remain intact, look for the market to continue to find support in the $91.77 to $90.45 range.

 

Stock Markets Drop on Global Growth Concerns

US and Japanese stocks fell sharply while European markets started Thursday’s session rather shaky in their insecure attempts for a chart trend. Investors became worried ahead of a series of US economic data due to be published today. If turns out to be positive, it could influence Fed’s consideration to end the stimulus programme earlier. Concerns over the prospects of global economic growth added more fuel to the situation: in a report released yesterday, the OECD (Organisation for Economic Cooperation and Development) lowered its growth forecast to 3.1% in 2013 and 4% in 2014.

Following their record-breaking performance, US indices reversed their gains, with the Dow ending the session 106.59 points down, or 0.69%, and closing at 15,302.80. Coca-Cola Co. was the company that recorded the largest decline within the index, sliding by 2.8%.

The S&P500 dropped by 11.70 points, or 0.7%, and ended at 1648.36 points, with nine out of its ten groups closing on negative territory. The largest decline was reported in shares of utility and healthcare companies. Despite the loss in momentum, the index has increased by 3.2% so far and is on track to register a seventh consecutive month in positive territory, the longest stretch of such a performance in the last four years.

The Nasdaq Composite slid by 21.37 points, or 0.6%, closing at 3467.52. Technological giant Apple Inc. ended the session with an increase, after CEO Tim Cook announced the company is planning on launching new products, however, without any further specification. Apple’s shares rose by $3.51, or 0.8%, and closed at $444.95.

Meanwhile, Japan’s Nikkei 225 plummeted by 5.2%, reaching a one-month low and extending its loss from last week’s 7%-fall, despite some gains in-between, to 14%. A stronger-performing yen against the US dollar and concerns about Japan’s increasing yields on its debt also ‘’helped’’ drive the index down.

 European indices, on the other hand, took a small step up on Thursday’s early trading, waiting for the US economic data results. Germany’s DAX was down 0.1%, France’s CAC up by 0.2% and the UK’s FTSE100 climbing by 0.2% at the time of writing.

Looking further in the day, investors will turn their attention to the revised data on the US GDP, the US Personal Consumption Expenditure index, along with Japan’s National Consumer Price index.

 

Source: dfmarkets.co.uk

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Crude Oil and Natural Gas Wait On Weekly EIA Inventory Data

Crude Oil and Natural Gas Wait On Weekly EIA Inventory Data
Crude Oil and Natural Gas Wait On Weekly EIA Inventory Data

Light Sweet crude traded near the lowest price in four weeks after an API industry report showed U.S. stockpiles rose the most in a month. The oil market is balanced, Saudi Arabia said before OPEC meets tomorrow. Crude oil is trading at 93.12 flat in the Asian session. The dollar was set to complete a monthly gain against all of its 16 major counterparts amid speculation the Federal Reserve will reduce monetary stimulus. Data due later today could push the US dollar higher. The US will see weekly unemployment claims, GDP estimates and housing data, all of which are expected to report at or over forecast as the US economy booms.

Crude oil futures fell below $94 per barrel, to log their lowest settlement in 4-weeks after the OECD cut its global growth forecast and the International Monetary Fund reduced its estimate for China’s growth. China’s economy is proving less responsive to credit, escalating pressure on Premier Li Keqiang to strengthen the role of private enterprise. The government’s broadest measure of credit rose 58 % to a record 6.16 tn yuan ($1 tn) in Jan-to March, when GDP gained 7.7 %, compared with 8.1 % a year earlier. Each $1 in credit firepower added the equivalent of 17 cents in GDP, down from 29 cents last year and 83 cents in 2007, when global money markets began to freeze.

With unemployment lingering at 7.5 % – still higher than before the last recession – the Federal Open Market Committee announced May 1 that it will increase or decrease the pace of its monthly bond purchases in response to changes in inflation and the labor market. The policy makers agreed to maintain monthly buying of $40 bn in mortgage securities and $45 bn of U.S. Treasuries in a bid to boost employment. Traders are watching closely today’s EIA inventory release. The EIA report was delayed for a day due to the US Memorial Day Holiday. The EIA report is expected to show that crude oil inventory down by 0.4mn barrels.

Natural gas futures declined for the third-straight session, as trader’s focused on forecasts for mild June weather across the US that could crimp fuel demand. With weather remaining mild, the demand for residential air condition usage drops. Natural gas inventories are expected to increase by 85-90bn cubic feet, actual data will be released by EIA later in the day. Nuclear plants that were offline for maintenance last week have all returned online once again, reducing excess demand on natural gas.

Resources Energy Inc., the Japanese company interested in developing a large liquefied natural gas project, has signed several agreements to explore business relationships in Alaska. The agreements are all nonbinding so far except for confidentiality provisions. They include two Alaska Native regional corporations, an Alaska telecommunications company and Cook Inlet natural gas producers, according to Mary Ann Pease, a vice president with Resources Energy Inc. Agreements have also been signed, which are confidential, with Cook Inlet explorers and producers including ConocoPhillips, Cook Inlet Energy Inc., Buccaneer Energy and NordAq Energy, Pease said. The DOE approved to controversial projects last week while 20 new projects await the green light.

 

Gold, Silver and Copper Headed Towards Month End Losses

Gold, Silver and Copper Headed Towards Month End Losses
Gold, Silver and Copper Headed Towards Month End Losses
Gold increase by 1%, reversing from the previous session’s losses as US dollar dropped while declines in equities triggered physical buying. Gold is trading at 1393.75 up almost $2 in the Asian session while the US dollar is trading at 83.64. Silver is weighed down by a drop in industrial metals and is trading at 22.408 and copper is down 0.78% at 3.26 this morning.

Gold holdings of SPDR gold trust, the largest ETF backed by the precious metal, increased to 1,013.15 tons, as on May 29. Silver holdings of ishares silver trust, the largest ETF backed by the metal, declined to 9,992.92 tons, as on May 29. Copper futures closed slightly lower, as the restart of a large copper mine prompted worries about excess supply at a time when demand for the industrial metal remains subdued due to weak global growth. Although copper stockpiles are rising to the highest in a decade, but manufacturers are paying the biggest premiums for the metal in as much as 7-years as financing deals lock up supply and extend lines at warehouses. Gold demand in India, the world’s largest buyer, is heading for a quarterly record after prices slumped to a 2-year low in April, as reported by the World Gold Council. The OECD reduced its world growth estimate for this year to 3.1% from a previous 3.4%. The International Monetary Fund trimmed its forecast for Chinese growth to 7.75% this year from 8%.

Gold is being supported by continued diversification from central banks and signs of increased physical demand which is countering continued outflows in ETF holdings. Central banks are buying gold as an overall strategy of forex portfolio diversification and the recent price drop will not deter them from a long term policy of diversification into gold. Central bank reserve managers are conservative rather than speculative and will ignore the day to day noise and price predictions emanating from certain banks in favor of passive allocations to gold as part of their foreign exchange diversification strategy.

Russia, Greece, Turkey, Kazakhstan and Azerbaijan expanded their gold reserves for a seventh straight month in April, buying bullion to diversify foreign exchange reserves due to concerns about the dollar and the euro. Russia’s steady increase in its gold reserves saw its holdings, the seventh-largest by country, climb another 8.4 metric tons to 990 tons, taking gains this year to 3.4% after expanding by 8.5% in 2012, International Monetary Fund data show. Kazakhstan’s reserves grew 2.6 tons to 125.5 tons, taking the increase to 8.9% this year after a 41% expansion in 2012.

Gold gained, paring a second monthly decline, as holdings in the largest bullion-backed exchange-traded product expanded while the dollar and Asian stocks fell. Silver headed for the worst run of monthly losses since June. The US will release some important data later today, including weekly unemployment, GDP estimates and housing data, which could send gold tumbling again. With just two days left in the month. We could see gold and silver closing even lower for the month.

 

Mixed Signals From The Fed Continue To Rule The Markets

Mixed Signals From The Fed Continue To Rule The Markets
Mixed Signals From The Fed Continue To Rule The Markets
Wall Street equities tumbled yesterday amid renewed worries about when the Federal Reserve might curtail its bond buying program. The sell-off comes one day after Dow closed at a record high as investors cheered upbeat reports on home prices and consumer confidence. But concerns that the Fed might scale back its stimulus policies as the economy improves weighed on the market on Wednesday. Dow Jones fell 106 points, or 0.7%, erasing the previous day’s gains. S&P 500 sank 0.7% and NASDAQ lost 0.6%. Stocks briefly pared losses on Wednesday afternoon following a speech by Boston Fed president Eric Rosengren. Echoing Bernanke’s comments, Rosengren said withdrawing stimulus too soon would hurt the economic recovery. But he reiterated that the Fed continues to monitor incoming economic data and stands ready to increase or decrease the pace of its bond buying. This morning Asian markets are taking cues from the US exchanges with the Nikkei and Hong Kong in the red.

Germany’s consumer confidence has improved from the last month. This supported the euro which moved up by 0.66% against the dollar, posting a positive close at $1.2941.  The US mortgage application declined to 8.8% from 9.80%. This supported the downside in the US markets and the dollar index. The dollar index fell 0.52% against the majors to settle at 83.66. Economic data anticipated from Europe in the form of economic, industrial and consumer confidence may support gains in the euro. The US will release its first quarter GDP data which is expected to improve and may limit the dollar’s losses in the NA session. Eurozone bonds fell across the board on Wednesday, on concern about a potential scaling back of US economic stimulus that has kept financial markets afloat. The European Central Bank, which shored up the eurozone last year, needs to act again to lift the bloc out of recession, the OECD said on Wednesday, calling for bold steps beyond just interest rate cuts.

Across the Pacific, Bank of Japan Gov. Haruhiko Kuroda said no financial system was immune to a possible crisis, and that the global economy hasn’t yet completely shaken off the effects of the global financial crisis. Mr. Kudora has spent the days since Thursday’s 7.3% decline in the Nikkei trying to explain the BoJ position and that bond yield gains were expected and within the banks estimates. He is trying to quell global worries over the aggressive monetary program adopted by the bank and the government.  The JPY is trading at 101.24 off its lows of 103. Exporters are hoping that the yen will remain weaker as they reap the profits and support record highs on the Nikkei. 

Weak Stock Indices Drag Crude Oil Lower

Crude oil futures traded lower on Wednesday in conjunction with a sharp sell-off in equity prices. The downswing was related to the rise in the Yen which was triggered when Japanese bond yields rose unexpectedly.

Thursday’s U.S. oil inventory data is expected to show crude oil stocks dropped 400,000 barrels last week.  Oil inventories remain at their highest levels since April 1981. This news should keep a lid on prices.

oil refinery

Technically, two tops at $97.35 and $97.38 are keeping pressure on the market, but long speculation has been strong enough to prevent a sharp break. Expectations are for July crude oil to settle once it reaches a retracement zone at $91.77 to $90.45.

The weaker U.S. Dollar and the sell-off in the equity markets helped to underpin August gold. Bullish traders are banking on uncertainty and the possibility of a hard stock market sell-off to drive up demand for gold. Otherwise, talk of ending the stimulus program early is expected to continue to pressure gold since it is expected to drive the U.S. Dollar higher.

On the upside, the market still has sold retracement zone resistance at $1413.25 to $1431.01. The main trend is down, but the change in trend point on the upside is $1488.50. On the downside, taking out a pair of bottoms at $1338.00 to $1323.00 will resume the downtrend.

A sell-off in the U.S. Dollar helped drive up the Euro and British Pound. Oversold conditions may have also contributed to the quick turnaround. The EUR/USD found support when it tested a trend line at 1.2836. Although it crossed over to the bullish side of a pivot at 1.2940, the market still appears to be range bound. Crossing 1.2997 will turn the main trend to up, but any rally is expected to be stopped by a major 50% retracement level at 1.3058.

The GBP/USD failed in its attempt to break through the last swing bottom at 1.5013, leading to a powerful short-covering rally. The market is now in a position to take out the swing top at 1.5156. This move will turn the main trend to up on the daily chart.

Fundamentally, the Sterling remains weak because of the possibility of additional stimulus by the Bank of England so today’s rally may have been triggered by short-covering rather than aggressive counter-trend buying. 

Wall Street rallied with optimism; Dow Jones ends with a record high

 

After US and UK markets resumed trading yesterday, Wall Street ended the session with new record highs, supported by better macro-economic news coming from the US. Latest data showed that the Consumer Confidence and Home Prices surpassed economists’ expectations. Moody’s credit rating raise of the US banking system from negative to stable also added euphoria to the market.

The Homes Prices Index was published before the session’s opening, which gave an upbeat start to the market. Results showed an increase by 10.9%, in opposite to experts’ forecast for a growth by 10.2%. The index, which measures the housing market in 20 major US cities, registered an increase for a twelfth consecutive month, thus marking its best annual performance for the last seven years.

Markets received another boost when Consumer Confidence data showed a substantial increase by 69.0 points in April to 76.2 points in May, with experts’ anticipating a more modest rise by 71.0 points.

The S&P500 climbed by 10.46 points to close at 1660.06, with eight of its ten industry groups reporting an increase yesterday. Best performing companies were those in the financial and telecommunications sectors, while the biggest fall was registered by the utility companies.

The technological Nasdaq Composite rose by 29.74 points and ended the session at 3488.69 points.

Meanwhile, the Dow surged by the impressive 106.29 points, reaching an intraday high of 15,520, ending the session above the psychological level of 15,400 points.

The index top-earners were Microsoft Corp. and UnitedHealth Group Inc. They rose by 2.2% to $35.02 and 2.1% to $63.34, respectively, per share. The weakest performance came from the AT&T Inc. which wiped 1.6% off their value to $36.18 per share.

Other top earners were the jewellery company Tiffany, whose shares rose by 4% to $79.22, supported by better-than-expected quarterly earnings. Tesla also registered an impressive performance, with its shares jumping by 14% to $110.33

Looking further in the day, the US session is shaping up to be rather quiet, while market volatility in the Eurozone is expected to come from Germany’s Harmonised Index of Consumer Prices (YoY) for May.

 

Source: dfmarkets.co.uk

 

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Why Nikkei Sell-Off May Foreshadow Things to Come

Why Nikkei Sell-Off May Foreshadow Things to Come
Why Nikkei Sell-Off May Foreshadow Things to Come

The one-day sell-off last week in Japan’s equities market with the benchmark Nikkei 225 plummeting more than seven percent in one day should not be ignored; in fact, the drop may be a harbinger of things to come. I don’t have a crystal ball, but my market sense is tingling.

The reality is that the sell-off in the equities market was not a surprise, given that the Nikkei has advanced 70% over the past six months. And this advance was driven largely by Prime Minister Shinzo Abe’s aggressive 10-year stimulus strategy to jumpstart the dormant Japanese economy.

Yet what was more concerning was the lack of a follow-through by the Nikkei equities market after the sell-off, as the index rallied a mere 0.9% the following day.

 

ews1

The market’s fear is that if the selling continues on the Nikkei, this could drive down confidence in the equities market and trigger deeper losses on the horizon, including declines in domestic trading.

The Japanese equities market could easily go lower, given the advance so far.

For Prime Minister Abe, should the Japanese equities market reverse course and decline, the move would likely erode confidence in Japan and test Abe and the country’s resolve.

In my view, as I have discussed in these pages in my previous commentary on Japan (read “Japan Not Home-Free Despite Strong GDP”), the country’s aggressive fiscal and monetary policy is not a sure bet to get Japan out of its economic abyss.

In fact, the aggressive printing of money in Japan will create a bloated national debt level on the country’s balance sheet, which is already one of the weakest in the world.

The ability to drive the economy by spending trillions may work in the upcoming years, but I wouldn’t feel good about amassing the amount of debt that Japan is.

The sell-off in the Nikkei equities market could make investors uneasy on this side of the Pacific.

Domestically, the market is concerned about the Federal Reserve looking at a possible reduction of its bond-buying program as early as June during the Federal Open Market Committee (FOMC) meeting that is scheduled for that month.

The fear is that more selling in the Nikkei equities market may trigger deeper losses to come not only in Japan, but elsewhere; so there may be some apprehension to jump into stocks at this point.

The chart of the S&P 500 below suggests that a possible correction may be in the works, as shown by the ovals. Note also that in 2012, the S&P 500 gained a mere seven points from May 1 to October 31—historically the weakest six months for stocks, according to the Stock Trader’s Almanac—but advanced 13.4% for the year, so we could be headed for some slack.

ews2

Chart courtesy of www.StockCharts.com

I would want to see a bigger sell-off here before considering injecting new capital into stocks.

Again, while the advance has been financially rewarding, I still feel a correction is on the horizon. A big sell-off could be an opportunity to buy.

By George Leong, B.Comm. for Profit Confidential

What Housing Recovery? Percentage of First-Time Home Buyers Falls Again in April

What Housing Recovery? Percentage of First-Time Home Buyers Falls Again in April
What Housing Recovery? Percentage of First-Time Home Buyers Falls Again in April

It’s almost as if the mainstream media is defining the U.S. housing market as being “hot,” while some economists are calling for robust growth ahead. But the reality is that we are far from a recovery in thehousing market and more troubles could follow.

As I have discussed in these pages many times before, institutional investors are running to buy homes for rental income, because the yields elsewhere are getting thinner. As a result, we’ve experienced hikes in home prices in the U.S. housing market.

Institutional investors rushed to buy homes with the philosophy of buy cheap, renovate, and rent. But they might be in for a surprise. According to real estate research firm Trulia Inc., since 2005, there have been almost four million single-family homes added to the rental market. That supply has met the demand created during the crisis in the housing market. (Source: Trulia Inc., April 4, 2013.)

As a result, the rental rates that institutional investors were banking on are actually compressing. Take a look at the table below, which depicts the year-over-year change in rental rates and home prices in some major cities in the U.S. economy.

U.S. City

Year-over-Year % change in rental rates for single-family homes

Year-over-Year % change in single-family home prices

Las Vegas, NV

-1.9%

24.6%

Fort Lauderdale, FL

-1.2%

10.7%

Chicago, IL

-1.2%

3.6%

Orange County, CA

-0.7%

13.7%

Washington, DC

-0.7%

6.2%

As institutional investors are paying more for homes, their rental income is getting softer.

And the fact of the matter is that we are missing the most important piece of the puzzle for a real housing market recovery—first-time home buyers. Existing-home sales reported by the National Association of Realtors (NAR) showed that in April, first-time home buyers accounted for only 29% of the purchases in the housing market—a decline of more than 17% from April of 2012, when first-time home buyers accounted for 35% of all the existing-home sales. (Source: National Association of Realtors, May 22, 2013.)

And there are other troubling issues in the housing market; more than a quarter of all homes with a mortgage in the U.S. housing market had negative equity in the first quarter of 2013, while 18.2% of homeowners didn’t have enough equity to be able to cover the related costs of selling or moving into another home. (Source: Zillow, May 23, 2013.)

All of this is just simply adding to my skepticism toward the housing market recovery. At the very best, the U.S. housing market is still very anemic

                                                 

By Michael Lombardi, MBA for Profit Confidential

How Peter Lynch Got It Right 20 Years Ago

How Peter Lynch Got It Right 20 Years Ago
How Peter Lynch Got It Right 20 Years Ago

There’s always strength in numbers.

The equities market is definitely due for a prolonged break, but one subsector I always follow is restaurant stocks. These are key benchmark stocks, and the performance of these stocks offers up an unscientific survey on consumer spending and sentiment.

So many restaurant stocks experienced a breakout at the beginning of the year. Then they took a break and re-accelerated again.

If there is more confidence in the economic landscape, consumers spend money on eating out or ordering in food.

Restaurant stocks are a group where you can make good money as a stock market speculator. Peter Lynch (the famous manager of the Magellan Fund) always advocated for this sector, telling investors to look here for opportunities. He wrote a chapter on it in his book Beating the Street.

What Lynch advocated, and I agree with wholeheartedly, is that a successful restaurant company must have an experienced and capable management team, proper financing, and a deliberate and methodical approach to expanding the concept. He advocated that a company’s slow and steady business expansion is what wins the race at the end of the day.

The great thing about restaurant stocks is that they don’t have to have a brand-new concept to be successful.

Cracker Barrel Old Country Store, Inc. (NASDAQ/CBRL) is one of the many companies that have been hugely successful over the last few years.

Cracker Barrel has a price-to-earnings (P/E) ratio of approximately 18 and is yielding 2.3%. The position has doubled on the stock market since the fall of 2011.

The company’s revenues in its latest quarter grew 4.4% to $702.7 million. Comparable store restaurant sales increased 3.3%, while earnings grew an impressive 37% to $35.17 million. The company just boosted its quarterly dividend by 25%.

Among other successful restaurant stocks, we recently considered Bloomin’ Brands, Inc. (NASDAQ/BLMN). (See “Fast Food Breakout: New Names Crushing the Competition.”)

Bloomin’ Brands is the new Outback Steakhouse. The company’s other brands include Carrabba’s Italian Grill, Bonefish Grill, Fleming’s Prime Steakhouse and Wine Bar, and Roy’s.

Since Bloomin’ Brands listed in the summer of 2012, the company has almost doubled in value.

Any aggressive investor should consider restaurant stocks as part of their ongoing search for new positions.

Even during tough times, restaurant stocks can surprise to the upside. McDonalds Corporation (NYSE/MCD) proved this with its value menu during the recession.

There have been a lot of interesting new initial public offerings (IPOs) in restaurant stocks. I would be researching all of them. The key to a good restaurant company is the package: experienced management, good backing from Wall Street, and a deliberate plan for expansion that preserves profitability. Company-owned (not franchised) stores are also a big plus.

There are always going to be new winners in restaurants stocks. Follow the group for the next big thing.

By Mitchell Clark, B.Comm. for Profit Confidential

Metals And Energy Markets Fairly Subdued

Metals And Energy Markets Fairly Subdued
Metals And Energy Markets Fairly Subdued
Gold is trading at 1386.05 gaining 6.35 in the Asian session. This is the usual course of action, gains in the morning to give these back in the European session. Gold futures declined by 1% in the international market as equities market rallied, driven by encouraging US home sales and consumer confidence data which reduced bullion’s safe haven appeal.

Gold holdings of SPDR gold trust, the largest ETF backed by the precious metal, declined to 1,012.25 tons, as on May 28. As long as hedge fund managers and money managers remain out of the markets and the ETF’s continue to decline their holding there is little help for gold to return to and uptrend. Gold’s only support seems to be traders betting on the FOMC decisions at their June meeting.

The US dollar outperformed most of its peers on Tuesday, as data showed Americans are the most confident about economic prospects in past 5-years. Ongoing positive eco data, the more likely that the Fed might begin tapering its asset purchases in the near term.

Silver recovered in early trading to 22.29 supported by the climb in gold, but more so on the strength of the US economy and the hopes for increase demand for industrial metals. Copper climbed with other base metals, after strong US housing and consumer confidence data lifted prospects for rising demand in the world’s biggest economy although gains were capped by a stronger dollar and concerns over Chinese growth. This morning the IMF downgraded its outlook for China, lowering its growth for 2013 from 8% to 7.7% based on global demand for Chinese exports. Copper is trading at 3.304.

Crude oil prices traded positively supported by worries that the escalating war in Syria might spark more strife in the Middle East, which accounts for almost a fifth of the world’s seaborne crude oil supplies while positive data’s from US added further support. Crude oil is trading at 94.81 this morning after closing above the 95 price level. Traders will wait for inventory data from the EIA which was delayed a day due to the Memorial Day holiday in the US.  US data today, includes mortgage applications and the Fed’s Redbook. Crude oil traders will be closely watching for the API releases. The API is expecting a decrease in crude stocks by 1.2million barrels.

Natural gas gave back close to 8 cents over the past day to trade at 4.22 after its break above 4.30 triggers many sell orders. Natural gas futures dropped for the third session in a row, as forecasts for below-normal Mid-west temperatures early next month signaled reduced demand for electricity to power air conditioners.

Greenback Trading Over 84 As Housing And Consumer Confidence Soar

Greenback Trading Over 84 As Housing And Consumer Confidence Soar
Greenback Trading Over 84 As Housing And Consumer Confidence Soar
With strong US data continuing to show a positive economic recovery is well underway and that the US has been able to survive the Spring Stall and continue growing. There were lots of questions in March and April after economic data printed on in the red. Consumer confidence and jobs data reported on the negative side of forecasts.  As soon as the “sequestered budget cuts” and the “fiscal cliff’ were behind consumer and businesses began to rebound as confidence returned. Yesterday, we saw a booming in housing prices jumping over 10% to prices not seen since 2006 while consumer confidence printed well above forecast.

Today markets will see GDP numbers for the US along with weekly unemployment figures and also more housing information. Housing seems to be the last piece of the puzzle to fall into place. The US dollar has climbed to trade at 84.32 weighing heavily on all of its crosses. The US dollar outperformed most of its peers on Tuesday, as data showed Americans are the most confident about economic prospects in past 5-years.

The euro continues to be weighed down by the greenback but also overall negative sentiment. The euro is trading at 1.2855. There seems to be an overall shift in EU thinking, allowing many countries to miss their budget goals and requirements in an effort to foster growth. France, Spain and the Netherlands have been allowed to overshoot their budget deficits. Traders are pushing the ECB to offer additional assistance to the eurozone to stimulate growth, which would mean that the ECB would have to look at negative interest rates. Spanish and Portuguese yields dipped on Tuesday, with more falls expected in the near term on signs that the European Central Bank will keep policy ultra-easy, supporting riskier assets. Italy’s two-year debt costs fell to their lowest level since the launch of the euro currency, helped by expectations the EU is set to lift tight controls on Italy’s public spending to help the economy.

The JPY is trading at 102.24 falling back to its previous trend after last week’s run on equities, when the Nikkei tumbled 7.3% after bond yields rose. Japanese yen tumbled broadly against major currencies, as global equity markets rallied after comments from central bankers, encouraging investment in riskier assets. Governor Kuroda suggested that there has been no change in economic conditions despite market swings. These comments are not particularly new and do not represent an overall shift in either the BoJ or PMO. Today’s BoJ meeting with market participants to discuss recent market moves could prove interesting; however for USDJPY traders the most important upcoming release is PM’s Abe’s growth strategy.

This morning’s big news is a revision in growth estimates for China. The IMF this morning downgraded China’s growth for 2013 from 8.0% to 7.7%. Although these are still good numbers, it is less than markets had expected. Markets are in large ignoring the update as the Chinese government has been warning that growth estimates were too high.

 

 

Liberty Reserve Puts Bitcoin Under A Microscope

The headlines around the globe this morning are flashing news that Liberty Reserve, the largest digital payment system, has turned about to be the largest money laundering agency in the world. Global arrests of the founders and members of Liberty Reserve including seizure of funds and even their domain, indicate that the government is not messing around. The US government says that the online payment system laundered funds for drug dealers, pornographers and terrorist.

The founder of an online currency transfer business was indicted in the United States along with six other people in a $6 billion money-laundering scheme described as “staggering” in its scope, authorities said Tuesday. Authorities say the network processed at least 55 million illegal transactions worldwide for 1 million users, including 200,000 in the United States. They call the international money-laundering case the largest ever.

“The scope of the defendants’ unlawful conduct is staggering,” said an indictment unsealed in federal court in Manhattan. In announcing the case, U.S. Attorney Preet Bharara said the network “became the bank of choice for the criminal underworld.” The headlines are indicting all online transfer payment agencies that operate outside of the global monetary rules and laws will have rippling effects on the growing world of digital payment systems.

Liberty Reserve Puts Bitcoin Under A Microscope
Liberty Reserve Puts Bitcoin Under A Microscope

Whether a payment system in complicit in allowing criminals and terrorists to freely move funds between each other, or develop a network outside of standardize banking and money laundering controls, they are conspirators in the crimes. Under US laws, a conspirator does not have to take an active part in a crime, or even knowingly be involved in the criminal activities; they are part of the conspiracy.

Under the US criminal definition of conspiracy is” Conspiracy is a crime separate from the criminal act for which it is developed. For example, one who conspires with another to commit Burglary and in fact commits the burglary can be charged with both conspiracy to commit burglary and burglary. Conspiracy is an inchoate, or preparatory, crime. It is similar to solicitation in that both crimes are committed by manifesting intent to engage in a criminal act. It differs from solicitation in that conspiracy requires an agreement between two or more persons, whereas solicitation can be committed by one person alone.

Why is this important?  Liberty Reserve regardless of guilty of a direct criminal act is guilty of at least conspiracy. But the question is not how this effect Liberty Reserve does as their future is at the hands of the American judicial system; it is the effect on global payment and currency systems. Systems like Bitcoin. Bitcoin is not anonymous. In fact, experts say that if prosecutions like Liberty Reserve continue, the most likely targets are major payment systems like WebMoney and eForexGold; payment systems that security experts contend allow their users to move capital anywhere in the world without verifying their identities. Bitcoin operates with greater transparency than those systems. It may be fully decentralized and requires no central bank or government authority, but Bitcoin transactions are as public — if not more so — than any other payment network. Each transaction is recorded in a public ledger, called a “block chain,” to keep people from writing the digital equivalent of a bad check.

The fact is whether or not the transactions are listed the owner and the identities of the owners are not verified and there are no records or documents required to hold accounts and move money. Bitcoin is about to face a barrage of legal questions and new laws to make them function within the banking and money laundering laws that any financial agency is required to follow.

 

Stimulus, Strong U.S. Economy Pressure Gold Prices

Talk of stimulus and a pair of bullish U.S. economic reports are helping to pressure August gold prices today. The stimulus talk is helping to alleviate some of the market turmoil that was fueled by comments from Fed Chairman Ben Bernanke last week when he said that the Fed could begin tapering its aggressive bond-purchasing program if conditions warrant such a move.

This morning better-than-expected reports from Case/Shiller and the Conference Board helped boost the U.S. Dollar, pressuring gold prices.

The news that the economy improved helped drive July Crude Oil prices higher this morning. The price action suggests that upside momentum is building, putting the market in a position to challenge the pair of tops at $97.35 and $97.38 over the near-term.

Better-than-expected news from Case/Shiller and the Conference Board led to speculation that an improving economy would lead to greater demand for crude oil.

Gold Bars

A jump in housing prices as reported by Case/Shiller helped drive up the U.S. Dollar against the Euro. The housing index showed that prices for U.S. homes rose in March, marking the fastest annual growth rate in nearly seven years. Later in the session, the Conference Board confidence index surged to a five-year high of 76.2 in May. This easily beat pre-report guesses of 71.0.  

The EUR/USD fell on the perception that a stronger economy would bring the Fed closer to ending its stimulus program. The reports also drove up interest rates, making the U.S. Dollar a more favorable investment.

Selling pressure also hit the GBP/USD. With speculators betting the Bank of England will implement additional stimulus and the Fed moving closer to ending its aggressive asset-purchasing program, the dollar is looked at as a more favorable investment because of its higher yield.