Thursday, April 30, 2015
Daily Market Color 04/30/2015
Daily Market Color
04/30/2015
Economic Reports & Headlines
We received a slew of reports today starting with the Bank of Japan's monetary policy announcement. The bank decided to keep their aggressive policy unchanged with 80 trillion yen in annual bond purchases and a key interest rate of 10 basis points. It has been two years since the bank announced its quantitative easing program. The goal was to reach 2.0% inflation in Japan in two years; however they had to extend the goal by an additional fiscal year.
Eurostat's Harmonized Index of Consumer Prices for April was flat and in line with consensus on a year over year basis. Nevertheless, there was a slight improvement from March's reading of negative 10 basis points. HICP readings have been negative since November 2014.
Eurostat's unemployment report for March showed joblessness decline by 36k. Euro area unemployment rate remained unmoved at 11.3%. Markets were expecting the rate to tick down 10 basis points to 11.2%.
The US Department of Labor released its weekly jobless claims report for April 25th, which showed a drop of 34k bringing the total number of new claims to 262k. This is the lowest level since April of 2000, according to Econoday.com.
The US Department of Commerce released its monthly Personal Income and Outlays report for March. Personal Income on a month over month basis was flat versus an expected rise of 20 basis points. On a year on a year basis prices did grow 3.8%. Consumer spending grew 40 basis points on a month over month basis and 3.0% on a year over year basis. Personal Consumer Expenditures increased 20 basis points on a month over month basis and grew 30 basis points on an annual basis. The Fed is targeting a 2.0% increase.
Greece and Euro area partners will work together throughout the weekend to come up with a deal by May 3rd to be voted on at the next Eurogroup meeting on May 11th, according to an article from Bloomberg.
Trades
I am remaining firm in my position to trade once bailout funding is released for Greece or once a default occurs. European debt, equity and currency markets should move on May 3rd and May 11th. However, these moves have a low probability of developing into a trend that is worth trading for me. I will wait patiently on the side lines.
Wednesday, April 29, 2015
Daily Market Color 04/29/2015
Daily Market Color
04/29/2015
Economic Reports & Headlines
The economic calendar for Wednesday is crowded. In addition to that they were updates in Greece. Great Britain started the day off with a read an update on housing activity. Nationwide HPI for April beat surpassed Econoday’s consensus by increasing 100 basis points on a month over month basis versus an expected 20 basis point increase. On a year over year basis, prices increased 5.2% versus expectations of 4.1%. This is good news to counter the poor GDP reading UK received yesterday.
The European Commission issued the EC Economic Sentiment report for April, which is a survey of business and consumer sentiment in the region. The headline figure came in slightly below consensus, 103.7 versus 103.9.
Over in Germany we got a read on inflation for March. Consumer prices declined 10bps as expected on month over month basis. On an year over year basis, prices increased 40bps as expected.
On the domestic front, first quarter GDP came in way below estimates on a quarter over quarter basis, 20 basis points versus 100 basis points. The poor performance was attributed to a strong dollar and a horrid weather conditions.
The Federal Open Market Committee (FOMC) made their monetary policy announcement which was in line with expectations. There was no change in policy however, it appears that market participants are expecting a June rate hike due to the Fed’s commentary. Various of components of the economy was revised lower by the Fed, however, it appears as if the rate hike will remain on the table regardless of the revisions.
04/29/2015
Economic Reports & Headlines
The economic calendar for Wednesday is crowded. In addition to that they were updates in Greece. Great Britain started the day off with a read an update on housing activity. Nationwide HPI for April beat surpassed Econoday’s consensus by increasing 100 basis points on a month over month basis versus an expected 20 basis point increase. On a year over year basis, prices increased 5.2% versus expectations of 4.1%. This is good news to counter the poor GDP reading UK received yesterday.
The European Commission issued the EC Economic Sentiment report for April, which is a survey of business and consumer sentiment in the region. The headline figure came in slightly below consensus, 103.7 versus 103.9.
Over in Germany we got a read on inflation for March. Consumer prices declined 10bps as expected on month over month basis. On an year over year basis, prices increased 40bps as expected.
On the domestic front, first quarter GDP came in way below estimates on a quarter over quarter basis, 20 basis points versus 100 basis points. The poor performance was attributed to a strong dollar and a horrid weather conditions.
The Federal Open Market Committee (FOMC) made their monetary policy announcement which was in line with expectations. There was no change in policy however, it appears that market participants are expecting a June rate hike due to the Fed’s commentary. Various of components of the economy was revised lower by the Fed, however, it appears as if the rate hike will remain on the table regardless of the revisions.
The ECB decided to increase the amount of Emergency Liquidity Assistance to European banks by 1.4 billion Euros, according to a report from Bloomberg.
Euro area bank lending increased for the first time since 2012, according to a report from Bloomberg.
Trades
European stocks have been on a decline that exceeded 1.0% for the past two trading sessions. Today’s selling was based on tapering fears from the European Central Bank in light of the optimistic Euro area bank lending report. All of this selling could be reversed with commentary from the ECB downplaying an early cut off to their bond purchases. If Greece hint at progress with the Troika, that will reverse the selling as well. It’s an unfavorable headline driven market for me to be trading right now, which is why I am on the sidelines. The only headline I am concerned with is a Greek default or the unlocking of a Greek bailout package. The probability of a big move in those two scenarios warrants a trade. And I believe that trade will be arriving soon in light of the intense repayment schedule Greece is currently facing between now and the end of May.
Euro area bank lending increased for the first time since 2012, according to a report from Bloomberg.
Trades
European stocks have been on a decline that exceeded 1.0% for the past two trading sessions. Today’s selling was based on tapering fears from the European Central Bank in light of the optimistic Euro area bank lending report. All of this selling could be reversed with commentary from the ECB downplaying an early cut off to their bond purchases. If Greece hint at progress with the Troika, that will reverse the selling as well. It’s an unfavorable headline driven market for me to be trading right now, which is why I am on the sidelines. The only headline I am concerned with is a Greek default or the unlocking of a Greek bailout package. The probability of a big move in those two scenarios warrants a trade. And I believe that trade will be arriving soon in light of the intense repayment schedule Greece is currently facing between now and the end of May.
Tuesday, April 28, 2015
Daily Market Color 04/28/2015
Daily Market Color
04/28/2015
Economic Reports & Headlines
First quarter GDP in Great Britain grew less than expected on a quarter over quarter basis, 30bps versus consensus of 50bps. On a year over basis, UK's economy grew 2.4% versus consensus of 2.6%.
The Federal Open Market Committee (FOMC) meeting started today. The committee meets eight times a year and makes a decision on US monetary policy during these meetings. A decision will be issued tomorrow.
The S&P Case Shiller 20 City Home Price Index came in stronger than expected on a month over month basis for February: 90bps versus 70bps. Year over year growth in February was 5.0% versus expectations of 4.8%.
The Conference Board’s Consumer Confidence Index for April came in below consensus, 95.2 versus 103.0.
Trades
Volatility is surely picking up in Europe. European stocks declined over 1.0% in today’s trading session on virtually no news. The optimism that followed the news of Greece’s Finance Minister being removed from leading the discussions with the Troika has fizzled. I envision that a move to the downside in the event of a Greek default would be temporary and short lived. Nevertheless it will warrant a trade. However, in the midst of that turmoil a strong rally could ensue if debt restructuring, in coordination with the Troika, takes place in Greece. That will set precedent in the Eurozone for other European countries that may be on the brink of being unable to service their debts. It would send a message that the troika will prohibit these countries from failing completely. It would send a message that Eurozone countries will be able to have an orderly default and still remain in the Eurozone. I will short any default, but I will switch that position if the Troika wants to keep Greece in the Eurozone despite defaulting.
Tonight we will get a policy announcement from the Bank of Japan. There could be a surprise policy action which could reverse the recent decline in Japanese stocks.
04/28/2015
Economic Reports & Headlines
First quarter GDP in Great Britain grew less than expected on a quarter over quarter basis, 30bps versus consensus of 50bps. On a year over basis, UK's economy grew 2.4% versus consensus of 2.6%.
The Federal Open Market Committee (FOMC) meeting started today. The committee meets eight times a year and makes a decision on US monetary policy during these meetings. A decision will be issued tomorrow.
The S&P Case Shiller 20 City Home Price Index came in stronger than expected on a month over month basis for February: 90bps versus 70bps. Year over year growth in February was 5.0% versus expectations of 4.8%.
The Conference Board’s Consumer Confidence Index for April came in below consensus, 95.2 versus 103.0.
Trades
Volatility is surely picking up in Europe. European stocks declined over 1.0% in today’s trading session on virtually no news. The optimism that followed the news of Greece’s Finance Minister being removed from leading the discussions with the Troika has fizzled. I envision that a move to the downside in the event of a Greek default would be temporary and short lived. Nevertheless it will warrant a trade. However, in the midst of that turmoil a strong rally could ensue if debt restructuring, in coordination with the Troika, takes place in Greece. That will set precedent in the Eurozone for other European countries that may be on the brink of being unable to service their debts. It would send a message that the troika will prohibit these countries from failing completely. It would send a message that Eurozone countries will be able to have an orderly default and still remain in the Eurozone. I will short any default, but I will switch that position if the Troika wants to keep Greece in the Eurozone despite defaulting.
Tonight we will get a policy announcement from the Bank of Japan. There could be a surprise policy action which could reverse the recent decline in Japanese stocks.
Monday, April 27, 2015
Daily Market Color 04/27/2015
Daily
Market Color
04/27/2015
Economic Reports & Headlines
We received
our first report for the week from the UK with the CBI industrials trends
survey for April. It’s a survey of manufacturing executives that started over
50 years ago. According to Econoday.com, the survey is supposed to indicate
trends in cost, output, prices and exports. April’s report indicated a
disappointment with the headline reading falling short of expectations.
On the
domestic front, Flash Services PMI came in strong for April. Consensus ranged
from 58.0 – 60.4 with the actual reading coming in at 57.8.
Over in
Greece there was a glimmer of hope due to the emasculation of Greece’s Finance
Minister, Yanis Varoufakis. Prime Minister Alex Tsipras removed the FinMin from
leading the bailout funding negations.
Trades
European
stocks rallied in light of Greece’s FinMin smaller role in the country’s debt
discussions with the Troika. I decided to close my short position in the Euro
Stoxx 50 because I will be unable to withstand the volatility. I still believe resistance
to the upside will remain in place as long as there is uncertainty in Greece.
If Greece fails to meet one of its debt payments or if the ECB decides to
discontinue emergency funding to Greek banks, then I will short European stocks
with more confidence. On the other hand, if a deal is struck between Greece and
the Troika then I will go long European stocks and trade alongside the ECB.
Later
this week, the Bank of Japan will issue its monetary policy announcement. Many
are expecting the BoJ to maintain its current policy. The bank failed to reach
its 2% inflation target that was set two years ago when they embarked on an unprecedented
amount of quantitative easing. BoJ extended their inflation forecast another
year. I will be looking forward to the BoJ to take further measures to weaken
the Yen. If they do, I will short the Yen or go long Japanese equities.
Saturday, April 25, 2015
Daily Market Color 04/24/2015
Daily
Market Color
04/24/2015
Economic Reports & Headlines
The
economic calendar was light today and it began in Japan with the Ministry of
Economy, Trade and Industry (METI) All Industry Index. This report combines
Japan’s Tertiary Index with activity from construction, agricultural and
fishing industries along with activity in the public sector. This index is
moderately similar to a gross domestic product report. February reading showed
an increase of 10 basis points over the previous month and a drop of 110 basis
points over the past year.
Over in
Germany, the IFO institute released its closely watched Business Climate Index
report. It’s a survey of 7,000 enterprises that serves as an indicator of
business expectations, current conditions and economic sentiment in the German
economy. The report for April was slightly better than expected. However,
business expectations came in slightly lower than expected: 103.5 versus 104.6.
The report is broken down into three segments: current conditions, economic sentiment
and lastly business expectations, which happens to be the segment that garners
the most attention.
Across
the Atlantic over in the US, the Bureau of Consensus and the US Department of
Commerce released their Durable Goods Orders report for March. The report was
mixed and it turned out to be an overall disappointment once you looked beyond
the headline figures. New Orders grew 4.0% on a monthly basis and beat
expectations of growing 50 basis points. However, New Orders minus transportation
declined 20 basis points in March on a monthly basis versus a widely expected
climb of 30 basis points. Examples of durable goods are industrial machinery,
appliances, cars and computers.
All eyes
were on Latvia, a small country located in northern Europe, for the meeting of European
Union finance ministers. Greece’s finance minister, Yanis Varoufakis, was under
pressure to provide a list of reforms along with a comprehensive plan for
implementing them to secure bail out funding. Instead of providing the list and
the plan, he offered a partial list in an attempt to unlock a fraction of the
bailout funding. Minister Varoufakis offer was shot down by the increasingly
impatient group of finance ministers.
Trades
Greece merited most of my attention today. I’m currently short Euro Stoxx 50 futures, which is a basket of 50 blue chip stocks in Europe. European equities have been on a rapid ascent ever since the European Central Bank (ECB) decided to embark on an aggressive form of quantitative easing. The ECB will purchase one trillion euros of European government bonds at a rate of $60 billion a month until September 2016. It is obvious that you refrain from trading against a powerful central bank such as the ECB; however, Greece is a temporary hurdle in 2015’s European bull market. Stocks on the right side of the Atlantic will face heavy resistance hitting new highs the longer Greece takes to meet the demands of the Troika. The Troika is compromised of the European Central Bank, European Union and the International Monetary Fund. If the Troika fails to ease their demands, then European equities will continue to face resistance to the upside. Time is ticking and Greece may very well default on one of its repayments to either the IMF or the ECB. More than likely it will be the IMF they will default on. Below you could see Greece’s debt repayment schedule according to UBS and the IMF:
Greece merited most of my attention today. I’m currently short Euro Stoxx 50 futures, which is a basket of 50 blue chip stocks in Europe. European equities have been on a rapid ascent ever since the European Central Bank (ECB) decided to embark on an aggressive form of quantitative easing. The ECB will purchase one trillion euros of European government bonds at a rate of $60 billion a month until September 2016. It is obvious that you refrain from trading against a powerful central bank such as the ECB; however, Greece is a temporary hurdle in 2015’s European bull market. Stocks on the right side of the Atlantic will face heavy resistance hitting new highs the longer Greece takes to meet the demands of the Troika. The Troika is compromised of the European Central Bank, European Union and the International Monetary Fund. If the Troika fails to ease their demands, then European equities will continue to face resistance to the upside. Time is ticking and Greece may very well default on one of its repayments to either the IMF or the ECB. More than likely it will be the IMF they will default on. Below you could see Greece’s debt repayment schedule according to UBS and the IMF:
May
1st 2015:
€195.1m
(IMF)
May
12th 2015
€744.9m
(IMF)
June
5th 2015
€297.9m
(IMF)
June
12th 2015
€335.2m
(IMF)
June
16th 2015
€558.7m
(IMF)
June
19th 2015
€335.2m
(IMF)
June
19th 2015
€89.4m
(ECB)
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