Financial market research and analysis

Our analysts have their fingers on the pulse of the world's financial market news.

CFD trading is high risk and may not be suitable for everyone.
Another China rate cut & Japan nearing recession

Wall Street is closed today for Presidents Day so that should mean thinner trading in general.

The number of new coronavirus cases has gone up in China but new stimulus measures from the Chinese central bank is putting investors at ease. The PBOC has cut ‘medium term’ rates in order to minimise the likely strain on the economy from the coronavirus. That will benefit around $29B in Chinese loans. This tells us a cut in the loan-prime rate (LPR) rate is coming on Thursday too.

EQUITIES

China stocks have reversed all the losses since re-opening after the Lunar New Year. The CSI 300 reversed earlier losses to near 3-week highs when the new rate cut was revealed. Japan’s Nikkei index bucked the trend of higher shares across Asia after the worse-than-expected fall in Japanese GDP growth was announced.

A surging British pound hurt the FTSE100 last Friday. Investors concluded that Chancellor Richi Sunak is more amenable to the kind of spending plans that are suited to Prime Minister Boris Johnson’s “levelling up” agenda. The aim of the spending would be to raise living standards outside of London and the South East. It can also cushion the economy through any Brexit bumps. We will just be watching the rumblings from credit agencies to see if Britain’s sovereign credit rating is at risk.

The DAX looks set to open at record highs on Monday, helped by multi-year lows in the euro and the belief interest rates will remain at rock bottom levels. Fears are growing that Germany could be nearing a recession but that makes it more likely authorities are forced to react. A recession coupled with a leadership void as Angela Merkel steps aside as Chancellor makes it likely that the German government ditches its policy of a balanced budget.

FOREX

The European Commission is assuming 1.2% growth across euro-area in 2020 but markets appear to be less optimistic. The euro struck 2015 lows against the Swiss franc and 2016 lows against the pound and 2017 lows against the dollar. Before fiscal stimulus comes down the pipe to react to the slowdown in Europe, the ECB will likely maintain asset purchases.

The Japanese yen is under pressure because Japan could be headed for a recession. Preliminary figures showed GDP in Japan fell -6.3% y/y and -1.6% q/q. A sales tax hike meant Japanese consumers front-loaded big ticket purchases into the third quarter and cut ordinary spending in the fourth. It’s the worst growth rate since Shinzo Abe came into office. The giveth with one had via low interest rates and taketh with the other hand via tax hikes approach from Abe isn’t working for Japan. And that goes some way to explain a plummet in Abe’s approval ratings. We see a high risk that the negative impact of the coronavirus could mean Q1 2020 sees a second quarterly decline and a technical recession in Japan.

1-4-2020

End of one of worst quarters ever
The Dow Jones just posted the worst first quarter ever. That’s how bad things are at the moment, but are they ‘peak bad’? Because that would imply a bottom in the stock market. Data from China today continue to suggest light at the end of the tunnel there, bu… Read more

31-3-2020

Markets stabilise on hopes for vaccine, SNB intervening on franc
Beware the Ides of March. There is a lot of relief out there that March as well as the first quarter is almost over. A fresh month can offer some fresh perspective, and perhaps a more constructive one.   President Donald Trump extending social distancing gui… Read more

18-3-2020

The rebound on stimulus hopes loses momentum. Brent < $30
A bigger picture is starting to emerge of how governments are responding to the pandemic and that in itself offers some needed certainty. Authorities are trying to balance economically damaging travel restrictions and social distancing rules with cheap loans f… Read more

17-3-2020

Stocks Rebound after rout, Airline bailouts? Gold holds $1450
Governments are stepping up their response to the coronavirus outbreak which is allowing markets a chance to recuperate on Tuesday.   Following the worst day since Black Monday on Wall Street, US futures went ‘limit up’ – meaning prices could not rise of ove… Read more

16-3-2020

Central Bank Bazooka Misses Target, Stocks in Freefall
Central banks led by the US shot off a bazooka of lower interest rates and quantitative easing but it has missed target. Markets are back into freefall.     Friday’s gains have evaporated and shares are headed deeper into bear market territory. Bank shares a… Read more

12-3-2020

Dow falls into bear market, FTSE to tank, little hope for ECB
Dow drops into bear market, S&P to follow after Trump speech Trump managed to spook an already spooked market. European share markets are set for sharp opening losses. The FTSE is on course to tank 300 points to take it down 30% off its May 2018 peak. The… Read more

10-3-2020

US tax cuts lightening the mood in market hangover
There will be investors waking up today and wondering if it was all a bad dream. But it was all too real. Oil did fall by the most since the Gulf War and global stock markets did have their worst day since the 08 crisis. Today will be a like a hangover. All yo… Read more

5-3-2020

OPEC meeting, Flybe administration & fortune favours a brave BOE
Shares in Europe look set for higher open following the wake of a ‘Biden bounce’ on Wall Street. The Dow saw another +1000-points day led by healthcare companies on the hope the US can avoid a national healthcare service under a President Sanders. Actually, we… Read more