Financial market research and analysis

The FTSE 100 stocks opened flat to negative. Clothing retailer, Next, plunged 12.56% at the open, after the company cut its annual profit forecasts and warned of a difficult year. UK retailers lead losses.

Tesco (-1.58%), Marks & Spencer (-5.22%)

Mining (+0.08%) and energy stocks (+0.17%) attempt to secure gains, as WTI futures advanced to $55.60, on analysts’ expectations that the US stockpiles may have declined for the first time in three weeks. Combined with OPEC’s efforts to reduce production, the price of a barrel is on a rising trend. Yet according to Energy Information Administration data (EIA), US crude inventories are at the highest seasonal level of the last thirty years and OPEC may need to cut more in order to sustain the positive price trend, as long as demand remains subdued.


Eurozone’s December inflation could not be fully representative

The EURUSD rebounded after a rapid spike to 1.0340. Traders remain sellers on rallies despite skepticism on fresh USD long positions. Inflation and services data across the Eurozone countries could give a fresh spin to the euro in Frankfurt. Headline Eurozone inflation could have accelerated to 1% year-on-year from 0.6% printed a month earlier. This would be the strongest read since September 2014. The core inflation, excluding food and energy prices, is expected steady at 0.8% year-on-year. Rising inflation is good news for the European Central Bank (ECB), as the inflation data measures the pick-up in the underlying economic activity.

The Eurozone’s inflation is on a rising path since the beginning of 2016. Still, December figures could be affected by seasonal pick-up in activity due to Christmas and year-end holidays. Therefore, any optimism around December figures could be short-lived and keep the EUR-bears ahead of the game.


US stocks set for a flat open

Donald Trump’s aim to bring jobs back to the US is fully on track. Ford stepped back from $1.6 billion worth of expansion in Mexican and redirected investment to Michigan amid criticism.

The US jobs data due this week could be softer according to analysts’ estimates. The US is expected to have added 178’000 non-farm jobs in December, the unemployment rate is seen higher at 4.7% versus 4.6% printed a month earlier, whereas the average hourly earnings may have improved 0.3% from -0.1% month-on-month as of last month. Soft data could temporally further weigh on the US dollar and US yields. Nevertheless, President-elect Donald Trump’s action on jobs is aggressive enough to temper any disappointment and keep the hawks in charge of the market.

The FOMC minutes are due today and will hopefully give more clarity on the Federal Reserve (Fed) members’ outlook regarding the future of the US’ monetary policy. The hawkish shift due to Donald Trump’s victory has been broadly priced in, therefore Fed hawks are not expected to react excessively to the minutes. The Fed is expected to hike rates three times in 2017, instead of two times forecasted previously.


The US 10-year yields recovered 2.76 basis points in Asia, bouncing off below 2.45%. The US dollar traded mixed against the G10 complex, yet remained offered against the emerging market currencies. Mexican peso (+0.33%) was little changed on Ford news. The Dow Jones and the S&P500 stocks are set for a rangebound open.


Yen depreciates despite broadly softening USD

The yen slid by 0.23% against the US dollar as Japan came back from holidays. Nikkei and Topix rallied 2.51% and 2.36% respectively at the first trading day of 2017 in Tokyo.

The USDJPY traded in a tight range of 117.54/118.19. The pair is expected to remain well supported above the ascending hourly Ichimoku cloud and is expected to find support at the 117.50/117.90 area. The upside appears limited due to the recent easing in the USD and US yields, yet the mid-term bias hints at a further rise towards the 120.00 handle.