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.
USD jumps on solid jobs data, lira falls
The US dollar rallied and the 10-year yield jumped to 2.0390%, as the solid US jobs report released the dovish pressure on the Federal Reserve (Fed) on Friday. Data showed that the US economy added 224’000 nonfarm jobs in June, well above the 160’000 expected by analysts. The unemployment rate rose from 3.6% to 3.7% and the average earnings growth remained unchanged at 3.1% y-o-y, yet the participation rate improved from 62.8% to 62.9%.

The solid US labour data will certainly bring investors to review their Fed expectations in favour of a less dovish monetary policy. Hence, all eyes are on Fed Governor Jerome Powell, who will deliver his semiannual testimony before the Congress on Wednesday. The FOMC meeting minutes will also be released on the same day. Both the FOMC minutes and Governor Powell’s testimony should remind investors that the US may need a gentle monetary support to prevent the US – China trade war from interfering with the US economic growth, but a significant policy easing is probably not necessary just yet.

Hence, the US markets could be expected to rectify their recent risk rally. The S&P500 (-0.18%), the Dow Jones (-0.16%) and Nasdaq’s composite index (-0.10%) closed a touch lower on Friday and the US equity futures remained offered in Asia.

US sovereign bonds sold off, although the probability of a 25-basis-point Fed rate cut in July remained priced at 100%. However, the expectation of a 50-basis-point cut waned.

Asian equities kicked off the week on a negative note. Shanghai’s Composite dropped as much as 3% and Hang Seng erased 1.88% on the back of escalating protests in Hong Kong. Australia’s ASX slipped 1.07%. Nikkei and Topix fell 0.95% and 0.73% respectively. Even a cheaper yen couldn’t increase investors’ appetite in Japanese stocks.

Gold tumbled below the $1400 mark an ounce. There is potential for a deeper downside correction if the Fed expectations were to become less dovish. The key support to the May – July positive trend is seen at $1375, the major 38.2% Fibonacci retracement.

The FTSE (-0.10%) and DAX (-0.33%) futures hint at a negative start in Europe as well.

The FTSE is expected to open 8 point lower at 7545p.

Cable slipped below the 1.25 mark on Friday following the US jobs report.

Inside the UK, polls continue hinting at a comfortable victory for Boris Johnson in the final round of Conservatives’ vote. Some 160’000 Tories will receive their postal ballots this week and decide who, between Boris Johnson and Jeremy Hunt, should take the reins of the party and the country before July 21.

The pound is better bid in Asia after Rory Stewart, a Tory MP, suggested an ‘alternative parliament’ to block a no-deal Brexit in an effort to tame worries that Boris Johnson would even suspend parliament to push through a no-deal exit by October 31st. Still, the political uncertainties, combined to a stronger US dollar, will likely continue weighing on the pound sterling moving forward. Sellers remain on top of the game and the pound-bears will likely continue challenging the 1.25-support.


Lira hammered as Erdogan ousts the central bank president

Turkey wakes up yet to another hectic day.

Turkish President Recep Tayyip Erdogan ousted the central bank president Murat Cetinkaya, as he has not supported his view that higher interest rates cause higher inflation. Hence, the interest rates under Cetinkaya’s lead were pushed and maintained at levels that Erdogan explicitly disliked.

As a result, Cetinkaya’s exit hints that a rate cut in Turkey may be imminent. But more importantly, the Central Bank of Turkey (CBT) may be preparing to lower the interest rates at an unsuitably faster speed compared to what could be absorbed by the market.

In this respect, even though the CBT was expected to start waning past year’s 625-basis-point tightening due to the taming inflation and significantly dovish Fed expectations, the sudden ousting of Cetinkaya may in fact frustrate investors and limit their tolerance for lower lira rates due to increased policy risks.

The lira sold off heavily against the US dollar (-2.19%) and the euro (-2.17%) in the Asian session and the sell-off could gain momentum as Europe steps in.

Although the Cetinkaya incident is not a shocker for those who follow the challenging relationship between Erdogan and the central bankers in Turkey, it will certainly destroy what was left of the independence of the CBT.

Even more if the bank lowers the interest rates in the coming meeting.

17-1-2020

S&P 500 tops 3,300 as Alphabet reaches $1 trillion
EQUITIES European shares look set to open higher on Friday bolstered by stats showing stable economic growth in China and another record-breaking session on Wall Street that saw the S&P500 top 3,300 for the first time. Mining companies are likely to featur… Read more

16-1-2020

Europe to open higher & Sterling recovers
Shares in Europe and on Wall Street are set for a higher open on Thursday after a positive session in Asia.   Wall Street notched up new records and finished the day higher after the signing of the phase one US China trade deal. That the S&P 500 and Nasdaq… Read more

15-1-2020

Stocks, oil lower as Tariffs stay in place, Persimmon, Goldman Sachs, Saunders, UK CPI
European shares are lower on Wednesday after a down session in Asia while LCG pricing points to a lower start on Wall Street. US Treasury Secretary Steve Mnuchin confirmed that tariffs against China will remain until November, after the US election. The tariff… Read more

14-1-2020

Currency manipulator, China exports, Yuan 5-month high, US bank earnings
European shares are flat on Monday after a mixed session in Asia while LCG pricing points to a lower start on Wall Street. INDICES: US removes China currency manipulator status Wall Street has yet again reached new record highs in the lead-up to the signing… Read more

13-1-2020

Waiting for signing, Taiwan, William Hill, Ford, UK industrial production
European shares are trading mostly higher on Monday after a rally in Asia while LCG pricing points to a higher start on Wall Street. INDICES: Taiwan, Trade deal signing The landslide re-election of President Tsai Ing-wen and its implications for Taiwan’s relat… Read more

10-1-2020

STOXX 600, Ukraine Boeing 737, growth hopes, Apple, Carney, US payrolls report
INDICES: STOXX 600 fresh record, Dow 29k? European shares have opened mixed on Friday after a strong session in Asia, while LCG pricing points to Wall Street opening higher. Stock markets are sitting at record highs because visions of better global growth and… Read more

7-1-2020

Dip-buying, Uber, Hyundai, Tesla, Eurozone CPI
INDICES: Iran tensions fall After a rise in Asian shares, European shares have opened on a firmer footing while LCG pricing points to a flat open on Wall Street. Energy and miners are the biggest sector laggards while the rest of the market edges mostly higher… Read more

6-1-2020

Iran, gold, oil, USDJPY, Aldi & supermarket Christmas sales
INDICES: Investors wait for Iran retaliation Stocks in Europe have opened lower on Monday. Today’s opening losses extend the stock market weakness that began on Friday when a US airstrike killed Iran’s top Military Commander Qassem Soleimani. The prospect of… Read more