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.
World equities rally, GBP extends gains
Equities rally worldwide as US and China said to meet early October in Washington, Hong Kong announced the withdrawal of the extradition bill and British MPs rejected a snap election by next month.

The US markets closed Wednesday’s session in the green. S&P (+1.07%), Dow (+1.04%) and Nasdaq (+1.29%) futures followed up on the US session gains.

The US 10-year yield jumped above the 1.50% mark. With only a slim chance of a trade deal, all investors ask is at least the continuation of the trade talks. It is uncertain whether Trump would attempt to cool down the trade war moving into the presidential election year, or he would continue fanning the flames and using it as a tool to exercise an increased pressure on the Federal Reserve (Fed) for lower interest rates. So far, he has shown no urge to seal a deal, and both the equity and bond markets were set on fire with dovish Fed speculations.

Nikkei and Topix rallied past 2% as Japanese yen weakened on improved risk appetite. ASX gained 0.80%. Energy stocks rallied 1.61% in Sydney, as the barrel of WTI crude traded past the $56 level and Brent crude recovered above the $60 a barrel mark.

The FTSE 100 extended gains to 7334p on Wednesday. FTSE futures (+0.63%) hint at a positive start in London; energy and mining stocks should remain on the front foot amid an improved global risk appetite. Meanwhile, relatively cheap sterling remains mouth-watering for Britain’s blue-chip investors.

DAX is set for a strong positive open as well.


Cable jumped 2.50% since September 3rd dip

In the currency markets, the pound extended recovery to 1.2260 against the US dollar, as British Parliament rejected Boris Johnson’s proposal for an early election by next month. Less than the half of the MPs voted in favour of a snap election, while Johnson needed at least two thirds support to throw an election as early as mid-October. It is certainly surprising for an opposition party to reject an early election, but the soft-Brexiteers chose to discard the slightest risk of a no-deal rush out of the European Union if Johnson successfully united hard Brexiteers under the same roof.

Investors trimmed their short positions in sterling, as the possibility of an imminent no-deal Brexit and an early election were discarded within 24 hours. The latest developments don’t mean that the UK will leave the European Union with a suitable deal, it only means that the Brexit deadline will be delayed by at least another three months. Yet the tiniest hope of a Brexit deal is enough to lift the sentiment across the pound markets, provided that the net speculative short positions in sterling hit the highest levels since the first quarter of 2017. Hence, there is potential for a further short squeeze in this market, but the recovery should remain limited given that an extended Brexit deadline means a stretched period of uncertainty and the UK’s economic fundamentals are deteriorating. Released earlier this week, the August PMI numbers hinted at a slower economic activity in Britain, reviving fears that the country could print a second straight quarterly fall in GDP and enter a recession. But the inflation levels are such that the Bank of England (BoE) would not be able to lower the interest rates to give support to the economy without compromising the price stability. Unlike its major peers, the BoE is expected to stay pat in the September monetary policy meeting.

The latter is not true for the Federal Reserve and the European Central Bank.


US jobs data in focus

The US dollar index fell 1% since the beginning of this week, following a meagre ISM report on manufacturing activity in August. Later today, the ADP employment report should reveal how much private jobs the US added in August. Analysts expect 148’000 new private jobs last month, slightly lower than 156’000 printed a month earlier.

On Friday, the August nonfarm payrolls are expected at 160’000 versus 164’000 released last month. The US unemployment rate should remain steady at 3.7%, a fifty-year low, but the average hourly earnings growth may have slowed to 3.00% year-on-year from 3.2% a month earlier.


Swiss GDP to have slowed in Q2 on global trade tensions, strong franc

Elsewhere, the Chinese slowdown may have taken its toll on the Swiss economy combined with the franc’s past 5% appreciation against the greenback, and nearly 6% appreciation versus the euro since April. The Swiss GDP growth is expected to have slowed to 0.2% in the second quarter versus 0.6% printed a month earlier. The year-on-year growth may have nearly halved, from 1.7% to 0.9% in Q2. Swiss economy is a victim of its currency’s solid safe-haven status. Even with a policy rate of -0.75%, Swiss policymakers are unable to stop haven flows from pouring into the franc. Deeper negative interest rates in the Euro-zone may increase the pressure for lower Swiss rates, but investors will unlikely renounce to their franc holdings in the absence of a concrete intervention.

The euro advanced past the 1.10 mark against the US dollar, after the incoming ECB president Christine Lagarde said she would review the debated negative rates, while emphasizing that she would keep them in place. Actual ECB head Mario Draghi is expected to lower the European rates by at least 10 basis points in September before kissing investors goodbye. The probability of a 20-basis-point cut is being priced in above 60% in the Euro-zone sovereign debt markets.

16-9-2019

Oil prices jump on Saudi attacks, equity futures fall and gold gains
Brent crude jumped 19%, as WTI crude surged 15% at the weekly opening bell, after a drone attack on Saudi Arabia’s state oil company Aramco halved the country’s production over the weekend. This has been the biggest one-time disruption in oil supply in the his… Read more

13-9-2019

Global equities rally, Eurozone yields converge after ECB delivers disputed stimulus
Asian equities gained after the European and US markets closed in the green, as the European Central Bank (ECB) delivered more stimulus to boost inflation and Trump administration hinted at an interim trade deal with China to ease tensions before the next face… Read more

12-9-2019

Euro tests $1.10 but ECB doves could be hard to satisfy
The European Central Bank (ECB) meeting is what matters the most to worldwide traders today. The ECB is expected to take monetary action at today’s meeting to give a boost to the depressed Euro zone economy as a result of the rising global trade tensions, slow… Read more

11-9-2019

Downside correction in sovereign bonds continues ahead of ECB, Fed meetings
Asian equities mostly gained on Wednesday, but stocks in mainland China remained on the back foot despite the Chinese government’s dismissal of quotas and approvals for foreign investors. The latter move was interpreted as a sign of desperation and an increase… Read more

10-9-2019

Sovereign bond sell-off hit sentiment, gold dives below $1500
A global sovereign bond sell-off sent the US 10-year yield to two-week highs.The 10-year German bund yield eased to -0.585% from above -0.70% at the beginning of this month. The euro held ground above 1.10 against the greenback, but the topside remained limite… Read more

9-9-2019

Equities gain on Chinese stimulus, GBP worried ahead of production data
Asian equities kicked off the week on a positive note as lower-than-expected jobs report in the US consolidated the dovish Federal Reserve (Fed) expectations and the People’s Bank of China (PBoC) announced more monetary stimulus amid country’s exports fell 1% … Read more

6-9-2019

Hexo is still a good play for cannabis investors
Hexo Corp is a leading player in cannabis industry with more than $1 billion market cap after the acquisition of Newstrike Investors like Hexo for its renowned international partnerships Revenues grow steadily, but investors are concerned with company burn… Read more

6-9-2019

NFP in focus, US jobs at risk due to trade war
The US dollar gained against most G10 currencies, except the kiwi, amid the strong data tapered the dovish Federal Reserve (Fed) expectations. The ADP employment data revealed on Thursday that the US economy added 195’000 private jobs in August, versus 148’000… Read more