CFD Markets News and Forecasts — 17-12-2018

Major US stock indexes declined significantly on Monday against the backdrop of a collapse of all sectors and the publication of weak US data.

Following the news of a sharp reversal of American homebuilders confidence in the previous month, the National Housebuilders Association (NAHB) published a report that unexpectedly reflected a further deterioration in trust in December. The report says that the NAHB / Wells Fargo housing market index fell to 56 points in December from 60 points in November. Economists had expected the index to reach 61 points. With an unexpected monthly decline, the index reached its lowest level since May 2015 (then it was 54 points).

Market participants were preparing for the Fed meeting, which starts tomorrow. It is expected that the regulator will raise rates to 2.25-2.50% from the current level of 2.00-2.25% per annum and only slightly adjust its economic forecasts. Despite this, the Fed is likely to abandon claims of "further gradual increase" in interest rates due to a change in its position of waiting. Most likely, the forecast of the Fed management will assume two more rate increases in 2019, rather than three, as expected in September.

WTI crude oil prices fell by almost 4% on Monday amid signs of oversupply in the United States, as well as investor concern about global economic growth and fuel demand. Oil reserves in the terminal Cushing, Oklahoma, rose by more than 1 million barrels from 11 to 14 December, traders reported, citing data from the analytical company Genscape.

All DOW components recorded a decline (30 out of 30). The outsider was American Express Company (AXP, -4.28%).

All sectors of the S & P finished trading in the red. The utility sector fell the most (-3.0%).

At the time of closing:

Dow 23,592.98 -507.53 -2.11%

S & P 500 2,545.94  -54.01 -2.08%

Nasdaq 100  6,753.73 -156.93 -2.27%

Builder confidence in the market for newly-built single-family homes fell four points to 56 in December on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) as concerns over housing affordability persist. Although this is the lowest HMI reading since May 2015, builder sentiment remains in positive territory.

“We are hearing from builders that consumer demand exists, but that customers are hesitating to make a purchase because of rising home costs,” said NAHB Chairman Randy Noel, a custom home builder from LaPlace, La. “However, recent declines in mortgage interest rates should help move the market forward in early 2019.”

“The fact that builder confidence dropped significantly in areas of the country with high home prices shows how the growing housing affordability crisis is hurting the market,” said NAHB Chief Economist Robert Dietz. “This housing slowdown is an early indicator of economic softening, and it is important that builders manage supply-side costs to keep home prices competitive for buyers at different price points.”

U.S. stock-index futures fell on Friday, as investors continued to worry about global economic slowdown, while awaiting the Federal Reserve’s monetary policy guidance.

Global Stocks:

(company / ticker / price / change ($/%) / volume)

Business activity grew at a slower pace than in recent months in New York State, according to firms responding to the December 2018 Empire State Manufacturing Survey. The headline general business conditions index fell twelve points to 10.9. New orders increased modestly, while shipments continued to climb significantly. Delivery times lengthened slightly, and inventories moved higher.

The employment index rose twelve points to 26.1, indicating that employment grew strongly, and hours worked increased modestly. The prices paid index, while still elevated, moved down five points, and the prices received index held steady. Looking ahead, firms remained fairly optimistic about the sixmonth outlook, though optimism was slightly more tempered than in November.

At the same time, Canadian investment in foreign securities increased to $14.9 billion, the largest investment since January 2018.

As a result, international transactions in securities generated a net outflow of funds of $11.0 billion from the Canadian economy in October.

From January to October 2018, portfolio investment generated a net inflow of funds in the economy of $4.8 billion, compared with $100.7 billion for the same period in 2017. Lower foreign purchases of Canadian government bonds combined with higher Canadian purchases of foreign bonds in 2018 explained the difference. Interest rates in the United States have increased by more than their Canadian counterparts so far in 2018.

Brent crude, the global oil benchmark, was trading up 0.9% at $60.81 a barrel on London's Intercontinental Exchange.

West Texas Intermediate futures, the U.S. oil standard, were up 0.8% at $51.62 a barrel on the New York Mercantile Exchange.

A softer U.S. dollar helped bolster oil prices at the start of the week, after a stronger greenback had provided a headwind for crude prices at the end of last week, according to analysts. Dollar-denominated commodities like oil tend to have an inverse relationship with the U.S. currency. The dollar was down 0.14% in midmorning trade, according to the WSJ Dollar Index, which measures the U.S. currency against a basket of 16 of its peers.

• US Measures On Steel, Aluminium Production Allow Protectionism To Be At Large Under Pretext Of National Security

The first estimate for euro area (EA19) exports of goods to the rest of the world in October 2018 was €209.7 billion, an increase of 11.4% compared with October 2017 (€188.3 bn). Imports from the rest of the world stood at €195.8 bn, a rise of 14.8% compared with October 2017 (€170.5 bn). As a result, the euro area recorded a €14.0 bn surplus in trade in goods with the rest of the world in October 2018, compared with +€17.8 bn in October 2017. Intra-euro area trade rose to €175.6 bn in October 2018, up by 8.7% compared with October 2017.

A year earlier, the rate was 1.5%. European Union annual inflation was 2.0% in November 2018, down from 2.2% in October. A year earlier, the rate was 1.8%.

The lowest annual rates were registered in Denmark (0.7%), Ireland (0.8%) and Portugal (0.9%). The highest annual rates were recorded in Estonia, Hungary and Romania (all 3.2%). Compared with October 2018, annual inflation fell in twenty-five Member States, remained stable in one and rose in one. In November 2018, the highest contribution to the annual euro area inflation rate came from energy (+0.88 percentage points), followed by services (+0.57 pp), food, alcohol & tobacco (+0.38 pp) and non-energy industrial goods (+0.11 pp).

• UK Business Sec Clark: Brexit Deal Must Be Put Parliament ‘ Soon’, Brexit Deal Important To End Uncertainty In Economy

In October 2018 seasonally-adjusted data, compared to September 2018, increased both for outgoing flows (+2.5%) and for incoming flows (+2.1%). Exports rose both for non EU countries and EU countries (+5.3% and +0.4% respectively). Imports rose for EU countries (+3.8%) and decreased for non EU countries (-0.1%).

Over the last three months, seasonally-adjusted data, compared to the three months earlier, showed an increase for exports (+1.0%) and for imports (+2.7%).

In October 2018, compared with the same month of the previous year, exports and imports raised (+9.6% and +14.2% respectively). Outgoing flows increased by +11.5% for non EU countries and by +8.1% for EU countries. Incoming flows rose by +24.8% for non EU area and by +7.9% for EU area. The trade balance in October amounted to +3,784 million Euros (+3,040 million Euros for non EU area and +744 million Euros for EU countries).

The prospects for the dollar to rise aren't great, and most of the gains it gathered came earlier in 2018. However, the European economy is taking hits from Brexit, Italian political uncertainty, French protests and the German emissions scandal, as well as uncertainty about trade, SocGen says. "That's a lot for the euro to cope with," the French bank says. Therefore, even though EUR/USD is up 0.1% at 1.1317, the best we can hope for is that the bottom of the current EUR/USD 1.12-1.1450 range holds in the near-term, SocGen says.

A positive start to trading on the stock markets of Europe is expected. This largely reflects US stock futures sentiment.

• The price of property coming to market falls by 1.7% (-£5,222) this month, and whilst it is the norm for new seller asking prices to fall at this time of year, this is the largest November drop since 2012

• New sellers pricing more realistically in effort to minimise pre-Christmas ‘buyer humbug’ syndrome fuelled by stretched affordability and Brexit uncertainty

• All regions see a monthly price fall, with largest falls in the south and the upper price sector:

• Higher end London commuter towns – where prices have risen by over 40% since 2011 – unsurprisingly have significant price falls

• Annual national rate is marginally negative (-0.2%, -£607) for the first time in seven years

• Price slowdown seen as an early Christmas present for some buyers with numbers of sales agreed up nationally by 1% compared to same period a year ago, indicating some sound underlying fundamentals

EUR/USD

Resistance levels (open interest**, contracts)

$1.1494 (1660)

$1.1465 (928)

$1.1407 (138)

Price at time of writing this review: $1.1307

Support levels (open interest**, contracts):

$1.1270 (4881)

$1.1231 (2963)

$1.1188 (2486)

Comments:

- Overall open interest on the CALL options and PUT options with the expiration date January, 7 is 69301 contracts (according to data from December, 14) with the maximum number of contracts with strike price $1,1500 (7123);

GBP/USD

Resistance levels (open interest**, contracts)

$1.2804 (728)

$1.2745 (183)

$1.2703 (188)

Price at time of writing this review: $1.2580

Support levels (open interest**, contracts):

$1.2518 (1544)

$1.2487 (1296)

$1.2452 (2546)

Comments:

- Overall open interest on the CALL options with the expiration date January, 7 is 33034 contracts, with the maximum number of contracts with strike price $1,3400 (3836);

- Overall open interest on the PUT options with the expiration date January, 7 is 30402 contracts, with the maximum number of contracts with strike price $1,2450 (2891);

- The ratio of PUT/CALL was 0.92 versus 0.94 from the previous trading day according to data from December, 14

* - The Chicago Mercantile Exchange bulletin (CME) is used for the calculation.

** - Open interest takes into account the total number of option contracts that are open at the moment.