CFD Markets News and Forecasts — 29-03-2019

• We now have to see what happens on Monday with indicative votes
• Clearly not the result we wanted but a number of senior colleagues have voted with us today
• We don't know what, if anything, parliament will resolve next week
• Government will continue to talk to lawmakers from all parties and continue discussions with the DUP
• EU have been clear that withdrawal agreement discussions are closed
• PM still believes that a general election is not in the national interest

• Did not pencil in 2019 rate hike
• Says yield curve is indicative of growth scepticism
• Calls current monetary policy stance "Mildly accommodative, within neutral territory"
• Expects Q1 data to be "a bit noisy" due to shutdown
• Says he is open to using a Range tools, incl. repo facility to set rates

MPs voted by 344 votes to 286 to reject the withdrawal agreement. 

The final reading for the January Reuters/Michigan index of consumer sentiment came in at 98.4 compared to a preliminary reading of 90.7 and the February final reading of 93.8.

That was the highest reading since October 2018.

Economists had forecast the index to be unrevised at 97.8. 

The report noted that advance in the sentiment index was entirely due to more positive assessments from middle and lower income households, which more than offset a drop in sentiment among upper income households. 

According to the report, the index of the current economic conditions rose to 113.3 from February’s final reading of 108.5. 

Meanwhile, the index of consumer expectations increased to 88.8 from February’s final reading of 84.4.

Overall, the data do not indicate an emerging recession but point toward slightly lower unit sales of vehicles and homes during the year ahead, the report says. 

The U.S. Commerce Department announced on Friday that the sales of new single-family homes increased 4.9 percent m-o-m to a seasonally adjusted annual rate of 667, 000 units in February, as lower mortgage costs helped buyers afford properties. That was the highest reading since March 2018.

Economists had forecast the sales pace of 620,000 last month. 

January’s sales pace was revised up to 636,000 units from the originally reported 607,000 units. 

According to the report, new home sales in the South, the largest area, rose 1.8 percent m-o-m in February to their highest level since July 2007. Sales in the Midwest climbed 28.3 percent m-o-m, while sales in the Northeast surged 26.9 percent m-o-m. Meanwhile, sales in the West were unchanged.

In y-o-y terms, new home sales recorded a 0.6 percent advance in February.

MNI Indicators’ report revealed on Friday that the expansion of business activity in Chicago slowed this month.

The MNI Chicago Business Barometer, also known as Chicago purchasing manager's index (PMI) came in at 58.7 in March, down from an unrevised 64.7 in February.

Economists had forecast the index to fall to 61.

A reading above 50 indicates improving conditions, while a reading below this level shows worsening of the situation. 

Of the major sub-components of the Barometer, employment and supplier deliveries both increased, albeit marginally. Production and new orders pulled back from last month but were appreciably above their respective January levels. Meanwhile, order backlogs shrank the most, with the indicator falling into contraction territory for the first time since January 2017. 

Statistics Canada announced on Friday that the country’s gross domestic product (GDP) increased a seasonally adjusted 0.3 percent m-o-m in January 2019, following a 0.1 m-o-m drop in December 2018. 

That was above economists’ forecast for a flat reading. 

In y-o-y terms, the Canadian GDP rose 1.6 percent in January. 

According to the report, the output of goods-producing industries increased 0.6 percent m-o-m, led by growth in manufacturing (+1.5 percent m-o-m) and construction (+1.9 percent m-o-m). Meanwhile, services-producing industries rose 0.2 percent m-o-m as all but one sector (accommodation and food services, -0.5 percent m-o-m) increased.

U.S. stock-index rose on Friday amid renewed optimism on the progress of U.S.-China trade talks.

Global Stocks:

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

DowDuPont (DWDP) initiated with a Neutral at Goldman; target $42

The Commerce Department announced on Friday that consumer spending in the U.S. edged up 0.1 percent m-o-m in January 2019, following a revised 0.6 percent m-o-m drop in December 2018 (originally a 0.5 percent m-o-m decrease). Economists had forecast the reading to show a 0.3 percent m-o-m growth. 

Meanwhile, consumer income fell 0.1 percent m-o-m in January after an unrevised 1.0 percent m-o-m increase in the previous month. 

The January decrease in personal income primarily reflected declines in personal dividend income, farm proprietors’ income, and personal interest income that were partially offset by increases in social security benefit payments (related to cost of living adjustments) and other government social benefits to persons, which includes the Child Tax Credit and the Affordable Care Act refundable tax credit.

The personal consumption expenditures (PCE) price index, excluding the volatile categories of food and energy, which is the Fed's preferred inflation measure, edged up 0.1 percent m-o-m in January, following a 0.2 percent m-o-m advance in the prior month. Economists had projected the index would increase 0.2 percent m-o-m.

In the 12 months through January, the core PCE increased 1.8 percent, decelerating from a revised 2.0 percent gain in the 12 months through December (originally a 1.9 percent advance). Economists had forecast a gain of 1.9 percent y-o-y.

In February, consumer income rose 0.2 percent m-o-m, due primarily to increases in wages and salaries, government social benefits to persons, and proprietors’ income, which were partially offset by a decrease in personal interest income. Economists had expected the personal income to increase by 0.3 percent m-o-m in February.

Analysts at ABN AMRO think that the Eurozone’s headline inflation was probably stable (at 1.5% y-o-y), though core inflation likely slipped to 0.9% y-o-y, when the flash estimate for March is published the coming Monday.

• “Early data from selected member states went in different directions (German HICP down to 1.5% from 1.7%, Spain up to 1.3% from 1.1% and Belgium CPI to 2.3% from 2.2%). The softness in the core partly reflects German package holidays, though underlying trends remain extremely subdued.”
• “Despite recent ECB downgrades, we continue to think the central bank remains too optimistic in expecting core inflation to embark on a clear upward trend over its forecasting horizon. One factor behind this view is that we continue to see slack in the eurozone labour market on aggregate.”
• “We think that the moderate rise in wage growth we have seen is a catch up to past rises in headline inflation rather than a reflection of labour market tightness. Indeed, we think that wage growth will slow going forward. Core inflation is likely to remain flattish in coming quarters.”
• “Given lower than expected underlying inflationary pressures in a number of developed economies that are more advanced in their cycle than the eurozone, it seems rather heroic to expect a significant acceleration in core inflation in the eurozone.”

Political Editor of The Sun Tom Newton Dunn tweeted that "allies of Dominic Raab say he will stand up soon and reveal he is backing the deal."

In another tweet, Dann said "Tory MPs think something is underway with the DUP. Dodds and Chief Whip met this morning, and both missed Cox's opening statement. Unlikely still, but don't rule out very last minute movement."

“@USTradeRep and I concluded constructive trade talks in Beijing,” the U.S. Treasury Secretary Steven Mnuchin announced on social media network Twitter on Friday.

“I look forward to welcoming China’s Vice Premier Liu He to continue these important discussions in Washington next week,” he added, but gave no details.

Mnuchin and U.S. Trade Representative Robert Lighthizer were in the Chinese capital for the first face-to-face meetings between the two sides since President Donald Trump delayed a scheduled March 2 increase in tariffs on $200 billion worth of Chinese goods, citing progress in trade negotiations.

China had a final current account surplus of $54.6 billion for the fourth quarter, the foreign exchange regulator said.

China posted a final capital and financial account surplus of $15.8 billion for the same period, the State Administration of Foreign Exchange said.

The final current account surplus for 2018 came in at $49.1 billion, while the final capital and financial account surplus was $111.1 billion.

Euro zone banks are supplying credit to all corners of the bloc and the ECB upcoming round of cheap loans is merely designed to "protect" that channel, ECB board member Benoit Coeure said.

"Today, the bank lending channel in the euro area is fully operational after years of fragmentation," Coeure told.

"To protect this achievement, we decided at our last monetary policy meeting in March to launch a new series of targeted long-term refinancing operations, 'TLTRO-III', starting in September 2019."

Sean Callow, analyst at Westpac, notes that Australia’s federal budget is typically delivered in May but with an election required no later than 18 May, the government has opted to announce the budget on Tuesday.

“Given that even a short election campaign would be around a month, parliament will be dissolved in April, allowing very little time for any legislation announced on Tuesday to become law. The budget will probably draw more interest than the RBA decision a few hours earlier, with a steady hand at 1.5% very likely, along with limited change to the statement. The week ahead includes plenty of Australian data, with February updates on retail sales, building approvals and the trade balance all due. Along with the federal budget, these will be important for the Aussie dollar’s ability to keep avoiding a break of 0.7000, as markets weigh up the case for RBA rate cuts.”

According to preliminary estimates from Istat, in March 2019 the Italian consumer price index for the whole nation (NIC) increased by 0.3% on monthly basis and by 1.0% with respect to March 2018, the same as in the previous month.

The stability of inflation was the result of opposite movements. The acceleration of prices of Non-regulated energy products (from +0.8% to +3.3%) were offset by the slowdown of prices of Unprocessed food (from +3.7% to +2.0%), of Services related to transport (from +0.9% to +0.4%) and of Tobacco (from +4.5% to +4.0%).

The core inflation excluding energy and unprocessed food was +0.5% (up from +0.4% in February 2019) and inflation excluding energy was +0.7% (stable compared to the previous month).

In March 2019, according to preliminary estimates, the Italian harmonized index of consumer prices (HICP) increased by 2.3% on monthly basis and by 1.1% with respect to March 2018, the same as in the previous month. The wide increase on monthly basis was mainly due to the conclusion of winter sales of Clothing and footwear, which are not taken into account in the national index NIC.

Office for National Statistics said, the UK current account deficit widened by £0.7 billion to £23.7 billion in Quarter 4 (Oct to Dec) 2018, or 4.4% of gross domestic product (GDP), the largest deficit recorded since Quarter 3 (July to Sept) 2016 in both value and percentage of GDP terms. Annually, the UK current account deficit widened to 3.9% of GDP in 2018, compared with 3.3% in 2017.

The UK total trade deficit widened by £0.6 billion to £9.4 billion, due to a widening of the trade in goods deficit, partially offset by an improving trade in services surplus.

The primary income deficit worsened by £1.1 billion to £8.4 billion in Quarter 4 2018.

The financial account recorded a net inflow into the UK of £35.8 billion in Quarter 4 2018, an increase from an inflow of £18.0 billion in Quarter 3 2018.

According to the report from Office for National Statistics, UK gross domestic product (GDP) in volume terms was estimated to have increased by 0.2% in Quarter 4 (Oct to Dec) 2018, unrevised from the previous estimate.

There has been an upward revision of 0.1 percentage points to GDP growth in Quarter 3 (July to Sept) 2018 to 0.7%, due to revisions to estimates of government services; the first two quarters of 2018 remain unrevised in the latest quarter.

Growth in the latest quarter was driven by the services sector, while all four sub-sectors of production and construction contributed negatively to GDP growth.

Private consumption and government consumption contributed positively, while gross capital formation and net trade contributed negatively to GDP growth in the latest quarter.

There have been some upward revisions to business investment in Quarter 3 and Quarter 4 2018 because of later survey returns, but business investment still fell in every quarter of 2018.

Nominal GDP increased by 0.7% in Quarter 4 2018 with compensation of employees providing the largest contribution to growth.

According to the report from Federal Employment Agency, unemployment fell by 72,000 from February to March to 2,301,000. Adjusted for seasonal influences, a fall of 7,000 is calculated for March compared to the previous month. Compared to the previous year, 157,000 fewer people were registered as unemployed. The unemployment rate fell by 0.2 percentage points to 5.1 percent. Compared to March of last year, it has decreased by 0.4 percentage points. The unemployment rate calculated by the Federal Statistical Office according to the ILO employment concept was 3.1 percent in February.

Underemployment, which also includes people in relieving labor market policies and short-term incapacity for work, fell 9,000 from a seasonally adjusted month ago. Overall, underemployment in March 2019 was 3,254,000. That was 185,000 less than a year ago.

KOF Economic Research Agency said, in March 2019, the KOF Economic Barometer rose and has reached a reading of 97.4. Economists had expected increase to 93.9 from 92.4 in February.  The recent downward tendency has at least for the time being ended. However, as the current barometer reading is still markedly below its average, in the coming months the Swiss economy can expect to experience rather weak growth rates.

By the end of March, the KOF Economic Barometer rose from 93.0 (revised from 92.4) by 4.4 points to 97.4. This is predominantly due to positive impulses from the manufacturing industry. The positive tendency within the manufacturing industry is mostly driven by the electrical industry, followed by the metal industry, mechanical engineering and the textile industry. In the goods producing sector (manufacturing and construction), the positive trend is above all attributable to the assessments of the intermediate products, order backlogs and the overall business situation. The assessment of production has also improved somewhat.

According to the report from Insee, in February 2019, household expenditure on goods decreased by 0.4% in volume, after a rebound in January  (+1.4% after −1.5% in December).

In February, energy consumption declined significantly (−3.3% after +6.5%). This decrease was mainly due to the drop in electricity consumption, as a result of relatively mild temperatures for the season. In addition, fuel consumption decreased very slightly (−0.2%).

In February, spending on manufactured goods increased (+0.6%). Durable good purchases went up (+0.6%), as did spending on other manufactured goods (+0.4%). Expenditure on clothing and textile accelerated slightly (+0.7% after +0.4%). Consumption of durable goods increased in February (+0.6%).Expenditure on textile and clothing accelerated slightly in February (+0.7% after +0.4%). In February, consumption of "other manufactured goods" increased again (+0.4% after +0.4%), driven by drug purchases. In February, food consumption fell slightly (−0.1% after −0.9% in January).

According to the report from Insee, over a year, the Consumer Price Index (CPI) should rise by 1.1% in March 2019, after +1.3% in February, according to the provisional estimate made at the end of March 2019. The decrease in inflation should result from a slowdown in the prices of services, food and tobacco. Contrariwise, energy prices should gather pace anew. At least, those of manufactured products should drop at the same pace as in February.

Over one month, consumer prices should rise by 0.8% after a stability in February. Manufactured product prices should rebound after the end of winter sales in February. Those of services and tobacco should rise after a stability in the previous month. Contrariwise, energy prices should slow down and food prices should fell back due to an accentuated decrease in fresh product prices.

Year on year, the Harmonised Index of Consumer Prices should slow down: +1.3% in March 2019 after +1.6% in February. Over one month, it should rise by 0.9%, after +0.1% in the previous month.

According to Karen Jones, analyst at Commerzbank, EUR/USD remains on the defensive and attention has reverted to the 1.1176 recent low.

“The market has recently not sustained breaks to new lows, but there is a risk of a slide to the 1.1110 end of May 2017 low (not our favoured scenario). We suspect that it is trying to base but needs to do more work. Once above the 200 day MA at 1.1459, the cross should target the 1.1570 January high, together with the 55 week MA at 1.1609. Below 1.1185/75 (61.8% retracement) lies the 1.1110, the May 2017 low and the 1.0814/78.6% retracement.”

According to provisional data from Destatis, turnover in retail trade in February 2019 was in real terms 4.7% and in nominal terms 5.5% larger than in February 2018. The number of days open for sale was 24 in February 2019 and in February 2018.

Compared with the previous year, turnover in retail trade was in the first two months of 2019 in real terms 3.9% and in nominal terms 4.6% higher than in the corresponding period of the previous year.

When adjusted for calendar and seasonal variations, the February turnover was in real 0.9% and in nominal terms 1.1% higher than in January 2019.

Separate data from Destatis showed, the index of import prices increased by 1.6% in February 2019 compared with the corresponding month of the preceding year. In January 2019 and in December 2018 the annual rates of change were +0.8% and +1.6%, respectively. From January 2019 to February 2019 the index rose by 0.3%. The index of import prices, excluding crude oil and mineral oil products, increased in February 2019 by 1.2% compared to February 2018 and in comparison with January 2019 it fell by 0.2%. The index of export prices increased by 1.3% in February 2019 compared with the corresponding month of the preceding year. In January 2019 and in December 2018 the annual rates of change were +1.1% and +1.3%, respectively. From January 2019 to February 2019 the index slightly rose by 0.1%.

EUR/USD

Resistance levels (open interest**, contracts)

$1.1410 (2280)

$1.1371 (2375)

$1.1341 (882)

Price at time of writing this review: $1.1231

Support levels (open interest**, contracts):

$1.1189 (3774)

$1.1145 (4526)

$1.1097 (1304)

Comments:

- Overall open interest on the CALL options and PUT options with the expiration date April, 5 is 75642 contracts (according to data from March, 28) with the maximum number of contracts with strike price $1,1350 (4599);

GBP/USD

Resistance levels (open interest**, contracts)

$1.3248 (378)

$1.3206 (310)

$1.3175 (734)

Price at time of writing this review: $1.3073

Support levels (open interest**, contracts):

$1.3025 (1434)

$1.3007 (789)

$1.2986 (479)

Comments:

- Overall open interest on the CALL options with the expiration date April, 5 is 25793 contracts, with the maximum number of contracts with strike price $1,3400 (4222);

- Overall open interest on the PUT options with the expiration date April, 5 is 31426 contracts, with the maximum number of contracts with strike price $1,2500 (5047);

- The ratio of PUT/CALL was 1.22 versus 1.16 from the previous trading day according to data from March, 28

* - 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.