Search

Client support: Phone: +357 (22) 008796

Market panorama. 1 February 2018

ATTENTION: Free access to the material presented in the Market Panorama is granted six hours after its publication. To get this material immediately, you are recommended to subscribe.

I. Market focus:

01/02/2018

The outcomes of the January meeting of the Federal Open Market Committee (FOMC) fully coincided with the expectations: the regulator did not make any changes to the parameters of its monetary policy, leaving its target range for the federal funds rate unchanged at 1.25-1.5 percent. The language in the accompanying statement was expectedly somewhat more hawkish than in the December statement. In particular, the Fed removed the note that price pressure measurements "have declined" and were "running below 2 percent", and said it expected the inflation "to move up this year" and stabilize around its 2 percent target "over the medium term." The FOMC also added that it expects “that economic conditions will evolve in a manner that will warrant further gradual increases in the federal funds rate.” The announcement of the outcomes of the Fed meeting strengthened market participants’ confidence that there will be three rate hikes this year, but overall, had no significant impact on the market dynamics.

The most significant event of the morning session on Thursday was the extremely disappointing data on construction permits in Australia, which triggered a sharp decline in the Australian currency. Overall, the beginning of today's session was fairly calm. Market participants await data on the U.S. labor market, set to be published tomorrow. The data from ADP, which were released yesterday, allow expecting a strong government report.

The main scheduled event of Thursday will be the release of the ISM Manufacturing Index for January at 15:00 GMT.

The stock market participants continue to assess the quarterly reports of companies, as the fourth-quarter earnings season rolls. Today, the focus will be on the quarterly reports from Altria (MO), DowDuPont (DWDP), Int'l Paper (IP), MasterCard (MA), Alphabet (GOOG), Amazon (AMZN), Apple (AAPL), Visa (V).


II. The market highlights are:

  • Federal Open Market Committee (FOMC) released its latest monetary policy decisions on Wednesday afternoon, following its latest meeting. As widely expected, the U.S. regulator did not make any changes to the policy stance, maintaining the target range for the federal funds rate at between 1.25 percent and 1.5 percent. In its statement, the FOMC also reiterated its belief that the economy will continue to expand at a moderate pace, and labor market conditions would remain strong. At the same time, the Committee members removed the note that price pressure measurements "have declined" and were "running below 2 percent". Instead, they said that the inflation is expected "to move up this year" and stabilize around its 2% target "over the medium term." The FOMC also added that it expects “that economic conditions will evolve in a manner that will warrant further gradual increases in the federal funds rate.”

  • The employment report prepared by Automatic Data Processing Inc. (ADP) and Moody's Analytics showed Wednesday the U.S. private employers added 234,000 jobs in January 2018. Economists had expected a gain of 185,000. The increase for December 2017 was revised down to 242,000 from 250,000. “We’ve kicked off the year with another month of unyielding job gains,” said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. “Service providers were firing on all cylinders, posting their strongest gain in more than a year. We also saw robust hiring from midsize and large companies, while job growth in smaller firms slowed slightly.” Meanwhile, Mark Zandi, chief economist of Moody’s Analytics, noted, “The job market juggernaut marches on. Given the strong January job gain, 2018 is on track to be the eighth consecutive year in which the economy creates over 2 million jobs. If it falls short, it is likely because businesses can’t find workers to fill all the open job positions.”

  • Statistics Canada reported Wednesday that the country’s gross domestic product (GDP) rose 0.4 percent m-o-m in November, following a flat performance in October. That was the biggest expansion in six months. Economists had forecast a 0.4 percent m-o-m growth in November. In y-o-y terms, the Canadian GDP rose 3.5 percent in November. According to the report, goods-producing industries rose 0.8 percent m-o-m, due mainly to the increases in the manufacturing and mining, quarrying and oil and gas extraction sectors  (+0.5 percent m-o-m), partly as a result of restoration in production capacity. Meanwhile, services-producing industries rose 0.3 percent m-o-m, led by such sectors as the real estate and rental and leasing (+0.4 percent m-o-m), wholesale trade (+0.5 percent m-o-m) and retail trade (+0.6 percent m-o-m).

  • MNI Indicators’ report showed Wednesday that the expansion of business activity in Chicago slowed in January. The MNI Chicago Business Barometer, also known as Chicago purchasing manager's index (PMI) came in at 65.7 in January, down from a revised 67.8 in December (originally 67.6), which was the highest reading since March of 2011. Economists had forecast the index to fall to 64.1. 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, the new orders index dropped to its lowest level in five months, the production index showed a more modest decline, and the backlogs index was the lowest since May. At the same time, the employment index surged to its highest level since late 2013, while input inflation rose to the highest level since September.

  • The National Association of Realtors (NAR) announced Wednesday its seasonally adjusted pending home sales index (PHSI) rose 0.5 percent to 110.1 in December from an upwardly revised 109.6 in November. The index is now at its highest reading since March. Economists had expected pending home sales to increase 0.4 percent m-o-m in December. According to the report, the pending home sales increased the South (+2.6 percent m-o-m as measured by PHSI) and the West (+1.5 percent m-o-m), but fell in the Northeast (-5.1 percent m-o-m) and the Midwest (+0.3 percent m-o-m). The chief economist for the NAR, Lawrence Yun, noted that pending sales edged up in December and reached their highest level since last March. "Another month of modest increases in contract activity is evidence that the housing market has a small trace of momentum at the start of 2018," he said. "Jobs are plentiful, wages are finally climbing and the prospect of higher mortgage rates are perhaps encouraging more aspiring buyers to begin their search now."

  • The U.S. Energy Information Administration (EIA) revealed Wednesday that crude inventories climbed by 6.776 million barrels to 418.359 million barrels in the week ended January 26. Economists had forecast an increase of 0.126 million barrels. At the same time, gasoline stocks fell by 2 million barrels to 242.1 million barrels, while analysts had expected a gain of 1.8 million barrels. Distillate stocks dropped by 1.9 million barrels to 137.9 million barrels last week, while analysts had forecast a decline of 1.2 million barrels. Meanwhile, oil production in the U.S. increased to 9.919 million barrels per day from 9.878 million barrels per day in the previous week. U.S. crude oil imports averaged about 8.4 million barrels per day last week, up by 380,000 barrels per day from the previous week.

  • The Australian Bureau of Statistics (ABS) announced Thursday the total number of building permits issued in the country tumbled by 20.2 percent m-o-m in seasonally adjusted terms in December. That missed economists’ forecasts for an 8 percent m-o-m decrease following an 11.7 percent m-o-m climb in November. According to the report, approvals for private sector dwellings excluding houses plunged 39.2 percent m-o-m in December, while private sector houses approvals rose 1.0 percent m-o-m. In y-o-y terms, total approvals fell 5.5 percent.

  • Markit/Caixin’s survey revealed on Thursday that China’s manufacturing sector continued to expand in January. The Caixin/Markit manufacturing purchasing managers' index (PMI) came in at 51.5 in January, the same reading as in December 2017, signaling a further modest improvement in overall operating conditions. The 50 mark divides contraction and expansion. Economists’ had predicted the reading to stay at 51.5. Among components, total new work and export orders both expand in January, albeit at a slower pace than in December. Output rose the most in 13 months. At the same time, employment continued to decline in January, which was partly linked to company downsizing policies, while the rate of input price inflation softened to a five-month low, but remained sharp overall. Commenting on the China General Manufacturing PMI data, Dr. Zhengsheng Zhong, Director of Macroeconomic Analysis at CEBM Group note that “The manufacturing industry had a good start to 2018. Going forward, we should keep a close eye on the stability of the demand side.”


III. Market Situation
Currency Market
The currency pair EUR/USD traded slightly lower. Market participants continued to assess the outcomes of the Fed meeting while awaiting statistics on manufacturing PMI for Eurozone and a set of the U.S. data (incl. weekly initial claims, the preliminary readings for fourth quarter productivity and unit labor costs, and the ISM Manufacturing Index). Recall, the Fed kept interest rates unchanged at its latest meeting. The regulator’s policymakers said that current conditions indicate that the overnight funds rate should remain anchored at 1.25 to 1.5 percent. At the same time, they acknowledged that inflation expectations recently increased, and said it expected the rate of price changes "to move up this year" and stabilize around the Fed’s 2 percent target "over the medium term."  The Fed also added that it expects “that economic conditions will evolve in a manner that will warrant further gradual increases in the federal funds rate.” These statements strengthened market participants’ confidence that there will be three rate hikes this year. Focus gradually shifts to tomorrow's data on nonfarm payrolls should confirm a strong picture for the U.S. economy, arguing in favor of further increases in rates and a strong dollar. Resistance level - $1.2516 (high of December 16, 2014). Support level - $1.2214 (low of January 22).

The currency pair GBP/USD traded slightly lower, as the U.S. dollar resume growth. In addition, investors adjusted their positions in anticipation of the release of the UK manufacturing PMI for January. The recent macroeconomic data on Britain showed a mixed picture - the December retail sales data indicated a stronger-than-expected decline, and the trade deficit widened in November. Nevertheless, the figures on industrial production turned out to be slightly better than projected in November, and the report on the number of people in work revealed a rise in the three months to November. According to economists’ forecast,  the UK manufacturing PMI rose to 56.5 points in January from 56.3 points in December. Resistance level - $1.4343 (high of January 25). Support level - $1.3977 (low of January 30).

The currency pair AUD/USD fell sharply, approaching its low of January 26, weighed down by the frustrating building permits data from Australia. The Australian Bureau of Statistics (ABS) announced the total number of building permits issued in the country tumbled by 20.2 percent m-o-m in seasonally adjusted terms in December. That missed economists’ forecasts for an 8 percent m-o-m decrease following an 11.7 percent m-o-m climb in November. According to the report, approvals for private sector dwellings excluding houses plunged 39.2 percent m-o-m in December, while private sector houses approvals rose 1.0 percent m-o-m. In y-o-y terms, total approvals fell 5.5 percent. Resistance level - AUD0.8134 (high of January 26). Support level - AUD0.7637 (low of January 16).

The currency pair USD/JPY rose moderately, approaching the high of January 26, due to an increase in yield on the U.S. Treasuries. At the same time, further growth of the pair was limited by favorable data from Japan. The latest report from IHS Markit showed the Nikkei Japan Manufacturing Purchasing Managers’ Index (PMI) increased to 54.8 in January, up from 54.0 in December. The reading signaled the sharpest improvement in the health of the Japanese manufacturing sector since February 2014. The growth of the Japanese manufacturing sector was underpinned by expansions in output, new orders and employment. Resistance level - Y111.18 (high of January 26). Support level - Y108.28 (low of January 26).

Stock Market

Index

Value

Change

S&P

2,823.81

+0.05%

Dow

26,149.39

+0.28%

NASDAQ

7,411.48

+0.12%

Nikkei

23,486.11

+1.68%

Hang Seng

32,642.09

-0.75%

Shanghai

3,446.24

-0.99%

S&P/ASX

6,090.10

+0.87%


U.S. stock indexes closed higher on Wednesday, helped by a new set of strong corporate earnings, upbeat macroeconomic data and the outcomes of the Fed’s latest meeting. The employment report prepared by Automatic Data Processing Inc. (ADP) and Moody's Analytics showed the U.S. private employers added 234,000 jobs in January 2018. Economists had expected a gain of 185,000. The increase for December 2017 was revised down to 242,000 from 250,000.  MNI Indicators’ report showed Wednesday that the expansion of business activity in Chicago slowed in January. The MNI Chicago Business Barometer, also known as Chicago purchasing manager's index (PMI) came in at 65.7 in January, down from a revised 67.8 in December (originally 67.6), which was the highest reading since March of 2011. Economists had forecast the index to fall to 64.1. The National Association of Realtors (NAR) announced its seasonally adjusted pending home sales index (PHSI) rose 0.5 percent to 110.1 in December from an upwardly revised 109.6 in November. The index is now at its highest reading since March. Economists had expected pending home sales to increase 0.4 percent m-o-m in December.

Asian stock indexes closed mixed on Thursday, as investors digested the outcomes of the January meeting of the U.S. Federal Reserve and awaited a raft of earnings reports from big international companies. The Chinese equities fell despite upbeat data on Caixin/Markit manufacturing PMI, as investors took profits ahead of the Lunar New Year holidays in mid-February.  The Japanese equity benchmark, the Nikkei, recovered from a four-week low, hit the previous day, helped by a weaker yen and an upbeat data on manufacturing PMI.

European stock indexes are expected to trade mixed in the morning trading session.


Bond Market
Yields of US 10-year notes hold at 2.73% (+2 basis points)
Yields of German 10-year bonds hold at 0.70% (0 basis points)
Yields of UK 10-year gilts hold at 1.52% (0 basis points)

Commodity Markets
Light Sweet Crude Oil (WTI) futures traded higher. Crude oil for delivery in March settled at  $64.77 (+0.06%). The crude oil prices rose slightly, as the s OPEC’s strong compliance with a supply reduction pact offset the latest report from the U.S. Energy Information Administration (EIA) on crude inventories and production in the U.S. The U.S. Energy Information Administration (EIA) revealed that crude inventories climbed by 6.776 million barrels to 418.359 million barrels in the week ended January 26. Economists had forecast an increase of 0.126 million barrels. At the same time, gasoline stocks fell by 2 million barrels to 242.1 million barrels, while analysts had expected a gain of 1.8 million barrels. Distillate stocks dropped by 1.9 million barrels to 137.9 million barrels last week, while analysts had forecast a decline of 1.2 million barrels. Meanwhile, oil production in the U.S. increased to 9.919 million barrels per day from 9.878 million barrels per day in the previous week. U.S. crude oil imports averaged about 8.4 million barrels per day last week, up by 380,000 barrels per day from the previous week.


Gold traded at  $1,341.10 (-0.28%). Gold prices rose moderately, due to the positive dynamics of the U.S. currency, the rise in yields on the U.S. Treasuries and increased expectations for three rate hikes this year. The index, measuring the value of the U.S. dollar relative to a basket of six major currencies, rose 0.16 percent to 89.28 Since gold prices are tied to the dollar, a stronger dollar makes the precious metal more expensive for holders of foreign currencies.


IV. The most important news that are expected (time GMT0)


08:15

Switzerland

Retail Sales

08:30

Switzerland

Manufacturing PMI

08:50

France

Manufacturing PMI

08:55

Germany

Manufacturing PMI

09:00

Eurozone

Manufacturing PMI

09:30

United Kingdom

Purchasing Manager Index Manufacturing

13:30

U.S.

Continuing Jobless Claims

13:30

U.S.

Initial Jobless Claims

13:30

U.S.

Unit Labor Costs

13:30

U.S.

Nonfarm Productivity

14:45

U.S.

Manufacturing PMI

15:00

U.S.

Construction Spending

15:00

U.S.

ISM Manufacturing

20:00

U.S.

Total Vehicle Sales

21:45

New Zealand

Visitor Arrivals

21:45

New Zealand

Building Permits



Market Focus

  • ECB's Weidmann says first ECB rate hike could follow the end of QE more closely than in the U.S
  • Industrial producer prices rose by 0.1% in the euro area (EA19) and by 0.2% in the EU28
  • European Commission forecasts Euro Zone inflation will accelerate to 1.6 pct y/y in 2019 from 1.5 pct y/y seen in 2018
  • UK service providers signalled a modest rebound in business activity - Markit
February 2018
  • 2018
  • 2017
  • 2016
  • 2015
  • 2014
  • 2013
  • 2012
  • 2011
  • 2010
  • 2009
  • 2008
  • 2007
  • 2006
  • 2005
  • 2004
  • 2003
  • 2002

Quotes

All posted material is a marketing communication solely for informational purposes and reliance on this may lead to loss. Past performance is not a reliable indicator of future results. Please read our full disclaimer.

Subscribe

Privacy Policy

To maximize our visitors browsing experience TeleTrade uses cookies in our web services. By continuing to browse this site you agree to our use of cookies. If you disagree, you may change your browser settings at any time. Read more

  • To maximize our visitors browsing experience TeleTrade uses cookies in our web services. By continuing to browse this site you agree to our use of cookies. If you disagree, you may change your browser settings at any time. Read more

    © 2011-2018 TeleTrade DJ Limited

  • Risk Warning: Trading Forex and CFDs on margin carries a high level of risk and may not be suitable for all investors. Leverage can work both to your advantage and disadvantage. There is a possibility that you may lose all of your initial investments, so you should not risk more than you are prepared to lose.

  • Prior to trading you should make sure you fully understand all the risks involved and take into consideration your level of experience and financial situation. TeleTrade strives to provide you with all the necessary information and protective measures, but if the risks seem still unclear to you, please seek independent advice.

  • The information presented on this website should not be perceived as a basis for investment decision making and is intended solely for informational purposes.

Connect with Us
Share on
social networks
Online
consultant
Request a callback
Top Page