Greg Secker – Global Market Update

The London markets managed to inch forward on Wednesday, having flitted in and out of red and green today the FTSE 100 finally finished the day four points up at 4416. Hotel group InterContinental Hotels (IHG) and hedge fund manager Man Group (EMG) leading the day’s climbers – the latter ahead of its full-year results tomorrow. Miners were among the day’s biggest strugglers, with Lonmin (LMI) and Fresnillo (FRES) leading the fallers. On Wall Street the Dow closed down 2% at 8,300, a fall of 173 points. At 02:30 am, Australia’s Private Capital Expenditure (which shows the change in the total inflation-adjusted value of new capital expenditures made by private businesses) came in at -8.9%, forecast at -6.0%. Australian business investment fell for the first time in six quarters, adding to signs that the economy has sunk into its first recession since 1991.  This was followed by New Zealand’s Annual Budget Release at 3:00. Swiss Trade Balance numbers came in at 7:15 this morning, forecast at 0.11 billion, with the actual better than expected at 2.56 billion.  In Europe, German Unemployment Change comes out at 8:55, forecast at 66K, up from the previous 58K, a key figure for Europe. At 11:00, British CBI Realized Sales is a major figure for the Pound, expected to turn negative, from 3 to -10. Stateside, at 13:30, we have Core Durable Goods Orders m/m, predicted to drop by 0.4%, less than last month’s fall. The non-Core figure including transportation items is expected to rise by 0.1%.  Also at 13:30, the US Unemployment Claims figures are published, expected at 628K from the previous 631K.  At 15:00, New Home Sales are released, expected to rise to 363K, from 356K last month. At 23:45, New Zealand Building Consents m/m figures are published. At 12:01 am, UK GfK Consumer Confidence is due.  Expectations are for an easing from -27 to -25. From 12:15 am we see a raft of figures from Japan.  These include Household Spending which is predicted to fall by 0.7%, Tokyo Core CPI, expected at -0.6% from 0.0% last month, the Japanese Unemployment Rate, expected at 5%, from 4.8%, and Prelim Industrial Production m/m, expected at 3.3%, previously 1.6%. At 7:00 am tomorrow morning, the GBP Nationwide HPI m/m figure is released, expected at -0.9%, from -0.4%.

Yesterday, notes Mr Secker, the FTSE closed up 46 points at 4,411. During the morning session the index fell heavily, and then rallied for the final 2 hours following the higher than expected consumer confidence figures. The Dow closed up 196 points at 8,437 following a rise in USD consumer confidence, expected at 42.7, with the actual number at 54.9.  During the early hours of the morning, Japan’s trade balance figures showed that Japan’s exports fell at a slower pace in April, adding signs that the country’s worst recession since World War II may be easing, while New Zealand’s NBNZ Business Confidence survey suggested that confidence is slowly rising.  The most significant news out today is USD existing home sales at 3pm, annualised figures of residential buildings sold during the previous month, excluding new construction.  This is expected at 4.65M, previously 4.57M. In the early hours of Thursday morning, we see Australia’s private capital expenditure q/q, previously 6.0%, expected at -5.5%, and New Zealand’s budget release at 3:00am.

There was no trading yesterday because of the Bank Holiday. The FTSE, writes Greg Secker, 100 closed on Friday up just 19 points at 4,365 with a high of the day just below the significant number of 4,400. There is still a lot of indecision in the market. The support level at 4,315 is still holding and it will be interesting to see whether the price action breaks up through the resistance or down through the support. With a Bank Holiday Monday in the US we have no new movement on the Dow Jones. Stock markets have been choppy over the past two weeks with gains that are then eradicated in end-of-week trading. Economic news last week – S&P downgrading the UK economy and raising questions about US debts – had the market reconsider gains made over the past few months. Key figures to watch out for in the US this week will be April home sales and the latest assessment of consumer confidence. Markets are also nervous about a possible bankruptcy reorganization filing for General Motors Corp on June 1st. Too early for clear direction yet. In Forex news we see the release of several figures released today. This includes: GfK German Consumer Climate which was released at 7:00, remaining the same at 2.5 points, and German Final GDP, also at 7:00 this morning, which remained unchanged at -3.8%.  At 7:45 we have French Consumer Spending, previously 1.1% and forecast at -0.4 %, and at 9:00 we see the European Current Account, predicted to show a smaller deficit of – 7.5 billion, from -8.1 billion.  At 10:00 we have European Industrial New Orders, predicted to turn positive, from -0.6 % to 1%.  In the US, at 15:00 we have CB Consumer Confidence, predicted to rise from 39.2 to 42.7.  This is the first significant figure for the dollar this week.  At 12:50 am, we have two important releases from Japan: Monetary Policy Meeting Minutes and Trade Balance.

Yesterday, notes Mr Secker, the FTSE closed down 13 points at 4,468. This 0.3% fall apposes the gains in the other major European exchanges where the Paris CAC gained 0.8%, and the Frankfurt DAX gained 1.6%. The mining sector lead the gains on the FTSE whereas the banks fell away slightly. FX news: Yesterday, notes Mr Secker, we saw that the Canadian consumer prices fall more than expected in April to 0.4% on an annualized basis from 1.2 per cent in March, the lowest in fourteen years. A 2.5% decline in energy costs led to a 0.1% drop of inflation during the month of April.  The Pound’s bullish sentiment was bolstered by the BoE minutes which showed the central bank was unanimous in keeping rates on hold at 0.50% and expanding their quantitative easing efforts. Today, Switzerland, France and Germany countries are on holiday.  Key news includes British Retail Sales out at 9:30, predicted to rise by 0.5% from 0.3% (indicating the change in the total value of inflation-adjusted sales at retail).  At 13:30 we have US Unemployment Claims, expected to drop from 637K to 630K. Yesterday, notes Mr Secker, the Dow Jones fell 52 points, or 0.6% to 8,422. The Standard & Poor’s 500 index fell by 0.5%, to 903 and the Nasdaq fell just 6 points, or 0.4%, to 1,727. US Bank stocks led the fall after the Fed announced that unemployment in the US could reach 9.6%.

Yesterday, notes Mr Secker, the FTSE closed up 35 points at 4,482, closing above the 200ema. This may be significant after the 130 move to the upside yesterday and is the second consecutive green bar. Yesterday, notes Mr Secker, ’s 0.8% rise has seen the index open and close above the 200ema. Yesterday, notes Mr Secker, the Dow Jones Industrial average fell 29 points or 0.3 percent to close at 8,474. At 9:30 today we see the release of the minutes from the Bank of England’s May 7 meeting. The growth and inflation outlook published in the BOE’s Quarterly Inflation Report suggests that the central bank may be open to expanding its quantitative easing programme. If the minutes from the BOE’s most recent meeting reiterate this, the British pound could pull back sharply. For those trading the USD CAD Income Generator, at midday Canada’s month on month CPI figures are released, expected to rise by 0.2%, unchanged from last month. Core CPI month on month (ex volatile items) is predicted to move from 0.3% to 0.1%. Expectations are for almost unchanged prices. This means that should there be a surprise, USD CAD could shake on this inflation figure.  Also worth noting that the price of oil has risen recently and Canada, being an exporter of oil, is highly affected by the price of oil and also by the Crude Oil Inventories that are published in the US today at 15:30.  Also Stateside, Geithner speaks at 14.30 while the FOMC Meeting Minutes are released at 19:00 delivering in-depth insight into the economic conditions that influenced the Federal Reserve’s vote regarding where to set interest rates.

Yesterday, notes Mr Secker, the FTSE rallied 98 points to close at 4,446 breaking up through the key level of 4,400 which has provided support and resistance over the last 2 weeks. Bullish sentiment continues to drive the FTSE 100 2.2% higher as all the other major global indices closed up around 2%. Forex news – significant news for today includes the UK’s consumer price index (CPI) reading for the month of April which is expected to rise 0.4 percent, the third straight increase. However, the annual rate of growth, which is more closely watched by the Bank of England, is forecasted to fall to a more than one-year low of 2.4 percent from 2.9 percent. If CPI falls more than projected, the British pound could pull back sharply as the markets will anticipate that the BOE will expand their quantitative easing efforts even further. On the other hand, if CPI holds strong, the currency could rally in response. At 10:00 we see the German ZEW Economic Sentiment figures, previously 13.0 and expected to rise to 20.0, with above 0.0 indicating optimism and below indicating pessimism.  This is a leading indicator of economic health and could potentially affect the Euro.  At 13:30 we see USD Building Permits, an excellent gauge of future construction activity, previously at 0.52m and forecast at 0.53m. At 12:50 am, Japanese Prelim GDP is predicted to show a fall of 4.2% in the first quarter. The Japanese economy has shown very fast contraction during this crisis. The Dow Jones industrial average rose 235 points yesterday to 8,504 (3% increase), closing most of last week’s losses.

On Friday the FTSE closed at 4,348 ending a mixed week down 87 points. In the early part of the week the index gained support from 4,400 but this proved to act as resistance on Friday. On Friday the Dow Jones industrial average fell 62 points or 0.8 percent, to 8,268 – falling 3.6% for the week. The S&P 500 index fell just 10 points or 1.1 percent, to 882.88, and the Nasdaq composite index fell 9 points or 0.5 percent, to 1,680. In Forex the British pound ended last week down against the US dollar and Japanese yen, but up versus the rest of the majors.  The GBP/USD pair remained contained within the same rising channel it has traded within for nearly a month, despite the still bleak fundamental outlook for the UK, and is continuing to trade above the 1.5000 level. Friday news from the US showed that the Consumer Price Index remained stable in April according to the Labor Department. That was in line with economist expectations but higher than the 0.1% decrease seen in March. The Core CPI, which excludes volatile items such as food and energy, rose 0.3% in April, maintaining the steady pace of growth seen over the last few months. News highlights for the week ahead include GDP figures in the US and Japan, CPI in the UK and Canada, US Building Permits and Unemployment Claims, meeting minutes from both the Federal Reserve (FOMC Meeting Minutes) and the Bank of England (MPC Meeting Minutes) and Retail Sales figures from both the UK and Canada.  The week wraps up with Fed Chairman Bernanke due to deliver opening remarks at the College Law School Commencement in Boston. High news today includes Reserve Bank of Australia Governor Stevens speaking at 23:10, which could move that currency. Today there is a Bank Holiday in Canada.

Yesterday, notes Mr Secker, the FTSE closed up 30 points with support being gained from 4,300. The index closed at 4,362 and made an attempt to regain the losses from Wednesday. It will be interesting to see what the index does today, the last day of the week. The Dow Jones industrial average ended yesterday up 46 points, but lagged gains by the S&P 500 index and Nasdaq composite index. Stocks rose on Thursday after three mostly down days as traders bought beaten-down financial and technology stocks.  Buying was subdued after a worse-than-expected weekly unemployment report added to concerns that the economic recovery might not come as quickly as hoped. The market is down sharply this week as investors worry that the optimism that sparked a huge rally might have been premature.  The S&P 500 index is still 32 percent above the 12-year low it hit in early March. In Forex-related news yesterday US Unemployment Claims came in worse than expected as did NZ Retail Sales m/m. We have a number of data releases due today; EUR Flash GDP q/q, US Core CPI m/m and, most importantly US TIC Long-Term Purchases which measures the level of net investment in US Government securities and therefore has an impact on the USD.

In the US stocks retreated more than 2 percent on Wednesday and bond prices rose after two reports suggested the economy is not bouncing back as quickly as investors hoped. The Dow fell 184.22, or 2.2 percent, to 8,284.89, while broader stock indicators sank even more sharply. The Standard & Poor’s 500 index fell 24.43, or 2.7 percent, to 883.92, while the Nasdaq composite index declined 51.73, or 3 percent, to 1,664.19. The decline put the S&P 500 back into the negative for the year to date. The Commerce Department said retail sales unexpectedly fell in April for the second straight month. Economists predicted April retail sales would be flat, but instead they fell, and March’s sales decline was revised to an even larger drop. RealtyTrac Inc. reported a troubling rise in home foreclosures. RealtyTrac data said April’s foreclosures were up 32 percent from a year ago, and up slightly from March. It was the second straight month that more than 340,000 U.S. households received a foreclosure filing. In Forex related news yesterday we had BOE Governor Mervyn King delivering a rather downbeat Inflation Report in the UK yesterday which ended the GBP’s recent gains. In the US we had Core Retail Sales m/m and Retail Sales m/m come in lower than expected. We also had EU Industrial Production m/m falling below expectations. Britain’s top share index closed down 2 percent on Wednesday, following disappointing U.S. retail sales figures, banks knocked by profit taking and mining stocks weighed down by weak commodity prices. The FTSE, writes Greg Secker, 100 ended down 94points at 4,331 retreating for the third straight session. The benchmark index is down 2.3 percent so far this year but up 25.2 percent since hitting a six-year low on March 9. Global market strategists believe that this setback is probably due to profits being taken after a long rally like this. No new stock trades

Yesterday, notes Mr Secker, the FTSE 100 closed down 9 points to close at 4,425. The index is hovering around the 200ema following the high-test bar on Thursday. This bar marked the end of 5 consecutive green bars. The FTSE, writes Greg Secker, 250 has powered through her 200ema and is gaining support from the 10ema showing there is more strength in the 250 than the 100 at the moment. 
Stateside, the Dow rose 50.34, or 0.6 percent, to 8,469.11 after falling 155 on Monday. The S&P 500 index slipped 0.89, or 0.1 percent, to 908.35 and the Nasdaq composite index fell 15.32, or 0.9 percent, to 1,715.92. Stocks ended mixed but well off their lows on Tuesday as early concerns about a barrage of stock offerings eased and as rising oil prices lifted energy stocks. The financial stocks that pounded the market to 12-year lows in March and then led the bounce higher fell for a second day. Even after sliding this week, bank shares have roughly doubled since early March, as measured by the KBW Bank Index. The fluctuations came as some traders worried that the economic recovery won’t be as brisk as hoped when stocks were posting big gains over the past eight weeks.
In forex-related news yesterday we had a range of good results in the UK with Manufacturing Production m/m, Trade Balance, Claimant Count Change, Average Earnings Index 3m/y, Industrial Production m/m  and RICS House Price Balance all coming in better than expected. The only lagging UK figure yesterday was the Unemployment rate which increased to 7.1%. Cable strengthened as a result closed at 1.5264. Elsewhere, we had good Trade Balance and neutral Federal Budget Balance results in the US, good Trade Balance figures in Canada and good Home Loans m/m figures in Australia. The Fed Budget was also announced in Australia. Today we have the BOE Inflation Report due in the UK, which will be important. We also await Core Retail Sales m/m and Retail Sales m/m from the US.