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Binary Options Daily Analysis – Equities Trade in Narrow Range, Bonds Slide
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Equities
Asian markets retreated on Wednesday. The Hang Seng fell 1.2% to 20052, and the Shanghai Composite sank 1.1% to 2119, after China Life Insurance missed earnings forecasts, pressuring financials. The Nikkei eased 5 points to 8925, and the ASX 200 declined .3% to 4281 as miners skidded more than 1%. Korean markets were closed for a holiday.
In Europe, stocks closed moderately lower. The FTSE fell .5% to 5833, the DAX slipped .4% to 6497, and the CAC40 closed down 1 point to 3449. Mining stocks fell after UK-listed Kazakh tumbled nearly 9% following a weak earnings report.
US indexes ended mixed, after trading in a narrow range. The Dow eased 7 points to 13165, the Nasdaq advanced .5% to 3031, and the S&P 500 edged up .1% to 1405.
Deere sank 6.3% and Staples tumbled 14.6% after missing earnings forecasts. In contrast, Abercrombie & Fitch surged 9% after earnings beat expectations.
Treasuries and Commodities
10-year noted tumbled 1 10/32 to yield 1.81%, and 30-year notes sank 1 18/32 to yield 2.92%.
Natural gas dropped 2.7% to 2.758 as intense volatility continues to drive price action in the commodity. Gasoline rose 2.5% to 3.075 and crude oil rose .9% to 94.30.
Gold edged up .2% to 1604.30, silver inched up .1% to 27.79, while copper fell .3% to 3.3505.
Currencies
The Dollar traded mostly mixed against global currencies on Wednesday. The Euro slid .3% to 1.2286, and the Pound ticked up fractionally. The Canadian Dollar advanced .3% to .9892, and the Australian Dollar rose .1% to 1.0505. The Yen declined .2% to 78.86.
Economic Outlook
The Empire State manufacturing index unexpectedly contracted to -5.9 from last month’s 7.4 reading. On a brighter note, CPI was flat, below forecasts for a .2% increase, and the NAHB housing market index rose to 37, beating forecasts of 35.
Thursday’s reports will include weekly unemployment claims, housing starts, the Philly Fed survey, and building permits.
Earnings are due from Wal-Mart, Gap, and Sears.
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Equities
Asian markets traded mixed on Thursday, amid concerns over China’s trade data. The Nikkei rallied 1.9% to 9093, a 6-week high, and the ASX 200 climbed 1.1% to 4330. The Hang Seng slipped .5% to 19963, and the Shanghai Composite declined .3% to 2112. The Kospi inched up 1 point to 1958.
In Europe, the major indexes rose, led by the mining sector, which rose .8%. The DAX gained .7% to 6996, the CAC40 advanced .9% to 3480, and the FTSE edged up 1 point to 5835. German chancellor, Angela Merkel, reiterated her intent to support the ECB’s efforts in strengthening the fragile euro zone.
US markets advanced as well, encouraged by upbeat earnings data. The Nasdaq led the gains, climbing 1% to 3063. The Dow ticked up 85 points to 13250, and the S&P 500 rose .7% to 1416.
Cisco shares surged 9.6% after it reported earnings which exceeded estimates, and boosted its dividend by 75%.
Facebook shares tumbled 6.3% to 19.87 as the lockup period came to an end, giving employees their first chance to cash out.
Treasuries and Commodities
10-year notes slipped 6/32 to yield 1.84%, and 30-year notes sank 23/32 to yield 2.96%.
Metals climbed, led by silver 1.2% gain to 28.135. Copper gained 1.1% to 3.386, and gold pushed up .6% to 1614.
Crude oil rose .9% to 95.22, while natural gas skidded 1.3% to 2.713, and gasoline fell .7% to 3.0627.
Currencies
The Euro-Yen jumped 1.1% to 98.09, while the Dollar traded mostly lower against other currencies. The Euro and Swiss Franc ticked up .6% to 1.2359 and .9718 respectively, and the Pound advanced .3% to 1.5738. The Canadian Dollar gained .3% to .9866, and the Australian Dollar inched up .1% to 1.0515. The Yen retreaded .5% to 79.38.
Economic Outlook
Weekly unemployment claims were roughly in line with estimates, coming it at 366K. Building permits rose to .81M from .76M, while housing starts were flat at .75M. The Philly Fed manufacturing index improved slightly from last month, rising to -7.1 from -12.9.
Friday’s reports will include consumer sentiment, and leading indicators.
Earnings are due from ANN, Foot Locker, and JM Smucker.
Asian Session Sees Stocks Mixed
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Asian stocks rose then fell overnight, fueled by last weeks better than expected consumer sentiment figures from the US and increased speculation that the European Central Bank might set limits on the yields from government bond to prevent the debt crisis spreading further. Asian trading saw Hong Kong’s Hang Seng Index rise 0.77% before being pegged back to 0.87% and there was a similar story with the Japanese Nikkei Dow, which at first rose to a 0.8% increase before coming back to just 0.05% up at time of writing. Australia’s S&P/ASX200 gained 0.06% before currently settling at 0.12% down as the bottom feeders and profit takers in the market kept gains in check.
In the worlds second largest economy – China – Property prices increased in July amidst borrowing costs cuts and following on from some eased restrictions on purchases in some local government areas. Prices in new homes increased in 49 out of 70 cities in comparison to the previous month, which was the most since May 2011. The risk of a rebound in the Chinese property market may discourage and prevent the People’s Bank of China from further cutting rates or reducing banks’ reserve requirement ratios in order to advance funds in the monetary system and support lending following on from the slump in new credit reported for July.
The upbeat sentiment in the US regarding its economy continued to spill over into Monday’s trading as Crude Oil followed on from Friday’s gains with a 0.33% increase in Asian trading, with a barrel of crude oil trading at 96.33. The improved sentiment in the US dampened expectations that Ben Bernanke and the Federal Reserve will stimulate the world’s largest economy. Stimulus tools and monetary easing policies tend to weaken the USD and send Gold – the traditional hedge to the USD – rising. The US Dollar index was down 0.02% whilst Gold was up 0.10%.
Today
With much investor focus resonantly on events in the US on Wednesday, today is a relatively quiet day on the economic calendar with the release of the short term debt auctions in Europe keeping traders busy, particularly with the EUR.
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Equities
Asian market climbed on Friday, buoyed by Angela Merkel’s comments in favor of further ECB action to contain the European debt crisis. The Nikkei advanced .8% to 9163, the ASX 200 rallied .9% to 4370, and the Hang Seng gained .8% to 20116. Trailing behind, the Shanghai Composite inched up .1% to 2115, and the Kospi skidded .6%.
European markets climbed to 13-month highs, led by gains in Spain in Italy. The Spanish IBEX 35 jumped 1.9%, and Italy’s MIB index climbed 1.3% amid hopes a plan to buy bonds of sovereign debt nations will gain support. The DAX gained .6% to 7071, the FTSE ticked up .3% to 5852, and the CAC40 edged up .2% to 3488.
Spain's IBEX Enjoys Powerful 2-Day Rally
US markets also posted moderate gains. The Dow rose 25 points to 13276, the S&P 500 gained .2% to 1418, and the Nasdaq advanced .5% to 3077. The VIX fell to 13.47, its lowest level since 2007.
Apple shares rallied 1.9% to 448.11, a new record-high after Jefferies lifted its price target from $800 to $900.
ANN, parent of Ann Talyor, surged 20.4% after earnings beat forecasts.
Treasuries and Commodities
10-year notes rose 7/32 to yield 1.81%, and 30-year notes gained 13/32 to yield 2.93%.
Gasoline skidded 1.8% to 3.0275, natural gas eased .2% to 2.719, while crude oil rose .4% to 96.01.
Copper pushed up 1.1% to 3.4195, silver fell .7% to 28.002, and gold settled flat at 1617.
Currencies
The Australian Dollar sank .7% to 1.0440, as the Dollar rose against global currencies. The Euro and Swiss Franc declined .2% to 1.2335 and .9743 respectively, while the Pound and Yen both fell .3%.
Economic Outlook
Consumer sentiment improved to 73.6 from 72.3, and leading indicators rose by .4%.
No major economic reports are due on Monday.
Earnings are due from Benihana, Lowe’s, and Urban Outfitters.
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MARKETS
US equities continue to march higher with its sixth straight weekly gain as S&P500 was up 0.9% and finished on its highs at 1418 and is within a stone’s throw to the 2012 highs and once broken would look set to make new 4 year highs. NASDAQ posting a 2.1% gain at 2,780 for the week and a break on the 2800 level puts it at 12 year highs which are prices not seen since the tech bubble popped in 2000. Markets rallied on increased economic optimism. It the option space total Put/Call ratio of 0.737 suggests options plays favor bullish moves. Volatility on the CBOE VIX at 13.45 down 8.75% on the week and at levels not seen since 2007 as markets continue to add risk. The DJIA was up 0.5% at 13,275.
Chart
NASDAQ100 Monthly Chart
FOREX
Yet again the Euro was up 0.3% at 1.2321 and with commodity currency the AUDUSD was down 1.3% at 1.0436 on news that the Treasury has said there is room for the RBA to cut rates some more. Other news in the currency markets come via Basel III that has suggested that banks are underestimating the risk attached to currency trading in the way of counterparty risk. Finally, traders are coming to terms that maybe the FED won’t pull the trigger on QE3 in early September. The Dollar index closed flat on the 82.663 on the week.
Chart
AUD/USD Weekly Chart
COMMODITIES
Crude saw another larger drawdown on oil inventories for the second week with -3.7m barrels versus analyst forecast of -2m draw and Brent rally 2% to 113.76 on the October 2012 contract. WTI was up 3% at 96.54 also on the October 2012 contract. RBOB unleaded gasoline futures closed up 0.3% at 3.0287. Natural Gas found some support up 0.8% at 2.732. Heating Oil finished up 2% to 3.0921 on the week. Gold finished the week down 0.4% at USD$1617.50 /oz in New York as volatility shrinks.
Chart
Gold Weekly Chart
EQUTIES
Technology Sector performed well with big cap names like Google +5.47%, Cisco +8.6% on the week.
Apple +4.25% as the iPhone 5 become the focus for investors, could be as early as next month.
EBAY up 6.5% and GAP Inc up 5.2% setting new 52 week highs as markets see some recovery in US retailer sales
Merck down 2.8% pulled the healthcare sector down and was the sector laggard as there are some reports that maybe the stock is overvalued.
Intel down 2% as news wires and news flow still talking about Warren Buffets sale of Intel shares
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Equities
Asian markets settled modestly lower on Monday, with no news to digest. The ASX 200 slipped .1% to 4364, the Shanghai Composite declined .4% to 2107, and the Hang Seng eased less than .1% to 20104. The Kospi ended flat, while the Nikkei managed a slight gain of .1% to 9171.
European indexes fell, as a newspaper report dismissed the notion that the ECB would cap bond yields to stabilize the region. The FTSE fell 5.5% to 5824, the CAC40 slipped .1% to 3481, and the DAX eased .1% to 7034. Banking shares sank 1.4%, and mining shares slumped 1.3%, leading the losers.
In the US, stocks closed flat after trading in an unusually narrow range. The Dow closed down 4 points to 13272, after moving in a 45 point range. The Nasdaq and S&P were unchanged.
Lowe’s tanked 5.8% after reporting earnings which missed estimates and cutting its outlook.
Aetna announced it will purchase Conventry Health Care for $5.6 billion. Aetna share climbed 5.6%, and Coventry shares surged 20.3%.
Treasuries and Commodities
10-year notes ended flat, yielding 1.81%, and 30-year notes ticked up 4/32 to yield 2.92%.
Natural gas rallied 2% to 2.772, while crude oil and gasoline settle little changed.
Silver jumped 2.8% to 28.785, while copper slumped 1.3% to 3.374. Gold rose .2% to 1620.90.
Currencies
The currency markets also traded narrowly, with the Dollar ending slightly lower. The Yen advanced .2% to 79.28, while the Swiss Franc, Euro, Pound, and Australian Dollar all rose .1%.
Economic Outlook
No major economic reports are scheduled for Tuesday. Earnings are due from best Buy, Dell, Intuit, and Williams Sonoma.
Stocks Down on Japanese Trade Deficit and Greek Fears
Asian stocks fell overnight as Japan announced a larger than expected trade deficit and as investors await the results of key talks between Greece and its creditors – the IMF, ECB and EU.
Japan
It was reported last night that Japan had seen its exports fall by 8.1% for July with imports rising by 2.1%. This fuelled investor worries that demand for Japanese products from key markets such as China (down 12%in July) and Europe (down 25% in July) are waning whilst the increased cost of oil raised the cost of imports. Analysts had anticipated a 2.9% decline after a revised 60.3 billion yen surplus in June. This was Japan’s 9th deficit in 12 months and highlights the dependency on energy imports following on from when the nuclear plants were closed after last year’s earthquake and tsunami disaster.
The Yen was down against the USD, falling 0.05%, trading at 79.25, which means it has gained more than 5% since mid March against the greenback. A strong Yen makes exports more expensive with Japanese GDP advancing an annualized 1.4% in the three months from June, was down from 5.5% in Q1.
Asian trading saw Hong Kong’s Hang Seng Index fall 0.83%, Australia’s S&P/ASX200 decline 0.11%, whilst Japan’s Nikkei 225 Index fell by 0.43%.
Greece
Greek Prime Minister Samaras is under pressure to show Greece can meet its commitments of 11.5 bn euros in public spending cuts within two years in order to receive its next 31.5bn-euro bailout payment in September. After telling German daily Bild that Greece needed “breathing space”, Samaras is expected to ask his European counterparts for a two year extension to the reform targets. Eurozone leaders have so far shown negative responses any move to soften the terms and conditions of the bailout, most notably in Germany, the eurozone’s strongest economy, where the German government is under pressure not to make any further concessions.
Today
North America takes the spotlight today although events in Greece should be monitored closely. Canada produces its retail sales figures but much of the trader focus will be on US Home sales and the publication of FOMC meeting minutes – key indicators of the state of the US economy.
Slowdown Hits Chinese Corporate Profits
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With Chinese stocks continuing to trade lower today and continue to trade at levels not seen since 2009 on concerns of a continued slowdown in the Chinese economy then today was definitely conformation of that. With reports from the China Securities journal over the weekend highlighting that corporate profits for listed companies on the Shanghai and Shenzhen stock exchanges only grew 6.75% in 2012 versus 36.14% for 2011.
Furthermore reports from Xinhua a Chinese news agency that:
“Construction and building materials companies saw their combined first-half net profits shrink 28.67 percent from one year earlier”
The report goes on to say:
“Aggregated net profits at eight steel companies that have unveiled their interim reports dropped by 68.49 percent year on year”
The profits of the biggest state owned enterprises (SOE) in china fell 13.2% from a year ago in the first seven months of 2012.
The question on most minds would be is China slowing faster than we would hope they are and brings into the discussion the possibilities of a hard landing and not a soft landing. The one sure thing from comments by Premier Wen Jiabao he has expressed the urgency of exports, growth and also highlighted the concern that yes China is slowing rapidly.
Putting this into context maybe markets are running on the smell of new money and quite possibly getting ahead of the game as there clearly are signs that the global economy continues to show weakness. Just maybe the recent run up is buy the rumor and sell the fact! For the moment expect to see Gold continue to move higher in the lead up to Jackson Hole and the possibility at the September FOMC of another round of QE combined with prospects of a China stimulus as well.
New York Gold Futures Daily Chart
Today in the markets: EUR German IFO Business Climate, US FOMC Member Pianalto Speaks
Binary Options Daily Analysis – US Stocks Rally on Bernanke Comments
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Equities
Asian markets slumped on Friday, as weak economic data overshadowed hopes for stimulus measures. The Nikkei dropped 1.2% to 9071, the Kospi fell 1.2% to 1920, and the ASX 200 declined .8%. Miners tumbled, as Rio Tinto skidded 4.4% and Fortescue Metals sank 6.1%. The Shanghai Composite lost 1% to 2092, and the Hang Seng slumped 235 points to 19876.
European markets settled slightly higher, amid news that the ECB may consider bond-yield targets to stabilize debt-ridden countries. The DAX rose .3% to 6971, while the CAC40 and FTSE settled flat.
Across the Atlantic, investors snapped up stocks after Bernanke hinted that additional measures may soon be announced. The Dow climbed 101 points to 13158, the S&P 500 advanced .7% to 1411, and the Nasdaq gained .5% to 3070.
Autodesk shares tanked 15.6% after earnings missed forecasts.
Treasuries and Commodities
10-year notes eased 2/32 to yield 1.69% and 30-year notes slipped 6/32 to yield 2.80%.
Natural gas skidded 3.6% to 2.702. gasoline fell 1.2% to 2.078, and crude oil declined .1% to 96.15.
Silver rose .5% to 30.621, posting its 5th straight gain, while copper declined .3% to 3.4835. Gold ended flat at 1670.70.
Currencies
The Dollar traded higher, while European currencies declined. The Euro and Swiss Franc fell .4%, and the Pound declined .3% to 1.5810. The Australian Dollar lost .4% to 1.0400, and the Yen retreated .2% to 78.68.
Economic Outlook
Durable goods orders jumped 4.2% last month, blowing past forecasts for a 2.6% increase.
Monday’s sole report will be the Dallas Fed manufacturing survey. The UK will observe a bank holiday, so trading volumes in Europe are likely to be light.
Earnings are due from Shanda Games and Tiffany.
Economic news- US talks of QE and China also looking to boost a slowing economy
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ECONOMIC NEWS
Key news from the US came from FOMC minutes where clearly the Fed is looking at QE as the bias amongst FOMC members clearly sits in the dovish stance with only the perma bull Jeffrey Lacker who is neutral – hawkish in his view. The strength of the US economy remains disappointing with existing home sales figures at 4.47m sales versus a market expectation of 4.52m with it trending back down but still above the September 2010 lows. All eyes on next weeks Case Schiller Index out on Tuesday.
ECB has been concerned, on reports that the ECB is planning to cap peripheral bond yields by promising unlimited purchases of debt on secondary markets. ECB has not denied it but have said it is wrong to speculate on future ECB bond interventions and attention will be paid to ECB’s President Draghi’s speech on this coming Saturday at the Jackson Hole Symposium.
News from China has also highlighted that the world’s second largest economy continues to show weakness in its manufacturing sector as the HSBC Flash Manufacturing PMI was 47.8 which is the 10th consecutive month of contraction in Chinese manufacturing which has opened the way for possible further stimulus from Beijing.
THE WEEK AHEAD
Monday: EUR German IFO Business Climate, US FOMC Member Pianalto Speaks
Tuesday: EUR GFK German Consumer Climate, EUR M3 Money Supply, **US S&P / CS Composite-20 HPI, US CB Consumer Confidence
Wednesday: EUR German Preliminary CPI, US Prelim GDP, US Pending Home Sales, US Crude Inventories, US Beige Book
Thursday: EUR German Unemployment Change, EUR Italian 10yr Bond Auction, US Unemployment Claims, US Core PCE Price Index, US Personal Spending, 3 Day Jackson Hole Symposium
Friday: EUR German Retail Sales, EUR CPI Flash Estimate, EUR Unemployment Rate, US Chicago PMI, US Revised University of Michigan Consumer Sentiment, *** US Fed Chairman Speaks, China Manufacturing PMI (Fri/Sat)
Saturday: ECB President Draghi Speaks