Market Views For 2016 - page 4
You are missing trading opportunities:
- Free trading apps
- Over 8,000 signals for copying
- Economic news for exploring financial markets
Registration
Log in
You agree to website policy and terms of use
If you do not have an account, please register
Investors look to January effect at start of 2016 As Wall Street wraps up its flattest year since 2011, investors will have to deal with many of the same issues next year as they attempt to gauge market direction.
While many market participants have a host of worries heading into 2016 that could hurt stocks and keep volatility high, they remain optimistic for gains in 2016 and a strong start to the year could boost that case.
According to the Stock Trader's Almanac, the direction of January's trading predicts the course for the year 75 percent of the time.
Stocks could get a boost next week from the so-called "January effect," when stocks that were sold off in December for year-end tax harvesting rally back in the next month as investors scoop them back up at lower prices.
Of the S&P 500 components, 301 were down 10 percent or more from their 52-week highs and 175 were off by at least 20 percent through Dec. 30, according to Ryan Detrick, market strategist at Kimble Charting Solutions in Cincinnati.
That broad decline was offset by the narrow leadership of the "FANG" stocks - Facebook, Amazon, Netflix and Alphabet. Combined, they comprise more than 5 percent of the weighting in the S&P 500 and have all risen at least 35 percent for the year.
While the overall breadth of the S&P is not promising, that may leave a broader swath of stocks that could see a rebound next month, according to Jeff Saut, chief investment strategist at Raymond James Financial in St. Petersburg, Florida.
"The individual investor is in hibernation. There are six distinct stages to a secular bull market and we are nowhere near euphoria, nowhere close, unless you own the FANGs," said Saut.
read more
What's Next For The USD Policy Divergence Trade? - Credit Agricole What is interesting at the start of the new year is the persistent divergence between the number of expected Fed rate hikes by the market and the glide path for the Fed fund rates implied by the December dot-plot.
This divergence could suggest that the Fed may tolerate lower US inflation and growth before changing its policy outlook. In turn, unless the US inflation or growth surprise significantly on the downside in coming quarters, this could pave the way for some hawkish surprises from the Fed.
This could further highlight the positive outlook for USD against the rest of G10. We remain particularly bearish on the antipodean currencies where we expect the combination of weak commodity prices and continuing Chinese slowdown to undermine the appeal of both AUD and NZD.
We also think that both USD/CHF and USD/JPY could head higher from here because we expect that the persistent portfolio outflows from Japan and Switzerland and into the US to become increasingly unhedged and thus have greater impact on FX spot.
How Much Room For Gloom On The RMB? - Goldman Sachs As recent days have shown, a key uncertainty for the year ahead is the degree to which the RMB will weaken. As we start 2016, non-deliverable forwards – hardly the best gauge of market expectations – are pricing a 5.5 percent depreciation of the RMB versus the Dollar for the year ahead, while our conversations with clients put consensus nearer 10 percent. '
We examine the RMB through the lens of China’s balance of payments (BoP), where we see two main drivers.
First, falling oil prices are a positive terms of trade shock, which is boosting the current account surplus, exerting appreciation pressure.
'Second, the potential for further capital outflows is clearly large, especially if RMB devaluation continues apace. We use the BoP to assess these offsetting forces. With oil prices near present levels, the current account surplus could near $400bn this year (from likely above $300bn last year and $220bn in 2014), even allowing for a continued widening in the services trade deficit. This provides additional “space” in the balance of payments to absorb capital outflows, raising the threshold above which reserve accumulation turns negative.
read more
Germany Markit services Dec PMI final 56.0 vs 55.4 exp German final readings now out
A welcome improvement but euro unfazed understandably given current events
EURUSD 1.0733 EURGBP 0.7332 EURJPY 127.27
The first three trading days of 2016 have been dramatic Risk aversion and commodity weakness the story so far
There have only been three trading days this year but it already feels like it's been a marathon. The big mover so far is AUD/JPY, which has fallen 4.4% already.
Before the calendar turned over, we produced a list of our top 10 trades for 2016.
Here's one thing we said:
"The scope of the commodity carnage will catch markets off guard and trigger a flight to safety that boost the yen as the BOJ grows increasingly shy about deploying more stimulus."
Download the full report.
source
The Contrarian View: Why HSBC Sees No 'Sweet 16' For The USD In contrast to a consensus that expects the USD rally to extend in 2016, HSBC holds a contrarian view projecting that the USD will fall this year. The following are the 3 main reasons behind HBCS's argument along with its forecasts for EUR/USD, and USD/JPY.
"In March 2015, we called the end of the USD bull run, a counter-consensus view at the time which has proven accurate. Our battle against the prevailing wisdom now extends into 2016, but rather than merely arguing the USD has stalled, we believe there are grounds to anticipate weakness," HSBC argues.
There are three main strands to HSBC's argument for USD weakness:
1) The Fed tightening cycle will see the USD weaken not strengthen.
"History shows the USD weakens once the Fed starts to hike rates. In addition, we believe the conversation about the pace of Fed hikes will retain a very dovish tone in 2016, mirroring the experience of other central banks which have tried to raise rates after the 2008/09 financial crisis," HSBC clarifies.
EUR/USD: Caught In 1.05-1.10 Range; What's Next? - Danske At the end of this week, EUR/USD moved higher, defying the sell-off in equities and oil prices.
The former suggests that the single currency is increasingly regarded as a safehaven currency while the latter underlines that the historically close co-movement of the oil price and EUR/USD is challenged. One reason for this is that the weaker oil prices now benefit the euro area relatively more than the US. Thus, an oil price that is set to stay 'lower for longer' boosts the potential for EUR/USD to move higher further out.
Currently, EUR/USD is in our view caught in the 1.05-1.10 range, but later on we expect a rebound on no renewed policy divergence and strong EUR fundamentals.
source
Week Ahead: Unhappy New Year, Divergence Trade, Enough Pounding A spike in risk aversion greeted investors at the start of 2016 with the ‘usual suspects’ – fears about China and geopolitical risks – dragging down the risk-correlated and commodity G10 currencies.
While the latest official measures seemingly arrested the market rout in China, global growth concerns and lingering geopolitical tensions could keep investors in damage limitation mode for now. We advise caution given that additional Fed tightening against the background of a slowing global economy should continue to add to market fears. Falling sovereign FX reserves should further undermine demand for global stocks and bonds, exacerbating any tightening in global financial conditions.
Further easing by the ECB, the PBOC and the BoJ as well as more official policies to restore market confidence should help alleviate investors’ worries over time. The key risk is that, in the absence of such measures, persistent risk aversion can make the Fed more cautious yet again and deal a blow to the USD-decoupling trade.
So far, however, there is little to suggest that the Fed is on the verge of changing its outlook. What is more, given that its cautiousness had added to investors' worries in September, we expect the Fed to continue to signal confidence in the US recovery, which should come across as relatively hawkish. That should support demand for the USD divergence trade.
What we’re watching
USD: threats to the divergence trade? – Risk aversion can still challenge the Fed’s outlook. Solid US retail sales needed next week to limit any risk aversion-driven USD underperformance against JPY, EUR and CHF.
GBP: enough pounding? – Improving UK data and the largely unchanged BoE outlook could offset Brexit fears to a degree and support GBP.
AUD: remain cautious – AUD latest underperformance could continue next week in view of Australian and Chinese data releases.
NOK & SEK: ahead of CPI – CPI data out of Sweden and Norway may matter less in the face of low oil prices and Riksbank’s FX intervention threat.
XAU: Gold shines – Gold has been the best performing asset in our universe since the start of 2016 as risk aversion burnished its safe haven appeal.
source
If China Surprises With A Rate Cut After Mkt Close, Sell Rallies In AUD/USD, NZD/USD - UBS The following are UBS' latest short-term trading strategies for AUD/USD, and NZD/USD.
AUD/USD: We prefer selling rallies, but remain cautious about the risk of further announcements from China after markets close, such as an RRR cut, as they have done on Fridays in the past. Should this be the case, look to establish fresh shorts into the rally, ideally towards 0.7150, with a stop above 0.7250
NZD/USD: We see risk for a bit more room on the topside and would look to fade rallies between 0.6720 and 0.6760, with a stop above 0.6825.
Euro to Dollar Forecast to Bottom Out Above Parity by Commerzbank
EURUSD forecasts for 2016 at Germany's Commerzbank show the exchange rate is likely to reach a low-point at just above 1.0 in 2016 despite another European Central Bank interest rate cut.
While analysts at the German bank do see the euro to dollar exchange rate falling closer to parity later on in 2016 they do not see any significant declines below 1.0.
The reason for the call lies with what markets are expecting and as things stand there should be four interest rate moves at the US Federal Reserve in 2016.
This contrasts to the potential for further interest rate cuts in Europe in 2016. So while the Fed cuts money supply, the ECB could be looking to expand supply.
This should ensure the flow of currency from Europe to the US continues - a scenario that will likely keep the EURUSD exchange rate under pressure.