Daily Market Reviews by MAYZUS
22 JULY 2013: MCDONALD’S FAILS TO DELIVE
DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments
After hitherto strong quarterly earnings season the heavyweight, McDonald’s, failed to deliver according to expectations. US-housing numbers for June were also weaker than forecast. After jumping in April and May the growth in housing sales unexpectedly took a breather last month. Experts are, nevertheless, unwilling to see the late figures as a token of underlying weakness in retail and US economic fundamentals.
The weaker profits of the world’s largest restaurant retailer are mainly seen as a result of declining sales in i's biggest market, Europe. In Europe one of the leading banks, the Swiss UBS, followed up the strong banking results from the United States and beat forecasts, in spite of an expansive lawsuit settlement with US regulatory authorities over housing bonds prior to the financial crisis in 2008. UBS added 2.7 % and reached a two-year high during yesterday’s trade.
The trading week started with a fall in the Dollar both in relation to the Japanese Yen (JPY), following Prime Minister Abe’s victory in the Upper Chamber elections, and in a stronger Euro. Abe has promised to keep focus on the economy. USD/JPY fell to 99.42 during Monday’s trade. EUR/USD added 100 points during Monday’s trading at 1.3215. The British Pound (GBP) stands at 1,5368 against the green back. Gold reached its highest level in a month and jumped USD 1328 an ounce after dipping below the 1200 level only a couple of weeks ago. Silver has also recovered strongly at 20.42. For the first time in years, New York crude, NYMEX, trades higher than Brent crude, both are above US 108 a barr
Copyright: MAYZUS Investment Company Ltd
24 JULY 2013: CHINA SHOWS MUSCLE
DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments
The US Dollar continues to lose ground against most currencies. The DXY-index, a Dollar weighed towards a basket of six major currencies, fell also on Tuesday from Monday’s low on 82.325. The Euro inched marginally above 1.32. USD/JPY keeps steady at 99.721. After new record highs in Asia spurred by a Chinese stock rally, Wall Street continued to new record highs on good quarterly earnings from Dupoint and United Technology. Apple is going to present results after closing in New York.
In an upbeat statement on Tuesday, the new Chinese Premier stressed that the aim of his authorities is to double the Chinese Gross Domestic Product, GDP, from 2010 to 2020, to obtain this target of economic growth of a minimum 7 % annually, which is needed. The last forecast for yearly growth in China in 2013, is 7.5 %. The Chinese government has introduced measures which encourage bigger competition between banks and financial lenders, while simultaneously keeping inflation under control.
The Hang Seng index added 2.1 % on the announcement that China shall start huge infrastructure projects within the railway industry. These projects will consume big amounts of cement, steel and commodities, and are seen by markets as a sure token that China will continue to be the same driving global force as it has been for the last few years. Chinese new leadership has no desire to give up on ambitious targets set by its predecessors. It is also determined to avoid any hard landing in its economy.
The Chinese statements were positively received, as were quarterly earning results from the US and the Federal Reserve’s (FED) statement last week, that monetary easing is going to continue for the unforeseeable future. Oil prices are keeping steady at the USD 108 a barrel level, and Gold and Silver started the week with higher prices than seen in weeks. Gold took a breather on Tuesday, and stayed at USD 1336 after adding 3 % on Monday. Commodities don’t show any clear direction, but the Chinese statements should represent a clear boost for a sector being under strong pressure.
Copyright: MAYZUS Investment Company Ltd
24 JULY 2013: USD AND EURO PICK UP GLOBALLY
DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments
US stocks edged lower on Wednesday after days with increases and new record highs. Disappointing results from heavyweights Caterpillar and AT&T, overshadowed a solid quarterly earnings report from the worlds highest capitalized company, Apple. The Dollar DXY-index weighed against a basket of six major currencies, picked up on data showing stronger domestic manufacturing and housing numbers in June. New home sales rose to a five-year high.
Surprise improvement in US and European factory activity offset further signs of cooling in the China’s economy. New data showed that the Chinese manufacturing sector is contracting for the third straight month. That had an immediate impact on the oil demand where prices fell 2 Dollars. NYMEX and Brent crude trade USD 106 – 107 a barrel. On Monday, strong statements from the new Chinese Premier lifted global stocks, demonstrating the markets volatility on day to day economic news.
Seemingly better outlooks for the United States and Europe caused investors to reduce safe-haven holdings in US and German Government debt. Gold, a traditional safe-haven asset, which has risen close to USD 100 an ounce over the last four days, snapped its winning streak on profit taking. The same trend is witnessed in Silver, which has also taken a breather after several winning days after being in free fall over the last five – six months.
Apple’s results which initially were met with some reluctance when presented after the closing session on Tuesday, beat analyst’s forecasts. The stock price climbed 5.9 % at USD 443.87, a far cry though from the peak numbers in the high 600's, a year ago. Apple has promised solid dividends. This is also pleasing investors which took the stock to its highest level since June the 10th. The stronger euro-zone factory data sent the EUR/USD to a one month high at 1.3230. USD/JPY is gaining ground trading above 100 Yen to a Dollar.
Copyright: MAYZUS Investment Company Ltd
26 JULY 2013: GLOBAL SHARES DROP ON CHINESE WORRIES
DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments
Shares fell worldwide on Thursday on worries about China’s slowdown and its impact on corporate earnings. These fears weighed heavier than tokens that Europe slowly might drag itself out of recession. Data showing better business morale in Germany and improvements in British economy pointing towards modest growth, did little to spark fresh demand from investors more focused on recent developments in Asia.
Investors worry that the Chinese growth engine is no longer running at full power. Chinese stocks suffered their second straight loss on Thursday despite measures from the government to spur the economy with heavy investments in railway and encouragement of the export industry. The Asia-Pacific, MSCI-index, lost 0,5 % from the previous day’s seven week closing high. Worries about China were also reflected in commodity markets, where copper dropped 0,5 %. Brent crude fell for a second day in row at USD 106,59 a barrel. Gold stands at USD 1314.
There have been marginal changes in the currencies. EUR/USD has lost 35 points and trades at 1.3196. The Japanese Yen (JPY) trades stronger against the USD at 99,68. The dollar is again dipping below the 100 yen a dollar mark.
Facebook shares soar after the social media delivered much stronger results than expected. Presented quarterly earnings delivered strong evidence that Facebook can drive on smartphones and tablets. Advertising revenue in the second quarter ignited a nearly 17 % share a rally. 700 million people daily use the Facebook platform. Facebook which was off to a rocky start when it introduced its IP in May 2012. In spite of a 15 % increase in the stock price yesterday, Facebook has still 20 % to go to reach its IPO-price.
Copyright: MAYZUS Investment Company Ltd
29 JULY 2013: DOLLAR ENDS WEEK LOWER
DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments
Concerns that the US Federal Reserve (FED) may lower its unemployment threshold at 6,5 % before terminating monetary easing and its USD 85 Billion monthly bond buying program, sent the dollar lower on Friday. Euro/USD climbed 1,1 % to 1.3282 over the week. The dollar as lost against a basket of currencies. Inflation data Prime Minister Shinzo Abe’s Upper House victory, boosted the Japanese yen. USD/JPY fell back from 100,32 to 98,50 yen a dollar. New Zealand dollar was the biggest gainer of the week - gaining 2 % against its US counterpart.
Speculation about a lower unemployment threshold comes after FED Chairman, Ben Bernanke, insisted that any monetary easing remained data-dependent. This convinced investors that any raise in interest rates was still a long way off. Investors have interpreted FED forward rate guidance that an interest rate hike will come earliest in 2016. The speculation was triggered by an article in Wall Street Journal which immediately put the dollar and US treasury yield under pressure. If the report signals will be a false alarm, USD will rally.
EURO gained ground on optimism on a turnaround in the Euro zone which is still in a deep recession. Even if the Euro zone remains in contraction, the negative figures are better than previous months due mainly to the recovery in Germany which continues to deliver better than its fellow European members. It is expected that the European Central Bank (ECB) will leave its interest rate unchanged when it meets later in the week.
The global equity market was in spite of good US-corporate quarterly results under pressure as China doubts on growth take hold. Indexes all over the world have climbed to new record highs, and technical corrections may be expected on this uncertainty. Gold and silver have consolidated last week’s gains after FED’s dovish attitude. Gold stays above USD 1300.00. Precious metals are helped by raising demand in China where sales volumes in gold and silver jewellery and coins are at record highs so far in 2013.
Copyright: MAYZUS Investment Company Ltd
30 JULY 2013: STOCKS FALL AS USD STRUGGLES
DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments
Wall Street stocks fell broadly as investors eye - US Federal Reserve (FED) two day policy meeting starting tomorrow. Its statement will be closely scrutinized and interpreted for any signal that FED will start tapering monetary easing. Economic data both from Euro zone and the United States last week were better than expected. If July monthly jobless figures to be published at the end of the week comes out on the positive side, this would constitute a strong argument for FED tapering in September as many observers have forecasted.
Dow Jones, Nasdaq and S&P fell broadly yesterday, indicating that the air might start to run out of weeks’ booming stock markets. The European stock markets were also weaker yesterday following a 3,3 % fall in the Nikkei index in Japan during Monday morning. The steep fall in the Nikkei followed a new increase in the value of the Japanese yen which rose to 97,83 yen to a dollar, a 2 % gain to the dollar over the last week. A stronger yen works against the interests of the big Japanese exporters and weigh negatively on the Nikkei.
Euro traded steady against the dollar at 1,3261. The International Monetary Fund (IMF) has approved the release of a new tranche of loans to Greece amounting to USD 2.2 B. The release follows a fourth review of the “troika” which together with IMF, ECB and EU releases a tranche of Euro 6,8 B. The total value of the loans granted in March 2012 amounts to Euro 175 Billion over a period of four years. The loans are dependent upon serious austerity measures including firing thousands of state employees, likely to raise to new strikes and social unrest.
Oil prices which peaked to months high last week, have stabilized. Brent crude fell to below USD 107 a barrel on the first trading day on Monday, but has recovered 107,57, NYMEX, New, York crude, which traded higher than Brent for some days ago, stays steady between USD 104 and 105. Gold is down from its high on USD 1338 an ounce last week, trading at 1328. Silver which reached USD 20,50 last week, trades in the interval between USD 19,80 – 20,00 an ounce.
Copyright: MAYZUS Investment Company Ltd
31 JULY 2013: DOLLAR EDGES UP FROM 5 WEEK LOW
DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments
The Dollar edged higher on expectations that the US Federal Reserve (FED), based on better economic data, will start tapering monetary easing in September or later in the autumn. Central bank meetings are due in the United States, England and European Central Bank (ECB) later in the week. No big changes are expected, but a FED policy decision pointing towards a termination in bond buying will probably put upward pressure on the interest rates and strengthen the Dollar.
The Dollar gained both against the Euro, 1.3254, and Japanese Yen which paid 98.06 Yen to a Dollar. The DXY-index where Dollar is weighed towards a basket of six major currencies, was up 0.3 % from a five week low. Oil prices, and precious metals, Gold and Silver, lost ground on a stronger Dollar. The Swedish Krone lost one percent on the Minister of Finance’s announcement of weaknesses in the generally perceived 'strong' Scandinavian economy.
The US banking giant JP Morgan Chase, which has lately been under regulators sharp scrutiny, settled on USD 410 million on alleged power market manipulations in California, and Midwestern states. The settlement dictated that JPM accepted the facts presented by the Federal Energy Regulator without denying or admitting certain allegations. Banks involvement in the commodity chain by trading metals and at the same time owing warehouses and pipeline/plants, have, this week, been under increasing fire from Congress. The disputed practice was initiated in 2003.
Global stock markets have lost some of their momentum starting a new trading week. Both Dow Jones and S&P ended in red following a sell off in telecoms and materials, after disappointing quarterly results from Verizon and Mosaic.
Copyright: MAYZUS Investment Company Ltd
01 AUGUST 2013: FED COMMENTS HALT DOLLAR RALLY
DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments
A Dollar rally across the board followed news that the US added 200 000 new jobs in the private sector in July. Last quarter’s economic growth was also stronger than expected, topping economists’ expectations. Gross Domestic Product (GDP) grew 1.7 % annual rate. 1 % was forecast. The rally quickly terminated on FED’s statement that the economy continues to recover, but still needs further support, giving no indication when to terminate monetary easing.
The published data marked the third straight quarter of GDP growth below 2 %, a pace normally too soft to bring unemployment down. Growth is, however, expected to move faster in the second half of 2013 as the fiscal burden brought on by Washington belt-tightening eases.
Investors first reactions on the data seemed to indicate that they increased the likelihood for an early autumn tapering. Traders betted initially on a stronger Dollar and the green back rose across the board. EUR/USD fell to 1.3218 to bounce back at 1.3278. USD/JPY is also initially stronger at 92.29. Oil and precious metal prices posted immediate losses on the predictions of a stronger Dollar. Brent crude fell below USD 106 a barrel and Gold to 1.317.
This turned on FED’s latest statement which kept investors guessing. An end to monetary easing would have weakened the stock markets, which have been given strong capital injections due to the bond buying program. Instead the data and FEDs lack of commitment boosted US stock markets as indexes inside the Euro area ended in red. USD/GBP, fell to 1.5133 following the data after trading above 1.53 for the last few days.
Chinese authorities, mindful of the risk of a sharp economic slowdown that could derail their reform efforts, sent their clearest signal yet that they will do what it takes to safeguard growth. China’s main planning agency followed Tuesday up on the Politburo assurances, stating that this year’s growth goal of 7.5 % was safe. Authorities will, if necessary, supply markets with ample funding. The official growth target represents already a 23-year low.
Copyright: MAYZUS Investment Company Ltd
02 AUGUST 2013: BOE AND ECB KEEP RATES AT 0.5 %
DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments
Both Bank of England (BOE) and The European Central Bank (ECB) decided yesterday to keep interest rates at a record low of 0.5 %. BOE also affirmed to continue bond buying at its present level of 375 billion pounds (USD 571 billion). ECB President Mario Draghi likewise hinted not to tighten monetary easing until well into 2014.
Before the ECB meeting the Euro fell from a six-week high of 1.3345 on Wednesday. The Euro fluctuated between 1.3345 and 1.3228 and trades now at 1.3225. EUR/ GBP advanced for the first time in eight days after a gauge in UK's July manufacturing. The Swedish Krona slumped on a report that factory activities were slowing down.
USD/JPY fell on bond flows. Data showed that Japanese investors the previous week sent record-high funds into foreign bonds for a fourth consecutive week. USD/JPY trades on 99.38 after the Central Bank decisions. Asian shares climbed on better than forecast Chinese manufacturing data. The Australian Dollar slipped to its lowest in three years on bets that the Australian Reserve Bank will cut interest rates next week.
Both Oil and commodity prices went steeply up before the Central Banks met. Brent crude jumped two Dollars to above USD 109 a barrel, but has since fallen back to USD 107.70. Copper rose 1 % on signs of modest growth in the global economy. Before Central Banks decisions this week, most investors expected no major changes in policies or forecast for interest rates. The final decisions confirm their outlook. Currencies remain steady with GBP and JPY losing some ground.
Copyright: MAYZUS Investment Company Ltd
05 AUGUST 2013: US-JOBS WEAKER THAN EXPECTED
DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments
The most important US job report for July was released on Friday. The US established 162 000 new jobs in July, much weaker than expected. Growth for May and June was simultaneously adjusted down with 7000 and 19 000 respectively. 185 000 non-farm payrolls were expected. The unemployment rate decreased from 7.5 to 7.4 %. Employment in the private sector increased with 161 000, 34 000 lower than expected.
The unemployment figures are far from the 6.5 % target set from the US Federal Reserve (FED) as benchmark for terminating the bond buying program of USD 85 billion monthly. It also helps to explain why FED, in its policy forecast last Wednesday, was careful not give any clear indication on a deadline for monetary easing. While the US economy has slowly picked up in 2013, there is no fundamental turnaround.
The postponement of any firm deadline for the termination of monetary easing is seen as positive for the stock markets, which reached new record highs. S&P reached a new peak of 1700. The stock futures have fluctuated following employment data. Stock markets in Europe ended the week in red, while the Japanese Nikkei climbed 2.82 percent on a weaker Yen.
The Dollar extended gains prior to the unemployment report on expectations that an upbeat job report will prompt FED to withdraw stimulus soon. The disappointing employment data turned markets around. The Euro gained 50 points immediately against the Dollar trading at 1.3253. Gold which dropped to 1282 bounced back 30 Dollars in a few minutes. Oil prices are still high.
EUR/USD started trading in Asia at 1.3283. USD/JPY stands at 99.00. Gold dropped down to USD 1311 an ounce. Brent crude started the week down trading at USD 108.95 a barrel.
Copyright: MAYZUS Investment Company Ltd
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MAYZUS Investment Company (formerly United World Capital) is proud to provide daily market reviews by the well-known financial expert –Mr. Arne Treholt, a former Political Secretary to the Minister of Shipping and Foreign Trade, then Deputy Minister of Law of the Sea of the Norwegian Royal Ministry of Foreign Affairs. He also held the position of Counselor for Economic Development and Social Affairs at the Ministry of Foreign Affairs, and was member of the Norwegian Mission to the United Nations, New York. At the moment Mr. Treholt is a Vice President and a Business Development Director of MAYZUS Investment Company.