Monthly Archives: January 2016

When the oil is growing. Forecast for the week on February 1-5

Equity markets finished the week on the positive. In general, this is understandable, taking into account the fact that the PBOC continues to inject liquidity in order to stabilize the situation, and the US Federal Reserve made it clear that to force the issue with the rate increase will not be. Plus stimulating monetary policy of the European Central Bank and the Bank of Japan, Bank of England statements of that raising rates is not the time, as well as the recovery of oil prices and the picture is quite favorable. The largest growth in the last week was the Japanese Nikkei (NKD), which added 3.44% against the decision of the Japanese regulator. US Dow Jones rose by 2.25%. NASDAQ added 0.54%. The German DAX 30 (FDAX) ended the week virtually unchanged (+ 0.14%). Hong Kong HSI continued to recover and closed the week higher by 1.28%.

Pair USD / CAD fell to the level of 1.4017, shedding 1.01%. USD / JPY showed an increase of 1.97%, mainly responding to the decision of the Bank of Japan to introduce negative rates.

Raw materials and precious metals showed positive dynamics. Brent crude oil finished the second week of growth. Quotes black gold strengthened to 11.56%. Gold (XAU / USD) added 1.85%. Silver (XAG / USD) appreciated by 1.71%. In many ways, this dynamics of metals due to the fact that the market is beginning to be put on a long pause that the Fed will take before the next rate increase.

Chart of the week:

nikkei chart

Nikkei chart

The economic data of the last week:

  • Monday. Germany in January, the index of economic expectations IFO 102,4 against forecast 104,1
  • Tuesday . US January Consumer Confidence 98.1 – above the forecast of 96.5
  • Wednesday. US Federal Reserve kept interest rates unchanged in the range of 0.25 – 0.5%. The accompanying statement was “softer” previous
  • Thursday. US: December, orders for durable goods have fallen by 5.1% against expectations of a 0.6% fall
  • Friday. US: Q4 GDP growth of 0.7% vs. 0.8%

Forecast for the week on February 1-5

Stock market

The Fed and the Bank of Japan gave the stock markets rather positive attitude. US regulators softened the tone of the accompanying statement. The Bank of Japan introduced a negative rate in order to stimulate the economy and to achieve the inflation target of 2%. Next week will attract the attention of a number of reports from the US, which will shed light on possible further actions of the Federal Reserve. This data on the index of business activity (ISM) in the industrial sector and the services the US. It will also report on private sector employment from the APD.

But the main attention is drawn to the report on the labor market, the published Friday. And the market will assess not only the number of newly created jobs, but also data on average hourly wages, which will allow to estimate inflation at this level. Provided that the statistics from the US will not be enough optimistic, the market still more will start to be put on the likelihood that in March we should not expect the US Fed rate hike (to date according to the positions of futures on a bet the probability is estimated at 15.5 %). Against this background, Dow Jones (YM) can continue to recover to the level of 16450 and, further, to 16675. Nasdaq (NQ) after a level of 4245.00 would target the rise to the level of 4370.20.

Commodity and raw market

Oil prices last week noted a three-week highs, rising to the level of 36.71. Key support quotes Brent crude oil gained from rumors that in February it may take meeting of the OPEC countries with other oil-producing countries, which will focus on reducing the volume of production (an average of 5%), which led to the closing of short positions . But in order to continue the growth of black gold will need the facts. Of course, the chances that the parties come to any compromise there. But the probability that agreement is reached on the synchronous decline, yet not too large. Therefore, it is possible that in the coming week, Brent will be kept within the range of 31.00 – 36.00 dollars a barrel.

In general, during the week the market will traditionally follow the dynamics of the index of commercial stocks and the state of production in the United States. Last week, for the first time after 6 weeks of growth of production in the US fell, which, in general, naturally, taking into account the reduction in the number of drilling rigs operating (70%). If such dynamics will become kind of trend, it will be perceived by the market, with due optimism, pushing the quotes in the area of ​​the upper limit. Although, if the part of Saudi Arabia it was confirmed willingness to negotiate, it is possible that the quotes rather quickly set his sights on a motion in district 39.00 level.

Currency market

This week a decision on the monetary policy of the Reserve Bank of Australia will announce. It is worth recalling that in the minutes of the December meeting the regulator noted that he expects the strengthening of economic growth in the next two years, noting the gradual diversification of the economy. In addition, recent data on the labor market in Australia, confirmed the third month of strong growth of employment in the country, are further evidence of a fairly stable situation. Besides, the aussie is at a low enough level to provide support to the economy. It is possible that this time the Reserve Bank of Australia will refrain from lowering rates. But the most strong support for AUD / USD pair may receive if the second meeting in a row will not be verbal intervention aimed at weakening “Australian“. In this case, one of the immediate objectives of growth may be a mark 0.7260.

Warning: Profitability in the past does not mean profitability in the future. Any projections are for information only and does not guarantee a result.

Review of 18-22 January, when the panic subsides. Forecast for the week 25-29 January

On the stock markets ended the week showed mixed trends. After the collapse of the lows in August 2015 in the first half, to the closing benchmarks we were not only able to win back losses, but also to strengthen against the backdrop of the recovery in oil prices and a soft rhetoric head of the European Central Bank at a press conference following the publication of decisions on monetary policy. US Dow Jones rose by 0.46%. NASDAQ added 2.47%. The German DAX 30 (FDAX), rose by 3.43% due to expectations of further stimulus from the European regulator. Hong Kong HSI rebounded from a minimum of 3.5 years, and closed the week higher by 0.98%.

The Canadian dollar was a powerful stimulus to growth against the decision of the Bank of Canada to maintain the level of rates unchanged (0.5%) and the recovery in oil prices. Pair USD / CAD fell to the level of 1.4153, shedding 2.89%. The EUR / USD background Mario Draghi hints at possible expansion of the QE program in March, the European currency was under pressure. For a week the pair fell to 1.09%.

Raw materials and precious metals showed positive dynamics. Brent crude oil ended the week above 32.00, noting a maximum of 32.27 dollars per barrel. The growth was 10.1%. Gold (XAU / USD) and silver (XAG / USD) round out the week with a symbolic increase by 0.83% and 0.7%, respectively. But after the stabilization of copper on Chinese markets and measures against the People’s Bank of China to inject 400 billion yuan into the financial system of the country, was able to gain a foothold in 3.01%.

Chart of the week:

brent crude oil

Brent crude oil

The economic data of the last week:

  • Monday. US and EU sanctions against Iran have removed
  • Tuesday. China: Q4 GDP + 1.6%, + 6.8% against the forecast + 1.7%, + 6.8%
  • Wednesday. The Bank of Canada kept interest rates unchanged at 0.5%
  • Thursday. The European Central Bank, Mario Draghi gave a signal to the market about the possibility of expanding the QE program in March
  • Friday. Germany in January, the index of business activity in the industrial sector (Markit) 52,1 – below the forecast of 53.0

Forecast for the week 25-29 January

Stock market

This week the stock markets can retain optimistic, but under certain conditions. The first – the lack of external shocks in the form of a new wave fall in the Chinese stock market. Second – the US Federal Reserve hints that the pause in the rate hike could be delayed, which would be a continuation of promise, who on Thursday made Mario Draghi, making it clear that the expansion of the quantitative easing program may occur in March. This was one of the key factors that enabled benchmarks recover. At the same time the German DAX 30 (FDAX) in connection with this gets a good potential for growth in the medium term. As one of the immediate objectives can be considered the level of 10055. But it is entirely ruled out short-term drawdowns down is not necessary.

On Wednesday, January 27, the Fed will announce a decision on monetary policy. At this stage, very few people waiting for the regulator decides to raise rates. According to the positions of futures rate in January, the probability of such an outcome is estimated at only 8.4%. Particular attention will attract comments from the Federal Reserve. Soft rhetoric containing allusions to the fact that they are not going to force the issue and will continue to raise rates when it will be created for the appropriate economic conditions could push up US indices. Against this background, Dow Jones (YM) may try to recover to the level of 16450. Nasdaq (NQ) in this case, sets his sights on a return to the level of 4370.20 after breaking 4245.00. Furthermore, additional factors can act in support of the weaker than expected data on orders for durable goods in the US (28 January), and a report on the pace of US economic growth in the 4th quarter of 2015 (January 29 at 13:30 GMT). Although the first reaction to the negative statistics may be a short-term decline that may allow to enter into positions at more attractive levels.

Commodity and raw market

Oil prices seem to “find” a temporary bottom. In the last two working days of last week, quotes Brent crude oil showed growth against the background of the stabilization of the situation in China, comments the head of the largest oil company of Saudi Arabia that the drop in oil prices below $ 30 – “irrational” phenomenon, as well as a sharp cold snap on the east coast the United States and some parts of Europe. Technically, closing the week above $ 32 per barrel for Brent opens the way up to the mark of 34.00 and further to 36.00. If we take into account the state of the demand and supply of oil on the world market, of course, reasons for the strengthening of the oil yet.

However, prices below $ 30 a barrel are questioning not only the profitability of shale projects, but also in the production of traditional methods of hard deposits. In addition, the low prices for oil will sooner or later provoke a decline in investment in the sector. All this may lead to a decrease in supply and equalize the imbalance. In particular, US working rig number decreased by nearly 70% compared with the maximum marked by 2014. The life cycle of shale projects is short, which means that in the United States for the next six months may begin a sharp reduction in production (although in the last 6 weeks, according to the EIA, it is growing). So next week, even the absence of bad news can be good news and push quotes Brent to around 34 – 36 dollars per barrel.

Currency market

On Friday it will be published fairly large block of macroeconomic statistics from Japan. This data on the consumer price index, and reports on the labor market and industrial production. Weak reports figures give reason to believe that the Bank of Japan will soon be waiting for action towards greater incentives, as has recently been actively rumored. And if it does not happen at the meeting on January 29 then it will be possible in March. But if the regulator will present such a surprise, USD / JPY pair may return to the area of ​​the level 120.60.

Warning: Profitability in the past does not mean profitability in the future. Any projections are for information only and does not guarantee a result.

Review for January 11-15: China makes its own adjustments. Forecast for the week on January 18 – 22

The situation on the Chinese stock market remains volatile, making adjustments to the dynamics of the American and European benchmarks, raw materials and commodity currencies. Shanghai Composite updated lows recorded in August 2015. Against this background, the US Dow Jones fell by 2.22%. NASDAQ lost 3.06%. Do not go to the benefit of indices and data on retail sales in the United States. The index fell by 0.1% against the forecast of 0.0%. The German DAX 30 (FDAX), which received an additional negative comments by the representative of the European Central Bank that they have already done enough in the direction of the stimulus, was down 2.61%. Hong Kong HSI has fallen to 4.91%.

On the currency market the USD / CAD (+ 2,69%), updating the maximum of 12.5 years at the level of 1.4553. The Australian and New Zealand dollars were under pressure, losing, respectively, 1.34% and 1.26%.

Raw materials and precious metals remained under pressure. Brent crude oil ended the week below the key level of 30.00, noting at least 28.80 dollars per barrel. Gold (XAU / USD) lost 1.38%. Silver (XAG / USD) fell by 0.11%.

Chart of the week:

brent crude oil chart

Brent crude oil chart

The economic data of the last week:

  • Monday. Canada: in December, the number of new 173 thousand vs. 200 thousand
  • Tuesday . UK: November, production in the manufacturing industry -0.4%, -1.2% lower than forecast at + 0.1%, -0.8%
  • Wednesday. China December Trade Balance 382.05 billion yuan more than the forecast 338.8 billion
  • Thursday. Germany: 2015, preliminary estimate of GDP 1.7% vs. + 1.6%
  • Friday. US December retail sales -0.1% vs. 0.0%

Forecast for the week on January 18 – 22

Stock market

Most likely, the Chinese theme will affect the dynamics of most tools and during the week, especially on Tuesday is scheduled for publication by a large block of macroeconomic statistics from China. The weak figures (in particular, a further slowdown in the economy and the decline in industrial production) can put pressure on the index HSI. A break below 18880 may open the way to the level of 17400. The fall is likely to continue as long as the PBOC does not present a clear plan to stabilize the situation.

Attention attracts and US statistics. Will be published data on the consumer price index in the United States. At this stage, the reports from the US markets will be evaluated very carefully, because they can shed light on the Fed‘s future actions in relation to monetary policy. Signs of a lack of power of the national economy may lead to the fact that the regulator will not rush to increase rates at the March meeting. Retail sales have proved to be weaker than expected. If more and published data reflect the continuing low price pressure, it can lead to the fact that the rhetoric of the Fed at the end of the January meeting will be soft enough. In the short term it can cause rollback Dow Jones (YM) to the level of 16450. Nasdaq (NQ) in this case, sets his sights on a return to the level of 4245.00.

Quite a large block of reports will be published and the German economy. This report on business sentiment from the institute ZEW, and data on the index of business activity in the industrial and service sectors. Also attract the attention and decision of the European Central Bank‘s monetary policy, or rather, the comments that will be performed during a press conference. Provided that the statistics will not be enough optimistic and the European regulator will give reason to hope that further easing is still possible, the DAX 30 (FDAX) may begin to rise, returning to the district level of 9920.0.

Commodity and raw market

Oil prices continue to update the lows. His contribution to the negative trend brings panic in the Chinese market and it seems that the lack of a clear plan of action at the national regulator. Technically, a break below 30.00 Brent gives reason to expect short-term reduction in the area of level 25-26 dollars per barrel. And in the current environment, such an outcome is not excluded. A key factor that puts pressure on quotes black gold is a surplus of supply in the region of 1.5 million barrels per day.

Therefore, the only factor which at this stage can provide support for Brent crude oil, a decrease in supply. Thus, while no obvious prerequisites for that. Despite the fact that existing prices make unprofitable production at a number of slate companies in United States production volumes for the last 5 weeks show a slight increase (and this against the backdrop of a sharp reduction in the number of operating drilling rigs). In addition, in the near future the market may see Iranian oil that will only increase the offer.

Tuesday will be issued a large block of statistics from China. This data on the rate of economic growth in the 4th quarter, and a report on industrial production and retail sales. Signs of further cooling of the economy of China could have a negative impact on the dynamics of copper (HG). It is worth remembering that China accounts for about 45% of world consumption of the red metal. Thus, weak statistics will provoke fear reduction in demand from major consumers. The negative macroeconomic background can only increase the panic that would have on the pressure of the metal with the immediate goal at the level of 1.8530.

Currency market

This week a decision on the monetary policy of the Bank of Canada will announce. The national currency during the recent weakening of the impressive exhibits, which in itself could serve as measures to stimulate the economy. However, Canada‘s economy is extremely sensitive to the dynamics of oil prices, since about 30% of revenue is made from the oil and gas sector. And the dynamics of “black gold” can have a negative impact on the country’s energy sector and, consequently, its prospects for growth.

Therefore, we can not completely exclude the possibility that the Bank of Canada will be decided on a slight reduction in the rate. If this happens, the short-term pressure on the Canadian dollar may increase, resulting in a pair USD / CAD in the area of 1.4700 level. If the regulator is quite aggressive, short-term rebound is possible down, but it should be viewed as an opportunity to enter long positions at a better price, because to turn up the oil loonie could remain under pressure against the US dollar.

Warning: Profitability in the past does not mean profitability in the future. Any projections are for information only and does not guarantee a result.

Review for January 4-8: worst start to year on record. Forecast for the week on January 11-15

The first trading session of the new 2016 proved the worst since 1932. The first four trading sessions in the US were the worst on record – or 119 years. Increased fears of cooling of the Chinese economy after the publication of weak statistics on business activity in industry and services of the Chinese People’s Republic provoked a collapse of stock markets in China and started a domino effect on the world markets. The decline in oil prices to new lows of April 2004 and the nuclear threat from North Korea have intensified the movement of capital to risk assets in the assets of a “safe harbor“. Positive US statistics pointed to the availability of opportunities for the Fed rate hike.

US indexes were down for the week by more than 6%, such as Dow Jones fell 6.3%. NASDAQ 7.1%. Asian markets HSI collapses to the August lows and closed near the elevation data lost 7.9%, the Japanese Nikkei gone down by 8%. In the European region, Britain‘s FTSE fell to the lows of 2015, losing 6%, was more aggressive reduction DAX – 8,9%.

In the financial markets under the pressure of oil, metals and under the influence of the yuan devalued currency commodity-dependent countries showed a decrease. Currency pair USD / NOK + 0,8%, to multi-year highs USD / CAD (+ 2,2%). Instability in China generates flows in Japanese yen, the USD / JPY pair dropped to 2.3%.

Gold (XAU / USD) due to geopolitical risks due to North Korea’s nuclear threat has received a new impetus to growth, rising 4.1%, but the silver (XAG / USD) in the movement did not participate 0.9%. On the Chinese fear the price of copper (HG) has updated the minimum, losing 5.6% for the week. China and Saudi Arabia, price dumping in the European market of oil has led to the renewal of 11 year lows of oil brand Brent, which is a week decreased by 11.3%.

Chart of the week:

brent crude oil

Brent crude oil

The economic data of the last week:

  • Monday. China December index of business activity in the manufacturing sector, 48.2 against expectations of 48.9
  • Monday. Eurozone: December index of business activity in the manufacturing sector, 53.2 against expectations of 53.1
  • Monday. US: December index of business activity in the manufacturing sector, 51.2 against expectations of 51.1
  • Wednesday. China December index of business activity in the services sector, 50.2 against expectations of 52.3
  • Wednesday. Eurozone: December index of business activity in the services sector, 54.2 against expectations of 53.9
  • Wednesday. US: December index of business activity in the services sector, 54.3 against expectations of 55.1
  • Thursday. Eurozone: November retail sales -0.3% -0.2% against expectations
  • Friday. US: December The number of jobs outside the agricultural sector of the USA, 292 thousand against the expected 203 thousand.

Forecast for the week on January 11-15

Stock market

Beginning of the year turned out to be overly pessimistic. Investors are likely to be depressed, the guru of the market and leading investment banks say about the transition probability of the market in a bearish phase. Dzhors Soros said that the current situation in the markets of the world is similar to that observed in 2008. Billionaire financier analyst Marc Faber expects the decline of the market by 20-40% due to China. Analysts at UBS indicated highly probable entrance of the US stock market in a bearish cycle in 2016 and the potential drawdown of S & P500 by 20-30%. Goldman Sachs analysts on Thursday lowered its forecast of earnings per share (EPS) for the S & P500 in the $ 3 to $ 106, $ 117 and $ 126 for the 2015, 2016 and 2017, reflecting the negative attitude of bankers.

The persistent weakening of the Chinese Yuan leads to the strengthening of fears of capital flight from China. On Friday, the Financial Times reported that the Chinese authorities gave an oral order to restrict the sale of US dollars to companies and individuals, which may indicate a critical situation. Chinese central bank actions do not bring the proper fruits of the country’s economy continues to slow, involving a whirlpool neighboring countries. According to the National Bank of China in 2015, the international reserves of the country decreased by $ 512.66 billion, the biggest decline in history. At the same time, in December last year, the Chinese currency reserves decreased by $ 107.9 billion, which was a record in the history of decline over the last month. As a result, by the end of the year in the reserves of the country was $ 3.33 trillion.

Complementing the overall anxiety uncertainty about the Fed‘s actions to further improve the rate. In particular, the vice-chairman of the US Federal Reserve, Stanley Fischer expects 4 Round Fed rate hike this year, which corresponds to the assumptions of the Fed.

Monday January 11 starts earnings season for the fourth quarter of 2015 and the entire 2015 calendar year. Traditionally the season opens aluminum giant ALCOA (AA), a report which will be published after the close of trading on Monday. At the end of the company measures the state of the global industry, as aluminum is used in almost all industrial areas. Despite the fall in the value of aluminum in the world markets in the 4th quarter by 6.5% compared to the 3rd quarter, the company’s shares may receive significant support from the account in the financial results of contracts with Ford (F) and Airbus more than $ 1 billion, as well as possible long-term contract with Lockheed Martin for $ 1.1 billion.

Also, in the week prior to the opening of trading on Thursday will publish a report JP Morgan (JPM), and after bidding Intel (INTC). On Friday, before the opening of trading will be published financial results of Citigroup (C).

World stock indices since entering the reporting season will be volatile. The high oversold levels will act as a deterrent, but the rebound, investors will be considered as a possibility to close long positions. Dow Jones (YM) can head to the area of 16000, while the resistance will be the level of 17,000 from the possibility of renewed sales. For the Nasdaq (NQ) support is at 4110, resistance at 4450.00.

Commodity and raw market

Oil prices are at the lowest level since April 2004, threatening large-scale crisis in the industry, reducing the investment in exploration and drilling, as well as limiting the opportunities to work with loan funds. Venezuela and Nigeria are on the verge of default. Currency of Petroleum Exporting Countries are under massive pressure, which leads to dissatisfaction market participants. At the same time, the devaluation of local currencies to become the only opportunity to survive and compete. Cost of the traditional production at the company level is in the range $ 20-36. For many companies, critical current prices. More critical current prices for oil shale extraction. For countries, the level of oil prices for a balanced budget is above $ 40.

The oil market is in the area of ​​speculation, expectations and tough struggle for the narrowing demand. In anticipation of Iran’s proposal on the oil market, Saudi Arabia has reduced prices for consumers in oil prices for Europe at $ 0.2-0.6 per barrel. This price reduction is at odds with the European market trends, where Russia has increased selling prices for its crude oil Urals. In turn, the latest data on oil and petroleum products in the United States reported a decline of oil reserves, but recorded an increase in stocks of gasoline and distillates, which brought supplies in Cushing terminal to new records. If we add to the general trends sprawling fears of a hard landing in China, as the largest consumer and the risks for India can be expected to remain turbulent prices.

As a result, the price of Brent crude oil remained under pressure with the nearest support at around $ 30-31, and resistance at $ 36.3 and, in the case of which it is possible to overcome the rapid movement into the zone of $ 42.3. But for such a significant movement needed drivers, or a change in market sentiment with respect to China and start a new large-scale incentive programs.

The overall uncertainty in the markets, the growing turbulence and pessimism bidders geopolitical risks stimulate interest in gold as a safe haven asset. After a prolonged correction of the yellow metal, and accumulated oversold, there is potential for movement in the area of $ 1130 and further up.

Currency market

This week the focus of Statistics of China and the United States. This statistics of the two countries are now determines the fate of the movement of capital. US macro data will be considered in the light of further steps the Fed to raise interest rates, in turn, data on China‘s health indicators will be China and its response to the actions of the authorities – the devaluation of the yuan and point steps to stimulate the economy. Published on Wednesday data on China‘s trade surplus acts leading indicator of industry activity of the country. Therefore, the publication of weak data of China will lead to additional pressure on raw materials and commodity currency countries. Thus, we have the opportunity to continue the growth of the pair USD / CAD and reduced steam AUD / USD.

In turn, the US dollar received further support from the expectations of the Fed‘s intentions to carry out conservation further rate increase. Published on Friday, January 8 data to create jobs outside of agriculture were much better than expected (292 thousand against 203 thousand.), Which supports investors in this thought. This week the focus of the US statistics on retail sales, which can send the EUR / USD pair in the 1,065 zone.

Warning: Profitability in the past does not mean profitability in the future. Any projections are for information only and does not guarantee a result.