Tuesday, July 26 :. Five Things market talk of
The volatility of the market recovers before the Federal Open Market Committee (FOMC) and the Bank of Japan (BoJ) decision later this week. In the business of the night, the Australasian markets were particularly volatile with more titles related to monetary stimulus financial mix / BoJ.
In Europe, the fear is not lost on investors, as they too expect a lot of results this week - this is the greatest week for the European market for some time. They are also waiting for the results of financial stress tests Euro Tuesday before entering the banking sector, and comments after the various political meetings to get an idea of what the central banks will not do it.
The Fed began its policy of two-day meeting today. Investors expect it any changes to their monetary policy decision on Wednesday, but the declaration of language will be closely watched for clues about future rate increases.
To date, investors have become more optimistic about the prospect of rate increases in recent times, with markets now price a chance to increase the December meeting of the Fed and its these spreads that help support the dollar by 51%.
1. There is concern that Japan monetary and fiscal easing will disappoint expectations
The rise of the yen this year has complicated Japan's efforts to stimulate economic growth weighing on inflation and making Japanese exports less competitive globally. Again last night, the yen was the main goal markets as investors sharply reduced their expectations for the stimulus plan soon to be announced in Japan, sinking actions and support the yen.
A Nikkei report before the opening of the market has speculated that the government of Prime Minister Abe would double the "planned" additional spending for 2016 in its stimulus program to + ¥ 6T. Despite this number possibly being doubled, the market was pricing in a much greater number, anything to + ¥ 10-20T was mentioned as Friday. Also disappointing traders was that spending will come over several years, which means that the initial impact will be less than expected.
Finance Minister Aso Japan later said that the size of the economic recovery has not yet been decided, and monetary policy is in the hands of the BoJ - theses comments helped send the yen to test the psychological ¥ 104 handle ahead of the US open.
It seems that the market is not convinced that Kuroda BoJ will pull the trigger on Friday.
2. Weale BoE exchange air and moves to "status quo" camp
BoE rate setter Martin Weale ( former "hawk") reported that it will now vote in favor of providing new impetus (August 4) for the UK economy, a position change caused by last Friday's UK PMI that pointed to a decline economic activity since June 23 Brexit historic vote.
There are only two weeks Weale said he was not convinced that interest rate cut director of BoE was necessary following the vote. His change of heart leaves the reluctance expressing "a" MPC member to vote for more stimulus in a few weeks.
Sterling immediately fell to a new two-week low of £ 1.3058 and € 0.8428 week minimum. From a technical perspective, strong support for the pound remains around the handle £ 1.30 - However, investors should still expect renewed selling before the decision of the BoE.
So far, retailers expect QE to be preferred policy instrument of the MPC in terms of delivering a more powerful package - initial guesstimates are around £ 50B, however, anything bigger could see the book quickly review its lowest Brexit £ 1.2796.
3. Global indices sending mixed messages
A rebound in European equities lost steam after hitting one month high last week.
This morning the Euro Indices see some selling pressure as market participants remain cautious ahead of meetings of the Fed policy and the BoJ this week - the market continues to digest the possibility a Fed rate hike in the near future, despite the expectations of the Fed to keep policy unchanged this week. Yesterday reference came to + 1% erase all of its losses Brexit. It's no surprise that financial stocks are leading the losses across the board, while the names of energy remain the notable lagging behind in the FTSE 100on the back of lower commercial oil stocks. inventories of raw materials and mining unlike most trades.
In Asia, stock markets were mostly mixed despite more negative sentiment on Wall Street yesterday. Japan's markets were particularly shaken with more titles related to a mixture stimulus is spent driving the Nikkei 225 down 1.5%
Indices :. Stoxx 50 -0.2% in 2964, FTSE + 0.2% to 6722, DAX flat 10195, CAC-40 -0.5% in 4367, IBEX-35 -0.6% in 8522, FTSE MIB -1.2% to 16,487, SMI -0.1% in 8188, S & P 500 Futures -0.1%
4. crude oil prices slump again to levels not seen since April
Expanding gas inventory and increased drilling in the US continues to be bad news for the oil market.
Crude oil this morning, managed to hit its lowest price since May (WTI 42.79 $ -0.79%, -0.42% Brent $ 44.53), under the pressure concerns a long-awaited rebalancing of the market would be delayed due to a supply glut.
also dampening sentiment, many traders cut their paris on the price rise. Speculators reduced their net position "long" in the Brent and WTI futures of crude oil barrels to + 453m -31m July 19
This week's inventory reports from the United States ( 4:30 p.m. EDT today API and DoE Wednesday 10: 30am EDT) are expected to show a drop in crude stocks but a rise in gas deliveries.
5. US yields remain sensitive front
Short-term yields are very sensitive to changes in monetary policy and two the year Treasury note auction on Monday is a good example of this.
announcement of the Fed rate tomorrow has temporarily weakened the appetite for two years produced the Treasury.
two-year sale yesterday, which was a tepid affair, indicates how sensitive short-term yields. The weakened demand managed to trigger a new crisis of the front-end sales, pushing the yield of 2 years for a month of high fees + 0.76% yield (higher than + 0.743% of similar debt exchanged before the sale). Fed-funds futures indicate that there are only 20% chance that the Fed will tighten monetary policy by its September meeting and a chance + 51% in December.
Appellate indirect bids, which is a proxy for foreign demand, managed to fall to 30%, the lowest since July 2014. While the direct auction was + 10.3% up + 9.9% last month, but below the + average for the last four sales of 18%.
Investors need guidance; otherwise there will be more "sitting on the fence" occur.
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