Thursday, March 3 :. Five things the markets speak of
European equity indices were trading lower across the board for most of the morning session, but currently trading mixed, despite a positive session during the Asian night. Ahead of non-farm payroll (NFP) report tomorrow, the markets continue to focus on the next potential movements of monetary policy of the Central Bank.
In FX, the EUR remains fairly stable at around € 1.0860 despite high hopes of more stimulus ECB next week (10 March). Many believe that other central banks should follow the example of Draghi. For example, the Swiss National Bank (SNB) may also be pressured to have to reduce their deepest NIRP. The next fortnight will have a significant impact on the global yield curves.
1. Yen Futures shorter dealers in four years
For many pro-traders, the yen is a cheap risk indicator (Yen / carry trade and the risk on assets). Over the past four years, the relationship between the yen and equities has been exceptionally tight (on a reverse basis). When the yen fell, stocks tend to rally and vice versa.
Tech analysts suggesting current futures market signals may point to a significant drop in Yen, which could be good news for "bulls" with an appetite for risk.
Bank of Japan (BoJ) Governor Kuroda keeps repeating that Japanese policymakers are willing to lower rates further if necessary (March 15). The governor promised to continue with negative rates (NIRP) and QE until their 2% inflation target to continue. adverse movement in interest rates Kuroda in late January had no impact significant currency, apart from the brief initial pressure ¥ 121.50 yen on the ad.
The recent future position reports, dealers / traders / speculators currently hold a position "extreme" net short-term yen. In fact, they have not been this short in more than four years, when the yen just before spiraling into a decline of 40%, which lasted 36 months.
2. GBP Bears go walking until ....
background Cable on Monday around 1.3850 £ and started to reverse some losses since that time, with GBP / USD up sharply at 1.4100 during the session £ overnight.
The book has found a temporary bottom, despite all the negativity of this week. There were two unfavorable polls on EU membership continuation of the UK. ORB poll out Monday saw 52% for departure and 48% who said they would vote to stay in the EU. ICM poll Tuesday saw the two sides deadlocked, + 41% to stay and 41% for departure.
Yesterday, Conservative PM Cameron unveiled his government's case to remain within the EU, and argued that supporters of leave need to develop a detailed plan for Britain outside EU, including the impact on the economy and prices. Polling day is on June 23 and the next three and a half months should a contentious case causing much volatility for the pound and the pound-cross.
UK services PMI printing this morning came in at 52.7 for February, well below expectations (55.1), and in the wake of this week lower manufacturing in the United -um and PMI construction.
Perhaps it is a sign of bad omen for the U.K. economy? Do not be surprised to see more analysts are starting to lower their expectations for Q1 U.K. GDP. Nevertheless, this kind of data will be an awakening for the Bank of England (BoE) - they should be able to put to bed any discussion to a more restrictive monetary policy in the near future.
The BoE will meet on March 17. The governor kept the rate bank manager waiting to + 0.5% for almost seven years and the market yield curve represents an increase of 25 bps is not the price for another three years.
3. Asia and Euro PMI mixed
February services PMI for China, Hong Kong and Japan came in mixed or lower overnight. China Printing slowed to 51.2 from 52.4, while the composite PMI returned to contraction of 49.4 against 50.1 before.
Analysts note that the second largest economy of the world is still "weak and unstable," although the relative outperformance in services is an indication of the continuing improvement of their economic structure.
Hong Kong PMI was slightly firmer, but is now in contraction for a full year (46.4 vs. 46.1 prior). This autonomous territory on the southern coast of China was hit by the global slowdown and lower tourism activity.
Japan PMI also fell amid slowdown in new order growth, the decline in employment and the lowest forecasts to activity on the prospects for twelve months. (BoJ continues to speak in favor of the expected impact of negative rates on the fight against deflation, but is also wary that there would be a limit to how other central banks may push the rate into negative territory).
Not a total surprise, but Euro PMI services readings were also mixed this morning - Germany, Spain and Italy all expectations to beat, while there was a miss surprise in the UK and France.
4. shares Norges Bank
Futures traders speculate that the Norges Bank will reduce its main interest rate to zero from + 0.75bps end of the year to support their economies through a downturn in oil prices induced plummeting.
Inflation was close to the target 2.5% desired by the Central Bank in recent months, but "the risk is decreasing as income from declining oil sector and investments future suspended. "
There is a perfect balance for policy makers. Together with other Tier 1 Central Bank about to go deeper into the NIRP territory of the Central Bank as Norges can have no discretion but to cut their benchmark rate to keep the NOK (€ 9.4243) building. on March 17, the market will be looking for a rate cut.
5. China's peoples National Congress
This weekend, Chinese leaders will begin ten days of political meetings to plan how to meet the economic challenges of the nation and meet the goal of doubling per capita income by 2020 from the government.
Many expect the authorities to deploy a larger budget deficit, projects and infrastructure policies to support reform of the offer.
Can these measures to reverse the current slowdown in the second largest economy in the world? To date, the Chinese authorities have set up a target of average growth of 6.5% for the next five years.
Capital Markets continue to focus on the yuan and its rate of "manipulated" impairment and its impact on the foreign exchange reserves of China. Do not be surprised to see China announce initatives tighter capital controls.
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