Euro falls on ECB’s inflation targets – Binary Options Daily Review

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Markets Report

Global Markets

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Friday 15th December 2017
Prepared by Barry Jenkins, MarketsWorld Binary Options Analyst

 
Market Index Closing Level Move on day Intraday Market Range
CAC 5,357.14 – 42.31 5,357.14 – 5,400.28
DAX 13,068.08 – 57.56 13,012.00 – 13,159.50
Dow Jones 24,509.07 – 76.36 24,509.07 – 24,672.48
FTSE 7,448.12 – 48.39 7,448.12 – 7,496.70
IBEX 10,176.50 – 84.00 10,176.50 – 10,293.10

Closing Markets Summary

Dow Jones

Stock indexes in the U.S. closed lower on Thursday with the Dow Jones ending a five-day winning streak as the market took a breather after several record-breaking sessions. Materials and health care sectors topped the losses while consumer discretionary shares were the sole gainers. Details of the Republican tax deal have started to trickle out, with the big elements including a new corporate tax rate of 21% and a new top individual rate of 27%. The corporate rate is currently 35%. There was still some uncertainty however, with Sen. Marco Rubio reportedly saying he was a ‘no” vote on the current version, without a larger expansion of the child tax credit. Markets found some initial support from better than forecast economic data but the gains didn’t hold. Sales at U.S. retailers climbed 0.8% in November, the start of the holiday shopping season. The increase was larger than forecasts. Jobless claims fell 11,000 in the latest week, while U.S. import prices rose 0.7% in November. The flash U.S. manufacturing PMI rose to 55 from 53.9 in November, while the flash U.S. services activity index fell to 52.4 from 54.5. Companies that featured included 21st Century Fox Inc. which rose 6.5% after Walt Disney Co. who announced it would buy the media company in a deal valued at $52.4 billion. Shares of Disney rose 2.8%. Teva Pharmaceuticals Industries Ltd. jumped 10% after announcing additional restructuring measures, including the loss of 14,000 jobs in the next two years, and the immediate suspension of dividends and cancellation of 2017 bonuses. Sanderson Farms Inc. fell 13% after the poultry producer posted weaker than forecast fiscal fourth-quarter profit. Valeant Pharmaceuticals dropped 11% after J.P. Morgan downgraded the stock to underweight from neutral. The Dow Jones closed down 76.77 points at 24,508.66. The S&P 500 closed down 10.84 points at 2,652.01. The Nasdaq Composite closed down 17.41 points at 6,856.53.

Europe

European equity markets closed lower on Thursday but off the lows of the day as the euro turned lower in the wake of the ECB issuing updated inflation targets. Stocks largely struggled throughout the session even after data showed euro zone business activity revved up this month. The pan-European Stoxx Europe 600 index fell 0.2% to close at 390.10, but it had dropped by as much as 0.4% earlier in the session. The oil and gas sector, as well as basic materials joined telecoms in moving higher. Utility and health care shares fell the most. The euro fell to 1.1781 from 1.1827 on Wednesday when it leapt 0.7% against the dollar after the Federal Reserve suggested U.S. inflation will continue to be sluggish in 2018. Read: In the bond market, the yield on Germany’s 10-year government bond rose 2 basis points to 0.326%. The European Central Bank left its monetary policy unchanged, as expected. Losses for European stocks accelerated during ECB President Mario Draghi’s press conference as the euro hit an intraday high of 1.1864. But equities came off session lows as the euro began to drop following inflation projections from the ECB’s staff and strength in the U.S. dollar. The 2020 forecast of 1.7% was slightly behind some expectations of 1.8%, which could have suggested the bank would raise interest rates in the first half of 2019. Economic data released by IHS Markit showed that its December preliminary composite purchasing managers’ index for the euro zone came in at 58.0, the highest since February 2011, led by continued improvement in France. The manufacturing PMI rose to a record of 60.6. Companies that featured included Capita PLC which 11% as the London-based business and outsourcing services company said its bid pipeline is currently valued at £2.5 billion, but that the bids are unlikely to add to profit in 2018 if successful. Steinhoff International Holdings NV fell 13% after the owner of Poundland and Mattress Firm said it will restate its 2016 financial results as part of its scrutiny into its European segment’s 2017 balance sheet assets. Denmark’s Vestas Wind Systems AS rose 6.4% and Spain’s Siemens Gamesa Renewable Energy SA gained 4% following reports that some Republican members of the U.S. Senate are reconsidering the potential for cuts of renewable energy tax credits. On regional markets the French CAC closed down 42.31 points at 5,357.14, the German DAX closed down 57.56 points at 13,068.08 and the Spanish IBEX closed down 84.00 points at 10,176.50.

FTSE

The FTSE 100 closed lower on Thursday, as traders digested a defeat for the government’s Brexit bill. The setback for British Prime Minister Theresa May is seen as potentially opening the way to a softer U.K. exit from the European Union. Stocks remained lower after the Bank of England left its benchmark interest rate unchanged as widely expected. The pound fell to 1.3429 after the Bank of England issued its last policy decision for 2017. Against the euro, sterling was at 1.1347, steady from Wednesday. The 10-year gilt yield rose 2 basis points to 1.19. In politics the U.K.’s lower house voted to amend the Brexit bill to give members of parliament the power to reject the final divorce deal struck with Brussels. The government had warned that the measure could jeopardize a smooth exit from the EU in March 2019. The vote which was an amendment to May’s flagship Brexit bill came after a rebellion of 11 members of her own Conservative Party, and is seen as a potential route to a softer Brexit. The Bank of England in a 9-0 vote left its key interest rate at 0.5%, as expected, the recent news in the macroeconomic data has been mixed and relatively limited. Global growth has remained strong. Domestically, some activity indicators suggest GDP growth in Q4 might be slightly softer than in Q3, the BOE said in a statement. The European Central Bank also left its monetary policy unchanged. Economic data the Office for National Statistics reported that November retail sales rose 1.1% month over month, and by 1.6% year-over-year. Those figures outstripped forecasts of 0.4% and 0.3%. Companies that featured included Sky PLC which fell 1.4% after the broadcaster’s largest shareholder, 21st Century Fox Inc. agreed to sell most of its assets to Walt Disney Co. in a deal that valued at about $52.4 billion. In a statement, 21st Century Fox said it “remains committed to completing its proposed acquisition of the shares in Sky it does not own, and anticipates that the acquisition of Sky will close by June 30, 2018.” Retailers were largely lower even after the strong U.K. sales report. Marks and Spencer was down 0.3% and Next PLC was off 0.8%. Associated British Foods PLC which runs fast-fashion company Primark fell 0.4%. But DIY retailer Kingfisher PLC turned higher and rose 0.7%. Lonmin PLC rose 21% on the midcap after South Africa’s Sibanye-Stillwater said it’ll buy the UK.-listed struggling miner for about £285 million. Capita PLC slid 12% after a trading update. The FTES 100 closed down 48.39 points at 7,448.12.

Economic News Expected Today

 USA

Type Period Forecast Previous Importance
NY Empire State Manufacturing Dec 18.60 19.40 Medium
Capacity Utilization Rate Nov 77.3% 77.0% Low
Industrial Production Nov 0.3% m/m 0.9% m/m Medium
Manufacturing production Nov 0.3% m/m 1.3% m/m Low

Economic News Expected Today

EU  Eurozone

Type Period Forecast Previous Importance
Trade Balance (euro zone) Oct 24.6bln 26.4bln Medium

Economic News Expected Today

UK United Kingdom

Type Period Forecast Previous Importance
BoE Quarterly Bulletin Dec     Low
BoE MPC Member Haldane Speaks Dec     Medium

Other Global Economic Data Expected

 

Type Period Forecast Previous Importance
Manufacturing Sales (Canada) Oct 0.8% m/m 0.5% m/m Medium

Economic News Round Up MarketsWorld Bars

Retail sales in the U.S. rose for the third-straight month in November, the U.S. Commerce Department reported that retail sales increased by a seasonally adjusted 0.8% last month, ahead of forecasts for a gain of 0.3%. Retail sales for October were revised to a gain of 0.5% from a previously reported 0.2% increase. Core retail sales, which exclude automobile sales, jumped by a seasonally adjusted 1.0%, compared to forecasts for a gain of 0.7%. Core sales in October rose 0.4%, whose figure was revised from a previously reported gain of 0.1%. In the U.S. the number of people who filed for unemployment assistance last week fell, the Department of Labor reported that the number of individuals filing for initial jobless benefits in the week ending Dec. 8 fell by 11,000 to a seasonally adjusted 225,000 from the previous week’s total of 236,000. Forecasts were for jobless claims to rise to 239,000 last week. Continuing jobless claims declined to 1.886 million from 1.913 million in the preceding week, which was revised up from 1.908 million. The four-week moving average was 234,750, down 6,750 from the previous week. U.S. import prices surged in November amid an increase in the cost of imported petroleum products, leading to the largest year-on-year increase in seven months. The Labor Department reported that import prices jumped 0.7 percent last month after a downwardly revised 0.1 percent gain in October. Forecasts were for import prices to increase 0.7 percent in November after a previously reported 0.2 percent rise in October. In the 12 months through November, import prices advanced 3.1 percent, the largest gain since April, after increasing 2.3 percent in October. Business activity in the U.S. private sector hit a nine-month low in December, as a slowdown in services offset better performance in manufacturing. Preliminary data released by IHS Markit showed that its composite purchasing managers’ index covering both the manufacturing and services sectors, fell to to 53.0 in December, from the prior reading of 54.5. By sectors, the research group said that its flash services purchasing managers’ index decreased to 52.4 in December, from the prior month’s reading of 54.5. Forecasts were for the reading to rise to 54.6. The flash manufacturing purchasing managers’ index increased to 55.0 in December from the prior month’s final reading of 53.9. Forecasts were for a rise to just 54.2.

The euro zone economy picked up further momentum in at the end of 2017, with December seeing the fastest growth in business activity in almost seven years. The preliminary reading of the Markit manufacturing purchasing managers’ index rose to a record high 60.6 this month. Forecasts were for a reading of 59.8. The services PMI rose to 56.5, compared to forecasts for 56.1. The composite output index, which measures the combined output of both the manufacturing and service sectors rose to 58.0 from 57.5, compared to forecasts for 57.2. The European Central Bank kept its ultra-easy policy stance unchanged on Thursday, promising to hold rates low for an extended period and even maintaining a pledge to provide more stimulus if needed. Six weeks after agreeing to halve asset buys from January, the bank reiterated its commitment to continue bond purchases at least until the end of September, and to keep reinvesting cash from maturing debt until much later to support a rebound in growth and inflation.

French private sector output remained strong in December, the preliminary Markit services purchasing managers’ index dipped to 59.4 this month from 60.4 in November. Forecasts were for a reading of 59.9. The manufacturing PMI rose to an almost 17-and-a-half year high of 59.3, compared to forecasts for 57.2. The composite output index, which measures the combined output of both the manufacturing and service sectors dipped to 60.0 from 60.3, but was ahead of forecasts for 59.4.

Private sector output in Germany expanded at the fastest pace in more than six-years in December, Markit reported that its Flash German Composite Output Index, which measures the combined output of both the manufacturing and service sectors rose from 57.3 in November to an 80-month high of 58.7 in December, ahead of forecasts for 57.2. The preliminary German manufacturing purchasing managers’ index climbed to a record-high of 63.3 from a final reading of 62.5 in November. Forecasts were for the index to slip to 62.2 this month. The flash services purchasing managers’ index rose to a 24-month peak of 55.8 from 54.3 in November, above forecasts for a reading of 54.7.

The Bank of England made no changes to interest rates as expected, the vote to hold was unanimous and they also reiterated that further modest increases are likely over the next few years. Retail sales in the UK rose more than forecast in November, the UK Office for National Statistics reported that retail sales increased by 1.1% in November from the prior month, compared to the previous 0.5% gain which was revised from an initial 0.3% rise. Forecasts were for November’s reading to advance by just 0.4%. Year-on-year, retail sales rose by 1.6% last month, better than forecasts for a 0.3% increase. British consumer confidence slipped in December to its second-weakest level in nearly four years, weighed by gloom about the state of the economy ahead of Brexit. The Thomson Reuters/Ipsos Primary Consumer Sentiment Index fell to 48.21 from 49.46 in November, the weakest level for three months and only slightly above September’s almost four-year low of 47.78.

The Swiss National Bank left its benchmark interest rate unchanged at record-low levels and said it will remain active in the foreign exchange market as necessary. In a statement, the SNB said it was keeping its benchmark interest rate unchanged at -0.75%, in line with expectations. The central bank also left the target range for the three-month Libor unchanged at between -1.25% and -0.25%. The accompanying rate statement released after the announcement said that the Swiss franc “remains highly valued,” even though it has weakened further against the euro and also, more recently, against the U.S. dollar.

Chinese industrial production for November came in with a gain of 6.1%, compared with a 6.2% rise seen followed by retail sales which rose 10.2%, compared to a 10.3% rise forecast and fixed asset investment came in up 7.2%.

Forex Round Up MarketsWorld Bars

The U.S. dollar edged higher against a basket of other major currencies on Thursday even after the Federal Reserve’s latest policy statement sent the dollar broadly lower. Economic data showed that U.S. retail sales rose for the third-straight month in November, while a separate report showed that U.S. initial jobless claims fell last week. In a widely expected move, the Fed raised interest rates by 0.25 basis points to 1.50% at the conclusion of its policy meeting on Wednesday. However, the central bank did not change its projections for 2018, which include three more interest rate hikes in both 2018 and 2019, disappointing expectations for four rate hikes next year. The USD/JPY was up 0.04% at 112.59. The euro slipped against the dollar on Thursday after the European Central Bank kept monetary policy on hold and revised up its forecast for growth and inflation, but added that underlying inflation remains subdued. The EUR/USD was down 0.40% at 1.779. Sterling pared back gains after the Bank of England left interest rates on hold, as expected, a month after the first rate hike in nearly a decade. The monetary policy committee voted to leave interest rates on hold at 0.5% in a unanimous decision. The BoE also maintained its current quantitative easing stimulus program, which has bought £435 billion of government debt and £10 billion of corporate bonds. The GBP/USD was up 0.04 at 1.3424, down from around 1.3443 earlier. The Canadian dollar was weaker against the U.S. dollar as declining oil prices dented demand for the commodity-related Canadian currency. The USD/CAD was up 0.24% at 1.2846. The U.S. dollar index was up 0.33% at 93.71.

 
Commodity Round Up MarketsWorld Bars

Gold prices ended higher on Thursday on some follow-through buying from Wednesday afternoon’s gains. February gold was up $8.30 an ounce at $1,256.90. March silver was up 7 cents at $15.94 an ounce.

Crude oil prices settled higher on Thursday, ignoring data forecasting a faster than expected rise in US shale oil production next year, while an ongoing pipeline shutdown supported Brent crude prices. The International Energy Agency in its monthly oil market report, revised upward its projection for US oil production, warning that total supply growth could exceed demand growth in the months ahead. The IEA raised US crude oil growth to 390,000 barrels per day this year and 870,000 bpd for 2018. Non-OPEC output, led by the US, will rise by 630,000 bpd in 2017, followed by an increase of 1.6 million bpd during 2018. West Texas Intermediate crude futures for January delivery rose 44 cents to settle at $57.04 a barrel. February Brent gained 87 cents to settle at $63.31 a barrel.

The MarketsWorld Overview MarketsWorld Bars

Canadian manufacturing sales is an important economic indicator and has the tendency to move the Canadian dollar. In September the indicator rose by 0.5%, this time, an increase of 0.8% is forecast.

 

 

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The information contained in this publication is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Any opinion offered herein reflects Barry Jenkins’ (MarketsWorld Analyst) current judgment and may change without notice. Users acknowledge and agree to the fact that, by its very nature, any investment in shares, stock options and similar and assimilated products is characterized by a certain degree of uncertainty and that, consequently, any investment of this nature involves risks for which the user is solely responsible and liable. This message is intended for recipient only and not for further distribution without the consent of MarketsWorld.

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