Indices

Asian Open: The Fed Guides Equities Higher, Copper Probes Resistance

We’re amidst another busy week for the Fed with 16 public appearances scheduled overall, with Powell, Mester and Daly hitting the wires overnight.
Equities higher because the Fed push strong economy with transient inflation narrative
San Francisco’s Federal Reserve System President Mary Daly told reports she was “bullish on the recovery”, “substantial” progress had been made towards the Fed’s 2% inflation target and financial condition goals. But, perhaps more importantly, she thinks the Fed could also be during a position to start tapering this year. This last point alone was enough to topple equities when James Bullard effectively read from an equivalent script on Friday, yet Jerome Powell soothed any negative response from markets together with his persistent view that inflation are going to be transitory, when he witnessed congress separately.

Bond yields were lower across the curve the US 10-year yield falling -2.2 bps below 1.5% and therefore the 2-year was down -2.6 bps to a two-day low of 0.23%. On the economy, Powell said labour demand is extremely strong and expects strong job creation in autumn. Lorretta Mester is additionally within the ‘transient’ camp and expects inflation to rise to around 3% to three .5% this year before falling back to a quarter in 2022, adding she expects employment to fall below 4% by next year.

The message of a ‘strong, but not too strong’ recovery was music to Wall Street’s ears, technology stocks took the lead with the Nasdaq 100 closing to a record high and therefore the Nasdaq’s biotech index now up 5.6% month-to-date. The S&P 500 stopping just in need of its own record high with eleven S&P 500 sectors closed the green.

The ASX200 recouped most of Monday’s losses during its best session in three-months yesterday, to shut with an outsized bullish inside day. Information technology sector is that the best performer month-to-date, although with an RSI (2) reading of 99.52 it’s at high risk of over-extension over the near-term. At the opposite end of the size , the ASX Allords gold miners index is currently down -10.7% over an equivalent period as they tracked gold prices lower.

Commodities: OPEC discuss raising boring
Brent rose briefly above $75 for the primary time in two years yet reversed earlier gains as OPEC+ discussed raising boring . alittle bearish pinbar formed on the daily chart and closed back below 74.95, although early trade Asia has seen it return back above that level with net resistance of 78.58 in view . WTI futures closed just beneath 73.15 after a quick spell above it and formed alittle indecision candle.

Gold’s rally lost momentum and closed -0.24% lower. Its direction over the near-term is now a touch unclear and therefore the reward to risk ratio appear inadequate on the daily chart for bears. However, key levels for to watch from here are 1756, 1760 and 1770.64 as support and 1790 and 1800 a resistance.

Copper prices have broken two key levels of support over the past two weeks; the 4.435 level and therefore the October trendline. We outlined a bearish case before these key levels broke supported a big reduction of net-long exposure this year (see 1:30 within the video), and we’re not entirely convinced the -16% decline from its peak is enough considering China are continuing to curb commodity prices. So, over the near-term we are monitoring copper’s potential to make a bearish reversal at the broken trendline and make its thanks to the three .943 – 4.00 lows.

That said, some noise are often allowed around a trendline break (spikes either side of it) although a clean retest and drop is usually preferred. And given the established decline in net-long exposure, we’d still seek potential shorts further out below 4.435 if prices were to interrupt back above the trendline.

S&P 500 finds support: Record highs in sight?

With major US indices during a seasonal “quiet period” between earnings seasons and therefore the ate up hold, traders are likely to require their cues from technical developments
This week’s bloodbath within the crypto markets is garnering all the headlines, but yesterday’s big bullish reversal in global stock indices is that the more important development for many traders and investors.

Following a period of low volatility, markets were spooked by hotter-than-expected inflation figures and last week’s big hawkish shift from the Fed, resulting in the S&P 500’s worst week since February. The elastic band snapped back yesterday, with the index seeing a pointy 1.4% rally off support from the 50-day exponential moving average and therefore the bottom of the well-established bullish channel.

With major US indices during a seasonal “quiet period” between earnings seasons and therefore the ate up hold, traders are likely to require their cues from technical developments, a minimum of until next Friday’s Non-Farm Payrolls report, and from a purely technical perspective, the bias for the S&P 500 remains bullish. After two months of consolidating near record highs, yesterday’s price action created a “Bullish Marubozu” candle, signaling strong buying pressure throughout the day:Considering the strong support from the 50-day EMA and rising channel, also as a uniform floor at 40 within the RSI indicator, bullish traders could consider buy trades near current levels with stop losses below support within the 4150 area and a target somewhere in record high territory around 4300+.

This general technique, where you limit your downside risk while trading within the same direction of the established trend, can help put the chances in your favor over the end of the day , though a person trade can always still fail.

US open: Futures edge higher ahead of Fed Powell’s testimony

After strong gains within the previous session, Wall Street is heading for a quietly positive start with most preferring to remain on the sidelines before Fed Powell’s testimony before Congress.
All eyes to Fed Powell

After solid gains within the previous session, US stocks are pointing to a mildly stronger start as investors weigh up the prospects of further economic process against inflation concerns. Whilst the Dow gained a powerful 1.8% within the previous session trading before Fed Powell’s testimony before Congress today is probably going to be subdued.

In pre-released remarks, Powell once more reassured those inflationary pressures are going to be transitory whilst also expressing optimism surrounding the outlook for the economy. These comments sound familiar but the6y come against a backdrop of a surprise hawkish shift within the Fed seen last week.

The Fed now expects 2 rate of interest hikes before the top of 2023.

Equities

Gamestop trades +8.4% pre-market after raising $1.1 billion in an offering of 5 million shares as the troubled computer game retailer cashes in on the surge in its stock price this year.

Torchlight Energy trades 4.1% higher pre-market, adding to 50% gains yesterday because it becomes the newest stock to catch the eye of retail investors.

Where next for the Nasdaq?

The Nasdaq trades above its 50 & 100 sma on the 4 hour chart. It also trades above its month old ascending trendline during a bullish trend. Aftter slipping briefly below the 50 sma within the previous session, the very fact that the Nasdaq has broken back above resistance at 14077 adds to the suggestion that there might be more upside to return . an opportunity above 14209 would bring fresh all time highs. Its worth noting the RSI bearish divergence could suggest that the move higher is running out of steam. 14077 offers support now and a move below 14000 could negate the near term uptrend.

The US Dollar is one the increase , clawing back a number of yesterday’s losses. US Dollar price movement has been volatile since the Fed’s hawkish surprise last week when it suggested that there might be two rate of interest rises in 2023. All eyes are now on Fed Powell for further clues on how transitory the spike in inflation could be .

GBP/USD is paring gains from the previous session. Sterling trades struggling despite the general public sector finances improving. Public sector net borrowing came in at £24.3 billion in May, down from £31.7 billion in April and better than the £26.1 billion forecast. The reopening of the economy means tax receipts have picked up, furlough number have declined and government spending on supporting the economy slowed slightly. Whilst this is often an improvement it’s still the second highest level of net borrowing in May since record began.

GBP/USD -0.3% at 1.3893

EUR/USD -0.2% at 1.1897

Oil eases lower on USD strength

Oil prices are edging lower on Tuesday after booking solid 2% gains within the previous session. Oil rallied following comments from the newly elected Iranian President which suggested that he could put the brakes on the US – Iranian nuclear talks. As a result, the prospect of the US lifting sanctions on Iranian oil and it flooding back to the market faded.

A strong demand outlook continues to under pin the worth of oil as economies reopening and travel picks up. However US Dollar strength is simply taking the sting off demand for the black gold.

API inventory data are going to be focused later after big draws on stocks piles were recorded last week.

US crude trades -0.7% at $72.56

Brent trades -0.6% at $73.73

European Open: Indices mixed, oil and energy lower, RBA hold rates

With no surprises by the RBA and mixed data from Asia, traders looked to weaker oil prices for a lead.
It was a mixed picture for equities across Asia today, with shares in Japan and China trading mostly lower, the ASX 200 essentially flat yet major indices for South Korea , Singapore and Taiwan were higher.

Only consumer staples and therefore the financial sectors closed higher for the ASX 200, with energy, materials and industrials each falling over 1%. Energy stocks were lower as oversupply concerns weighed on oil prices and sent WTI back to $60 before Thursday’s OPEC meeting. Yet volatility was contained overall. Gold resources (GOR.AX) was the weakest stock within the index, falling -7.5% in line with gold prices which touched fresh lows and fell to 1,706.

The Nikkei 225 was struggling following weak CAPEX (capital expenditure) data, which revealed that Japanese companies had cut spending on large equipment for a 3rd consecutive quarter as manufacturer’s continued to chop costs.

Forex: Dollar slightly bid, EUR/USD quietly breaks support
The USD is slightly firmer with the US dollar index (DXY) rising +0.2% to a 3-week high. EUR/USD quietly broke beneath the 1.2023 low in Asian trade but, with the 100-day eMA and 1.2000 handle in close proximity, we are on one’s guard for a false break and corrective bounce higher. USD/CHF closed above its 200-day eMA yesterday and costs have remained during a tight range near yesterday’s highs. subsequent major resistance is around 0.9200, which is around 45 pips away.

GBP/USD printed a 2-week intraday low but prices have since recovered back above 1.3888 support. Failure for bears to overcome this level could end in a minor, technically driven rebound. GBP/AUD nudged its was to a 2-day low following RBA’s meeting and traded back below its 100-day eMA. Last week’s rally appears to possess topped out after finding resistance at its 200-day eMA on Friday.

USD and CHF are currently the strongest major whilst GBP and CAD are the weakest. Although it’s been a quiet session overall with all pairs remaining well within their 10-day ATR’s (average true ranges).

Asian PMI’s still rally
South Korean manufacturing PMI expanded at its fastest rate in 11 years in February, reaching 55.3 and up from 53.2 in January. With new orders and output hitting 11 year high it paints a really rosy picture for global demand and, ultimately, global growth in H2 2021. New export orders also rose for a fifth consecutive month, with respondents highlighting domestic demand and from South Asia.

RBA keep policy unchanged in dovish meeting
The Federal Reserve Bank of Australia predictably held rates at 0.1%, where they expect to carry them until inflation rises comfortably within their 2-3% firing range . The RBA think the economy still operates with considerable spare capacity and “significant gains” for employment are required to satisfy their goals. Moreover, wage growth also will got to be “materially higher”. and that they don’t expect to ascertain this until 2024. Dovish it’s then!

It appears that Monday’s doubled-the-usual bond purchase may are a single-off event, as against a change in momentum as their statement made regard to bond purchases being “brought forward in the week to help with the graceful function of the market”. But they’re going to still answer “market conditions” (translates as ‘higher bond yields’) if and when need be.

The Australian dollar gave little response, although that would be expected since there was no element of surprise at today’s meeting. The ASX 200 spiked 70-points but now trades back near its opening price around 6,785.

USD/CAD focused for Canada’s GDP
With GDP data for Canada released later within the US session and therefore the recent rebound of the US dollar, we are seeking bullish opportunities on USD/CAD.

Recent price action on the weekly charts have made us question whether USD/CAD has already printed a big low. February’s candle produced a Rikshaw Man Doji and last week’s candle produced a “buying tail” (lower wick) after bears did not hold prices beneath the January 2021 and April 2018 low.

Switching to the hourly chart shows that a bullish engulfing candle formed at the 50-hour eMA and costs have now broken above its high to suggest a swing low is in situ . The low has also respected a 38.2% Fibonacci retracement level. Given the strength of the rebound from the 1.2465 low, we suspect recent price action to be corrective and bulls will attempt to target the highs around 1.2746/63.

German retail sales are expected to fall -0.3% in January, although there could also be potential for a downside surprise given lockdowns.

Canada’s GDP is predicted to 7.5% in Q4, a far cry from Q3’s 40.5% rebound but admirable none the less. A downside surprise should help lift USD/CAD in line with our bullish bias, whereas a stronger print could cap upside potential.

Vaccine optimism, a calmer bond market, stimulus & Zoom in focus

US regulators approve JNJ vaccine boosting hopes of a quicker reopening. The bond market stabilises leaving US stimulus & Zoom earnings after the closing bell focused .
US futures

Dow futures +1% at 31235

S&P futures +1% at 3848

Nasdaq futures +1.2% at 13070

In Europe

FTSE +1.3% at 6568

Dax +0.9% at 13918

Euro Stoxx +1.3% at 3683

Stocks cheers the covid stimulus bill progress

US stock markets are pointing to a stronger start amid a calmer mood within the bond market and leaving the main target firmly on the US covid stimulus bill which was voted on within the House of Representatives over the week and now makes its thanks to the Senate where it’s expected to be voted on next week.

Calmer bond market

After the bond market rout roiled financial markets last week, the image is notably calmer in the week . the ten year US treasury yield continued to ease back from its spike higher to 1.6% last week to current levels of 1.43%.

However, speeches by Federal Reserve System policymakers John Williams and Lael Brainard could well push the main target back on inflation expectations and therefore the bond market.

Manufacturing PMIs focused

The latest round of producing PMIs have revealed broadly upbeat readings; China being the notable outlier. China’s Caixin PMI dropped to its lowest level in 9 months, although the market has shrugged off the figures given the likely distortion from the Lunar New Year .

Final PMI’s were upwardly revised across Europe with the Eurozone PMI recording its highest level since 2018 as demand surged.

US ISM manufacturing PMI is due at 15:00 UTC.

FDA approves Johnson & Johnson vaccine

Reopening optimism is adding to the upbeat mood after the US regulators approve the Johnson & Johnson round covid vaccine. this is often the third vaccine to receive approval stateside and has the potential to hurry up the reopening process dramatically boosting risk sentiment.

Zoom earnings

One of the most beneficiaries of the pandemic has undoubtedly been Zoom. It’s share price has soared across the year from an IPO price of $36 in late 2019 and valuation of $9 billion to its current price of $370 and a valuation of $120 billion.

Revenue has also surged with Q3 seeing a 367% jump in revenue to $777.2 million, well before the $694 million expected and significantly up from Q1 2020 revenues of just $328 million. The share price has been on the decline since late October’s all time high of $588 because the prospect of a successful vaccine rollout and economies reopening have raised fears that growth will slow. So guidance are going to be closely eyed. Expectations are for EPS $0.78c.

FX – EUR shrugs off accelerating German inflation

The US Dollar is extending 0.6% gains from the previous week. US Dollar Index DXY +0.15% holding above 91.00.

EUR/USD – trades depressed versus the stronger USD despite German inflation accelerating in February. German CPI February jumped 1.7% vs 1% Jan and 1.2% expected. The ECB weekly bond purchases are awaited.

Analyst Fiona Cincotta looks at EU/USD price action and levels to observe .

GBP/USD trades -0.20% at 1.3906

EUR/USD trades -0.25% at 1.2045

Oil resumes uptrend

Oil along side other risk assets is on the increase at the beginning of the week due to the upbeat market mood. Investors still cheer the continued economic recovery and therefore the prospect of a vaccine led reopening of the economy.

Iran’s rejection of the EU and US’s invitation for direct nuclear talks is additionally underpinning the worth . Iran refuses to restart talks without the US first halting sanctions.

Attention will address this week’s OPEC+ meeting with chatter surrounding a production hike increasing.

US crude trades +2% at $62.25

Brent trades +0.4% at $64.81

What to expect from the UK Budget 2021

The UK has already unveiled its roadmap out of lockdown and in the week we discover out the budget to travel with it. We outline what to expect from the united kingdom Budget to form sure you’re fully prepared.
Are you ready for the Budget?
Budgets are always market-moving events but the exceptional circumstances means this one could have a much bigger impact. GBP, the FTSE 100 and stocks are going to be among the assets responding to the news that comes out on Budget day.

When is that the Budget?
The Budget are going to be delivered by the chancellor Rishi Sunak on Wednesday March 3. He will address the House of Commons at around 1230 GMT.

Coronavirus Budget 2.0: What to expect from the Budget
The Budget is when the govt introduces new policies associated with taxation and spending. It also reflects on the present state of the economy and forecasts are published to point out how it’ll perform within the coming years in light of any changes that are made.

While every Budget comes with its own unique tests, this one is arguably one among the foremost challenging of all time. The economy has been hammered and debt is piling up because the government has had to prop businesses unable to trade during the pandemic, then there’s the challenge of forging a replacement financial future for the country following Brexit.

The last time the chancellor outlined his vision for the country’s finances was back in March 2020, when he had to reply to the state being plunged into lockdown with what was dubbed the Coronavirus Budget. With the autumn Budget having been cancelled, this one are often considered Coronavirus Budget 2.0, where the govt outlines subsequent step of its plan.

The Budget are going to be aligned with the roadmap out of lockdown announced by prime minister Boris Johnson last month that aims to ease restrictions across the country in four steps, culminating in most lockdown rules being removed on summer solstice . The chancellor’s job is to form sure the economy is fighting fit when it’s allowed to reopen and to supply the kickstart it needs after months of being locked down.

The primary challenge for the chancellor is to strike the proper balance between providing further, albeit expensive, support to people and businesses within the remaining months of lockdown to stay the ship steady until lockdown ends, against the growing got to address the burgeoning debt pile which will need to be repaid at some point .

Sunak has said the Budget are going to be one that ‘provides support to people’ but that he also wants to ‘level with people’ about the impact the pandemic has had on the general public purse and the way the govt intends to deal with it.

UK government debt: How will it’s repaid?
The UK’s debt pile has soared to an all-time high of over £2.1 trillion as a results of increased borrowing during the pandemic. Supporting the economy has seen the govt borrow over £270 billion thus far within the current fiscal year , up from but £50 billion the year before, and therefore the Office for Budget Responsibility forecasts that would climb to as high as £385.5 billion by the time the year ends on March 31.

The chancellor has suggested he wants to stipulate how the govt will repay this debt, but this doesn’t mean he must take immediate action. People and businesses still need time to get over the toll of the pandemic and announcing measures but holding off on implementing them would offer time to organize .

Plus, with interest rates at record lows and possibly heading toward negative territory, the value of servicing all this debt is inexpensive, and a few argue this is often the right time to borrow extra money to take a position within the recovery. If the govt pulls existing support too early and fails to guide the economy back to health, then the recovery could falter.

However, not addressing the debt pile now might be seen as kicking the can down the road. there’s an argument that debt should be paid down now to avoid the danger of being deep within the red when the environment isn’t so favourable. the govt won’t want this level of debt if interest rates rise.

Will taxes go up within the UK?
The problem for the chancellor is that he must usher in more income if he wants to form a significant dent to the debt pile, but introducing new costs for people and businesses at a time once they try to financially recover is counterproductive.

He has the added problem that the Conservatives pledged to not raise tax , social insurance or VAT during their successful election campaign in 2019, potentially tying the chancellor’s hands and preventing him from toying with the three single biggest sources of income.

The government is keen to stay thereto pledge, but it can’t be ruled out that it’s broken considering it had been made before the pandemic erupted and therefore the exceptional circumstances that the country now finds itself in. Former Conservative chancellor Ken Clarke has suggested Sunak considers raising all three taxes to assist pay down debt.

Tax rises can therefore not be ruled out, but they’re likely to return into a force at a way later date, possibly in April 2022.

Will tax thresholds be frozen?
Sunak could get creative so as to take care of his party’s campaign promises. one among the more likely ideas reported to be in consideration is freezing tax thresholds. Currently, people start paying a 20% rate after earning £12,500 and 40% once they earn over £50,000. By freezing those thresholds, more people would pay more tax as wages increased, although this is able to depend upon a stable job market with rising pay.

Will corporation tax go up?
Corporation tax paid by businesses could also rise over the approaching years, with reports suggesting it’ll gradually increase from 19% today to as high as 25% by 2024. If that does happen, then the primary increase is probably going to be delayed to offer businesses an opportunity to recover before facing higher taxes.

Sunak is additionally likely to undertake to deal with the imbalanced impact the pandemic has had on some businesses over others. Whilst most businesses have struggled, some have thrived. The chancellor could invite extra money from people who have done well during the pandemic to assist support people who haven’t been as lucky. Reports suggest this might be achieved in several ways, like a one-off tax applied to people who have made excessive profits. The new Digital Service Tax on internet-based businesses could even be adjusted.

Will VAT rise?
The chancellor could look to tweak VAT surely products and services as how of accelerating income without adjusting the quality rate. for instance , this might see higher VAT applied to un-environmentally friendly products and services.

Will Capital Gains Tax increase?
One area potentially ripe for the taking is Capital Gains Tax. Reforming the tax has been within the pipeline for a few time. Currently, people pay less tax on their capital gains like once they take advantage of selling a property, company or shares than they are doing on their income, and there’s a growing chance that these two are going to be aligned by raising Capital Gains Tax.

This may encourage more traders to think about moving from trading CFDs, which is subject to Capital Gains Tax, to spread betting, which isn’t .

Will the lifetime pensions allowance be frozen?
Last on the potential moves on tax might be a £1 million cap on the pensions lifetime allowance. Currently, people can save the maximum amount as they need in their pension but a cap would mean they might got to pay tax if it’s exceeded, potentially encouraging people to spend more and save less.

UK unemployment rate: How will the govt help the jobless?
Sunak said over the weekend that around 750,000 people have lost their job during the pandemic which he wants to ‘make sure we offer those people with hope and opportunity’.

Unemployment sits at its highest level in five years at 5.1%, but this is often still relatively low compared to the likes of the financial crisis because the government’s furlough scheme has encouraged companies to stay employees on the books albeit they can’t work immediately due to lockdown. Currently, the furlough scheme is thanks to expire at the top of March.

Will furlough be extended?
Ending furlough now would undoubtedly cause a pointy rise in unemployment, especially as financially-broken businesses nervously await to seek out out once they can reopen. it’s therefore highly likely that furlough are going to be extended, but the question is for a way long. it’s likely to be a brief extension, possibly until the top of June when the govt hopes all restrictions will are lifted, then reviewing things again.