CFD Markets News and Forecasts — 21-03-2019

Major US stock indexes have risen significantly due to the rally in shares of the technical sector, which made it possible to outweigh the fall in stocks of financial companies after the Fed decided not to raise interest rates this year.

The driving force behind the growth of the technology segment was Apple (AAPL) and chip manufacturers. IPhone maker shares jumped 3.9% after Needham analysts said they expect the company's video service, which will be launched on Monday, will have a significant impact on its future profit, and upgraded the AAPL share rating to Strong Buy from Buy. .Shares of chip makers have risen in price after the company Micron Technology Inc (MU) said it expects recovery in the segment of memory chips.

The focus of market participants was also slightly exceeded the expectations of macroeconomic reports. Thus, the report of the Ministry of Labor showed a more significant than expected reduction in the number of initial claims for unemployment benefits, which indicates still strong conditions in the labor market, although employment growth slowed down after a significant increase last year. According to the report, the number of Americans applying for unemployment benefits fell by 9,000 to 221,000 last week, while analysts had forecast a decline to 225,000.

At the same time, the Philadelphia Fed Report showed a stronger than expected recovery in manufacturing activity in the region. The Philadelphia Fed index jumped 13.7 in March from -4.1 in February. Economists had expected the index to rise to 4.5.

Almost all the components of DOW finished trading in positive territory (26 out of 30). The growth leader was Apple Inc. (AAPL, + 3.90%). JPMorgan Chase & Co. shares turned out to be an outsider. (JPM; -1.58%)

Almost all sectors of the S & P recorded an increase. The greatest growth was shown by the consumer goods sector (+ 1.5%). Only the financial sector declined (-0.1%).

At the time of closing:

Dow 25,962.51 +216.84 +0.84%

S & P 500 2,854.88 +30.65 +1.09%

Nasdaq 100 7,838.96 +109.99 +1.42%

The Conference Board a reported on Thursday its leading economic index for the U.S. rose by 0.2 percent in February after revised data showed flat performance in January. That was the first increase in five months.

Economists had expected the indicator to edge up by 0.1 percent compared to the 0.1 percent drop originally reported for the previous month.

Ataman Ozyildirim, Director of Economic Research at the Conference Board, noted that accommodative financial conditions and rebound in stock prices more than offset weaknesses in the labor market components.

"Despite the latest results, the US LEI's growth rate has slowed over the past six months, suggesting that while the economy will continue to expand in the near-term, its pace of growth could decelerate by year end," he added.

According to the report, the coincident economic index increased by 0.2 percent in February following a 0.1 percent gain in January, while the lagging economic index was unchanged after advancing by 0.6 percent in the previous month.

U.S. officials seeking a China trade deal are focused on long-term changes to that nation’s economy. But the U.S. President Donald Trump is set on reducing the trade deficit, and is pushing his negotiators to get China to agree to purchase more goods, two sources told CNBC.

China has offered to purchase up to $1.2 trillion in U.S. energy, agriculture and aircraft products over a period of six years. But Trump has long wanted a number “double or triple” China’s proposal, the sources said. 

According to them, the U.S. president renewed his desire for a larger purchase deal in recent weeks, following data that revealed the U.S.-China trade deficit was widening.

• There won’t be a shortage of financial services or a credit crunch...on the continent after Brexit
• Thanks to the great efforts of everyone involved I can say we are well prepared and have risks for financial stability under control

• Room for maneuver on Brexit deal is limited
• We must strive until last minute to ensure an orderly Brexit

U.S. stock-index fell on Thursday, as investors continued to digest the Fed’s latest statement, which was more dovish than expected.

Global Stocks:

The latest report from the Federal Reserve Bank of Philadelphia revealed on Thursday the Philadelphia Fed Manufacturing Index rose to 13.7 in March from -4.1 in February.

Economists had expected the index to increase to 4.5.

A positive reading indicates growth.

According to the report, both new orders (1.9 in March versus -2.4 in February) and shipments (20 versus -5.3) rebounded this month, while inventories (17.2 versus 3.3) and average workweek (10.6 versus 4.7) grew faster. On the price front, prices paid rose quicker (19.7 versus 21.8), while prices received slowed (24.7 verso27.s 7). 

• I'm here to discuss with fellow leaders a request for short extension until June
• A short extension in Article 50 will give time for parliament to decide
• What is important is that parliament deliver on result of referendum
• Now is time for parliament to decide

(company / ticker / price / change ($/%) / volume)

Apple (AAPL) target raised to $220 from $170 at Citigroup

Apple (AAPL) upgraded to Strong Buy from Buy at Needham

The data from the Labor Department revealed the number of applications for unemployment benefits fell to a four-week low last week, pointing to still strong labor market conditions.

According to the report, the initial claims for unemployment benefits decreased 9,000 to 221,000 for the week ended March 16. 

Economists had expected 225,000 new claims last week. 

Claims for the prior week were revised upwardly to 230,000 from the initial estimate of 229,000.

Meanwhile, the four-week moving average of claims rose 1,000 to 225,000 last week.

• Underlying inflation broadly on track with forecast
• Employment growth could now moderate significantly
• Brexit could prompt policy moves in either direction
• Gradual, limited tightening still probably needed
• Monetary response to Brexit is not automatic and could be in either direction
• Brexit uncertainties continue to weigh on confidence, short-term economic activity

• Bank rate kept unchanged at 0.75%; votes 0-0-9
• Asset purchase target maintained at £435 billion
• Corporate bond target maintained at £10 billion

• Nobody wants a no-deal Brexit; will only ever be a British choice

• Brexit is "incredibly" challenging process
• PM May working incredibly hard to get Brexit done
• Will have meetings with EU's tusk, French President Macron ahead of the Summit on Thursday

Further business statement next week will be made as appropriate

Timing of Brexit vote depends on European Council decision

Government will seek to amend Brexit date through a statutory instrument if agreement to delay Brexit is reached

A no-deal Brexit would significantly harm the EU and a deal on financial services between Britain and the EU is likely whatever form Brexit takes, Barclays Chairman John McFarlane said.

"In the event of a no-deal Brexit, it would hurt the EU very significantly," McFarlane told.

He said the EU and eurozone appear as if they are becoming a "closed system" in financial services, while London has developed as a global financial centre by being open, he said.

He expected that trade would continue between the financial sector in London and the EU after Brexit.

J.P. Morgan says there's still room for a global run-up in equities, but "the most important thing" is whether the world economy responds to efforts to spur its growth.

Accommodative policies by the Fed and the ECB, as well as increasing efforts by Chinese authorities to boost the world's second-largest economy, have helped fuel stocks' rally this year, said Tai Hui, J.P. Morgan Asset Management's chief market strategist for Asia.

"But for the rally to really continue, I think the most important thing we're watching out for is whether the global economy starts responding to a more dovish Fed, a more dovish ECB, to more stimulus from China," Hui told.

Asset managers and other financial firms from the EU have only a week to register with UK regulators to continue operating in Britain in the event of a no-deal Brexit, a senior regulator said.

Nausicaa Delfas, executive director of international at the Financial Conduct Authority, said notifications from EU firms who want to continue serving UK customers must be received by March 28, the eve of Britain's scheduled departure from the bloc. Delfas said over 1,000 EU financial firms have notified the watchdog that they want to make use of Britain's "temporary permissions regime".

This allows them to continue operating in Britain for up to three years if Britain fails to secure a Brexit deal with Brussels, giving them time to apply for a new licence.

European Parliament's Brexit coordinator Guy Verhofstadt recently saying that it was 'impossible' for the EU to give the UK a Brexit extension beyond May 23rd.

Sean Callow, analyst at Westpac, points out that the FOMC managed to deliver a dovish surprise and the median is now for 0 hikes in 2019 and just 1 by end-2021, from 3 in Dec.

“Along with the “dots”, the Fed trimmed its 2019 and 2020 GDP forecasts to 2.1% and 1.9% (the White House budget projections are 3.2% and 3.0%) and announced that its balance sheet runoff would conclude in Sep 2019, earlier than many expected. The Fed’s switch to projection of a rates pause of at least 12 months should reverberate on the dollar and US yields for some time, weighing on DXY towards its January lows. But beyond that, most major currencies are not likely to be compelling alternatives. We don’t expect pricing for Fed easing to gain too much traction.”

According to the report from Office for National Statistics, the monthly growth rate in the quantity bought in February 2019 increased by 0.4%, with a decline of 1.2% in food stores offset by growth in all other main sectors. Economists had expected a 0.3% decrease.

In the three months to February 2019, the quantity bought increased by 0.7% when compared with the previous three months, with strong growth in non-store retailing and fuel.

The monthly fall in food stores was the strongest decline since December 2016 at negative 1.5%, reversing the increase of 0.9% in January 2019, with food retailers suggesting that “getting back to normal” following the January sales had contributed to this fall.

Year-on-year growth in the quantity bought in February 2019 increased by 4.0%, with growth in all main sectors, while the only sub-sector to show a decline within non-food stores was household goods stores at negative 1.3%. Economists had expected a 3.3% increase.

Online sales as a proportion of all retailing fell to 17.6% in February 2019 from the 18.8% reported in January 2019; this was a year-on-year increase of 9.4% when compared with February 2018.

• Global growth momentum continued to moderate in late 2018.

• Global growth is projected to decelerate in 2019, but to stabilise over the medium term.

• Long-term risk-free rates have declined since the Governing Council’s meeting in December 2018, in the context of a deterioration in the macroeconomic outlook and a perceived slowing of the pace of monetary tightening in the United States

• Euro area real GDP growth remained subdued in the fourth quarter of 2018 at 0.2% quarter on quarter

• Incoming information suggests that growth will continue at moderate rates in the near term.

• This assessment is broadly reflected in the March 2019 ECB staff macroeconomic projections for the euro area. These projections foresee annual real GDP increasing by 1.1% in 2019, 1.6% in 2020 and 1.5% in 2021.

• According to Eurostat’s flash estimate, euro area annual HICP inflation increased to 1.5% in February 2019, from 1.4% in January.

• Money growth and credit dynamics moderated in January 2019, but bank funding and lending conditions remained favourable.

• The aggregate fiscal stance for the euro area is assessed to have been broadly neutral in 2018, but is projected to be mildly expansionary from 2019 onwards.

The European Union could next week hold an emergency summit to offer a Brexit extension with potentially onerous conditions such as holding another referendum, British Foreign Secretary Jeremy Hunt said.

“We don’t know what the length would be and it could have some very onerous conditions,” such as holding another referendum. He said such an option would be unlikely to be supported by the British parliament.

Hunt said if the deadlock remained next week - parliament still had the option to vote to revoke Article 50 and cancel the entire Brexit process, though it was “highly unlikely”

• Situation of FX market continues to be fragile

• Prepared to intervene in markets if needed

• Central bank makes downward revision to its growth outlook for advanced economies

• Global risks are still to the downside

• 2019 GDP growth forecast seen at 1.5% (unchanged)

• 2019 inflation forecast seen at 0.3% (down from 0.5% in December)

• 2020 inflation forecast seen at 0.6% (down from 1.0% in December)

• 2021 inflation seen at 1.2%

Ministry of Commerce said, China's outbound direct investment outside the financial sector stood at $15.66 billion in the January to February period. That represents an on-year drop of 6.9% in the first two months.

The country's nonfinancial outbound direct investment slipped nearly 15% in January from a year earlier.

Karen Jones, analyst at Commerzbank, points out that the EUR/USD pair has broken up from a falling wedge pattern and rallies will find initial resistance at the 200 day ma at 1.1480 and the 1.1570 January high together with the 55 week MA at 1.1630.

“It is a reversal pattern and it is bullish it implies that 1.1176 is an interim low in place. We have our doubts that the market will at this juncture retest the Dips should find initial support at the 1.1367 100 day MA ahead of the 1.1329 20 day MA, this should now hold the downside for further upside attempts. Below 1.1185/75 (61.8% retracement) lies the 1.1110, the May 2017 low and the 1.0814/78.6% retracement.”

So the EU-27 will be setting new Brexit day rather than Britain and will demand a vote in the house of commons to boot!.

Cable pares gains as pound falls on word of shorter extension date.

• China Vice Premier Liu will visit US in early April for trade talks

• Vice Premier Liu, Lighthizer, Mnuchin had several calls recently

• China welcomes Italy taking part in the Belt and Road

• China urges US to follow one China principle

• No further information to say on US-China trade talks

• Chinese companies frontloaded exports last year

• Chinese exports have good momentum in March

• Chinese exports, imports rebounded in March

• Spring Festival factor in Jan-Feb trade data

• Imports, exports trade overall stable in 1Q

• Online retail still a big consumption driver in China

The Swiss National Bank (SNB) bought foreign currencies worth 2.3 billion francs last year.

The central bank has waged interventions from time to time over the past decade as it seeks to stem appreciation pressure on the currency, but provides few details on such action and only lists a total in its annual report.

The tally for 2018 is the smallest since 2013. Last year the franc briefly fell as low as 1.20 per euro on waning risk aversion in April, though later reversed most of that slide.

The SNB is likely to affirm its commitment to interventions at its policy announcement later on Thursday.

British private-sector employers expect to give staff a basic annual pay rise of 2.5% this year, the same as in 2018, though some will delay awards until after government Brexit plans are clearer, an industry survey showed.

British wage growth rose to its highest in a decade at the end of last year at 3.5%, and the Bank of England sees only a slight slowdown in 2019 as employers struggle to find staff in the face of the lowest unemployment in decades.

XpertHR, a company that collates data on pay settlements at large employers, said firms it surveyed expected on average to award pay rises of 2.5% this year. Before 2018, 2% was the standard pay rise offered.

EUR/USD

Resistance levels (open interest**, contracts)

$1.1570 (4032)

$1.1554 (3201)

$1.1536 (383)

Price at time of writing this review: $1.1418

Support levels (open interest**, contracts):

$1.1343 (4473)

$1.1296 (3862)

$1.1247 (2933)

Comments:

- Overall open interest on the CALL options and PUT options with the expiration date April, 5 is 70899 contracts (according to data from March, 20) with the maximum number of contracts with strike price $1,1350 (4473);

GBP/USD

Resistance levels (open interest**, contracts)

$1.3400 (635)

$1.3372 (418)

$1.3343 (796)

Price at time of writing this review: $1.3215

Support levels (open interest**, contracts):

$1.3146 (411)

$1.3118 (1437)

$1.3087 (677)

Comments:

- Overall open interest on the CALL options with the expiration date April, 5 is 24997 contracts, with the maximum number of contracts with strike price $1,3400 (4390);

- Overall open interest on the PUT options with the expiration date April, 5 is 27102 contracts, with the maximum number of contracts with strike price $1,2500 (4075);

- The ratio of PUT/CALL was 1.08 versus 1.11 from the previous trading day according to data from March, 20

* - The Chicago Mercantile Exchange bulletin (CME) is used for the calculation.

** - Open interest takes into account the total number of option contracts that are open at the moment.