UK data ahead: The calm before the storm

Andrew Hall , PhillipCapitalUK
14/Aug/2018 08:52

Economic data kicks off in earnest this week with the publication this morning of unemployment and average earnings figures for June due at 09.30 BST. The ILO measure of unemployment is expected to hold steady at 4.2%. Average earnings including bonuses are forecast to maintain the May level to at +2.5%, as are those excluding bonus payments, this time at +2.7% - no sign of a surge expected, although the likes of Ian McCafferty might describe this as the calm before the storm if their predictions are correct.


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Asian shares mixed on Turkey turmoil

Andrew Hall , PhillipCapitalUK
14/Aug/2018 08:32

Asian shares traded mixed on Tuesday as they fought to contain the contagion from the sharp falls in the Turkish lira, whilst disappointing Chinese economic data further sapped market sentiment. Retail sales and Industrial production (YoY) (Jul) both came in below forecast at 8.8% and 6.0% respectively, perhaps pointing towards the need for more policy stimulus. The MSCI's broadest index of Asia-Pacific shares outside of Japan dropped -0.20%, whilst in Japan the Nikkei rose +2.28% with all sectors trading higher after the yen lost some of its recent strength, following recent gains as markets sought the ‘safe-haven’ currency after recent turmoil in Turkey. Elsewhere we saw Hong Kong’s Hang Seng index slide -1.16%, with sharp falls in industrial stocks leading the way.


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Turkish lira slides to recored lows

Andrew Hall , PhillipCapitalUK
13/Aug/2018 10:03

The Turkish lira plummeted to a record low on Monday in what is now a fourth successive day of losses after President Erdogan defiant remarks, who shows no signs of backing down despite the US increasing pressure on the nation by taking the decision to double the tariff on Turkish steel and aluminium. The lira has dropped more than 20% against the dollar last week, and is down over 40% in the past year. Turkey itself, although in a dire situation, is not too much of a problem. It is the fear of contagion and the exposure of some international banks to the region that is causing the nervousness. The euro is showing signs of weakness as a result, giving, on the face of it, some relief to the beleaguered pound. Although this is far from the truth as its US dollar value attests.


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Oil prices edge lower as markets remain bearish

Andrew Hall, PhillipCapitalUK
13/Aug/2018 09:58

Oil prices edged lower on Monday as markets remain bearish as concerns on fuel demand growth seep in to the market on heightening trade tensions and economic concerns in emerging markets, however US sanctions on Iran indicate towards tighter supply. WTI trades around $66.82 per barrel, whilst Brent is currently at $75.73 per barrel.


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Turkish lira slumps on ECB concerns

Andrew Hall, PhillipCapitalUK
10/Aug/2018 09:56

The Turkish lira has dropped over 12% against the dollar this morning on reports that the ECB is concerned about banking exposure to Turkey. As other emerging market currencies fall in line with TRY, markets look to press Erdogan to calm nerves when he speaks later today. USDTRY currently trades at 5.8616.


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Market wrap - US-China, Equities, Brexit

Andrew Hall , PhillipCapitalUK
10/Aug/2018 08:46

As the US imposed further sanctions against Russia and threatens more tariffs against China the global geo-political situation is not in the best shape it has ever been and the prospects for global trade are causing worries through the markets. Equities are showing some signs of concern and this is adding support to interest rate markets. The yield environment is pretty benign despite the US set to remain on its tightening path. In the UK Brexit continues to undermine confidence as we hear more every day of the possibility of a "no deal" outcome. This could mean that in order to support the economy, the next move in the Bank Rate could be down; we aren’t quite at that stage yet but this is a scenario that could gain in probability as the weeks progress.


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Asians stocks mixed amid trade tensions

Andrew Hall , PhillipCapitalUK
09/Aug/2018 09:16

Asian stocks traded mixed on Thursday, whilst advancing Chinese shares helped offset the escalating US-China trade war following yesterday’s announcement that the Chinese Government will impose their own 25% tariff on $16bn worth of American imports on items including medical equipment, fuels, paper, motorcycles and cars. In currencies the yen rose 0.1% against the dollar, whilst back in the UK the pound slumped against both the euro and the dollar as fears mount on a no-deal Brexit. The pound has tumbled 1.7% against the dollar and 0.8% against the euro since the start of the month, with cable trading at 1.2866 and EURGBP at 0.9011 this morning.


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Oil slumps to 7-week low

Andrew Hall , PhillipCapitalUK
09/Aug/2018 09:11

Oil prices slumped yesterday recording their steepest one day fall in more than three weeks as the escalating trade dispute between the world’s largest two economies begins to take effect. Mounting tensions between the US and China has raised concerns regarding global economic growth which would subsequently lower demand for oil. Data yesterday from the EIA showed a smaller than expected drop in US crude inventories at -1.351M against expected -3.333M. WTI trades around $66.22 per barrel, whilst Brent trades in the low $72 per barrel in early trading.


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China's exports rise despite escalating trade war

Andrew Hall , PhillipCapitalUK
08/Aug/2018 10:00

China’s exports advanced above expectation in July despite their trade surplus with the US remaining near record highs and the announcement from the US that a date has finally been set for a 25% tariff on a further $16bn worth of Chinese imports set to take effect 23 August. CNY exports for July (YoY) came in at +12.2% above forecast of +10.0% and advancing from June’s reading of +11.2%. Talks between the world’s two largest economies have failed to produce an agreement with markets now awaiting China’s response, either way the continuing escalating trade tensions have sapped market optimism as fears on global growth mount.


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BoE McCafferty hawkish on further rate hikes

Andrew Hall , PhillipCapitalUK
08/Aug/2018 09:04

Outgoing MPC member Ian McCafferty, speaking on LBC radio, suggests that just a "couple" of rate hikes over the next "couple" of years. He said he doesn't know what impact unwinding QE will have on the economy but that nothing will happen on that front until the Bank Rate reaches 1.5%, a level from which they can be materially cut. McCafferty went on to blame a reduction in the number of European bankers living in London since the Brexit referendum for the fall in London property prices.


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Pound dives to 11-month low

Andrew Hall , PhillipCapitalUK
07/Aug/2018 09:16

The pound is bearing the brunt of the rising alarm over the prospect of a "no deal" Brexit, slipping yesterday against both the US dollar and the euro. Hopes of higher yields from the currency were dissipated as part of the charm offensive that delivered the rate rise and this is also causing investors to vote with their feet. The pound hit an 11-month low against the dollar and trades around 1.2957 this morning, whilst EURGBP trades at 0.89324.


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Tags:   UK Brexit GBP Euro Cable.

US reimposes sanctions on Iran

Andrew Hall , PhillipCapitalUK
07/Aug/2018 08:48

US economic sanctions against Iran have come into effect today affecting currency, gold and cars amongst other products. The sanctions follow US President Donald Trump’s decision in May to leave the international agreement which curbed Iran’s nuclear activities, a deal which Trump describes as the "worst deal I've ever seen". Nonetheless White House national security adviser John Bolton offered an 11th hour olive branch prior to the sanctions taking effect saying that “they could take up the president's offer to negotiate with them, to give up their ballistic missile and nuclear weapons programs fully and really verifiably”. Bolton went on to say "If the ayatollahs want to get out from under the squeeze, they should come and sit down. The pressure will not relent while the negotiations go on”. Negotiations do however seem some way of though for the time being with Hassan Rouhani, Bolton’s Iranian counterpart calling the actions of the US "psychological warfare", which doesn’t "make sense". The two nations remain at odds with one another and with further US led sanctions due to come into effect in November it is unlikely a resolution will be found anytime soon.


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'No-deal' rated 60-40 accroding to Fox

Andrew Hall, PhillipCapitalUK
06/Aug/2018 10:22

Liam Fox, the secretary of State for International Trade becomes the latest big fish to cast doubt on a deal with the EU. He rated a ‘no-deal’ as 60-40 blaming European “intransigence” for failing to accept the UK’s blue-print for leaving the bloc. “It’s up to the EU 27 to determine whether they want the EU Commission’s theological purity to be maintained at the expense of their real economies.” “I think it’s essential that no deal looks credible to the EU.” Cable has dropped this morning to trade below the 1.30 mark at $1.2975.


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Asian shares trade mixed on growing trade concerns

Andrew Hall , PhillipCapitalUK
06/Aug/2018 10:08

Asian shares traded mixed on Monday as the US-China trade war came back to the fore after China threatened to impose additional tariffs on $60bn worth of US goods, elsewhere the yuan found support after intervention from the People's Bank of China. The MSCI's broadest index of Asia-Pacific shares outside Japan traded up +0.50% retreating from earlier highs, whilst in Japan the Nikkei pared gains to end largely flat at +0.13% with gains in iron and steel offset by losses in most other sectors including banking. In Hong Kong the Hang Seng traded +0.60% higher, after five sessions of losses.


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US: Nonfarm payrolls forecast at 190K

Camilla Boldracchi , PhillipCapitalUK
03/Aug/2018 09:10

The U.S. are set to release nonfarm payrolls and the ISM report on non-manufacturing activity for the month of July today at 13.30 BST. Nonfarm pay roll consensus predicts jobs growth of 190,000, after adding 213,000 positions in June, while the unemployment rate is expected to nudge down to 3.9% from 4.0%.


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Bank of England increases interest rates to 0.75%

Andrew Hall , PhillipCapitalUK
03/Aug/2018 09:01

The rate rise was delivered with a unanimous verdict, which was probably the only surprise yesterday. We feel this was a move by the more dovish members of the committee to say, "OK we agree with you but that is going to be it for the time being", and certainly the message delivered by the Bank at the QIR was not that the next hike was going to follow shortly, reiterating the hiking cycle will remain "limited and gradual". Building domestic inflationary pressures through an expected pickup in wage growth and little spare capacity in the economy were the reasons given for sanctioning the increase. The Governor of the Bank of England Mark Carney reassured us that if a messy Brexit situation occurs that brings with it deflationary pressures, the MPC is ready to act accordingly; their assumption is for a smooth Brexit…mmm? Market reaction was fairly muted, showing that the move had been well and truly priced in.


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Tags:   UK BoE MPC Rates Carney.

Asia in the Limelight

Andrew Hall, PhillipCapitalUK
02/Aug/2018 10:30

Asian stocks declined on Thursday as ‘soft’ economic data out of China failed to alleviate trade war fears, whilst global bond markets were shook by Japans new capacity for higher yields. The yen added 0.1% to trade at 111.59 against the dollar. The MSCI's broadest index of Asia-Pacific shares outside Japan declined -0.80%, with declines led by sharp falls in Chinese H-shares, whilst in Japan the Nikkei was down -1.03%. Elsewhere Hong Kong’s Hang Seng slumped -2.32% dragged down by steep declines in technology stocks.


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Tags:   Asia Nikkei MSCI

Bank of England Rate Decision in Focus

Andrew Hall, PhillipCapitalUK
02/Aug/2018 09:42

The day of the hawks could be upon us as the MPC gathers to count the votes for whether or not interest rates are raised. The data is unconvincing, something we have been told would determine any rate decision but the will appears to be strong. Two additional votes are all that are needed this time around (it could be three next time as it is incumbent hawk Ian McCafferty’s last meeting). A no change outcome would be the biggest surprise for the market, kicking the speculation can out to November, and would cause some relief in shorter term yields, however, the chances are looking slim, even if it is the logical thing to do, particularly as the Brexit horizon gets even more cloudier and sinister looking. The Bank’s Quarterly Inflation Report this afternoon will leave plenty of opportunity for Mark. Carney to set out the reasons for whatever decision the MPC comes to and there is every chance he could be flanked by members from both teams in what is expected to be a split camp irrespective of which way they vote.


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Tags:   BoE Carney Inflation

Trump deliberates 25% tariff on $200bn Chinese goods

Andrew Hall , PhillipCapitalUK
01/Aug/2018 09:08

The Trump Administration are deliberating proposals to more than double the planned tariff on $200bn worth of Chinese imports from 10% to 25% in a move that further escalates tensions between the two largest economies, with pressure mounting on China to return to the negotiating table. The US set a 25% tariff on $34bn worth of Chinese imports in early July, with the review period on a further $16bn having now ended and expected to come in to effect in the coming weeks. The U.S. Trade Representative's Office has set an initial deadline for final public comment on the 10% tariff of Aug. 30, with public hearings taking place the week before. China remain critical of US policies and stance, with Wang Yi China’s Foreign Minister saying “China and the U.S. have had several rounds of consultations and reached important consensus, but regrettably the U.S. did not fulfil its obligations,” Wang said. “Nor did it make concerted efforts with China.”


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BoE should raise rates but prepare for reversal

Andrew Hall , PhillipCapitalUK
01/Aug/2018 08:54

The Bank of England should raise interest rates tomorrow according to NIESR but be prepared to cut them again as early as autumn if Brexit talks turn soar or global trade tensions continue to escalate. NIESR kept its forecast for economic growth unchanged at 1.4% this year and 1.7% next year, although bear in mind this assumes a ‘softer Brexit’. Sterling is currently trading up at 1.31235 against the dollar.


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Tags:   UK BoE NIESR Rates Brexit.