Weekly Trading Update, 13/03/2015

Europe

After a quiet week for data the main talking point of the week has to be the high-flying DAX which has continued to soar upwards breaking the 11,800 mark. Investors seem to still be confident in the eurozone being the biggest opportunity for investment continued to stay positive on last week’s confirmation of the ECB announcing bond purchasing of 60 billion euros a month until September 2016. This should initiate spending into the economy, hence raising production/output and consequently putting upward pressure on prices. 

The second reason for investors to feel confident about the eurozone out-performing other major indices must be the huge rate of decline of the euro vs. dollar as this will result in imports being relatively more expensive resulting in domestic firms benefitting from both foreign and domestic demand looking towards them. Consequently improving trade balances within the eurozone.

UK

The FTSE has tailed off this week as concerns over the UK’s economic strength have provoked worries in investors’ minds. Economic data has failed to impress with construction output shrinking 2.6% vs the predicted 1.4% increase, as house buildings fade further resulting in selling within the market towards the end of the week.

The energy markets have once again been the downfall for the FTSE as light crude continues to slide. Large energy energy stocks (BG, Royal Dutch Shell etc) have created downward pressure on the index and hence pushed the FTSE within distance of the biggest weekly loss for the index since December. This is all very unnerving as the FTSE had recently hit a record high of 6,974.26 at the start of the month.

Finally Carney spoke on Thursday, announcing the Bank of England’s fears of the delay of raising interest rates as two major issues still plague the economy, keeping prices low. These are of course the falling oil prices and the strong pound buying in ‘cheap’ imports.

US

Once again the Dow has proven to be a very cruel index to trade as it makes 3 figure swings daily. The Dow strayed off on Tuesday along with the other major indexes over no real data in the market. It managed to regain some of these losses as bank stress tests came out.

The Dow shot up over 200 points as unemployment claims shrank unexpectedly at 289K vs the forecasted 306K. This created great positivity within the market and the bulls believing in the strength of the economy jumped in at this opportunity. However this was only short lived and as Friday commences the Dow has fallen away 200 points, potentially due to the overreaction of the buyers in the market.  

Commodities

WTI has had another torrid week with Monday being the only positive day; the energy has continued to tumble from just under $50 a barrel to around $45.50 throughout the week. Once again this is on the back of noise and no real inventory results as these were in line at 4.5M. Light crude smashed through technical levels continuing its sell off as OPEC and the US won't step back on production.

Gold has also has a tough week with continuous down days, the precious metal has nothing to shout about as the Fed announced that rates may rise earlier than first thought, this creates larger yield in banks than in gold and hence the sell off on the metal down through $1149.

FX 

A brief word on Eurodollar which has continued to hit fresh lows – hitting a 12 year low on the back of QE in Europe creating excess supply of euros and the potential raise on interest rates enticing traders in to buy up the dollar. Analysts speak of the euro-dollar reaching parity which quite well be the case as the major pair has fallen 2.15% this week to lows through the 1.050 barrier.

Stock of the week: ASOS

Investors may have been watching the Cheltenham races but there was no horsing around when it came to ASOS’s results. The clothing retailer bucked the trend and surprised the neigh sayers by posting positive Q2 top line results showing the strength in international sales which was an area of concern. Retail sales came in at 14 percent higher in the 6 month period up to March creating demand for the share and hence the 17.20% rise in share price to 3,838.00p.

(Source: IT-Finance.com)


Economic Diary, 16^th to 20^th March 2015  

Monday 16^th March

EUR – ECB Draghi Speaks

Tuesday 17^th March

JPY – Monetary policy statement

EUR – German economic sentiment

CAD – Manufacturing sales

Wednesday 17^th March

GBP – Claimant Count change

USD –Crude oil inventories
USD – FOMC statement

Thursday 18^th March

CHF – SNB Monetary policy assessment

USD –Philly Fed Index
USD – Unemployment Claims

Friday 19^th March

CAD – Core CPI