Market forecast 28.2.2017

For the week of 27 February, the Euro and US Dollar are both attempting to recover as it attempts an upward trend.  However, a downward trend is expected, and a flat trajectory is seen as momentum remains neutral.

The US dollar, however, closed last week moving up slightly a notch higher, so better days are expected ahead.  The US dollar lost ground last week against three currencies:  The New Zealand dollar, the Australian dollar, and the Japanese yen.

The market is still bracing itself to higher interest rates on the U.S. equity prices since newly-elected President Trump announced several times that he will implement tax reforms, and that these reforms will be announced in a matter of weeks. The aim of these tax reforms is to lower the overall tax burden on American businesses. However, implementing tax reforms will not be an easy road to pass in the U.S. Senate.  As a result, this delay could lead to a steady increase in interest rates.  Investing in the U.S. dollar may not be ideal during this time.

The Japanese Yen, despite overall slump in the past couple of months, is slowly gaining ground against the U.S. Dollar because investors are using this currency as a hedge. Many investors are also using the Yen as a hedge to brace themselves for the outcome of the upcoming French Presidential elections and the rumoured Scottish referendum in the United Kingdom.

Many market analysts are bullish over the British Pound and the US Dollar pairing, despite the fact that it slid down to 0.4%, its lowest level since February 15. Political changes in both the United Kingdom and the United States continue to make both currencies volatile, but financial analysts predict that both will be stable in the long term.

In the United States residential real estate sector, there was a considerable increase of brand-new home purchases across all states in January, and this is expected to climb up as the weather gets warmer, especially across the colder regions.  These January home sale figures are a significant increase compared to a lacklustre December. Home sales are expected to increase by .50% this coming week. The UK housing market, on the other hand, is expected to be in good shape despite Prime Minister Theresa May’s Brexit plans and other political instabilities. There is a forecasted slight increase in mortgage approvals in the UK this week.

The Euro is expected to be steady, with a forecasted 50% increase in the Consumer Price Index (CPI) in both French and Italian markets. The Spanish and Italian Manufacturing Purchasing Managers’ Index (PMI) is expected to slightly increase mid-week, while the French and German manufacturing PMI will remain steady, same as last week. When it comes to the services PMI for the Euro, there is an expected increase at the end of the week for Spanish and Italian services PMI, and the French and German services PMI, just like in the manufacturing sector, is expected to be remain the same as last week.

The pairing of the Euro and British Pounds decreased last week, though it also had significant gains.  At the beginning of the week, the GBP is expected to steadily increase.  However, with fresh rumours of a Scottish referendum affecting market decisions, the British pound is steadily weakening against the Euro, Australian Dollar, and U.S. dollar. The sterling will continue to steadily slide against major currencies until the concern for the referendum is abated. It is expected to stabilize once the news is confirmed to be unfounded. But in case of this eventuality, the Prime Minister should be ready to accept the consequences.


Weekly Market Review:

The global market report ending February 17, 2017 showed improvement on global equities. The US economy reached record highs during the trading week, which reflected strong economic growth. The International Monetary Fund is still doing everything to help Greece with its debt issue. The Asian market is mixed, with China having trouble regarding its debt while Japan is declining, yet still improving compared to past performances.

US Economy is Showing off Strong:

US stocks closed on record highs for the week in which Dow Jones leads the most while Russell 2000 fell short. As expected, the economic data released showed very favorable figures where core consumer price index and core retail sales hiked by 0.3% and 0.6%, respectively. S&P 500 registered increased total earnings, which is an optimistic trend if this would continue for every Q4 report.

Federal Reserve Chairwoman Janet Yellen sees a possible interest rate hike by June, after her Tuesday and Wednesday congressional testimony. Analysts beg to differ as to how much the hike would be after June.

On other news, Steven Mnuchin was appointed as the new treasury secretary by US President Donald Trump. Strong business sentiment could be fueled in the coming week, as Mnuchin targets a tax reform program. Policies would be unveiled in the coming weeks.

Stock Index Closing Change from Last Week % Change
Dow Jones 20, 624.05 354.68 +1.75%
NASDAQ   5, 838.58 104.15 +1.82%
S&P 500   2, 351.16   35.06 +1.88%
Russell 2000   1, 399.86   11.02 +0.79%

 

Others Closing Change from Last Week % Change
Oil        53.37   0.01 +0.02%
Gold 1, 236.00 -5.60 -0.45%
EUR/USD           1.0615 -0.0058 -0.54%
Russell 2000      112.82 -0.42 -0.37%

 

Europe is Facing Uncertainty:

The European Commission forecasted a slowdown on economic growth for countries under the euro currency, from 1.7% last year to 1.6% for the current year. The statement expressed was due to the issues they face, which include the Brexit’s effect upon its effectivity; the US upcoming trading and economic policies; and the election results for France and Germany.

The International Monetary Fund and the European Union have a few issues, bringing about a pessimistic result for Greece’s debt bailout. The country’s creditors would likely be unhappy if IMF would not be able to grant the €7 billion. If the said amount would not be granted, the country’s debt would be unsustainable, especially now that IMF would be focusing on other political agenda such as the upcoming elections.

Stock Index Closing Change from Last Week % Change
UK FTSE 100 7, 299.96 22.04 +0.30%
Stoxx Europe 600     370.22   0.12 +0.03%
Europe Dow 1, 604.42  -4.59 -0.29%

 

Asian Market – Mixed Trading Week with Heavy Underlying Issues:

The GDP report for Japan showed improvement, reflecting a three-year stretch. For the year 2016, the GDP growth increased by 1%, which was attributed to the increased demand for export, except for domestic consumption, which is still marking improvement. Economic meetings continued last week between Prime Minister Abe and US President Trump over policies, tariffs, and surplus.

China is facing issues regarding its financial stability where the country’s increasing reliance on debt is showing drastically. The reported debt figure registered at 3.74 trillion yuan or USD 545 billion. The Chinese government seems to understand the situation; thus, they would focus on maintaining the country’s stability over the coming week to avoid further debt crises.

 

Stock Index Closing Change from Last Week % Change
Nikkei 225 19, 234.62 144.00 +0.74%
Shanghai Composite   3, 202.08  -27.54 -0.85%

 

As an investor, decisions must not be based mainly on the policies–such as tax reform—that are deemed beneficial to businesses. Such policies entail potential loss or negative impact on earnings if they do not pan out well. Market volatility should always be considered due to the different economic issues around the world. Long-term goals should be the focus. Diversification of portfolios is the best way to remain focused and balanced.

 


Market Forecast:

Last week’s market performance was a mix of an optimistic US economy against the gloomy Asian and European markets. A lot of economic issues were setting a volatile market for most equity investments despite their advancing figures brought about by improvements in the US economy. The Greek bailout is yet to be confirmed, whether the IMF would be able to provide the amount the country needs. Here is an overview of what to expect for the coming trading week.

US Reports:

The US Crude Oil Inventory report would be released on Wednesday. Last week’s report dropped figures due to the output cut from refineries and the low demand for gasoline. Analysts forecasted, though, that in the coming weeks, demand for crude oil products would improve. Be it noted that in the last four weeks, there was an accumulated 8.43 million barrels per day decline in gasoline demand.

The Federal Reserve Minutes of Meeting would also be released on Wednesday. The report would entail the approval of interest rate hikes last December 2016, after the optimistic result of Trump’s win on the country’s economy. Economists purported that the economy would be able to achieve growth of up to 2.1% against the past year estimate of only 2%. Trump’s promise to spend more on infrastructure is believed to be a major contributory factor in improving the country’s economic growth.

Unemployment claims remain below the 300,000 mark, with a predicted figure of 242,000 registering the coming week, as opposed to 239,000 last. The unemployment report marks another positive business sentiment among investors, projecting a healthy economy.

Europe Reports:

The GDP data for the UK would be released on Wednesday with an economic forecast figure of 0.6% for Q4 2016. The Q3 GDP growth was 0.5%. There are several reasons for this growth, the main one of which is the country’s improved consumer spending. On the contrary, the construction industry is weak and does not add further variable for a strong GDP figure. 2017 is predicted to be slow in terms of economic growth due to higher living costs and a decline in various business investments.

The Eurozone Consumer Confidence would be released Monday with an improvement of -4.7 to -4.3. On the other hand, the Inflation report to be released on Wednesday is predicted to be 1.2% for January 2017 against 1.1% last December 2016.

Asia-Pacific Reports:

This coming Thursday in Australia, RBA Governor Philip Lowe is scheduled to testify in the House of Representatives Standing Committee on Economics. The testimony would include his stance on more spending to be focused on infrastructure. This would result in solutions for the country’s increasing population. Aside from that, he is against the US President’s barriers on trade policies, which the country mostly benefits from. Australia is on an open international trading system. He believes the country would be able to attain a 3% economic growth rate for the coming years. The mining industry, though, could see a downtrend in the coming months.

Despite a volatile Asian market being affected by Trump’s trade policy, equity investment could still provide a reasonable opportunity to put money into. Volatility rate is low in Asia. Bank policies may still continue per country. Meanwhile, China is starting to tighten its fiscal measures amidst rising debts.  According to many analysts, China is on the verge of an economic issue: its rising debt is overshadowing the slow GDP growth of the country. However, the effect would still not be realized until the full effectivity of US trade policies.

The global marketplace seems to again register a volatile week for investors who should decide correctly on their investment plan. Stay wise, invest diversely, and keep eye on the long-term game.

 

 


Market Review 17.02.2017

US stocks came in strong last trading week as it reported new record highs. The same is true with the European market as companies released their Q4 earnings. The Japanese stock market registered a slight gain over the week while China continues unfolding its economic pressure. Now, let’s have the details.

US continues to gain after a more promising policy on hand:

The profit-driven policies promised by the current administration pose promising gains over the trading week. The administration directly quoted “something phenomenal in terms of tax,” after a meeting with executive officers in the aviation industry. Another important factor that boosts the optimism in the US market is what analysts consider the administration’s willingness to cooperate with the Republicans. The aim would be the entitlement spending reduction where representatives would be agreeable as long as there will be no effect on the beneficiaries.

On other news, the energy sector believes that the oil prices would still struggle as the OPEC’s agreement on oil cut production would be balanced out by more options on oil drilling and exploration technology improvement.

Dow Jones closed at 20,269.37, up by 197.91 (+0.99%) while NASDAQ closed at 5,734.13, up by 67.36 (+1.19%). S&P 500 and Russell 2000 performed slightly well, closing at 2,316.10, up by 18.68 (0.81%) and 1,388.84, up by 11.01 (+0.80%).

Oil closed at $53.85 per barrel (+1.6%) while gold is at 1,234.70, a decrease (-0.17%) compared to last week.

European market slowly improves:

The European Central Bank is making headlines again as deregulation of the banking sector is on the top concern of their plans. Current President Mario Draghi said that US President Donald Trump’s relaxation of banking regulations might result in another global financial crisis. He further added that the ECB would still continue with the current monetary policies despite slight improvement in the Eurozone market. Other news report the volatility of European bonds, especially in Greece and France. The French Presidential election is coming to a close and it poses as a factor for volatility.

Japanese market optimistic;  China, on the brink of Crisis

Nikkei 225 closed at 19,378.93, up by 2.44%, showing positive gains over the week. Meanwhile, the Japanese yen showed strength early but by the closing day, it reverts back to 113.5,  better than at the end of last year. US President Donald Trump and Prime Minister Shinzo Abe held a two-day summit last week. The meeting shed light on where the Japanese economy stands, as US is its most important trading partner.

China, meanwhile, is doing everything it could to salvage the declining Yuan. Investors were pressuring the country as most of them were moving out money from the country, leading further to the Yuan’s decline.

 As an Investor:

Monetary policies around the major global market are all trying to implement balanced and sustainable measures that would promote growth and sustainability. Setting aside the fact of the strengthening dollar, economies should be viewed in a holistic way, particularly in dependent countries where its currency is weakening due to the former scenario. This will enable proper assessments to be made.

Global markets are now driven by a slow-paced growth across other markets. Needless to say, the US economy growth is fast enough as more optimism is  driven towards its economic policies.

The equity market would be volatile in the coming weeks as earnings, elections, new policy measures, and political agendas are laid out for every analyst to see. Always focus on the long term goal and always diversify.


Market Forecast 14.02.2017:

The US stocks closed on a positive note last trading week, as investors were more optimistic about President Donald Trump’s pro-business monetary policy plans. The European market slightly improves while the ECB keeps on tracking the effect of the policies in place. The Asian market had a mixed trading week where Japan is slowly tracking improvement. China was re-assessing its policies to solve short-term fallouts.

Here is a take on the highlights for the coming week.

US:

Federal Reserve Chairman Janet Yellen will meet with the Senate Banking Committee for the Semiannual Monetary Policy report on Tuesday. The testimony may contain discussions on putting a halt on increasing interest rates, as the global market is slowly falling, due to trade restriction policies and the strengthening of the US dollar. Although the US is steadily improving in employment and wage growth, other global markets might not be able to do so.

The Retail sales report to be released Tuesday is forecasted to hike by 0.1% for January 2017 and a 0.4% increase for core sales. President Trump’s policies over bank regulations and tax cuts would certainly factor in the increasing economic growth and increased consumer spending. Reported December gains benefited from increased sales in furniture and automobiles.

The Inflation data report would be released on Wednesday where the forecasted rate for January would be increased by 0.3% for consumer prices and 0.2% gain for core CPI. The December 2016 report saw a rate increase of 0.3% for consumer prices. If the rate reflects the coming week, this would be another notch higher from the past two years with regards to the country’s inflation rate.

The unemployment claims report to be released Thursday improves its figure from the Feb. 4 report with an astounding 234,000. That could be said based on analyst reports that the unemployment rate is on a nine-year low, with 4.8%. This says that the country is reaching a healthy labor market, with the rate reaching max employment.

Another optimistic report to be released on Thursday is that of building permits. Economists are highly positive as housing construction registered the highest annual demand from 2007.

The closing price for crude oil products slightly ticked up. The US Crude Oil inventory report would be released Wednesday.  Due to the rising demand, stocks registered a high number of 13.8 million barrels against the forecast of 2.5 million. Oil prices would likely continue to rise despite the high number of stocks and imports, which could be balanced out by the high demand for usage.

Japan:

The country’s GDP data would be released on Sunday. For the Q4 of 2016, the expected report to reflect would be a growth rate of 0.3%. Q3 reports suggested slowly improvements and recovery in terms of wages and employment. On the other hand, the main triggers for the slow economic growth of the country were the restrictions attached to new trade policies by the US and China. Despite that, rising export demands could sustain much needed optimism for the country’s economic improvement.

Europe:

The UK’s inflation report data would be released on Tuesday, with a January 2017 CPI forecasted increase of 1.9%. Last month’s report registered an increase, which would be attributed to the rising prices in food and airfare. Following the Brexit issue, it is expected that prices would continue to affect consumers while the pound weakens.

Germany would also release the GDP report this coming Tuesday. It has an expected growth rate of 0.5% for Q4 2016. However, the underlying concern would be US trade restrictions where the country relies on export activities. Germany’s slow growth could still have another problem where the UK’s exit from the EU would pose a big effect on domestic economic activity.

Stay diversified and focus on the long term goals. Short term policies would contribute to short term effects. but looking at the holistic level in a portfolio would aid better in decision-making. Global markets, especially the equity investments, are volatile so learn to balance the mix and ratio of an investment.

 

 


Weekly Market Summary 10.2.2017

Nothing really changed much during the trading week, as stocks closed flatly from last week’s performance of the US market. The rest of the major global markets performed well, gaining in comparison to last week, except for the slightly lower figures for the Asian market.

US Stocks Closed, Slightly Unchanged:

US stocks underperformed during the week despite good news coming in from the employment and manufacturing reports. President Trump’s immigration ban sparked different sentiments, which could be identified as a factor causing the sluggish performance of the US stocks. It should also be noted that despite the release of favorable Q4 earnings reports, some companies have no assurance that their related stock prices hiked their values. The US Fed kept monetary policies unchanged.

Dow Jones closed at 20,071.46, down by 22.32 (-0.11%), while NASDAQ closed at 5,666.77, up by 5.98 (+0.11%). S&P 500 and Russell 2000 performed slightly well, closing at 2,297.42, up by 2.73 (0.12%) and 1,377.84, up by 7.13 (+0.52%).

Oil closed at $53.84 per barrel (+1.3%) while gold did at 1,221.60, on a down (+0.18%) compared to last week.

European Market Poses Weak but Improving Gains:

The European market seems to perform well this week. Financial sectors within the European region aim for more lax banking and fiscal regulations to boost their economies. On other good news, the Eurozone report of GDP improved by 1.7% for the year 2016, surpassing the 1.6% rate of the US. It would be attributed to a 1.8% increase in consumer prices, with oil prices getting back on track. Another would be a seven-year record streak of low unemployment rate for the year. Greece is back on the spotlight again with the IMF predicting an “explosive” effect of the country’s debt by 2030. The country should be doing everything right now, as many analysts are concerned that a potential financial crisis may happen in the zone. The UK has voted to initiate the start of the Brexit process, with the deadline looming on March 31.

Stoxx Europe 600 closed at 364.07, up by 0.59%; Europe DOW at 1,610.02, up by 0.15%; and FTSE 100 at 7,188.30, up by 0.67%.

Asian Market Improves:

The Japanese market closed lower, compared to last week at 18,918.20. The Bank of Japan is performing measures reassuringly to yield curve control. The yen to US Dollar trading closed at 113 yen per dollar, which marks an improvement against the 117 Yen to the dollar last year. In relation to this, the Bank of Japan still decided to keep the bank’s policy unchanged. The interest rate is still at -0.1%. The move is backed by the bank’s belief of a stronger economic return until March 2019, adding to the unpredictability of deflation. On other Asian markets, China opens the year 2017 disappointingly in comparison to last year in terms of manufacturing figure reports. Although the country is performing well, the Chinese Central Bank’s implementation of stricter fiscal policies slows down the economic movement of its business activities.

 

As an investor, the following should be duly noted and taken into consideration for long-term investing:

  • Adjustments should be given room. Policies and new measures to be implemented among fiscal agencies and monetary authorities would bring volatility and uncertainty in the global market. These would either uphold or take down existing improvements and create newer imbalance in trading.
  • Focus on a diversified portfolio. Rallying stocks get a record high every now and then. Therefore, putting a portfolio in a position that would reap long-term viability is the best tactic to take advantage of on such rallies. Balance the portfolio by determining which of the assets are underperforming. and adjust it by placing more of the performing ones.
  • Portfolio balance is important. Uncertainty, market volatility, and drastic economic measures would affect a portfolio any time of the day. Getting a balanced structure of equity and fixed-income class of assets would certainly make a viable investment account stand for a longer term.

 


Market Forecast 08.02.2017

Here is what to expect this coming trading week. Earning season reports are already laid out with incoming reports from Disney, Coca-Cola, and General Motors. BNP Paribas and Commerzbank would also provide interest data this coming week. The agreement on the production cut by OPEC would be cleared this week by the International Energy Administration regarding its concern on whether it could support the US’ rising demand.

Positive US Outlook for the Week despite Trump’s Sideline Policies

The travel ban implemented by President Trump was not well-received. Analysts say this move is getting more attention than what was promised. Though stocks have been rallying over the past few weeks, these sudden policies, which affect the sentiment among other global markets, would likely influence what the administration should be focusing on. Analysts say that it is the political sentiment that drives the market right now and not the bank’s regulations or policies. Investors and traders are hoping that the promised tax reforms and increased fiscal spending would be immediately set in motion to further cement the strong economic movement.

The unemployment report claims reflect positively as it continues to show a healthy labor market in the country. Last week’s report of 246,000 would be supported by a slightly increased forecasted figure of 249,000. The economy is expecting strong support from its labor sector. The US crude oil inventory report reached 6.5 million barrels last week, with an expected additional 2.6 million the coming week. The trading price still remains within the $53 range due to a weak dollar index.

Another report to be taken for the long term positioning of every portfolio is the upcoming Consumer Sentiment report to be released on Friday. Based on the report, 44% of the respondents were positive towards the improvement of the economy while 33% expect the decline in the unemployment rate to continue. However, outside relations with other countries do not fare well this week after unprecedented words have been thrown by President Trump towards Japan, Australia, and Mexico. This action has added more volatility to the market.

Chinese reports take spotlight next week

Friday is the date set for China’s January trade figures. The report is expected to reflect information based on last month’s figure of $40.8 billion to $48.9 billion trade surplus. The country still needs to address its housing market problems and the effect of US policy on economic activity protection. On the brighter side, the country’s economy recorded growth by 6.8% for Q4 due to bank’s lending activities and government spending. Caixin services PMI would also be released Monday, with an expected figure rising to 53.6, as compared to the last report of 53.4.

Reserve Bank of Australia rate decision

Last December, the bank kept its benchmark interest rate of 1.50% while retaining its monetary policy. This coming Tuesday, the bank would release its decision. As economists expect, the bank would not change the rate due to its attempt to put a balance on the housing market against inflation and wage growth, which was not reaching the target figures. Retail sales figures would also be released this coming Monday.

 Reserve Bank of New Zealand reports

The current rate of 1.75% is expected to be influenced by the US status in its political stance and focus, as well as by the looming Brexit movement. Based on the forecast, the bank would keep its current rate, yet changes would be made as soon as certain factors such as inflation and outside economic effect perpetuate in the country’s economic position.

Canada’s Employment Report

This month would expect a drop from 6.9% to 6.8% on Canada’s unemployment rate. It is the full-time positions that are marking gains, which reflect an 81,300 increase while part-time positions showed a drop by 27,600.

 


Weekly Market Review 3.2.2017

A good trading week over the US permeated after Dow Jones closed at 20,000 level. Other US indices also struck record highs, which mean that the US is expecting results of a better economic outlook and positive sentiments among investors. European stocks are waiting for the release of reports on earnings before any significant movement and decision could be made. Asian stocks, especially the Japanese indices, are performing well, but China’s economic outlook is viewed on the pessimistic side.

US Trend Kick-off:

Dow Jones really kicked-off upon reaching 20,000 by Thursday and closing at 20,093.78, with a +1.3% change. The same also reflected with S&P 500 and NASDAQ, closing in at record high with 2,294.69 (+1.0%) and 5,660.78 (+1.9%). Russell 2000 favorably closed at 1,370.25 as well. The said figures were attained after a positive earnings report was released and investors were feeling optimistic towards the US economy.

Record highs and impressive figures are not the only factors to be considered here, but as an investor, sustainability should be noted as well. The economic policies that would be implemented under the current administration aims to improve economic spending and ease up on tax burdens among businesses. Note that such policies would not take immediate effect, as this would take time–until late this year or the coming 2018. In addition, the market would pose more volatility as every economic policy to be implemented would either be a hit or miss. It could also be divisive and downward and not beneficial at all. Record highs are not a guarantee of continuous rise, but just the start of a cautious trading effort. Be mindful of selling when the trend continues. Sticking to the strategy is the best action to take.

The European Market is on a Waiting List:

Brexit is in full force despite the Supreme Court’s ruling that the parliament has a vote about starting action on Article 50. The issue regarding Brexit’s economic impact has not yet reflected, based on the 0.6% growth in the Q4 GDP and an overall rate of 2% for the year 2016. Prime Minister Theresa May would meet with US President Donald Trump for a discussion on trade agreements. In relation to the SC Ruling, she said that the said rule would not affect the Brexit process.

European earnings are expected to be published in the coming weeks; thus, the European market is not quite as volatile as it appears to be. US President Trump’s economic policies have a big influence on how the European market reacted towards its business growth-filled agenda. In other related matters, Stoxx 600 closed a record high based on its 11-week trading.

Asian Markets were Mixed:

Japan performed well where Nikkei 225 closed at 19,467.40, up by 1.7%. Exports recorded a 5.4% increase from last year despite US President Donald Trump’s withdrawal from the Trans-Pacific Partnership last Monday. Governor Haruhiko Kuroda of Central Bank is optimistic that global economy would recover and Trump’s withdrawal would not affect Japan’s economic trade.

China is rating negatively as the country is on the verge of a financial crisis, with its economic growth relying on credit. The country’s short-term growth focus puts it in a substantial position to make its economic growth go at a slow rate. Thus, the country should consider a lot of options to sustain quality growth and push consumption and services.

Other News:

Canada is up for renegotiation with NAFTA where the possibility of keeping its interests first before Mexico’s is what’s circulating around. This means that Mexico is on its own in terms of bargaining on how the trade practices would push the US.

The EUR/USD exchange rate closed at 1.0699, with a 0.0015 change from last week.

Oil closed at $53.12 per barrel (+1.3%) while gold is at 1,193.70 down (+1.2%) compared to last week.