The US federal reserve released their quarterly interest rate decision in the United States. They left rates on hold for the next period but hinted at a rate hike maybe on the cards before the end of this year.
Once again the Federal Reserve suggested that interest rates are due to rise again. Even though inflation has been falling this year, which was an admitted surprise, reporters were told on Wednesday that the economy is strong enough to handle another hike. Janet Yellen suggested they expect that the strength of the economy will warrant further increases in rates.
The federal reserve also suggested that the economy is strong enough to begin reducing the balance sheet. The $4.5 trillion balance sheet which came about from the stimulus program when the economy and recession hit, will begin unwinding in October.
According to the Fed. Business is getting stronger, hiring is strong, people are spending once again and projected a healthy 2.4% growth this year.
While the signs for further interest rate increases are apparent the Fed did not change the base rate yesterday. We can probably expect another rate increase by the end of this year, and three more are expected as we move into 2018.
Even though the stock market took an initial small tumble on the news that rates were left on hold, they soon recovered and ended higher, with the Dow Jones making (yet) another all time high.
Gold prices reacted strongly to the downside on this news. It immediately fell and broke the magical $1300 barrier. Whilst $1300 is not a major support, it is a round number and a significant number to break.It remains to be seen whether Gold can recover and attack the August highs again.
US dollar was strong after their interest rate announcement. US dollar versus the Japanese yen rose 112.50, and seems like the trend is most certainly up for the foreseeable future.
On the foreign exchange market Wednesday things began slowly. Mixed moves from the major currencies meant choppy trade until data from the West arrived.
Things became more volatile as the Bank of Canada (BoC) moved rates by 0.25 to 1%. This sparked some life into the Canadian Dollar, and in turn its US cousin. A swift move of over 250 pips ensued for the USDCAD pair, as it hit a low on the day of 1.2129.
Overnight weak trade balance data out in Australia couldn’t really dampen the spirit of the AUD. Which held in the high range, 0.8000, against the US Dollar. That could come in to scrutiny today as US unemployment data arrives, and could breathe some life into the current weak greenback.
But today is all about the Euro. After midday UK time today the ECB will announce the minimum bid rate, and will be followed by a meeting and press conference. Draghi is most likely going to shed some light on the ECB’s thoughts on the Euro, and a strong address could see some volatile moves as the US opens for trading.
The weakness in the US Dollar also helped Cryptocurrency Bitcoin gain some ground. After 4 down days, a little light relief came as the price of Bitcoin headed back towards the early month high.
From a technical perspective Bitcoin seems to have re-tested the previous high, possibly creating an area of support. If it can now go on to make a new high, then maybe just maybe this rally is not yet over. The chart below shows the level clearly.
Ethereum was making similar moves, mirroring the strength in Bitcoin and aided by a weaker US dollar. Again the last two days have seen it make a back test of the early August highs, and is now making a move up once again. Whether new highs will follow remains to be seen.
After a torrid time during 2014 and 2015, stocks in the mining sector made some good recoveries during 2016 and early 2017. Some spectacular gains were made by the major players, even the juniors and small caps got in on the action.
Then came spring 2017, and those stars of 2016 began to fall once again, which was inevitable after such a strong and sustained rise. However, recently the mining sector index made a small double bottom pattern from a previous support level. See the chart below. Is this the beginning of another leg up in this recovery, or just a stall before falling further?
A lot depends on precious and base metal prices. Gold and silver prices have been in steady decline over the last few months, which in turn reflects directly into values of those mining stocks who rely on higher prices. Conversely, Copper has been heading up and right now is sitting the mid-level of 2015 prices. Companies who mine copper have performed a lot better.
Charts and Comments on Companies
Fresnillo is one such company who needs Gold to be strong. If you see the chart below, we have compared FRES (Red) to Spot Gold (Blue). The peaks and troughs are simple to see. Higher Gold prices equates to more profit for FRES.
Kaz Minerals doesn’t seem to be suffering from the slow-down in the mining sector. KAZ is focused on Copper, and recently stated in a new release, “KAZ Minerals is delivering industry-leading production growth as promised to the market and was among the lowest cost copper producers globally in 2016.”
The chart shows that strength, not only with Copper prices on the rise but also the company doing great.
Anglo American share price has mirrored the mining index very closely. We can only assume because it has such a diverse set of metals and minerals that it produces. It mines Platinum, Iron, Copper and Diamonds among others. AAL share price has been making gains over the last month, but would need to make progress above 1200 to get investors talking about the possibility of new highs in 2017.
Deutsche Bank bumped up its target price on shares of HSBC, hailing the restart of dividend payments in the US but cautioned that investors would need to be patient when it came to expectations for capital upstreaming from the States.
Analysts David Lock and Stephen Andrews welcomed the first dividends from HSBC’s US unit in nearly 10 years.
While symbolic, they expected it would help fund future buybacks.
As well, they said the lender’s first quarter results printed ahead of analysts’ estimates, helped by a better performance from life insurance manufacturing and investment distribution.
However, commentary from management on the pace of capital upstreaming from the US was absent.
Lock and Andrews said it would still take more than three years for between seven to eight billion dollars of excess capital in the US to be returned to the holding company.
Full version: http://www.livecharts.co.uk/share_prices/Deutsche-Bank-lifts-HSBC-target-price–retain-news25916964.html
Spain’s largest lender posted better-than-expected quarterly profits thanks to a strong performance in almost all regions – especially in Brazil, UK and Spain – and a drop in its non-performing loan ratio.
Net profits at Santander jumped 14% during the first three months of the year to reach 1.87bn, edging past the consensus forecast from FACTSET for 1.847bn.
Mexico was one weak spot, with results down 3% in comparison to the prior quarter.
At 11.3bn top line growth was 5% ahead quarter-on-quarter, with costs just 1.6% higher versus the fourth quarter of 2016 and loan loss provisions stable.
Its net interert income improved 10.2% year-on-year to hit 8.402bn while its non-performing loan ratio dropped from 4.33% one year ago to 3.74%.
Together, the above saw it return on tangible equity rise by 100 basis points to 12.1%. driving an 11 basis point improvement in its common equity Tier 1 ratio to 10.66%.
Santander reiterated its commitment to lift its CET1 ratio by roughly 10 basis points per quarter.
Full version: http://www.livecharts.co.uk/share_prices/Santander-shares-slip-despite-beating-first-q-news25853207.html
Another day and another new all-time high for the Dow Jones industrial average index. It seems like groundhog day with this strap line, but here it goes again. The DJIA was buoyed by tech stocks rebounding in tremendous fashion, with the Nasdaq 100 also pushing higher after a few days of the wobbles.
Movers within the index were 3M and Goldman Sachs, posting the most gains. But technology stocks were back, and with a bang. As out-performers on the year so far, it was no surprise to see some relief as the S&P information technology sector has already gained 17.6 percent this year to date.
But tomorrow is the big day. The Federal Reserve will make their quarterly interest rate announcement tomorrow, with expectation that the central bank is going to raise interest rates by a quarter point.
How this will affect the Dow Jones index is hard to predict. Some commentators are saying the Dow Jones has already priced in a rate hike, some are saying brace for a sell on “event” type move. But all we can do is “wait and see”.
It would be foolish not to expect some sort of correction in value of the blue chip stocks in the Dow Jones index. If you look at the chart below, you would have to say it’s gone way (way) higher than anyone could have predicted before President Trump won the election. That doesn’t mean it can’t go higher, but how much?
In the past, shocks from interest rate decisions have been one of the main catalysts for a surge in the opposite direction for stocks. When interest rates are hiked by a higher percentage than what was expected it can cause a sell off.
But right now the Federal Reserve are playing it cool and calm. No shocks, no large jumps. Just sneak those rates up as quarter points, in a gradual and timely fashion. Maybe this is allowing investors to digest the changes, and continue to hold a bullish stance? Well, no one else seems to have a firm answer as to why the markets are going so high. It is as good as any other explanation.
Until next time…
London-listed housebuilders slumped on Friday as investors woke up to news of a hung parliament, after PM Theresa May failed to get the seats needed to deliver a majority government.
With just days before Brexit negotiations are due to kick off, May has fallen short of the 326 seats needed to deliver a majority Conservative government in the 650-seat House of Commons, leaving the UK in political limbo.
Shore Capital pointed out that the UK housing market was already losing momentum with signs of growing caution by potential home buyers, adding that the uncertainty that is likely to follow this election result can only consolidate this. The brokerage noted that the housing market does not bear uncertainty well and said that with a number of question marks over issues such as what direction Brexit negotiations will take or which way housing policy will go, that uncertainty is likely to grow.
A hung parliament was declared in the U.K. general election which resulted in some wild swings overnight for the FTSE 100.
After ending slightly down on Thursday, the main share index was priced by spread betting companies as down 100 points as the exit polls were announced.
During the early hours, one by one the results came in and the overnight price gradually began to recover. When it became apparent that the Conservative party would continue to hold the most seats and have the ability to form a coalition Government, the FTSE 100 price jumped when the market opened and headed toward the weeks highs.
And there it stayed, pretty much.
For the rest of the trading day the index held tight in a 50 point range from 7480 to 7530, give or take a few points.
Relief all round for investors who would have taken a Corbyn victory as a signal to sell, with extreme uncertainty in the city about how his Labour Government and their policies would affect business growth.
As for individual sectors, the majority were buoyed by the result and finished positive. The main laggards were general retailers and food producers, as the value of sterling declined – pointing to imports become more expensive.
The British Pound fell 300 pips overnight when exit polls were announced but managed to recover a small piece of ground during the morning session in Europe.
Further pressure is expected for sterling over the coming days. Once again uncertain times in the U.K. are on the horizon, with Brexit talks about to begin and no Government yet in place to move the process forward.
One thing is for sure- it’s never dull for long on the UK markets!
Shares in Dalradian Resources rose more than 4% as it said drilling continued to reveal the high-grade nature of the Curraghinalt gold deposit in Northern Ireland.
from LiveCharts News – http://www.livecharts.co.uk/share_prices/news_article.php?id=26003503
Shares in Landore Resources Ltd are down almost 5% after its full-year pre-tax loss widened, and said it would continue to raise additional equity as need to carry out its development plans.
from LiveCharts News – http://www.livecharts.co.uk/share_prices/news_article.php?id=26002514