25 / 05 / 2018 | 市场新闻

Fundamental Analysis 25.05.2018 – Market Outlook

Market Recap

Modest movements in most currencies, especially considering the surprising news that US President Donald Trump is calling off his meeting with North Korean Supreme Leader Kim Jong-un. US stocks closed down slightly but well off the lows, while Tokyo stocks are higher this morning and South Korea down only by a small amount, so the move clearly isn’t disturbing the world that much. 

The only currency showing a notable move was CAD,  which plunged on Trump’s threats to impose tariffs on US auto imports under US national security grounds. A spokesman for Canada’s foreign minister said it was “inconceivable” that Canada would pose “any kind of security threat to the US.” Mexico is actually the #1 exporter of autos to the US, followed by Canada. 

Oil was down after Russia's energy minister Alexander Valentinovich Novak said that at their Tuesday 22nd of June 2018 meeting, Organization of the Petroleum Exporting Countries (OPEC) would discuss reversing the group’s production curbs and increasing output to compensate for falling production in Venezuela and the loss of global supply caused by new US sanctions on Iran. Libya also recently announced that it would curb production by 120k bbl/day because of power shortages. All this is pushing prices up to levels that OPEC fears will dampen long-term demand for oil, so they want to keep prices from rising further.

UK retail sales were much better than expected (+1.6% mom vs +0.9% expected, -1.1% previous). It didn’t help the pound much however, which suggests that sentiment for the British currency remains weak as politics dominate. 

Today’s market

The day starts with the Ifo indices for May 2018. They’re expected to be down just marginally, really nothing major at all, considering that the current assessment hit a record high in February 2018 and the business climate hit a record high last November (the data goes back to 2005). This compares with Wednesday’s 23rd of May 2018 German Purchasing Manager's Index (PMIs), which fell more than expected (albeit also remaining at a fairly high level). I think this indication that activity is stabilizing at a relatively high level would be taken as good news for Germany and the euro.



UK Finance housing loans are forecast to continue their recent decline. There was an upsurge in January 2018, but since then they’ve been coming back down steadily, resuming the decline that started a few months before the Brexit vote. This should be negative for GBP.

The second estimate of Britain’s Q1 Gross Domestic Product (GDP) rarely brings any revision to the main figures, just details about the composition of the figures.

  

The big indicator of the day is US durable goods. The headline figure, which is the one that the FX market usually focuses on, is expected to fall on a mom basis, but that’s entirely due to the big aircraft orders in the previous month. Excluding transportation, it’s expected to show a decent rise, which should reinforce expectations of +3.0% or so GDP growth in Q2 and therefore could be positive for the dollar.

 

The Sveriges Riksbank – Sweden’s central bank – is 350 years old this year, the oldest central bank in the world. It’s holding a commemorative conference today. The conference is in two parts:  the morning is for a Swedish audience and the afternoon is aimed at an international audience. The afternoon session will feature a panel discussion with Federal Reserve System (Fed) Chair Jerome Powell, Bank of England Governor John Carney, European Central Bank (ECB) Board member Coeure, plus Bank of International Settlements (BIS) General Manager Agustin Carstens. There’s some disagreement though on what the panel discussion will be about. The Riksbank’s web site says:  Panel discussion: The future of central banking? But the Fed’s web site says Panel Discussion:  Financial Stability and Central Bank Transparency.  

Later in the day, Dallas Fed President Robert Steven Kaplan,  Atlanta Fed President Raphael Bostic and Chicago Fed President Charles Evans speak on a panel discussion on “Technology-Enabled Disruption:  Implications for Business, Labor Markets and Monetary Policy” at the Dallas Fed.



The Fundamental Analysis is provided by Marshall Gittler who is an external service provider of Claws and Horns (Cyprus) Limited, an independent analytical company. Any views and opinions expressed are explicitly those of the writer. Any information contained in the article, is believed to be reliable, and has not been verified by STO and is not guaranteed to be accurate. References to specific products, are for illustrative purposes only and are not a form of solicitation, recommendation or investment advice. Past performance is not a guarantee of future performance.
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24 / 05 / 2018 | 市场新闻

3 questions to ask yourself before making a trade

Trading speculative derivatives such as Contract for Differences (CFDs) is the activity of buying and selling financial instruments with the intent of profiting from price movements in the underlying asset. Trading can be a difficult task for a trader that is just starting out and for those that don’t have the necessary experience to understand the market conditions and make the right decisions. 

However, some people believe that trading is not so difficult and start the process without having an organised plan about how they are going to take advantage of the markets and therefore sometimes they could fail and lose capital because of their lack of preparation and experience. The available trading options are increasing but the difficulties around trading remain, especially when new traders are involved. Traders should prepare a trading strategy before they engage in one of the most volatile financial markets.

Some experienced traders suggest that people who want to trade should ask themselves a series of questions beforehand. The answers to these questions could shed light on what exactly traders want to achieve and form a suitable strategy that would help them achieve their targets. 

How useful is it to analyse a trading idea?

Traders sometimes lose capital because their ideas about trading transactions are coming from sources that are not accurate. Some traders get ideas from trading forums, others from Facebook groups about trading etc. Experienced traders’ piece of advice is to not trust every source such as forums, groups or media and urge beginners to filter data. They also invite people who start to trade now to take their time and analyse each idea and examine which could be the advantages and the disadvantages. 

How much money will be at risk?

Before engaging in trading, traders should decide how much money are they willing to risk for their cause. Sometimes traders tend to make impulsive trades and spend significant amounts of capital. This kind of actions could lead to capital losses as impulse is rarely a good indicator for traders. Experienced traders suggest that determining a conservative position size can be a step towards the right direction. They also urge beginners not to over invest on any trade but they advise them to take marginal positions in different securities. 

Is there a plan for entry or exit?

Before starting to trade, forming a trading plan is essential. Usually, impulse traders don’t think about having a plan for entry or exit. This type of trader is interested only in making a trade and worry about these elements later. People experienced in trading suggest that there should be a defined initial stop point for a trade, which should also be in line with the maximum amount of capital that the traders is willing to risk. Another decision that traders have to take is to define what trading strategy they will follow in order to protect their profits.

STO and Trading 

STO has set as a goal to offer an optimal trading experience to its clients. STO pays special attention to its clients’ education by arranging educational courses such as webinars and providing its clients with the latest market news reports. STO account owners are able to trade on the most active shares in the US, German and Italian stock markets. 

Trading Forex and CFDs (Contracts For Difference), which are leveraged products, are high risk investments and puts your capital at risk. You may sustain a loss of some or all of your invested capital. Only speculate with money you can afford to lose.
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23 / 05 / 2018 | 市场新闻

Fundamental Analysis 23.05.2018 – Market Outlook

Market Recap

A typical “risk off” profile to the FX market:  CHF and JPY were the two best-performing currencies, while the commodity currencies were the biggest losers. The move was due to renewed concerns about US-North Korea relations after US President Donald Trump said that there’s a “very substantial chance” his proposed summit with North Korea’s Supreme Leader Kim Jong Un “won’t work out.” US stocks closed lower as a result.

Odd then that EUR was lower too. Peripheral European bond spreads tightened as doubts emerged that Italy’s President Sergio Mattarella would accept the 5 Star/League’s nomination for the next Prime Minister, Giuseppe Conte, after questions arose about whether he was entirely honest about his stated academic qualifications. It seems that EUR/USD is being driven more by global risk factors than the idiosyncratic European factors, and the conclusion must be that EUR is the “risk on” currency and USD the “risk off” currency. Mattarella is expected to announce his decision today.

Gilt yields rose and GBP gained slightly after Bank of England Governor John Carney told Parliament’s Treasury Committee that “it made sense to take a bit of time” to assess the economic outlook in light of the soft Q1 Gross Domestic Product (GDP), while noting that “it's more likely to have been temporary and idiosyncratic factors that slowed the economy.” His colleague on the Monetary Policy Committee, Gertjan Vlieghe said he sees one or two rate hikes a year for the next three years. Investors see only two hikes in the next four years.

Today’s market

First thing on the agenda is the preliminary purchasing managers’ indices (PMIs) for the Eurozone. The manufacturing PMIs are all expected to be down a little, confirming the loss of some momentum in the EU economy. The scale of the decline is modest though and the PMIs are at historically high levels, so even a small decline leaves them at levels indicating continued expansion.

 

The Eurozone composite PMI is expected to be unchanged at a relatively high level as the service-sector PMI, the main determinant of the overall PMI, is also expected to be unchanged. That suggests the EU economy is likely to continue to expand. However, the lack of any rebound following the recent decline also suggests that the scope for a material acceleration in growth is limited. This may make the European Central Bank (ECB) more cautious and convince them to delay the end of Quantitative easing (QE) to the end of the year and to wait longer after that before starting to normalize policy. In that respect, the figures could be negative for EUR.

Next up is the UK consumer price index (CPI). This is of course a major indicator for the UK, but there will be another one on the 13th of June 2018 ahead of the 21st of June 2018 Bank of England meeting. In any case while the headline inflation rate is forecast to remain the same, core inflation is expected to moderate slightly, as is producer price inflation, as the pass-through from a weaker sterling fades. The figure is therefore likely to be negative for GBP. 

  

The US PMIs by contrast are expected to be unchanged (manufacturing) or higher (services), which suggests an acceleration in growth in Q2. This would confirm the upturn in growth that both the Atlanta Federal Reserve System (Fed) and New York Fed are estimating for Q2 (4.1% and 3.1% qoq SAAR, respectively, vs 2.0% in Q1). Given the mounting questions about ECB policy against the background of sluggish growth and policy uncertainty in Italy, It is expected that signs of accelerating growth in the US would tend to reassure investors about the Fed’s intentions and therefore could be positive for the dollar.

US new home sales are expected to be down modestly, as are existing home sales (due out tomorrow). It’s a little worrisome as springtime is the peak period for home buying. The problem is that a) the inventory of homes for sale is relatively low, and b) mortgage rates are now at a five-year high. The big question is whether sales are being held back by low inventory or by high mortgages. The former is a neutral factor but the latter could have some impact on Fed thinking.

The release of the minutes from the May 2018 Federal Open Market Committee (FOMC) meeting is one of the major events of the week. The statement following the meeting was considered rather hawkish, because they changed their wording to show more confidence in inflation. As a result, the likelihood of four rate hikes this year increased following the meeting (see graph). 

In reading the minutes, the focus will be on what they were thinking when they changed their statement from inflation “continued to run below 2%” to “moved close to 2%.”  Any specific discussion of the data is likely to be somewhat stale however after average hourly earnings growth slowed in April 2018 and the rate of increase in the core CPI was unchanged.

We should also look out for discussions about the flattening of the yield curve. This has been a big issue, since of course a flat yield curve is a necessary precursor to an inverted yield curve, and an inverted yield curve normally heralds a recession. Some FOMC members have argued the Fed should be cautious in raising rates further lest the yield curve invert, which in my view confuses cause (recession) with effect (inverted yield curve). 

Later in the evening, the garrulous Minneapolis Fed President Neel Kashkari has yet another moderated Q&A session.

Overnight, New Zealand announces its trade figures. While the balance is forecast to flip from a small deficit to a small surplus, it’s not enough of a surplus to stop the 12-month moving average from declining further. Furthermore, the improvement is expected to come from lower imports, not higher exports, which are forecast to remain unchanged. This could be negative for NZD.

And finally, early in the European day, Germany will announce the second estimate of its Q1 GDP. Usually there’s no revision, but rather we get the detailed breakdown of the data.

The Fundamental Analysis is provided by Marshall Gittler who is an external service provider of Claws and Horns (Cyprus) Limited, an independent analytical company. Any views and opinions expressed are explicitly those of the writer. Any information contained in the article, is believed to be reliable, and has not been verified by STO and is not guaranteed to be accurate. References to specific products, are for illustrative purposes only and are not a form of solicitation, recommendation or investment advice. Past performance is not a guarantee of future performance.
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23 / 05 / 2018 | 市场新闻

Investments and the ROI ratio

Understanding the basic concepts of investing should not be overlooked - saving money from a monthly salary is vastly different to trading with complex financial instruments. The basic idea behind investing is to invest capital into assets and gain from a potential increase in their prices. However, investing can result to capital losses if the market moves against the investor’s interests. 

Investors can find the appropriate solutions by browsing through various types of investments. Some of the most known ones are for example stocks, mutual funds, government and corporate bonds, real-estate as wells as other lower risk investments such as certificates of deposits (CDs) which enable you to earn interest on your money while maintaining some liquidity. Regardless of the type of investment, investors will be always interested to know how much they could gain and what is the timeframe for that. Expressions such as Return On Investment (ROI) are very common in discussions between investors.

Return On Investment (ROI)

Return on investment (ROI) is a financial ratio used to calculate the benefit an investor will receive in relation to their investment cost. The ROI can be measured if you divide the net income by the original cost of the investment. Depending on the figures included in the calculation, the higher the ratio the greater the benefit earned. 

ROI calculations help investors decide whether an investment opportunity is suitable for their plans or it should be skipped. An ROI calculation could also indicate how an investment has performed to date. A positive or negative ROI result could reveal a lot about the course of an investment and could help an investor improve or change drastically his strategy. 

ROI calculations are especially useful for people who choose to have an investment portfolio. The ROI calculations are a vital part of an investment strategy and investors could use the results in order to separate the high-performing investments from the low-performing ones. Thanks to the ROI calculation results, the managers of investment portfolios can compare their investments with the performance of other available investments and make well-informed decisions.  

Why do analysts prefer the ROI metric?

Many market analysts choose to use the ROI metric in their analyses because it’s very easy to be calculated. Analysts can do the calculations having only two figures available-the cost and the benefit. Another reason is that the ROI metric is generally understood by many people and can be used in discussions about investments without the need for further explanations. 

ROI limitations

Investors should know that the ROI metric has some disadvantages that could create problems when thinking about an investment strategy. The first is that the ROI metric disregards the time factor. An investor could calculate the ROI of two different investments and find out that the result is for both 30%. However, calculating the ROI doesn't include how much time do these two investments need to produce the same yield. This means that while the two investments produce the same yield, one of them, for example investment A, could be doing it in 1 year and the second investment B in 3 years. The investment A would be the preferred one as it would be equally profitable but in shorter time. 

The second disadvantage is that the ROI can be easily manipulated by analysts or investors who want to alter data. Some of them tend to hide the additional costs such as sales fees, stamp duties, maintenance costs etc. This could happen in order to achieve their own personal targets by selling or buying an asset in the price they want. Investors should be careful in this situation and take in consideration every factor. 

STO and Investo

Our consolidated experience in portfolio management helped us develop an investment strategy for STO clients called “Investo”. Our “Investo” strategy is suitable for individuals who seek long-term investment goals, and who want to trade Forex and CFDs but lack the advanced knowledge of a professional portfolio manager or the necessary time to trade. Trading CFDs requires the potential investor to have sufficient knowledge and experience to understand the nature and the risks involved in trading CFD and the management of his/her portfolio of   leveraged derivative products. 

Trading Forex and CFDs (Contracts For Difference), which are leveraged products, are high risk investments and puts your capital at risk. You may sustain a loss of some or all of your invested capital. Only speculate with money you can afford to lose.
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22 / 05 / 2018 | 市场新闻

Fundamental Analysis 22.05.2018 – Market Outlook

Market Recap
Attention yesterday Monday 21st of May 2018 was focused on Italy, where a proposal to issue “mini-BOTs” – notes that would be backed by expected tax receipts in the future – sent Italian yields soaring. (BOTs are Buoni Ordinari del Tesoro, a common Italian Treasury bill or short-term credit note.) The move is seen as a way of both getting around the EU’s rules on bond issuance and also in effect creating a parallel currency that would trade at a discount to the euro, since the “mini-BOTs” wouldn’t pay any interest. The very idea sent investors rushing out of Italian bonds and into German Bunds, with the result that the Italy-Germany 2-year spread widened out by 21 bps in one day!



Nonetheless, EUR managed to gain vs USD nonetheless as longer-dated US interest rates declined slightly, removing the main force pushing the dollar higher recently. It’s hard to discern why bond yields declined, however. In fact, TIPS breakevens continued to move higher as US gasoline prices approached $3 per gallon, a price that’s considered expensive in the US

Furthermore, the Fedspeak was generally hawkish. Atlanta Fed President Raphael Bostic (voter) said “inflation is likely to run a bit above 2 percent for a while” and that while monetary policy should be flexible, i.e. the Federal Reserve System (Fed) shouldn’t panic if there is a modest overshoot of inflation, he still favors two more rate hikes this year. Philadelphia Fed President Harker (non-voter) said that inflation might even reach 2.5% this year and that he could be persuaded to support four rate hikes.

With inflation expectations continuing to move higher and Fed officials moving towards more tightening, it’ll be no surprise if bond yields resume their climb soon and the dollar resumes trending upward with them as well.



CAD was the best-performing currency. There seemed to be no particularly cause, just a reaction to the big drop on Friday 18th of May 2018 in a thin holiday market (Canada was on holiday yesterday for Victoria Day). In fact if anything, the US-Canada yield spread moved further in the US’ favor. But oil prices were higher too. CAD may also be benefitting from the move to put the US-China trade war “on hold,” which not only helped all the commodity currencies but also suggests the US isn’t really intent on ripping up existing trade relations. Nonetheless, it still feel that the recent poor data for Canada may cause some reassesment of the likelihood of Bank of Canada tightening and therefore cause CAD to weaken ahead of next week’s Bank of Canada meeting.

Today’s market

There may not be any headlines coming out today, but certainly the main event is the restart of Brexit talks in Brussels. The big debate in the UK is how to finesse the problem of Britain’s border with Ireland. UK Prime Minister Theresa May made a huge concession recently and agreed that all of the UK will have to remain tied to a customs union with the EU after 2021 until they work out some alternative to a “hard border” with Ireland. Under this plan, all of Britain would be covered by the EU’s common external tariff. That would eliminate the need for any customs border between Ireland and the UK.

The plan is deeply unpopular with many of the “Leavers,” as it leaves Britain more attached to the EU than they would like. Furthermore it has no clear end, meaning it could just be a path to “EU-lite.”

The bigger problem though is that the EU has already rejected this approach. “If this is it, we will have a crisis,” said one senior EU diplomat who’s involved in the talks.

We will see this week how the irresistible force of Brexit meets the immovable object of the EU, or more concretely, the Ireland/UK border.

Early in the day, the UK Parliament’s Treasury Committee holds hearings. There will be a reappointment hearing for Bank of England Monetary Policy Committee (MPC) member Jan Vlieghe. And at the same time, Bank of England (BoE) Governor Mark Carney plus some of his MPC colleagues, such as Dave Ramsden, Michael Saunders, and the aforementioned Mr. Vleghe will testify to the committee about the BoE’s recent Inflation Report. To remind you, in the May 2018 inflation report the Bank lowered its growth forecast for this year and projected that inflation would fall faster than it had previously anticipated. The tone of the testimony is therefore likely to be dovish, which could be negative for the pound.



The UK public sector net borrowing (excluding banks) is expected to be up sharply, but since the data aren’t seasonally adjusted, what matters is how that would affect the 12-month moving average. In this case the market consensus forecast would lower the average slightly, meaning the government is still managing to narrow its deficit. This could be positive for the GBP. Note though that there could be a negative surprise (greater-than-expected borrowing) because of the shift in Easter, which could affect VAT receipts.



The Confederation of British Industry (CBI)’s industrial trends survey is a second-tier indicator. It probably won’t get much attention today, what with the Parliamentary testimony and the Brexit talks going on. But with little else on the schedule and lots of mystery surrounding the state of the UK economy, it could. In any event if it does, it’s could be negative as the orders DI is expected to fall. Selling prices are expected to remain constant for the third month in a row. 



Other indicators out today include Canadian wholesale trade sales and Richmond Fed manufacturing index. Overnight we get the Westpac leading index for Australia; no forecast is available.

The Fundamental Analysis is provided by Marshall Gittler who is an external service provider of Claws and Horns (Cyprus) Limited, an independent analytical company. Any views and opinions expressed are explicitly those of the writer. Any information contained in the article, is believed to be reliable, and has not been verified by STO and is not guaranteed to be accurate. References to specific products, are for illustrative purposes only and are not a form of solicitation, recommendation or investment advice. Past performance is not a guarantee of future performance.
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22 / 05 / 2018 | 市场新闻

Investors focus on UK CPI inflation data

Economists are waiting for the release of important economic data coming from the United Kingdom this week. On Wednesday May 23rd 2018, the Office for National Statistics (ONS) will publish data regarding the UK’s Consumer Price Index (CPI) inflation and the Producer Price Index (PPI) for April 2018. On Thursday May 24th 2018, the ONS will release a report regarding the retail sales in the UK during February 2018 and on Friday May 25th 2018 it is expected to announce the preliminary data for the UK’s Gross Domestic Product (GDP) growth in the first quarter (Q1) of 2018. 

UK CPI inflation likely to remain unchanged in April 2018

The most important of the releases is the UK’s CPI inflation data. The CPI is an indicator used to measure the rate at which the prices of goods and services bought by households rise or fall, which is the rate of inflation, referred to as the CPI inflation. Analysts are anticipating that the CPI inflation will remain unchanged at 2.5%, on an annualised basis. The ONS will also release data regarding the UK’s core CPI inflation in April 2018. Core CPI inflation is inflation excluding the prices of seasonally volatile products such as food and energy. According to analysts’ forecasts, the UK’s core CPI inflation is expected to moderate from 2.3% recorded in March 2018 to 2.2% on a year-to-year basis. 

The Bank of England’s (BoE) board and its Governor Mark Carney would like to see the UK’s CPI inflation rate hovering around 2%. In March 2018, the inflation rate fell unexpectedly to 2.5% from 2.7% recorded in February 2018. The 2.5% inflation figure in March 2018 was the lowest recorded since March 2017. According to the ONS report that accompanied the data, prices in March 2018 rose at a softer pace for housing, clothing and household equipment while the cost of miscellaneous goods and services dropped. 

BoE’s interest rates in the spotlight

The unexpected drop in the UK’s CPI inflation in March 2018 led some investors to sell the British Pound as they believed that the BoE wouldn’t proceed in hiking its interest rates at its May 2018 meeting. Their suspicions were confirmed when the BoE’s governing board decided that it should keep rates unchanged fearing that the drop-in inflation would jeopardise the success of its monetary policies. 

Market analysts at BNP Paribas (BNPP) said in their report, released on May 18th 2018, that the March 2018 inflation figure was lower than expected “so in the end cautiousness prevailed: all members of the Monetary Policy Committee (MPC) agreed that any future increases in interest rates were likely to be at a gradual pace and to a limited extent.” They also commented that “under the central bank’s assumption of three 25 basis point rises over the next three years, a small margin of excess demand is likely to emerge by early 2020.This would increase domestic inflationary pressures such that inflation settles at the central bank’s 2% inflation target.”

STO and the British Pound

The British Pound against the US Dollar, the Euro and the Japanese Yen are just some of the currency pairs you can trade with on the STO online trading platform. Traders can take advantage of the STO’s Forex variety and choose from over 30 currency pairs when trading. STO provides its clients with educational courses to help them encounter the various trading challenges. 

Trading Forex and CFDs, which are leveraged products, are high risk investments and puts your capital at risk. You may sustain a loss of some or all of your invested capital. Only speculate with money you can afford to lose.
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21 / 05 / 2018 | 市场新闻

Fundamental Analysis 21.05.2018 – Market Outlook

Market Recap

The US and China on Saturday 19th of May 2018 announced a face-saving agreement that allows the two to call an early end to their "trade war", right before the 21st of May 2018 deadline for comments about the proposed tariffs. The statement doesn’t make any concrete promises on China’s side, but even so it’s enough for the Administration to claim “victory.” As a result, USD was higher across the board despite a notable decline in US Treasury yield (down 6 bps in the 10-years).

The China agreement is a big win for USD, because if we look at the various uncertainties that the US faces, trade was far and away the #1 question. The latest Baker, Bloom & Davis indices of economic policy uncertainty are mostly below average, certainly so for fiscal and monetary policy, which are the main ones affecting the FX market. Only trade is above average. (Note:  latest data available is from March 2018.) With the uncertainty in this policy area down somewhat, the dollar should be able to rally further, especially as uncertainty with regards to the key fiscal and monetary policy areas in Europe has risen in response to the Italian challenge.

The news is good for US stocks, which were higher in futures trading Monday 21st of May 2018 morning, and therefore for the risk-sensitive currencies AUD and NZD.

It is suspected that Italian politics are manifesting themselves in the currency market through EUR/CHF. As you can see, CHF strengthened considerably vs both USD and EUR on Friday 18th of May 2018 afternoon. It’s since fallen back vs USD, but is steady at the higher levels vs EUR.

CAD was the worst-performing major currency after Friday’s 18th of May 2018 disappointing economic statistics. Retail sales ex autos fell instead of rising as expected while the headline rate of Consumer Price Index (CPI) inflation slowed instead of remaining unchanged as expected. The currency is recovering slightly this morning however. Nonetheless, with inflation apparently slowing and oil prices probably at or near their peak, the prospects for a more hawkish Bank of Canada meeting next week are slim. I’d expect to see CAD weaken further ahead of the 30th of May meeting.

GBP also weakened on yet another threat:  appearing on TV on Sunday 20th of May, Scotland First Minister Nocola Sturgeon said she wanted to “restart a debate” about Scottish independence and would consider another referendum on the topic in the autumn, once there’s some clarity about the Brexit outcome. So now Scotland is added to the Ireland problem and it looks like the United Kingdom isn’t so united any more. Adding this problem too is negative for sterling.

Commitment of Traders (COT) report

Speculators continued to trim their short USD positions both by reducing long currency positions and adding to short positions. There was a small exception in CAD, where investors reduced their shorts a bit.
 

Speculators continue to pile into short CHF positions. They’re now the shortest they’ve been over the last five years, but still less than half what they were back in 2007, so there’s plenty more room to go. Asset managers (not shown) meanwhile held record short CHF positions.

Speculators reduced their “inflation trade” positions somewhat, cutting both their long WTI and short US Treasury positions. No surprise as oil rises to its highest level in four years and bond yields to their highest level in seven years.

Today’s market

The only major indicator out is the Chicago Fed National Activity Index (CFNAI) for April 2018. The CFNAI is different from the other regional Federal Reserve System (Fed) indices, which gauge conditions in that Fed district. The Chicago index is designed to gauge overall economic activity and related inflationary pressure on a national basis, not regional. It’s comprised of 85 existing monthly indicators of national economic activity. A positive index reading corresponds to growth above trend and a negative index reading corresponds to growth below trend. Although the components have all been previously announced, the indicator is one of the more closely watched among those issued by the various regional Feds. It’s expected to be higher, well above the six-month moving average, which should corroborate the estimates of stronger growth in Q2. It could be positive for the dollar.

European Central Bank (ECB) Governing Council member Ewald Nowotny will give the keynote speech at the Czech National Bank’s Research Open Day 2018. He’s been the most vocal ECB member calling for the end of QE and the normalization of policy. His statements on the subject were market-moving at first, but now he’s just repeating the same theme, so not likely to affect the euro. Just Thursday 17th of May 2018 for example he said the ECB “shouldn’t wait too long with normalizing monetary policy, given the situation of the economy.” “The asset purchase program that runs until September 2018 should be ended around that time, or step by step. There  should be a rate increase within a foreseeable period, and as third step, the ECB should begin to stop replacing the maturing assets.”

Atlanta Federal Reserve System (Fed) President Raphael Bostic will speak on the subject of "Welfare Economics: Trade and a Review of Principles.” I have no idea whether the speech will contain anything market-moving. Bostic is a voting member of the Federal Open Market Committee (FOMC) though so we have to pay attention.

Philadelphia Fed President Patrick Harker, a non-voter, will appear at the Chief Executives Organization’s CEO Financial Seminar 2018 in New York. The title of the speech is “A Conversation with Pat Harker.” He hasn’t spoken very much recently, and when he did speak it was on topics not related to the market, so it’ll be interesting to hear his views. Harker will be speaking again on Thursday 24th of May on the labor market and technology.


The Fundamental Analysis is provided by Marshall Gittler who is an external service provider of Claws and Horns (Cyprus) Limited, an independent analytical company. Any views and opinions expressed are explicitly those of the writer. Any information contained in the article, is believed to be reliable, and has not been verified by STO and is not guaranteed to be accurate. References to specific products, are for illustrative purposes only and are not a form of solicitation, recommendation or investment advice. Past performance is not a guarantee of future performance.
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21 / 05 / 2018 | 市场新闻

Why do oil prices surge

Back in 2008 the price of crude oil reached $100 per barrel. The global financial crisis that started in the same year in the United States (US) spread quickly across the globe. The impact of the financial crisis, for which many economists believe that it was the worst since the Great Depression, forced governments to bail out large financial institutions and implement new monetary and fiscal policies to prevent a possible collapse of the world financial system. Economies worldwide slowed during this period, as credit tightened, and international trade declined.

Because of the economic slowdown, the price of crude oil started to decline reaching $40 per barrel in 2016. As the global economy seems to be recovering in recent years, the demand for oil is rising in response to the increased rate of economic growth. On May 20th 2018, the price of Brent crude oil stood at $78.51 per barrel and the price of West Texas Intermediate (WTI) crude oil at $71.37 per barrel. Oil prices have jumped sending the prices of every oil product such as gasoline higher. 

Venezuela and Iran weigh on oil prices

The US President Donald Trump decided some days ago to exercise the get-out clause in the Iran nuclear agreement and reinstitute sanctions that had been terminated by the previous US President Barack Obama. Economists suggest that the Iranian oil output will be reduced from 3.8mn barrels per day to 3.4mn because of the US-Iran deal’s termination. 

Venezuela which is another major oil producing country is facing large financial problems. Inflation in the Latin American country has soared, and the government of Venezuela has been forced to cut back the oil production as oil workers are unpaid and the much-needed investments in oil fields are not done. Analysts at Barclays estimate that Venezuela’s output in 2018 will be some one million barrels per day less than last year’s 2.3 million barrels per day. 

Experts comment on oil prices

A Goldman Sachs report, released on May 9th 2018, forecast that the price of Brent crude oil could reach $82.50 per barrel during the summer months of 2018. Goldman Sachs’ experts said that increased geopolitical tensions in the Middle East, plunging Venezuelan production, and now the U.S. withdrawal from the Iran nuclear deal could push oil prices higher. They also commented that the probable cutback in the Iranian crude oil supply could push up oil prices by around $6.20 per barrel, adding that ‘such elevated oil geopolitical risks exacerbate the upside risks to Brent forecasts and reinforce our view that oil price volatility will continue to increase.’

The International Energy Agency (IEA) announced on May 20th 2018 that it is ready to act if necessary to ensure that markets remain well supplied. On May 12th 2018, the IEA had commented that the restoration of sanctions on Iran may have implications for the oil market balance. ‘The IEA is discussing and will discuss oil market conditions and outlooks with relevant stakeholders, both oil consumers and producers. For now, the rapidly changing geopolitical landscape will move the attention away from stocks as producers and consumers consider how to limit volatility in the oil market,’ said the IEA’s Executive Director Keisuke Sadamori when he was asked by reporters about the current oil market situation. 

STO and commodities trading

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18 / 05 / 2018 | 市场新闻

Fundamental Analysis 18.05.2018 – Market Outlook

Market Recap

Rising Treasury yields exerted their influence on the FX market and the dollar rose.

The US data was good – following the better-than-expected Empire State manufacturing index earlier in the week, the Philadelphia (Philly) Federal Reserve System (Fed) index unexpectedly rose 11.2 points (a 2.2-point decline was expected) to the highest level in a year. New orders surged, which implies that manufacturing will remain strong in coming months, and the prices received index rose to the highest level since 1989, implying upwards pressure on inflation. The Conference Board’s leading index rose for the seventh consecutive month and the four-week average of initial jobless claims edged down a new low. While higher yields weighed on the S&P 500, which closed slightly lower, the Russell 2000 index of small-cap stocks hit a record high.

Nonetheless, looking at the timing of the Treasury market moves, they don’t seem to have been so directly influenced by the data – rather, it appears that yields started to drift higher around 2 PM New York time. We’ve seen similar action many times in the last few week.

Given the rise in Treasury yields and USD/JPY’s sensitivity to US interest rates, it’s no surprise that JPY was the biggest loser on the day. The yen weakened steadily throughout the day, helped this morning by the announcement of a larger-than-expected slowdown in Japan’s inflation rate. JPY is expected to continue to weaken as US yields over 3% prove attractive to Japanese investors. US 5-year nominal yields are now higher than the 10-year yields of any other G10 currency.


CAD was lower as the US administration failed to meet yesterday’s Thursday 17th of May 2018 deadline to notify Congress about a North American Free Trade Agreement (NAFTA) agreement. Now any agreement will have to be approved by the new Congress that’s seated in January 2019, if indeed they can reach agreement at all. With a Mexican presidential election coming up on the 1st of July 2018, it  will be increasingly difficult to reach an agreement. US Trade Representative Robert Nighthizer said the countries are “nowhere near close to a deal.” With the Consumer Price Index (CPI) expected to remain steady today (see below), we could see further weakness in CAD.

The Italy situation seems to be clearing up a bit. Reports surfaced yesterday that the final agreement between the League and 5 Star Movement wouldn’t include asking the European Central Bank (ECB) for debt relief to Italy nor would it call for Italy to leave the euro. But a larger fiscal deficit and greater bond issuance does seem likely. The League’s leader said Monday 21st of May 2018  would be the “make or break” day for the discussions between the two parties. Italian spreads over Bunds fell by 4 bps, but this hardly makes a dent in the 20 bp jump on Wednesday 16th of May 2018, implying that the market isn’t totally reassured yet.

Today’s market

The day starts with a speech by Cleveland Fed President Loretta Mester on macroprudential and monetary policy at an European Central Bank (ECB) conference on the topic. She’s a voting member of the Federal Open Market Committeee (FOMC) and one of the more hawkish members. She just spoke a few days ago and said that a) inflation hadn’t yet reached the 2% target on a sustained basis (even though it has actually reached the target), and b) it might be necessary for rates ultimately to rise higher than she had previously anticipated.

After that, it’s pretty much Canada Day. These are the last major Canadian indicators before the Bank of Canada meeting on the 30th of May 2018 and so will be closely scrutinized.

Canadian retail sales are forecast to grow more slowly than in the previous month, but still at a pace above the recent trend. The figures are expected to be taken as encouraging and could therefore be modestly positive for CAD. 


 

However, there’s little doubt that the Canadian CPI, which is released at the same time, will be the more important indicator. Canada has a bewildering number of ways of measuring inflation, but almost all of them are expected to show the rate of inflation staying the same (except for the “CPI core – trim yoy%”, which is forecast to accelerate to 2.1% yoy from 2.0%). In theory no change in inflation should mean no change in currency expectations either, but what we saw last week with the US CPI was that an unchanged CPI can lead to a fall in the currency which could be negative for CAD.



The Fundamental Analysis is provided by Marshall Gittler who is an external service provider of Claws and Horns (Cyprus) Limited, an independent analytical company. Any views and opinions expressed are explicitly those of the writer. Any information contained in the article, is believed to be reliable, and has not been verified by STO and is not guaranteed to be accurate. References to specific products, are for illustrative purposes only and are not a form of solicitation, recommendation or investment advice. Past performance is not a guarantee of future performance.
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18 / 05 / 2018 | 市场新闻

How to improve your trading productivity

Trading speculative derivatives such as Contract for Differences (CFDs) is the activity of buying and selling financial instruments with the intent of profiting from price movements in the underlying asset. Since traders are not owners of the underlying asset, they are just speculating on the price movements of the underlying asset. Therefore, traders could benefit from rising markets as well as from falling ones. However, trading also involves significant amount of risk of loss to your invested capital. 

The leveraged nature of the financial instruments means that the effects of small movements in prices are magnified and can have large impacts on the value of trade positions, both in respect of profits made and losses incurred. The higher the leverage rate, the higher the potential of making profits and the higher the risk of experiencing significant losses. The world of trading is competitive. Possible measures for mitigating the risks of loss on trading accounts, are for example actively monitoring your trading accounts to ensure there is always available margin on their accounts, stay updated with market news, utilise education material to enhance your knowledge of trading CFD products and first practice trading on demo accounts rather than live trading accounts.

Traders need to be productive even if sometimes trading can be a tiring process because of the long hours needed and the influx of information. However, there are ways with which traders could improve their productivity and expand their range of knowledge. This article will suggest some ways in which investors could improve their trading skills. 

Performing in-depth market analysis

Being a trader without learning about the market updates is a quite difficult task. The lack of knowledge about what is going on in the financial markets could be a serious handicap in the world of trading. Many traders are devoting part of their capital to pay for financial news from various professional research or financial news agencies and providers in order to remain up to date at all times. 

Seasoned traders suggest that making decisions related to trading requires from traders to accurately evaluate all influencing factors beforehand. This could be a difficult task mainly because of the limited time available but the more experienced traders insist that achieving the desired targets, an in-depth market research should be carried out. 

Paper trading

The expression 'paper trading' may sound unusual but some traders consider it to be a useful type of practice. Paper trading helps traders learn the secrets of trading. Paper trading is a concept that has to do with trading stocks with pretend money but doing it with real numbers in real time. The combination of the paper trading practice and the internet makes for a good educational package which could help in developing the traders' skills without taking any real money risk. Trading paper money also helps traders to test new ideas without incurring the kind of emotional trauma when real money is lost. 

Analysing new charts 

Technical traders use the price history of any asset, and the price patterns that are formed, as a basis for making trading decision and analysis.  The technical analysis is a technique that uses the price chart of an asset as a key component in forecasting where the price will head next. Chart patterns are a key tool in a technical trader's portfolio.

Seasoned traders suggest that a good practice for a trader could be picking, for example, five completely new charts of financial instruments they would like to trade and analyse them carefully. The trader who wants to practice his skills in this way could expand his range of knowledge regarding the financial instruments and later put the new skills in use while trading in real markets. 

The suggested strategies above are some of the ways in which some seasoned traders have improved their trading productivity, however traders and investors must be aware that there is never any guarantee of any trading technique or strategy to improve trading productivity, as there are many risk factors involved when trading speculative derivatives such as CFDs. Before making any investment decisions, you should be aware of the key risks involved by reading the Risk Disclosure document on our STO website. 

Trading with STO

STO has set as a goal to offer an optimal trading experience to its clients. STO pays special attention to its clients’ educational needs by arranging educational courses such as webinars and providing its clients with the latest market news reports. STO account owners are able to trade on the most active shares in the US, German and Italian stock markets. 

Trading Forex and Contracts for Difference (CFDs), which are leveraged products, are high risk investments and puts your capital at risk. You may sustain a loss of some or all of your invested capital. Only speculate with money you can afford to lose.
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