CFD Markets News and Forecasts — 27-09-2018

Major US stock indexes finished trading in positive territory, helped by the rise in price of Apple and Amazon shares, as well as the Fed's confidence in the strength of the economy, as this year it raised rates for the third time.

The focus of investors' attention was also data on US GDP. The Commerce Department reported that the gross domestic product, representing a wide range of goods and services produced in the US, grew by 4.2% in the second quarter, seasonally adjusted and adjusted for inflation in the second quarter. This was in line with the agency's August estimate. Overall, the report reinforced the view that the US economy is on a sustainable basis in the second quarter, driven by rising consumer spending, net exports and investment in business. The data also showed that consumer spending, accounting for more than two thirds of the US output, rose 3.8% year-on-year, not confirming the previous estimate. Investments in the business were slightly stronger than previously thought, while fixed non-residential investment increased by 8.7% per annum, compared with the previously reported growth of 8.5%. World trade added 1.22% to GDP growth rates for the quarter, compared with an earlier estimate of 1.17%. Export was revised upward, and imports revised down. Meanwhile, some areas in the economy showed weakness in the second quarter. Housing investment fell by 1.3% year-on-year, while private inventories were revised downward, subtracting 1.17 percentage points from growth in the second quarter.

Most DOW components recorded a rise (17 out of 30). The leader of growth was the shares of Apple Inc. (AAPL, + 2.06%). Outsider shares were DowDuPont Inc. (DWDP, -2.16%).

Almost all sectors of S & P completed the auction in positive territory. The utilities sector grew most (+ 0.7%). Only the financial sector declined (-0.1%).

At closing:

Dow 26,439.93 +54.65 +0.21%

S & P 500 2,914.00 +8.03 +0.28%

Nasdaq 100 8,041.97 +51.60 +0.65%

Shares of Amazon.com Inc. (AMZN) jumped 1.6% in morning trade Thursday, after Stifel Nicolaus analyst Scott Devitt raised his stock price target to $2,525 from $2,020. The new target is the highest of the 47 analysts surveyed by FactSet, just above the second-highest of $2,500.

Pending home sales fell slightly in August and have now decreased on an annual basis for eight straight months, according to the National Association of Realtors.

The Pending Home Sales Index, a forward-looking indicator based on contract signings, decreased 1.8 percent to 104.2 in August from 106.1 in July. With last month's decline, contract signings are now down 2.3 percent year-over-year.

Lawrence Yun, NAR chief economist, says that low inventory continues to contribute to the housing market slowdown. "Pending home sales continued a slow drip downward, with the fourth month over month decline in the past five months," he said.

"Contract signings also fell backward again last month, as declines in the West negatively impacted overall activity," he said. "The greatest decline occurred in the West region where prices have shot up significantly, which clearly indicates that affordability is hindering buyers and those affordability issues come from lack of inventory, particularly in moderate price points."

U.S. stock-index futures rose on Thursday, supported by gains in Apple (AAPL; +1.5%) and Amazon (AMZN; +0.7%), while investors assessed the Federal Reserve's policy statement and a big batch of economic data.

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Global Stocks:

(company / ticker / price / change ($/%) / volume)

Visa (V) initiated with an Outperform at BMO Capital Mkts

Apple (AAPL) initiated with an Overweight at JP Morgan; target $272

In the week ending September 22, the advance figure for seasonally adjusted initial claims was 214,000, an increase of 12,000 from the previous week's revised level. The previous week's level was revised up by 1,000 from 201,000 to 202,000. The 4-week moving average was 206,250, an increase of 250 from the previous week's revised average. The previous week's average was revised up by 250 from 205,750 to 206,000

Real gross domestic product (GDP) increased at an annual rate of 4.2 percent in the second quarter of 2018, according to the "third" estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 2.2 percent.

Real gross domestic income (GDI) increased 1.6 percent in the second quarter, compared with an increase of 3.9 percent in the first quarter. The average of real GDP and real GDI, a supplemental measure of U.S. economic activity that equally weights GDP and GDI, increased 2.9 percent in the second quarter, compared with an increase of 3.1 percent in the first quarter.

The increase in real GDP in the second quarter reflected positive contributions from PCE, nonresidential fixed investment, exports, federal government spending, and state and local government spending that were partly offset by negative contributions from private inventory investment and residential fixed investment. Imports decreased.

The price index for gross domestic purchases increased 2.4 percent in the second quarter, compared with an increase of 2.5 percent in the first quarter. The PCE price index increased 2.0 percent, compared with an increase of 2.5 percent. Excluding food and energy prices, the PCE price index increased 2.1 percent, compared with an increase of 2.2 percent.

New orders for manufactured durable goods in August increased $11.1 billion or 4.5 percent to $259.6 billion, the U.S. Census Bureau announced today. This increase, up two of the last three months, followed a 1.2 percent July decrease. Excluding transportation, new orders increased 0.1 percent. Excluding defense, new orders increased 2.6 percent. Transportation equipment, also up two of the last three months, led the increase, $10.9 billion or 13.0 percent to $95.3 billion.

Shipments of manufactured durable goods in August, up three of the last four months, increased $1.9 billion or 0.8 percent to $253.1 billion. This followed a 0.1 percent July decrease. Transportation equipment, up two of the last three months, led the increase, $1.6 billion or 1.9 percent to $86.0 billion.

The inflation rate in Germany as measured by the consumer price index is expected to be 2.3% in September 2018. Based on the results available so far, the Federal Statistical Office (Destatis) also reports that the consumer prices are expected to increase by 0.4% on August 2018.

In September 2018, the harmonised index of consumer prices for Germany, which is calculated for European purposes, is expected to increase by 2.2% year on year and 0.4% on August 2018.

Economic Sentiment decreases in both the euro area and the EU In September, the Economic Sentiment Indicator (ESI) decreased in both the euro area (by 0.7 points to 110.9) and the EU (by 0.9 to 111.3).

The decrease in euro-area sentiment resulted from lower confidence levels in the industry sector and among consumers, which were only partly offset by increases in the retail trade and construction sectors. Confidence in the services sector remained broadly stable. Amongst the largest euro-area economies, the ESI remained virtually unchanged in Germany (-0.2), Italy (-0.2) and the Netherlands (+0.1), while it decreased strongly in France (-1.7) and Spain (-1.5).

The decline in industry confidence (-0.9) resulted from a marked decrease in managers' production expectations and a smaller worsening of their assessment of the stocks of finished products, while managers' appraisal of the current level of overall order books improved slightly. Of the questions not included in the confidence indicator, managers' views on both export order books and past production improved somewhat.

• At its monetary policy meeting on 13 September, the Governing Council concluded that the incoming information, including the September 2018 ECB staff projections, broadly confirms the Governing Council's previous assessment of an ongoing broad-based expansion of the euro area economy and gradually rising inflation.

• While the global economy maintained a steady pace in the first half of 2018, momentum is expected to moderate.

• In financial markets, euro area long-term risk-free rates have been broadly unchanged since the Governing Council's meeting in June 2018.

• The September 2018 ECB staff macroeconomic projections for the euro area foresee annual real GDP increasing by 2.0% in 2018, 1.8% in 2019 and 1.7% in 2020.

• According to Eurostat's flash estimate, euro area annual HICP inflation was 2.0% in August 2018, down from 2.1% in July.

The annual growth rate of the broad monetary aggregate M3 decreased to 3.5% in August 2018 from 4.0% in July, averaging 4.0% in the three months up to August. The components of M3 showed the following developments. The annual growth rate of the narrower aggregate M1, which comprises currency in circulation and overnight deposits, decreased to 6.4% in August from 6.9% in July. The annual growth rate of short-term deposits other than overnight deposits (M2-M1) was -1.4% in August, compared with -1.1% in July. The annual growth rate of marketable instruments (M3-M2) was -4.3% in August, compared with -3.3% in July.

EUR/USD

Resistance levels (open interest**, contracts)

$1.1872 (2935)

$1.1858 (3009)

$1.1838 (604)

Price at time of writing this review: $1.1699

Support levels (open interest**, contracts):

$1.1643 (3907)

$1.1596 (4868)

$1.1548 (3012)

Comments:

- Overall open interest on the CALL options and PUT options with the expiration date October, 15 is 88659 contracts (according to data from September, 26) with the maximum number of contracts with strike price $1,1900 (5054);

GBP/USD

Resistance levels (open interest**, contracts)

$1.3291 (2936)

$1.3261 (2447)

$1.3245 (1688)

Price at time of writing this review: $1.3133

Support levels (open interest**, contracts):

$1.3070 (1105)

$1.3029 (1508)

$1.2986 (1734)

Comments:

- Overall open interest on the CALL options with the expiration date October, 15 is 29229 contracts, with the maximum number of contracts with strike price $1,3200 (2936);

- Overall open interest on the PUT options with the expiration date October, 15 is 36198 contracts, with the maximum number of contracts with strike price $1,2800 (2491);

- The ratio of PUT/CALL was 1.24 versus 1.15 from the previous trading day according to data from September, 26.

* - The Chicago Mercantile Exchange bulletin (CME) is used for the calculation.

** - Open interest takes into account the total number of option contracts that are open at the moment.

Statement by Reserve Bank Governor Adrian Orr:

The Official Cash Rate (OCR) remains at 1.75 percent.

We expect to keep the OCR at this level through 2019 and into 2020. The direction of our next OCR move could be up or down.

Employment is around its sustainable level and consumer price inflation remains below the 2 percent mid-point of our target, necessitating continued supportive monetary policy. Our outlook for the OCR assumes the pace of growth will pick up over the coming year, assisting inflation to return to the target mid-point.

Our projection for the New Zealand economy, as detailed in the August Monetary Policy Statement, is little changed. While GDP growth in the June quarter was stronger than we had anticipated, downside risks to the growth outlook remain.

Robust global economic growth and a lower New Zealand dollar exchange rate is expected to support demand for our exports. Global inflationary pressure is expected to rise, but remain modest. Trade tensions remain in some major economies, increasing the risk that ongoing increases in trade barriers could undermine global growth. Domestically, ongoing spending and investment, by both households and government, is expected to support growth.

There are welcome early signs of core inflation rising towards the mid-point of the target. Higher fuel prices are likely to boost inflation in the near term, but we will look through this volatility as appropriate. Consumer price inflation is expected to gradually rise to our 2 percent annual target as capacity pressures bite.

We will keep the OCR at an expansionary level for a considerable period to contribute to maximising sustainable employment, and maintaining low and stable inflation.

• Some Asset Prices In Upper Reach Of Historical Ranges

• Inflation Seems To Be Fairly 'Nonreactive' To Labor-Market Slack

• We Take Broader Financial Conditions Into Account When Setting Rates

• Fiscal Policy Is Boosting The Economy

• Short-Term Rates Remain Low

• Benefits Of Economic Expansion Have Not Reached All Americans

• Overall Financial Conditions Remain Accommodative

• Fed Funds Rate at a Median of 2.4% at End of 2018

• Median of 3.4% at End of 2020

• See Fed Funds Rate at a Median of 3.0% in Longer Run

• Officials Median End-2018 Unemployment Forecast Raised to 3.7% From 3.6% in June

• Median GDP Growth Forecast Raised To 3.1% in 2018, 2.5% in 2019

Both economic and income expectations are on the rise, whilst propensity to buy has taken a slight hit. GfK forecasts a further small increase in consumer climate of 0.1 points in comparison to the previous month, moving to 10.6 points. It is not only the weather which has been sunny. Consumer climate had a sunny September, too. Despite political turbulence, economic and income optimism are on the up. Propensity to buy dropped slightly but remains at a very good level overall.

• Labor Market Has Continued to Strengthen

• Household Spending, Business Investment Have Grown Strongly

• Job Gains Have Been Strong, On Average

• Risks To Economic Outlook Appear Roughly Balanced

• Voted 9-0 For Fed Funds Rate Action

• Fed Expects Further Gradual Rate Increases Consistent With Sustained Expansion