CFD Markets News and Forecasts — 28-11-2018

Major US stock indices rose sharply, the reason for which were statements by Fed Chairman Powell, which weakened investors' fears that an increase in interest rates could slow the growth of the economy.

Powell said that rates are just below the levels that are considered neutral at the Fed. However, the head of the Fed noted that, by historical standards, the rates remain low. In addition, as part of his speech, Powell did not dispel expectations regarding another rate increase in December. Meanwhile, Powell pointed to the increased volume of debt obligations of American companies and the deterioration in the quality of these loans, and this, in his opinion, is one of the vulnerable points of the US financial system. At the same time, Powell considers such risks moderate. He also pointed out that the economic outlook provides many reasons for optimism.

A certain attention of investors was also attracted by data on the USA. The Commerce Department reported that growth in the US economy slowed in the third quarter, as previously reported, but growth rates were probably strong enough to keep growth on the path to achieving the Trump administration’s 3 percent goal this year. Gross domestic product increased in the third quarter by 3.5% on an annualized basis, after rising 4.2% in the second quarter.

In addition, the Department of Commerce said that sales of new homes in the United States showed a significant decrease compared to the revised September level. The Commerce Department reported that in October, new home sales fell to 544,000 units from a revised figure of 597,000 units in September. Economists had expected new home sales to rise to 575,000 from the 553,000 originally reported in the previous month.

Almost all the components of DOW recorded an increase (27 of 30). The growth leader was the shares of The Boeing Company (BA, + 4.96%). The outsider was Verizon Communications Inc. (VZ, -1.07%).

All sectors of the S & P finished trading in positive territory. The growth leaders were the services sector (+ 2.8%) and the technology sector (+ 2.7%).

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 3.6 million barrels from the previous week. At 450.5 million barrels, U.S. crude oil inventories are about 7% above the five year average for this time of year.

Total motor gasoline inventories decreased by 0.8 million barrels last week and are about 5% above the five year average for this time of year. Finished gasoline and blending components inventories both decreased last week.

Distillate fuel inventories increased by 2.6 million barrels last week and are about 6% below the five year average for this time of year. Propane/propylene inventories decreased by 0.6 million barrels last week and are about 3% below the five year average for this time of year. Total commercial petroleum inventories increased last week by 2.4 million barrels last week.

Fifth District manufacturing activity grew moderately in November, according to results of the most recent survey from the Federal Reserve Bank of Richmond. The composite index slipped from 15 in October to 14 in November, pulled down by drops in the indexes for new orders and employment, while the other component, the index for shipments, rose. However, all three continued to reflect expansion, as did most other measures of manufacturing activity. Firms were optimistic, expecting growth to continue in the next six months.

Sales of new single‐family houses in October 2018 were at a seasonally adjusted annual rate of 544,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development.  This is 8.9 percent below the revised September rate of 597,000 and is 12.0 percent below the October 2017 estimate of 618,000.

The median sales price of new houses sold in October 2018 was $309,700.  The average sales price was $395,000.

U.S. stock-index futures advanced on Wednesday on expectations of a breakthrough in U.S.-China trade negotiations at the upcoming G20 Summit, while investors looked forward to Fed Chairman Jerome Powell’s comments for clues on the path of interest rate hikes.

Global Stocks:

Wall Street. Stocks before the bell

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

Upgrades before the market open

United Tech (UTX) upgraded to Hold from Sell at DZ Bank

Exports of goods for October were $140.5 billion, $0.8 billion less than September exports. Imports of goods for October were $217.8 billion, $0.2 billion more than September imports. Advance Wholesale Inventories Wholesale inventories for October, adjusted for seasonal variations but not for price changes, were estimated at an end-of-month level of $650.4 billion, up 0.7 percent from September 2018, and were up 6.6 percent (±4.2 percent) from October 2017. The August 2018 to September 2018 percentage change was revised from up 0.4 percent (±0.4 percent)* to up 0.6 percent.

Real gross domestic product (GDP) increased at an annual rate of 3.5 percent in the third quarter of 2018, according to the "second" estimate released by the Bureau of Economic Analysis. In the second quarter, real GDP increased 4.2 percent.

Real gross domestic income (GDI) increased 4.0 percent in the third quarter, compared with an increase of 0.9 percent (revised) in the second quarter. The average of real GDP and real GDI, a supplemental measure of U.S. economic activity that equally weights GDP and GDI, increased 3.8 percent in the third quarter, compared with an increase of 2.5 percent (revised) in the second quarter.

Current dollar GDP increased 5.0 percent, or $248.4 billion, in the third quarter to a level of $20.66 trillion. In the second quarter, current-dollar GDP increased 7.6 percent, or $370.9 billion.

The price index for gross domestic purchases increased 1.7 percent in the third quarter, compared with an increase of 2.4 percent in the second quarter. The PCE price index increased 1.5 percent, compared with an increase of 2.0 percent. Excluding food and energy prices, the PCE price index increased 1.5 percent, compared with an increase of 2.1 percent.

• UK Economy Seen 6.3% to 9% Smaller Under No Deal

• Economy Seen 0.1% to 1.3% Smaller Under Govt Withdrawal Plans

• Economy Also Seen Smaller Under Average Free Trade Deal, EEA Membership

Spark New Zealand said Wednesday that the Government Communications Security Bureau had told it that its plan to use Huawei equipment in the network--which Spark is due to complete by July 2020--would "raise significant national-security risks."

Huawei "is aware of Spark's statement and we are looking into the situation," a Huawei spokesman said. The world's largest maker of telecommunications equipment, Huawei is a major supplier of gear for next-generation 5G networks, which will offer higher speeds and help connect an expected boom in internet-connected devices.

The annual growth rate of the broad monetary aggregate M3 increased to 3.9% in October 2018 from 3.6% in September, averaging 3.7% in the three months up to October. 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, stood at 6.8% in October, unchanged from the previous month. The annual growth rate of short-term deposits other than overnight deposits (M2-M1) was -1.0% in October, compared with -1.4% in September. The annual growth rate of marketable instruments (M3-M2) was -4.8% in October, compared with -7.7% in September.

EUR/USD

Resistance levels (open interest**, contracts)

$1.1422 (2656)

$1.1388 (2663)

$1.1361 (980)

Price at time of writing this review: $1.1280

Support levels (open interest**, contracts):

$1.1251 (4204)

$1.1220 (4651)

$1.1182 (5712)

Comments:

- Overall open interest on the CALL options and PUT options with the expiration date December, 7 is 124137 contracts (according to data from November, 27) with the maximum number of contracts with strike price $1,1200 (5712);

GBP/USD

Resistance levels (open interest**, contracts)

$1.2873 (1027)

$1.2847 (660)

$1.2825 (545)

Price at time of writing this review: $1.2748

Support levels (open interest**, contracts):

$1.2717 (2834)

$1.2691 (1271)

$1.2672 (1973)

Comments:

- Overall open interest on the CALL options with the expiration date December, 7 is 58114 contracts, with the maximum number of contracts with strike price $1,3500 (4743);

- Overall open interest on the PUT options with the expiration date December, 7 is 46437 contracts, with the maximum number of contracts with strike price $1,2500 (4491);

- The ratio of PUT/CALL was 0.80 versus 0.80 from the previous trading day according to data from November, 27

* - 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.

With the economy doing well and likely to turn in a growth performance above 3% this year, "it's time to get back toward something that's more normal" on the interest-rate front, he said. He added that in terms of achieving the Fed's inflation target, "we've gotten inflation back up to 2%. That's really something to be happy about because we spent a lot of time below 2%."

The 10-year Treasury note yield was down 1.3 basis points to 3.057%, while the 2-year note yield declined 0.6 basis point to 2.831%. The 30-year bond yield was mostly unchanged. Bond prices move in the opposite direction of yields.

A positive start of trading in Europe is expected, after US stocks rebounded before the close of the day. Quotes on the Asia-Pacific stock markets are also rising. Caution still persists as markets await the start of the G20 summit, which will take place from November 30 to December 1 in Argentina.

• "We are now looking at cutting all GM subsidies, including for electric cars."

Whilst the propensity to buy has in fact been able to improve its already very good position, economic and income expectations have had to take slight hits. Since the propensity to save increased significantly, GfK is predicting a slight downward trend of 0.2 points in the German consumer climate for December to 10.4 points. The weak period of economic activity has also been visible in consumer mood in November. Neither economic activity nor income prospects were able to quite maintain the level of the previous month and have decreased slightly.

Total construction:

• The trend estimate for total construction was flat in the september quarter 2018.

• The seasonally adjusted estimate for total construction work done fell 2.8% to $53,143.6m in the september quarter.

Building work done:

• The trend estimate for total building work done rose 0.7% in the september quarter.

• The trend estimate for non-residential building work fell 0.9% and residential building work rose 1.5%.

• The seasonally adjusted estimate of total building work done fell 1.5% to $30,116.1m in the september quarter.