Tin tức thì trường

• There's no fundamental justification for a tightening of nominal bond yields at the long end
• Governing Council should instruct board at March 11 meeting to fight unwarranted tightening of financial conditions
• ECB should accelerate PEPP purchases

According to ActionForex, analysts at TD Bank Financial Group note personal income surged by 10% in January, while personal spending rose by 2.4%, and sugget another round of income support measures proposed in the American Rescue Plan combined with sizeable household savings should spur spending on activities put on hold during the pandemic.

"Personal income surged by 10% month-on-month in January, on par with market expectations. The strength was largely due to the increase in social benefits (+52.6% m/m), specifically, the stimulus checks and expanded unemployment insurance benefits from the relief act enacted at the end of 2020. Wages and salaries rose by 0.7% on the month. Proprietors’ income declined by 0.5% despite the renewed support of the Paycheck Protection Program’s second round."

"Personal spending rose by 2.4% m/m in January, a hair below the consensus call of 2.5%. Spending growth was led by goods, up 5.8%, with services up 0.7%. The increase in goods spending was broad-based with recreational goods and vehicles (notably, information processing equipment) driving the increasing. In services, gains were led by food services and accommodation, one of the most battered industries during the pandemic."

"The overall PCE price deflator rose by 0.3% in January, slowing down from an increase of 0.4% in December. Year-on-year the price index was up 1.5%. An important contributor to the increase was oil prices."

"After removing energy and food prices, the core PCE deflator remained flat at 0.3% m/m, but increased to 1.5% y/y (from 1.4% in December)."

"With solid growth in personal income and spending, concerns over inflation have reached a fever pitch. Today’s report hardly points to inflation spiraling out of control, but indicates ongoing recovery."

"The economic outlook is increasingly upbeat. Encouraged by the rollout of vaccines, consumers seem to be more confident in spending money than they were several months ago. As the economy continues to open up, another round of income support measures proposed in the American Rescue Plan combined with sizeable household savings should spur spending on activities put on hold during the pandemic, allowing the economic recovery to pick up considerable steam."

MNI Indicators’ report revealed on Friday that business activity in Chicago expanded in February, albeit at a slower pace than in January, recording its eighth straight month of growth.

The MNI Chicago Business Barometer, also known as Chicago purchasing manager's index (PMI) came in at 59.5 in February, down from an unrevised 63.8 in January.

Economists had forecast the index to drop to 61.1.

A reading above 50 indicates improving conditions, while a reading below this level shows worsening of the situation. 

The final reading for the February Reuters/Michigan index of consumer sentiment came in at 76.8 compared to a preliminary reading of 76.2 and the January final reading of 79.0. This was the lowest reading since August.

Economists had forecast the index to be revised to 76.5.

According to the report, the index of consumer expectations fell 4.5 percent m-o-m to 70.7 from January’s final reading of 74.0, while the index of the current economic conditions decreased 0.6 percent m-o-m to 86.2 from January’s final reading of 86.7.

“Despite a small gain in late February, consumer sentiment was slightly lower for the entire month than in January,” noted Richard Curtin, the Surveys of Consumers chief economist. “All of February's loss was due to households with incomes below $75,000, with the declines mainly concentrated in future economic prospects,” he added. “The worst of the pandemic may be nearing its end, but few consumers anticipate the type of persistent and robust economic growth that restores employment conditions to the very positive pre-pandemic levels.”

FXStreet notes that GBP/USD has reversed sharply lower for a break of not only near-term price support at 1.4082/79 but also the rising 13-day exponential average. Economists at Credit Suisse see scope for further but still corrective weakness to 1.3840/30, with a fresh floor looked for here.

“Support moves to 1.3910/02 initially, below which should then see a move to price and trend support at 1.3840/30. We would then look for an attempt to find a floor here for a resumption of the core uptrend.”

“Resistance is seen at 1.3971 initially, with a move above 1.4022/29 needed to ease the immediate downside bias. Above 1.4182 though is needed to suggest the correction is over for strength back to 1.4237, then 1.4302/77.”

U.S. stock-index futures rose on Friday, as the heavily-weighted technology stocks rebounded after the recent sell-off after the core PCE price index, the Fed's preferred inflation measure,  showed tame price pressures.

Global Stocks:

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

Twitter (TWTR) target raised to $95 from $77.25 at Pivotal Research Group

HP (HPQ) target raised to $27 from $23 at Cowen

American Intl (AIG) upgraded to Overweight from Neutral at Atlantic Equities; target $55

HP (HPQ) upgraded to Overweight from Neutral at JP Morgan; target raised to $38

• There will be a high bar to unwinding UK monetary easing
• We do keep a close eye on markets, there has been volatility in recent days
• Gilt market pricing is orderly as of now
• I see market moves as a reflation trade, not an inflation trade
• Reflation trade is driven by U.S.

The Commerce Department reported on Friday that consumer spending in the U.S. rose 2.4 percent m-o-m in January 2021 after a revised 0.4 percent m-o-m decline in December 2020 (originally a 0.2 percent m-o-m drop). This marked the biggest monthly rise in consumer spending since June 2020. Economists had forecast the reading to show a 2.5 percent m-o-m increase.

Meanwhile, consumer income jumped 10.0 percent m-o-m in January, following an unrevised 0.6 percent m-o-m gain in the previous month. This was the largest monthly gain in consumer income since April 2020. Economists had forecast a 9.5 percent m-o-m climb.

The January gain in personal income was more than accounted for by an increase in government social benefits to persons as payments were made to individuals from federal COVID-19 pandemic response programs.

The personal consumption expenditures (PCE) price index, excluding the volatile categories of food and energy, which is the Fed's preferred inflation measure, increased 0.3 percent m-o-m in January, the same pace as in the prior month. Economists had projected the index would go up 0.2 percent m-o-m.

In the 12 months through January, the core PCE increased 1.5 percent, accelerating from a revised 1.4 percent in the 12 months through December (originally a 1.5 percent climb). Economists had forecast an advance of 1.4 percent y-o-y. 

GBP retreated against most of its major counterparts in the European session on Friday as expectations of improving economic conditions and fears of accelerating inflation triggered a sell-off in global bond markets, sending yields to pre-pandemic levels. Market participants increasingly have become worried that faster inflation could prompt the central banks to hike interest rates as well. 

The yield on the benchmark 10-year U.S. Treasury notes briefly jumped as high as 1.6% on Thursday, their highest level since February 2020, but then backpedaled somewhat. The 10-year yield is now holding near 1.48%, up more than 50 basis points since the year started.

The Bank of England's (BoE) chief economist Andy Haldane acknowledged on Friday that "there is a tangible risk inflation proves more difficult to tame", which could force policymakers to "act more assertively than is currently priced into financial markets". 

FXStreet reports that Karen Jones, Team Head FICC Technical Analysis Research at Commerzbank, notes that the GBP/USD pair has failed at the 1.4245 March 2018 high and and is set to test the 1.3864/1.3755.

“GBP/USD has failed just ahead of its initial target at 1.4240 (1.4245 is the March 2018 high) and our profit stops have been hit.” 

“We look for a correction lower, dips lower should find some support at the 20-day ma at 1.3864 and at the two-month uptrend at 1.3755.” 

“The 55-day ma lies at 1.3683, but our longer-term uptrend is not encountered until 1.3411.” 

FXStreet notes that the S&P 500 has seen an aggressive rejection of resistance at 3930/34 on increased volume as rising bond yields and then the poor Treasury auction last night took their toll. This raises the prospect of a lengthier consolidation and a test of more important supports at 3792/74 – the early February price gap and rising 63-day average, in the view of the Credit Suisse analyst team.

“We look for a break below 3806 for a test of a cluster of what we see as more important supports at 3792/74 – the early February price gap and rising 63-day average. Our bias remains for this to remain a floor to define the lower end of a sideways range, ahead of the broader uptrend eventually resuming.” 

“A close below 3774 would be seen as technically important, raising the prospect of a more protracted and deeper corrective phase with support seen next at 3728/26 and then more importantly at the 3694 late January low.” 

Salesforce.com (CRM) reported Q4 FY 2021 earnings of $1.04 per share (versus $0.66 per share in Q4 FY 2020), beating analysts’ consensus estimate of $0.75 per share.

The company’s quarterly revenues amounted to $5.817 bln (+19.9% y/y), beating analysts’ consensus estimate of $5.682 bln.

The company also issued upside guidance for Q1 FY 2022, projecting EPS of $0.88-0.89 versus analysts’ consensus estimate of $0.76 and revenues of $5.875-5.885 bln versus analysts’ consensus estimate of $5.72 bln.

For the full FY 2022, it guided EPS of $3.39-3.41 versus analysts’ consensus estimate of $3.51 and revenues of $25.65-25.75 bln versus analysts’ consensus estimate of $25.43 bln.

CRM fell to $222.00 (-3.93%) in pre-market trading.

FXStreet notes that EUR/GBP has reversed sharply higher from a cluster of Fibonacci supports at 0.8543/20 and analysts at Credit Suisse see scope for a deeper recovery to 0.8793/0.8809, but with a fresh cap expected here. 

“Immediate resistance is seen at 0.8756 and then the 38.2% retracement of the fall from December and early February highs at 0.8793/0.8809. Our bias is for this latter resistance to then ideally cap for an eventual resumption of the bear trend. Above 0.8809 though can see strength extend further to 0.8841.” 

“Support moves to 0.8685/75 initially, below which can see a fall back to 0.8627/17."

HP Inc. (HPQ) reported Q1 FY 2021 earnings of $0.92 per share (versus $0.65 per share in Q1 FY 2020), beating analysts’ consensus estimate of $0.66 per share.

The company’s quarterly revenues amounted to $15.646 bln (+7.0% y/y), beating analysts’ consensus estimate of $15.004 bln.

The company also issued upside guidance for Q2 FY 2021, projecting EPS of $0.84-0.90 versus analysts’ consensus estimate of $0.61.

For the full FY 2021, company guided EPS of $3.15-3.25 versus analysts’ consensus estimate of $2.65.

HPQ rose to $28.41 (+0.78%) in pre-market trading.

• High degree of two-sided uncertainty on inflation is understandable
• There is tangible risk inflation proves more difficult to tame
• If economies bounce-back as vaccination programme is rolled-out, policy stimulus could over-stimulate the economy and, with it, inflation
• Reasonable chance disinflationary trends could persist and indeed be amplified by the COVID crisis, posing downside inflation risks
• Costs to the economy and BOE getting these judgments wrong could be significant
• Few, if any, historical precedents to help judge the response of the economy to this scale of shock and degree of policy stimulus

FXStreet reports that in the opinion of FX Strategists at UOB Group USD/JPY could now extend the upside to the 106.70-region in the near-term.

24-hour view: “Yesterday, we held the view that USD ‘could break last week’s peak near 106.20 but the next resistance at 106.70 is likely out of reach’. Our view was not wrong as USD eased off after rising to 106.40. Further USD strength appears unlikely. For today, USD is more likely to consolidate and trade between 105.80 and 106.40.”

Next 1-3 weeks: “USD subsequently rose to 106.40. Upward momentum has improved and the focus now is at 106.70. Only a break of 105.40 (‘strong support’ level was at 105.20 yesterday) would indicate that USD is unlikely to strengthen further.”

FXStreet reports that economists at Credit Suisse discuss EUR/USD prospects.

“With the market still above its rising 13-day exponential average and more importantly its 1.2109 recent low our bias is to still stay higher for now whilst above here.” 

“Below 1.2109 would see the basing effort curtailed for now to warn of further weakness to 1.2063/61, then what we would look to be better support at 1.2035/19, with a fresh floor looked for here.” 

“Resistance moves to 1.2184/85 initially, above which is needed to add weight to this view for strength back to 1.2208.”

Reuters reports that the Bank of Japan bought exchange-traded funds (ETFs) on Friday for the first time this month as Tokyo stock prices slumped.

The central bank last bought ETFs on Jan. 28 and held off buying more as Japan's share prices hit their highest in three decades in line with a global stock market rally.

The fact it stepped in on Friday, when Japan's Nikkei suffered its biggest one-day fall since April, underscored the bank's new approach of intervening only when markets become volatile, analysts said.

The BOJ bought 5 million yen ($47,068) worth of ETFs on Friday, central bank data showed.

Its policy at the moment is to buy ETFs at an average annual pace of roughly 6 trillion yen, a commitment that forces it to keep buying even when stocks are booming.

Some analysts saw the BOJ's moves in February as a prelude to what may come out of a March review of its policy tools to make its asset-buying programme more nimble.

CNBC reports that according to JPMorgan’s chief emerging markets economist, a major risk to India’s economic recovery is that millions of households and small businesses may potentially be cut off from the credit they need.

The government, the central bank, and analysts are underestimating the level of permanent scarring that can take place in South Asia’s largest economy as a result of last year’s pandemic-led contraction, Jahangir Aziz said CNBC.

The loss of income related to the coronavirus pandemic has run into billions of dollars on an annual basis, according to Aziz. “We know that the listed companies did not suffer that much, so, it has to be that the SMEs (small and medium enterprises) and the households took a much larger hit,” he said.

“I just can’t imagine that with that kind of income loss, you won’t have serious impairment of balance sheets of households and SMEs,” Aziz added.

FXStreet reports that economists at ANZ Bank discuss NZD/USD prospects.

“We are in an episode like that at the moment, and while the NZD remains a ‘market darling’ and reflation remains the thematic, we expect it to continue trading at the rich end of valuations, especially with commodity prices also buoyant.”

“Given the degree of momentum in markets and the more assured domestic outlook (which is built on a foundation of successfully containing COVID-19), we have upgraded our NZD forecast and now see the NZD/USD pair gradually appreciating towards 0.77 by the end of 2021.”

Bloomberg reports that Executive Board member Isabel Schnabel said that the European Central Bank may need to boost its monetary support for the economy if rising government borrowing costs hurt growth.

“A rise in real long-term rates at the early stages of the recovery, even if reflecting improved growth prospects, may withdraw vital policy support too early and too abruptly given the still fragile state of the economy. Policy will then have to step up its level of support,” she said.

Schnabel’s remarks add to a sense of concern from the ECB that the bond market threatens to stifle the euro region’s recovery even before it’s begun.

On Thursday, Chief Economist Philip Lane said the ECB will use the flexibility of its emergency bond-buying program to prevent any undue tightening in financial conditions.

FXStreet reports that UOB Group’s FX Strategists noted that the upside momentum in USD/CNH has improved and allows a potential move to 6.5150 in the next weeks.

Next 1-3 weeks: “We have held a positive view in USD for more than a week now. After USD eased from 6.4760, we noted yesterday that ‘upward momentum has deteriorated further’. We added, USD ‘has to move and stay above 6.4700 within these 1 to 2 days or break of 6.4200 would indicate positive phase has ended’. USD surged overnight and extended its gains to 6.5080 during Asian hours. Upward momentum has been boosted and we see room for USD to move towards the major resistance at 6.5150. On the downside, the ‘strong support’ level has moved higher to 6.4400 from 6.4200.”

Reuters reports that BofA's weekly fund flow data showed that equity funds attracted their third largest inflow on record at $46.2 billion in the week to Wednesday, led by flows into tech and financial stocks.

Bond funds attracted $7.1 billion in a 16th straight week of inflows while Treasury Inflation-Protected Securities (TIPS)added $1.3 billion, BofA found, citing EPFR data gathered before the latest spike in real yields triggered a stock market selloff.

In equities, U.S. stocks raked in $20.4 billion while emerging markets enjoyed record inflows of $11.6 bln into debt and equity.

FXStreet reports that economists at HSBC believe the recent GBP strength is not justified and the cable appears to be overstretched. 

“The UK’s economic recovery remains lacklustre compared to others. The HSBC UK activity surprise index is one of the few trending sideways, not up, showing that the economy is not outperforming expectations in the way the US or Eurozone are.”

“UK equities remain a laggard suggesting that it is not foreign equities inflows driving GBP outperformance.”

“Momentum is clearly a powerful force in FX but we have built a value case for why the GBP is overstretched and that case does not change until the fundamentals behind it change. For a currency, the danger in exceeding your grasp is not that you reach heaven but that you get a nasty fall back to reality when the momentum wanes.”

According to the report from the Federal Statistical Office, Switzerland’s GDP growth slowed to 0.3 % in the 4th quarter after reaching 7.6 % in the 3rd quarter.1 Major losses were recorded in the services directly affected by the tightening of the containment measures. Other industries continued to recover. On the whole, the second wave of the coronavirus until the end of 2020 had much less of an impact on the economy than the first wave did last spring. Economic recovery was interrupted in certain sectors during the 4th quarter. In Switzerland, capacity restrictions and business closures were ordered to contain the coronavirus. International travel also declined sharply, which was detrimental to tourism. Value added in accommodation and food services (–20.8 %), as well as in arts, entertainment and recreation (–7.7 %), fell considerably after the temporary easing of restrictions during the summer months. This was also true in transport and communications (–0.5 %), where the decrease in value added reflected the reduction in mobility among the Swiss public. Finally, a decline was reported in healthcare and social work (–0.7 %). The decreases in these sectors are therefore far less severe than those experienced in spring 2020. Nonetheless, the economy is still feeling the impact of the second wave of the coronavirus and the measures implemented to contain it in the 1st quarter of 2021.

Private consumption contracted considerably (–1.5 %) in the 4th quarter. While spending on hospitality and leisure services slumped, expenditure on food and other goods such as electronics rose. All in all, private consumption fell less sharply than it did during the 1st quarter at the start of the pandemic, despite the second wave of the coronavirus. As such, trade (+1.5 %) posted a positive result for the quarter. 

According to the available provisional results, real GDP shrank by 2.9% in 2020, much more severely than at the time of the financial crisis in 2009 (−2.1 %). An even sharper decline was recorded in 1975, in the wake of the oil crisis. 

During today's Asian trading, the US dollar rose against the euro and the pound, but declined against the yen.

The ICE index, which tracks the dollar's performance against six currencies (euro, swiss franc, yen, canadian dollar, pound sterling and swedish krona), rose 0.35%.

The dollar is supported by the flight of investors from risks on the background of rising US Treasury yields: the yield on ten-year US Treasuries on Thursday rose above 1.6% for the first time in a year. By the close of the market, the yield of securities was 1.525%, on Friday it fell to 1.477%.

The growth in the yields of US government securities traditionally supports the dollar: the higher the rates, the more attractive the US currency is for buyers. At the same time, it is a wake-up call for risky assets that have largely benefited from exceptionally soft financial conditions during the coronavirus pandemic.

Forecasts of a faster-than-expected economic recovery are fueling concerns about the possibility of faster inflation in the United States, which could push the Federal Reserve to raise its benchmark interest rate.

The Federal Reserve does not yet expect US inflation to increase "to alarming levels," Fed Chairman Jerome Powell said earlier this week.

Meanwhile, Federal Reserve Bank of Kansas City President Esther George warned that U.S. inflation could accelerate rapidly when more Americans are vaccinated against COVID-19.

According to the report from the Insee, in Q4 2020, GDP measured in volume fell (–1.4%) after its rebound in Q3 (+18.5%). Economists had expected a 1.3% decrease. In Q4, during which the second national lockdown and curfews were enforced, GDP stood 4.9% below its level in Q4 2019 (year-on-year evolution). Its year-on-year decline was moderate when compared to the drop in Q2, when the first lockdown occurred (–18.6% year-on-year). On average in 2020, the economic activity unprecedentedly fell, by −8.2% after +1.5% in 2019. The annual estimation of the activity drop and other economic aggregate established by summing all 4 quarters will be consolidated at then end of May 2021, along with the publication of the provisory annual account of 2020.

The sanitary measures in Q4 were reflected in a sharp drop of households’ consumption expenditure (−5.4% in Q4, after +18.1% in Q3). In contrast, gross fixed capital product (GFCF) continued the recovery which had already begun last quarter (+1.1% in Q4 after +24.1% in Q3). Overall, total domestic demand (excluding changes in inventory) fell, contributing by –2.9 points to GDP growth this quarter, after +19.3 points in Q3.

Foreign trade also continued its rebound and exports increased more than imports (+5.8% after +22.1% for exports, and +1.8% after +16.4% for imports). Overall, foreign trade made a positive contribution to GDP growth in Q4: +1.0 point, after +0.8 points in Q3 2020. Finally, changes in inventories also made a positive contribution to GDP growth (+0.4 points after –1.7 points).

EUR/USD

Resistance levels (open interest**, contracts)

$1.2279 (3580)

$1.2248 (3058)

$1.2225 (2570)

Price at time of writing this review: $1.2141

Support levels (open interest**, contracts):

$1.2079 (3002)

$1.2038 (5328)

$1.1993 (7101)

Comments:

- Overall open interest on the CALL options and PUT options with the expiration date March, 5 is 101353 contracts (according to data from February, 25) with the maximum number of contracts with strike price $1,1200 (7101);

GBP/USD

Resistance levels (open interest**, contracts)

$1.4099 (958)

$1.4082 (494)

$1.4052 (1789)

Price at time of writing this review: $1.3936

Support levels (open interest**, contracts):

$1.3867 (174)

$1.3826 (246)

$1.3757 (114)

Comments:

- Overall open interest on the CALL options with the expiration date March, 5 is 15204 contracts, with the maximum number of contracts with strike price $1,4250 (2482);

- Overall open interest on the PUT options with the expiration date March, 5 is 17619 contracts, with the maximum number of contracts with strike price $1,3500 (1365);

- The ratio of PUT/CALL was 1.16 versus 1.07 from the previous trading day according to data from February, 25

* - 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.

According to the report from the Society of Motor Manufacturers and Traders (SMMT), UK car production fell -27.3% in January to 86,052 units. With a fall of 32,262, this was the worst January performance since 2009, and a 17th consecutive month of decline. Multiple factors, including the ongoing effects of the pandemic, global supply chain issues, extended shutdowns and friction in the new trading arrangements following the end of the Brexit transition period, affected output.

Car manufacturing for both home and overseas markets was down, to 16,692 and 69,360 units respectively, representing falls of -18.3% and -29.1%. While exports still accounted for more than eight in 10 of all cars made in the month, shipments to major markets the EU, US and Asia all fell by double digits, down -26.2%, 34.5% and -36.1%.

In better news, the growth in UK production of battery electric (BEV), plug-in hybrid (PHEV) and hybrid vehicles (HEV) seen in 2020 continued, with combined output of these vehicles rising 18.9% in January to 21,792 units. This means more than one in four (25.3%) of all cars leaving factory gates was alternatively fuelled, further evidence of the UK’s growing capability in ultra-low and zero emission vehicle manufacturing.

CNBC reports that an economist from the Bank of America said that China stands a good chance of doubling the size of its economy by 2035.

Doubling of China’s GDP requires an average annual growth of 4.7% for the next 15 years — which some observers said may be hard to achieve. But Helen Qiao, head of Asia economics at BofA Global Research, said some reform measures would help China get there.

“We think China would be able to achieve it,” she told CNBC’s “Street Signs Asia” on Friday.

In addition to doubling its GDP, the Asian economic giant would surpass the U.S. as the world’s largest economy around 2027 to 2028, predicted Qiao.

China was one of the few economies globally that grew in 2020 despite the challenges posed by the Covid-19 pandemic. Official data showed the Chinese economy expanding by 2.3% last year, and the International Monetary Fund has forecast an 8.1% growth for China this year.

As reported by the Federal Statistical Office (Destatis), the index of import prices decreased by 1.2% in January 2021 compared with the corresponding month of the preceding year. In December and in November 2020 the annual rates of change were -3.4% and -3.8%, respectively. From December 2020 to January 2021 the index rose by 1.9%.

The index of import prices, excluding crude oil and mineral oil products, increased by 0.5% in January 2021 compared with January 2020 and in comparison with December 2020 it rose by 1.4%.

The index of export prices increased by 0.1% in January 2021 compared with the corresponding month of the preceding year. In December and in November 2020 the annual rates of change were -0.6%, each. From December 2020 to January 2021 the index rose by 0.9%.