Next Week News

The jobless rate in Australia came in at a seasonally adjusted 5.5 percent in March, the Australian Bureau of Statistics said on Thursday.

more...

Heading into a new week, bulls remain confident, buoyed by technical indications and market internals. A rate hike is likely and the commentary surrounding it could spoil the party.

The technical picture remains encouraging for bulls, as the major indices seem to be on track to leave behind the 3-month long correction. The Dow, the S&P 500 and the Nasdaq are all above their 50- and 200-day moving averages, and thanks to the recent rally, the short-term indices are likely to turn higher again soon. Small caps are spearheading the recovery after a brief period of weakness, as the Russell 2000 took out its January high well ahead of the broader indices. The Volatility Index (VIX) closed at 13, near the weekly open, despite a spike to the 15 level on Tuesday, as the “boring” sessions that followed pushed the measure lower.

more...

The latest U.S. non-farm payroll jobs numbers lived up to President Trump's billing via Twitter today, with the unemployment rate at 3.8% and the Dow Jones Industrial Average rising almost 1%. But how many more times will the Federal Reserve raise interest rates in 2018? Don't discount three.

more...

Are you invested in the stock market right now? If not what are your reasons for staying out? Will your current positions impact your year-end results and what could you be doing differently?

more...

Risks from global factors such as protectionism has increased, European Central Bank President Mario Draghi warned on Thursday, after the bank signaled that it would end its massive bond-buying program at the end of this year. "Uncertainties related to global factors, including the threat of increased protectionism, have become more prominent," Draghi said in the introductory statement.

more...

Over the past few months, Donald Trump’s administration has greatly escalated its efforts to reshape the global trade agreements of the past, picking fights with both allies and adversaries across the world in an effort to negotiate more favorable terms for United States of America, one of the biggest markets for exports for the rest of the world.

Up until now, the conflict has been more rhetorical rather than policy-based, focusing on a few isolated industries and a hodgepodge of retaliatory measures.

However, given Donald Trump’s predilection to push every policy idea well past its limit, global investors are becoming increasingly more concerned that the current low-grade skirmish will turn into a full-blown trade war.

Let’s take a look at the political, economic and financial implications of what may well be the defining investing theme of 2018.

Politics
Donald Trump was elected on the populist platform of an ‘America First’ rhetoric, upending decades of American foreign policy, which saw the country as a leader of the Western world that supported and nurtured its allies, to one that put its primacy first at the expense of allies and adversaries alike.

One of Trump’s key political points was the reduction in the massive trade deficit with China, which stood at $365bn in 2017. However, as many political analysts have pointed out, Mr. Trump’s go-at-it-alone style that managed to antagonize the USA's strongest allies and best trading partners, such as the European Union and Canada, has actually strengthened China’s hand rather than isolating it on the global stage, managing to turn the US—rather than China—into an international outcast at the moment.

Furthermore, Trump’s threat to ignore the very institutions of free trade that the US helped to establish—such as the WTO—could create long-standing damage to a system that has been responsible for the greatest economic progress in human history, as measured by world GDP.

Economics
So far, the economic impact of a trade war has been minimal. The Trump administration has only implemented 4% tariffs on $50 billion worth of Chinese goods.

However, according to a recent Marketwatch article, economists at Bank of America Merrill Lynch modeled an all-out battle, assuming a global 10% tariff on all goods and services, which is the tariff rate Trump threatened to impose on $200bn worth of Chinese goods.

Financial
Little wonder then that financial markets are becoming increasingly more concerned about the negative implications of the current state of affairs.

Equity, fixed income and currency markets are already beginning to feel the pressure of a trade war; risk aversion trades have increased markedly over the past few weeks despite evidence that growth in G-11 continues to remain steady.

Markets, however, are beginning to price in the prospects of greater economic friction that could raise prices, dampen demand and cool all investment for the foreseeable future. This leaves a variety of instruments vulnerable to a near term sell-off should rhetoric turn to policy and retaliation from all parties involved.

EURCHF

Perhaps no currency pair is more vulnerable to risk-off flows than EUR/CHF. The pair has already declined 500 pips from its recent multi-year highs of 1.2000, but the correction may just be beginning. The swiss franc euro faces trouble on both fronts as investors flock to the safety of the Swissie at any sign of rising global geopolitical tensions, but it is also threatened by developments in Europe where nationalist sentiment threatens to undermine the delicate balance of the European Union.

In Italy, the populist parties are setting the stage to massively increase the fiscal budget, blowing up the country’s already-tenuous finances and possibly giving rise to the prospect of Italy’s exit from the euro.

Meanwhile in Germany, Angela Merkel is under enormous pressure from her coalition partners to curtail the migrant flows and bow out of a pan-European response to the problem. Although the prospect of a coalition break-up and early election remains slim, the odds have risen sharply over the past two weeks. Should Ms. Merkel be forced to seek re-election, the uncertainty in the financial market will reach a fever pitch as she is viewed by investors worldwide to be the last bastion of hope against the more militaristic, nationalistic and protectionist global environment that could come to pass.

For now, the EURCHF pair is barely holding on to the 1.1500 support level, but should tensions in Germany and Italy escalate this week, that level could quickly give way and send the pair towards 1.1000 figure over the near term horizon.
By Kathy Lien

The heavy selling on Monday and the late sell program on Friday that erased most of the day’s gains has put investors and traders on edge over the weekend. Many are wondering if the stock market’s trend was damaged last week and what that might mean for the week ahead.

more...

Russia's service sector activity expanded at the weakest pace in just over two years in June, survey data from IHS Markit showed Wednesday.

more...

Federal Reserve Chairman Jerome Powell reiterated during testimony on Capitol Hill on Tuesday that the central bank believes gradually raising interest rates is the "best way forward." Appearing before the Senate Banking Committee, Powell offered an upbeat assessment of the state of the U.S. economy.

more...

Following a two-day meeting of the Federal Open Market Committee, the Federal Reserve on Wednesday announced its widely expected decision to leave interest rates unchanged. Citing realized and expected labor market conditions and inflation, the Fed said it decided to maintain the target range for the federal funds rate at 1.75 to 2 percent.

more...