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***Notes/Observations
from around the world***
-
Apple earnings beat expectations, despite losing its leader in 2011
-
Japan does record its first trade deficit since 1980
-
European equity indices opened the session higher, but have since pared gains
amid another batch of disappointing corporate earnings, rise in peripheral bond
yields (notably Portugal), continued concerns related to the Greek debt talks
and caution ahead of the US Fed's interest rate decision due later today.
Speakers:
-
EU was said to be losing hope regarding voluntary Greek bond deal and chatter
circulated that the ECB might take losses on Greek bond positions
-
IMF's Lagarde commented in a French radio interview that if good decisions are
taken at this time it could help revive global economic growth. She noted that
the Greek financial situation was extremely difficult and stressed that the EU
needed firewalls to prevent contagion in the region. She reiterated that
combining the EFSF and ESM was a positive idea. Global economy was on a narrow
path with limited room for maneuver.
-
IMF Zhu Min commented during CNBC Davos interview that global risks remained on
the downside and reiterated that Europe
needed to increase the size of its bailout fund and stressed the need to
get the Greek PSI deal done
-
German Chancellor Merkel commented in the Spanish press that Europe must take
measures to increase economic growth and jobs. She reiterated that Germany
wanted to keep the euro
-
Japan Econ Min Furukawa commented that the Govt shared the same view of economy
as the BOJ and reiterated the view that the recent decline in exports was due
to strong yen and slowing global economy. He believed that the trade deficit
last year was due to one-off factors.
-
Spain Econ Min Guidos commented that H1 to be very difficult for Spain, though
might see some signs of optimism at year end. He noted that a VAT hike was not
on the agenda
-
German IFO economist Abberger commented that 2012 had started on a positive
note with export and construction sectors were clearly more confident. -The
weak Euro currency has helped. The IFO did not expect Germany to slip into
recession but cautioned the current business situation was less favorable
compare to Dec
-
India Central Bank Gov Subbarao commented that interest rate cuts were
dependent upon several factors that include Rupee currency, India's deficit
balance and level of inflation
-
Bank of England Minutes saw another unanimous vote to keep both interest rate
and asset purchases steady. On monetary policy some MPC members thought further
expansion of QE was likely to be required but it reiterated the view of no
compelling reason to think that QE impact now materially different from first
round. On inflation the MPC reiterated it would
fall sharply in the coming months, but the extent and speed of further
fall was uncertain. Some saw risk spare capacity greater than assumed in Nov
inflation report while others saw risks to inflation more finely balanced, less
clear that inflation would fall below target. The minutes had mixed news on
energy prices, as Middle-East raised risk of sharp rise in oil prices.
Currencies:
-
The FX price ahead was quiet ahead of the FOMC rate decision but the USD was
firmer ahead of the NY morning. Dealers did note that the statement could be
vital for the USD's direction particularly in regards to inflation targeting.
The scenario laid out by various dealers noted that no inflation targeting by
the Fed would provide the greenback with momentum to test the low 1.28's.
Conversely any inflation targeting could weaken the greenback towards 1.3250 area in the near future.
Political/
In the Papers:
- During the session, the German press
reported that that the EU said to be losing hope regarding voluntary Greek bond
deal. It was added that the ECB may take losses on Greek bond positions.
-
The Telegraph's Evans-Pritchard commented on PSI talks related to Greece and
the role that CDS could play. He suggested that EU officials signaled that they
would allow Greece to default unless its private creditors are willing to
accept more pain. The head of the EU Commission's economics team Mario Buti
said the EU is prepared to allow credit default swaps (CDS) on Greek bonds to
play a role if the talks with private creditors do no yield the desired
results.
-
The Ireland's NAMA may disclose its actual loan losses according to the Irish
Independent. The comments follow years of campaigning by Blackrock, Co
Dublin-based Brian Flanagan, who had requested it include greater transparency
about loan sizes, and the extent of those losses. Note that NAMA does not
provide any details about individual borrowers or of development projects;
there is no plan to modify that, as it has long argued that disclosures as such
would breach confidentiality.
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Today's Economic News:
Our
day trading
strategies today will depend on the news, and today begins
with FOMC/Fed Day on our radar. Today
will be classified by periods of high and low volume, small windows of
opportunity throughout the day as traders tip-toe around the news ahead of the
FOMC Announcement at 12:30pm EST today.
We
begin the day at 815am with an important pres conference from the ECB President
which is certain to have the Euro moving early this morning. We then move through the 930am EST US market
open and into the 1000am EST Pending Home Sales report. You can see the trend in home sales has been
narrowing, really not giving us much direction for the near future. We can see higher lows in the data, as well
as lower highs, and with the majority of the homes on the market falling out of
escrow over financing and employment concerns, along with government incentives
we really don’t trust much housing news these days, however we will be watching
for it to see if we get any reaction out of the market.
 |
| 2 year Pending Home Sales |
 |
| 12 mo Pending Home Sales |
The
biggest news of our morning will be crude oil inventories, which are released
at 1030am EST and we will be sitting on hands trading crude oil futures from
1015-1035am EST waiting for the market’s reaction to the news. Remember, we need to stay patient AFTER the
news is released to ensure that we don’t fall victim to the fake-out breakout
that comes after the news. We always
like to FADE the news on crude oil inventories.
We can also see crude inventories data has been mixed, with no easy
trend to follow. I see triple tops and
higher lows, which suggests less demand, however we will get a better look at
the market personality this morning after 1030am.
 |
| 2 year CL Inventories |
 |
| 6 mos CL Inventories |
To wrap up our day today we will have the FOMC
Rate Announcement at 12:30pm EST which means we need to be very careful looking
for trades after 1130am today. Expect
the volume to taper off quickly once the lunchtime hour hits as traders leave
the pit early so they can come back early for the early afternoon report. Remember, the rate announcement is made at
1230pm EST and then we have a public news conference with Fed Chairman Bernanke
at 2:15pm EST to talk it over with the press.
You can see the fed funds rate shown below is at record-breaking lows
and has been for some time now. This is
one of the concerns we have for the US recovery, as the Fed has already done
almost everything it can with rates lower than ever, so we HOPE it works!
 |
| Fed Funds Rate |
We
can expect to see market reactions both at 1230 and 215pm EST today however
most professional traders will chose to sit on the sidelines because of
unpredictability and illiquidity of price action making it very dangerous to
trade FOMC Day after 1130am EST.
 |
| Today's Day Trading Strategy for News |
As
always we will be watching the news closely looking for clues and trading
opportunities today. This morning after
1130am EST we will be members-only, so come join us as an advanced member and
get unlimited access to our trade room every day.
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friends, they want to learn this too!
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