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Reserve Bank of Australia says there's no automatic reason to follow global rate hikes

The recent outbreak of hawkishness by policymakers in the western world does not automatically mean that interest rates need to rise in Australia, a top central banker said on Friday.

Canada’s central bank increased interest rates to 0.75 percent this month while the U.S. Federal Reserve has raised rates four times over the past two years. 


Policymakers in Europe have also shifted to a less dovish stance.
That led some investors to build long positions in the Australian dollar in anticipation the Reserve Bank of Australia (RBA) might echo its global peers. The local dollar surged to a two-year peak of $0.7992 this week. It last stood at $0.7934.

Just as the policy rate in Australia did not need to decline to the very low levels seen in other parts of the world, the fact that other central banks increase their policy rates does not automatically mean that the policy rate here needs to increase.


The Aussie also got a boost this week after the RBA’s minutes of its July policy meeting showed board members had discussed the neutral rate of interest.

The RBA sees the neutral policy interest rate which neither stimulates the economy nor retards it — at 3.5 percent compared to the official cash rate of a record low 1.50 percent. That was interpreted by some in the market as a hawkish message, a conclusion that Debelle rejected.


He pointed out that the policy rate in Australia was low because the neutral rate was lower than it used to be. That means the current policy setting was not as expansionary as a 1.50 percent cash rate would have been in 1990s or early 2000s.

Debelle also noted that a rising local currency could “counteract” the benefits of low cash rates and faster global growth.

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US. and Chinese will Try to Ease Trade Tensions

 

US. and Chinese officials will try to ease trade tensions and bridge differences on Wednesday in annual economic talks that trade experts say will likely yield some small-scale agreements to grant U.S. firms more access to some of China’s markets.

But the talks are not expected to solve larger problems, such as U.S. complaints about China’s excess capacity in steel and aluminum and subsidies for state-owned enterprises, nor China’s complaints about U.S. refusals to sell Beijing advanced technology products.


China agrees to open up its markets more and which the U.S. can claim as victories,“ said Eswar Prasad, a professor of trade policy at Cornell University and a former China division chief at the International Monetary Fund.

U.S. Treasury Secretary Steven Mnuchin and Commerce Secretary Wilbur Ross said on Tuesday they would be looking for China to agree to concrete steps with specific delivery dates to open markets, including more access for U.S. firms in the financial services sector.


The talks, rebranded by the Trump administration as the "U.S.-China Comprehensive Economic Dialogue,” come at the end of a 100-day effort by the two countries to craft an economic plan aimed at reducing the U.S. goods trade deficit with China, a gap that reached $347 billion last year and was up 5.3 percent through May this year.

China agreed in May to resume purchases of U.S. beef for the first time in 14 years and made commitments to buy U.S. liquefied natural gas and allow U.S. card payment services companies to operate in China. But while U.S. beef is now available in Chinese shops, it has taken longer for the other promised steps to be implemented.


Chinese Vice-Premier Wang Yang said on Tuesday that China has some concerns of its own to air at the talks, including “outdated” U.S. export controls for high-technology products.

In remarks to a business lunch, he said such Chinese purchases would reduce the U.S. trade deficit, noting that China imported $227 billion worth of integrated circuits last year, but only 4 percent of that came from the United States.


Prasad said the United States would be better served by focusing less on near-term steps but pushing China for bigger reforms such as opening major portions of its services sector to U.S. competition, relaxing corporate ownership rules, reducing subsidies for state-owned enterprises and clamping down on intellectual property theft.

Some U.S. officials said China was likely to push to turn the 100-day plan into a year-long effort, partly because China is viewed as unlikely to launch bolder economic reforms before its 19th Party Congress, a once-in-five-years event to set leadership, takes place this fall.


The annual summer dialogues, first launched in 2006, have focused in the past on China’s currency practices and what was once viewed as an undervalued yuan. But that issue has faded after the U.S. Treasury declined to follow through on Trump’s campaign threats to name Beijing a currency manipulator.

David Dollar, a former Treasury attache to Beijing who is now a senior fellow at the Brookings Institution, said that as in the past, the meeting is likely to focus more on process than substance, with the same complaints airing year after year.

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Oil Price Surge Above $46 as Demand Increases

Oil prices surge above $46 a barrel as optimism that demand will help shrink supplies outweighed an increase in U.S. rigs drilling for crude.

Futures were little changed in New York, after rising 5.2% last week. Stockpiles will drop at a faster pace worldwide this half of the year as demand rises and OPEC members comply better with an output-cut agreement.

 

While oil advanced last week, prices in New York are still below $50 a barrel on concerns expanded global supplies will offset output curbs by the Organization of Petroleum Exporting Countries and its allies as part of a deal to help re-balance the market.

The group’s output climbed last month to the highest this year as members exempt from the deal Nigeria and Libya pumped more and others slipped in delivering their pledged curbs.

West Texas Intermediate for August delivery was at $46.66 a barrel on the New York Mercantile Exchange, up 12 cents, at 11:37 a.m. in Seoul. Total volume traded was about 47% above the 100-day average. Prices gained $2.31 to $46.54 a barrel last week.

Brent for September settlement added 15 cents, or 0.3%, to $49.06 a barrel on the London-based ICE Futures Europe exchange. Prices climbed 4.7% last week. The global benchmark crude traded at a premium of $2.18 to WTI.

 

The number of active oil rigs in the U.S. rose to 765. It’s the second week of renewed growth after drillers snapped a 23-week stretch of advances at the end of June.

Shale explorers have been the driving force behind a surge in U.S. production, more than doubling the rig count from a low of 316 in May 2016.

 

 

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Uranium Price Forecast to Rise by 40% by the End of 2018

Uranium was the glaring exception amid a broad-based rally in metals and minerals in 2016. The price of U3O8 fell 41% in 2016 with the industry tracker UxC's broker average price hitting 12-year lows below $18 per pound in November.

After top supplier Kazakhstan announced in the second week of January that it's cutting output by 5.2 million pounds, equal to 3% of global production, the price rallied, hitting $26.75 a pound by mid-February.

 

But Japanese utility TEPCO’s declaration of force majeure on a key uranium delivery contract from Cameco Corp., the world's top listed uranium producer, dampened enthusiasm.

And news in April that the US dept of Energy is making cuts to the amount of uranium that it disperses into the market (as much as 1.1m pounds per year less) did little to buoy sentiment, not to mention bad news surrounding nuclear power including the first new reactor to be built in the UK in a generation and risks to the US industry.

Last week Russian state nuclear corporation Rosatom suspended its Mkuju River uranium project in Tanzania for at least three years due to depressed uranium market.

Spot uranium rose to $20.75 this week but remains technically in a bear market, trading down more than 20% from its February peak. Despite the current negativity analysts surveyed in July predict a steady increase in the price from today's levels rising by 40% by the end of next year and over $40 a pound in 2020.

 

 

 

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16 ETFs in Hong Kong Closes Amid Plummeting Demands

Deutsche Bank’s asset management unit is closing multiple exchange traded funds (ETF) in Hong Kong amid low demand. The 16 Deutsche Bank X-trackers ETFs ceased trading who have assets of less than $40 million.

The closures highlight the challenge of operating ETFs in markets where investors have yet to be persuaded by their allure. 

 

While the $4.5 trillion global ETF market is setting new asset records almost every month, Hong Kong is bucking the trend. Investors have pulled money from ETFs this year even as equity prices in the former British colony climb to a two year high.

Hong Kong is at a slower stage of development and client needs are different. Distributing ETFs is harder in Asia and they may not have seen enough demand.  

Hong Kong’s ETF market is hampered by factors including use of a commission based fee model where banks or other distributors receive higher fees for selling active funds rather than ETFs.

Money flowing into U.S. equity ETFs increased by 7.5% or $177.6 billion this year. In Hong Kong, assets dwindled by 6.6%, or $2.3 billion. 

 

The ETF closures include 10 funds on China covering sectors including banks, health care, financials and energy. BlackRock has been shutting down funds in Hong Kong, most recently earlier this year. 

Six of those had also tracked sectors on the CSI300 index. BlackRock, the world’s largest money manager, and Deutsche Bank still operate ETFs in Hong Kong.

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U.S. Stock Market Indexes Surge at Record High

U.S. stocks market indexes surge at record high, led by modest gains in banks and technology companies.The latest gains were enough to nudge the Dow Jones industrial average to its second all time closing high in two days. 

The S&P 500 Index closed within five points of its record. The financial index was the best performer among the 11 major S&P sectors, ending up 0.61%. Quarterly earnings kick off later today with three of the biggest U.S. banks including JPMorgan Chase, Wells Fargo and Citigroup reporting results.

Analysts estimate Q2 earnings for S&P 500 companies rose 7.8% from a year ago, with financials projected to have had the third best profit growth among sectors.

Investors have more than doubled the amount of cash invested in a key financial sector fund in the last few days, betting that Q2 bank earnings will be strong.

 

The Dow Jones Industrial Average rose 0.1% to 21,553.09, the S&P 500 gained 0.19% to 2,447.86 and the Nasdaq Composite added 0.21% to 6,274.44.

About 5.8 billion shares changed hands on U.S. exchanges, below the 6.8 billion daily average for the past 20 trading days

 

 

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Asian Shares Rally Amid Fed Raise Rates

Asian shares scaled a two year top today as investors wagered that policy tightening in the United States would be glacial at best, lifting Wall Street to record peaks and lowering bond yields almost everywhere.

The star performer was the Canadian dollar, which rocketed to 1 -month highs after the country's central bank hiked rates for the first time in seven years and left the door wide open to further moves.

 

MSCI's broadest index of Asia Pacific shares outside Japan rose 0.45% to its highest since mid 2015. Japan's Nikkei firmed 0.4% and Australia's ASX index jumped 1%.

Stocks were underpinned by a drop in bond yields as Dr Yellen sounded cautious on inflation and noted the Fed would not need to raise rates, all that much further to reach current low estimates of the neutral funds rate.

Indeed, markets doubt even that modest tightening will ensue and imply only a 50-50 chance of a rise by December. Treasuries rallied in reaction, with yields on two year notes falling to three week lows, as did bonds in Europe.

The odd man out was Canada, where yields hit their highest since late 2013 after the Bank of Canada raised rates a quarter point, saying the economy no longer needed as much stimulus.

 

Against a basket of currencies, the dollar was holding just above nine month lows at 95.793. The drop in US yields benefited gold, which pays no interest, and nudged the precious metal up to US$1,218.35 and away from its recent trough of US$1,204.45.

Oil prices faded as a report showing hefty draw downs in US crude inventories was offset by data pointing to lackluster gasoline demand.

 

 

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Australia to Buy Back $262 million of Shenhua's Mining Licence in NSW

Australia will buy back half of a coal exploration licence from China Shenhua Energy as pressure from farmers and environmentalists opposed to mining on prime agricultural land.

The NSW state government had agreed to pay $262 million to buy back 51.4% of Shenhua's exploration licence on the Liverpool Plains 400 kms northwest of Sydney.

 

The exploration licence for Shenhua's $1 billion Watermark mine, granted in 2008, sparked a public backlash and split Australia's conservative ruling coalition into pro-mining and pro-farming camps.

Development has been delayed by assessments and modifications in response to concerns raised by farmers, and mining has not yet begun. Shenhua was disappointed by the government's move and would have mined the area responsibly but added the buyback was an acceptable financial outcome.

Anti-mining activists vowed to continue campaigning for a complete ban on mining in the region, including a coal mine proposed by Korea Electric Power Corp (Kepco).

Kepco is facing renewed resistance from farmers after the state's planning department endorsed its project, saying the impact on water supplies was outweighed by the economic benefits a mine would bring.

 

Last year, New South Wales agreed to buy back BHP Billiton's licence for the Caroona coal mine on the Liverpool Plains for A$220 million, ending a decade-long fight by farmers to shut down the project.

 

 

 

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Temasek Holdings Surged $275 billion SGD in Portfolio Value

Temasek Holdings reported that its portfolio value increased to $275 billion SGD. Its one year total shareholder return was 13%, reflecting the strong performance in equity markets around the world over the period from April 1, 2016, to March 31, 2017.

This measure includes dividends paid to its shareholder, the Finance Ministry, but not capital injections from the ministry. Temasek's shareholder did not make any capital injections in the last financial year. 

 

The boost in portfolio comes from a recovering global economy and strong stock markets which helped Temasek Holdings net portfolio value to a new all-time high. But the investment company warned in its annual review that the global economic recovery is still in its early stages and a host of uncertainties remain, both in the medium and long term.

It is also facing stiffer competition amid a difficult investing environment, yield hungry investors are driving up asset prices and making it tougher to find good deals.

Temasek invested $16 billion and divested $18 billion in the portfolio during the fiscal year, marking the first net divestment position since the end of March, 2009.

The report marks a sharp turnaround from the previous year, when Temasek reported its net portfolio value tumbled by around S$24 billion, or around 9 percent, to around S$242 billion as of March 31, 2016. It was the first time the portfolio had declined since 2009, which was during the global financial crisis.

 

The investment company has now continued to focus on new, long-term opportunities in areas including technology, life sciences, agribusiness, non-bank financial services, consumer and energy and resources.

While the company had previously looked to publicly listed investments, Temasek was focusing on private and negotiated opportunities such as equity market valuations.

 

 

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Gold Imports in India Spike Ahead New Sales Tax

Gold imports in India surged more than tripled from a year ago as retail demand jumped ahead of the new sales tax that prompted jewellers and bullion dealers to replenish stocks.

June gold imports climbed to an estimated 75 tonnes from 22.7 tonnes a year ago. For the first half of the year, imports rose to 514 tonnes, up 161% from a year ago.

 

The rush of buying by retail consumers will likely lead to lower July imports. That would put pressure on global gold prices that are already trading near their lowest level since mid March.

Demand was higher than normal in June as some consumers advanced buying to avoid paying higher tax. As part of a new nationwide sales tax regime, the goods and services tax on gold jumped to 3% from 1.2 percent previously.

Gold premiums in India jumped to $10 an ounce in the last week of June, the highest level in 7-½ months.

Imports would be significantly less in July compared to June. Right now demand is very weak due to monsoon. India’s gold imports in July could be less than 35 tonnes.

In July, gold demand usually remains weak in India due to fewer weddings and as farmers are busy sowing crops. Two-thirds of India’s gold demand comes from rural areas, where jewelry is a traditional store of wealth.

 

 

 

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Snap Inc. Shares Crashes, Falls Below its IPO Price

Snap Inc. shares falls below its initial public offering price (IPO) of $17 down 1.1% to $16.99 marking a new post IPO low for the social media upstart. The stock has fallen more than 30% so far this year, as concerns about Snap's future growth, profitability and rivalry with other social media. 

In May, Snap reported its first earnings as a public company and missed on all three of its most important metrics - earnings, revenue and user growth which did little to reassure nervous investors.

 

Credit Suisse analysts cut their price target for Snap to $25 from $30, although they kept their outperform rating. The analysts said they expect Snap to be volatile in the near term as more than 700 million shares potentially come out of their lock up period later this month.

However, advertisers still appear to be flocking to Snap Inc. as they were drawn to the platform's access to younger users and improving return on investment. This signify well for Snap, as advertising is the main revenue source for the company. 

In its most recent quarter, about $129 million of Snap's total $149.6 million in revenue came from advertising. Other deals, such as Snap's purchase of Zenly for $200 million in late March, could have indirect benefits for advertisers. 

Snap likely used the Zenly acquisition to build out its Snap Map product, which was released in late June and lets users share their location with friends inside an interactive map. Snap Maps could become a crucial part of the online to offline integrated advertising ecosystem.

 

Snap's recent declined was 42.4% below the record high of $29.44 reached in its second day of trading. The IPO breach came in Snap's 90th trading day on the public market. The stock had previously dipped to $17 in mid June.

Dipping below an IPO price is seen on Wall Street as a setback to be avoided by chief executives and their underwriters, but it is not uncommon for Silicon Valley companies.

 

The Snapchat messaging app is popular among people under 30 who enjoy applying bunny faces and vomiting rainbows onto their pictures. But many on Wall Street have been critical of Snap's high valuation and slowing user growth and the company has warned it may never become profitable. 

 

 

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China Hedge Funds Bounces after 5 Years Low

Greater China hedge funds added more than 13% on average in the first half of 2017 to rank among the top performing strategies in the world. Hedge funds from Greenwoods Asset Management, Springs Capital and SPQ Asia Capital were among standout performers with gains of 20% or more.

Hedge funds worldwide are struggling with investor redemption after central bank intervention suppressed volatility and sapped returns. China funds were a rare pocket of out performance as global hedge funds on average gained about 2.4% in the first half. 

 

China hedge funds bounced back after five years of worst performance.  Investors are taking notice that the majority of hedge funds in China saw inflows in May for the first time since 2015.

While Greater China equity funds overall benefited from surging Hong Kong listed shares and large cap stocks on the mainland, mainly bets on technology, Internet and consumer companies drove returns at some of the top performers. 

 

The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong touched post October 2015 highs in the first half. The MSCI China Index added about 24% through June 30. China’s initiation into MSCI Inc.’s indexes has further boosted the outlook for the nation’s largest stocks.

Greenwoods’ $1.6 billion Golden China Fund made nearly 27% in the first half. Performance was boosted by bullish bets on consumer stocks listed in Hong Kong and China.

Other managers found opportunities in overlooked areas. Springs Capital’s China Opportunities Fund added more than 7.5% in June, with 2017 gains topping 24%.

Profit at the fund, one of the rare offshore stock hedge funds that focuses on yuan-denominated shares traded in China, was driven by gains in chemical materials, high-end manufacturing and healthcare stocks. It avoided large cap stocks most popular with foreign investors in the yuan shares market.

 

Large companies, including blue-chips and leaders of small industries, may outperform small and mid-cap stocks over the next three years as large companies gain share when China’s slowing economy spurs industry consolidation.

 

 

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MMG Sold its Nickel Mine in Tasminia for $25 Million to Dundas Mining

MMG has completed the sale of its Avebury nickel mine in Tasmanian to Dundas Mining for $25 million.

The Avebury mine, located 8km west of Zeehan in Tasmania’s West Coast has been in care and maintenance since 2009. MMG is confident that the sale will reinvigorate the Zeehan area, by providing new jobs and economic benefit to the region. 

 

The Tasmanian Government welcomed the sale and the resources minister Guy Barnett said it showed a positive sign of growing confidence in the state’s resource sector. 

MMG remains committed to Tasmania through its Rosebery operation and will continue to make social and economic contributions to the state and West Coast region. 

Dundas Mining is a privately owned exploration and mining development company based in Tasmania and their commitment to bringing the Avebury operation back into production as soon as possible is.

He added that jobs are the state government’s main priority and looks forward to the restart of the mine to create more employment.

 

 

 

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Host Plus to Invest 12% of Funds Capital in Infrastructure

Host Plus Pty Ltd. is seeking board approval to invest about 12% of the fund’s capital in infrastructure, from 10% ongoing. Australian funds managing retirement savings now hold $100 billion in infrastructure assets, double the amount four years ago. 

According to Preqin data, the soaring worldwide investor demand has pushed the average size of such deals to a record $519 million.

 

The Chief Investment Officer of Host Plus sees potential to acquire more stakes in attractive assets, which he views as offering steady, predictable income for his fund’s almost 1 million members. 

Host Plus which has stakes in airports and office buildings to water filtration plants and wind farms, beat its local peers with a 9.5% return over the three years ended May 31.

Prices for infrastructure assets reached eye watering levels as opportunities to invest dwindled. There were 650 sales in the six months ended June 30, from 1,110 a year earlier. 

While equities provide investors with dividend yields, volatility can be a deterrent. Infrastructure and real estate investments are good alternatives.

 

Last month, a group of senior executives from Australian retirement funds along with IFM Investors have visited the Vice President of U.S.A to canvass potential cross border infrastructure deals and explore ways pension money can be used to improve American roads and airports.

Discussions were centered around how pension funds can work as long-term financial backers as opposed to private equity funds, which typically sell their investments after making a profit.

About $800 billion of President Donald Trump’s touted $1 trillion infrastructure program is expected to come from states, cities and private capital, including pension money.

 

 

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Bank in Japan Planning to Raise $5 Billion through U.S Bonds

SoftBank Group is planning to raise as much as $5 billion through an offering of U.S. dollar bonds.

The Japanese bank has announced that Morgan Stanley, Bank of America Merrill Lynch and Deutsche Bank as joint global coordinators for a bond offering.

 

The bond offering comes after the telecoms to investment conglomerate announced raising the world’s largest private equity fund, the nearly $100 billion Vision Fund, backed also by Saudi Arabia’s main sovereign wealth fund.

It bought British semiconductor designer ARM Holdings last year for $32 billion and has been involved in a number of deals across the globe this year, including acquisitions of two robotics business from Google’s parent company Alphabet Inc.

SoftBank was considering selling around $9.8 billion worth of hybrid bonds in the financial year that ended in March to bolster its capital base and secure funds for future growth.

Hybrid bonds are often treated as quasi equity by credit rating firms, allowing companies to raise capital without hurting their ratings.

The Japanese bank did not specify the purpose of the proceeds in the announcement. 

 

 

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Former Mining Traders will Launch a New Online Platform called Open Mineral

A team of former traders from Glencore will launch a new online trading platform called Open Mineral it will help connect miners with customers such as smelters and sign deals without the need of brokers.

The online marketplace will let miners put up tenders for their concentrate directly to end users. The platform will focus first on goldsilvercopperzinc and lead which represent a combined market worth about $50 billion.

 

Open Mineral will also provide trade services such as transportation, surveying, assaying and insurance. The company is now accepting registrations and the marketplace will go live in August.

Smelters and miners could potentially boost returns by millions of dollars by dealing directly in the concentrate market which is inefficient and opaque. 

Since annual concentrate deals for the year are already set, the new online tool will target spot and 2018 contracts, which are due to be negotiated before the end of the year.

Open Mineral is not the first attempt to take the trading of metals from the physical to the online world. Last month, the former chief executive officer of the London Metals Exchange launched an alternative electronic trading platform for metals.

 

 

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Trade Surplus in Australia Surged $2.47 Billion After Coal Export Bounces

Australia's trade surplus has risen far more than expected after a recovery in coal exports. The trade balance rose to a surplus of $2.47 billion in May from a now revised $90 million surplus in April when coal exports had slumped from the impact of Cyclone Debbie.

Combined with recent upbeat reports on consumer and business spending, economic growth now looks likely to have picked up from the March quarter's disappointing 0.3% pace. 

 

On a seasonally adjusted basis, exports climbed by $2.58 billion, or 9% during the month, driven mainly by a 62% surge in the value of coal exports and a 39% jump in the value of LNG exports. Imports rose by $205 million, or 1% during the month, on a seasonally adjusted basis.

Shipments of liquefied natural gas (LNG) are also ramping up significantly as new projects come on line. Analysts at National Australia Bank predict the value of LNG exports will pass A$27 billion this year and near A$35 billion in 2018, overtaking coal as the second biggest earner.

Australia has been on track to overtake Qatar as the world's largest LNG exporter, but just this week the Gulf state announced plans to expand its output by 30%.

The West's three biggest energy corporations have expressed interest in helping Qatar with its ambition to produce 100 million tonnes of LNG annually, equivalent to a third of current global supplies in the next five to seven years.

 

Commodity exports were heavily impacted by Cyclone Debbie in late-March, which caused temporary production stoppages at several Queensland mines and widespread damage to rail lines.

The Australian dollar initially lifted on the news, rising to as high as 76.06 US cents, but has since given up the gains. At 1200 AEST, the local currency was trading at 75.92 US cents. 

 

 

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Steel Overcapacity to be Discuss at the G20 Summit

G20 leaders will discuss steel overcapacity at this week's summit as risks undermining the global trading system and sparking retaliatory action around the world in products beyond steel. 

The U.S. has recommended the possible new tariffs will be released some time after the G20 summit. They are also conducting a similar study into the case for aluminium tariffs.

 

While tariffs on both products would be aimed primarily at China, U.S. allies fear they will bear the brunt of the measures because Chinese steel exports are already largely subject to U.S. restrictions and Canada and Mexico are likely to be exempt.

Trade diplomats fear U.S. security-based tariffs on steel would widen cracks in the global trading order after Saudi Arabia, Bahrain and the United Arab Emirates cited national security at the WTO last week to justify their economic boycott of Qatar.

Qatar has threatened legal action. Its WTO representative Ali Alwaleed Al-Thani said a national security claim was not a "free pass" and would need testing in court.

WTO Director General Roberto Azevedo said that it would be concerning to see countries making national security demands within the WTO's dispute settlement system, the global trade court for the its 164 members.

William Reinsch, a fellow at the Stimson Centre said if the threat of tariffs are used to pressure members of the G20's forum on steel overcapacity, set up last year to tackle the problem, a good outcome could yet prevail.

 

 

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Asia Pacific Bank Outlook Revised by Moody’s to Stable

Moody’s added that 77% of bank outlooks in the region are now stable, an increase from 64% at the end of last year. Banks in China, Hong Kong, Singapore, Australia, New Zealand and Mongolia are mostly behind the increase in stable outlooks.

Improving operating conditions and a more positive credit cycle led Moody’s Investors Service to upgrade its outlook for Asia-Pacific (APAC) banks to stable from negative. 

 

Asset quality is stabilizing in most banking systems, as the negative credit cycle in many of the systems has proven to be shallow with a moderate economic upturn now evident in APAC, while commodities prices are relatively stable.

Commodity related problem loans have mostly peaked and it now expects relatively stable prices to support asset quality. Profitability will also recover in many markets because of lower credit costs and better net interest margins.

Other improvements highlighted by the agency include the return of foreign capital flows into emerging Asia. But it warned that corporate and household leverage remain elevated in some countries and rising property prices could amplify credit risks in the case of a major market correction.

Latent property related risks are more pronounced in Australia, China, Hong Kong, New Zealand, Malaysia and India, based on property price appreciation, the banks exposure level, or both.

 

 

 

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U.S Market Data Glitch Causing Stock Prices Crashing

The prices of several big name Nasdaq listed stocks appeared on some websites to either spike or plummet, seemingly due to a glitch related to the market data that runs the largely automated markets.

The prices of Amazon Inc and Microsoft Corp stocks appeared to have lost more than half their value, while Apple Inc shares appeared to more than double. 

Google parent Alphabet Inc and eBay Inc shares were among others that all appeared to be priced at $123.47 on some financial news websites on Monday evening.

According to Nasdaq,  the actual prices of the stocks were not affected and no trades were completed at that price.

They were now investigating the improper use of test data distributed by third parties. Prices on Nasdaq's website were not affected.

 

Nasdaq and other U.S. stock exchanges closed early on Monday ahead of the U.S. Independence Day holiday on Tuesday.

Testing of stock exchange software is mandated by the U.S. Securities and Exchange Commission and happens on a regular basis to help prevent electronic glitches, often using test symbols and historical data.

 

 

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Emmerson and Evolution Mining will Begin its Gold Production in Northern Territory AU

Emmerson Resources will open its new gold mine with the Australian gold producer Evolution Mining in Northern Territory. The company announced that the local government in NT granted the final approvals for Edna Beryl gold mine to begin its production.

According to the managing director of Emmerson, the commencement of production at Edna Beryl is a pivotal step since Emmerson began its exploration in the Tennant Creek Mineral Field back in 2008.

 

In the said agreement, Evolution is funding $15 million in exploration by the end of the year in order to earn a 65% interest in the project with an option to earn an additional 10% over the next two years through a $10 million commitment.

The mine is being developed in cooperation with the NT government, which is conducting a feasibility study into establishing a mill at Tennant Creek which could lead to the mine's expansion. The first 600 tonnes of development ore averaged grades of 40 grams per tonne, which would make the mine high grade. 

Mining at Edna Beryl East will be undertaken by the Edna Beryl Mining Company under a tribute agreement. It says the underground mine will start small but has exploration upside. The agreement relates to a 3D envelope around the shallow mineralisation. 

Drilling last year extended the mineralisation beyond this 3D envelope, opening up the possibility of either expanding the current mining area or if the next round of drilling is successful, contemplating a larger scale of development.

 

Emmerson's stock price has risen 7.53% in the last 5 trading days since the announcement, compared to a year to date loss of 23.08% on the ASX.

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RBA Expected to Keep Interest Rates on Hold

The Reserve Bank of Australia is expected to keep interest rates on hold at its policy meeting today. The risk is the RBA adopts more upbeat views on Australian economic activity considering the solid growth in employment.

The RBA has kept its benchmark rates at a record low of 1.5% since August last year. Economic growth has appeared slightly sluggish. 

 

Last month, Australia reported gross domestic product for the first quarter rose 1.7% on year but economists have said growth would likely improve in the second quarter, as economic activity was hindered by Cyclone Debbie earlier in the year.

The RBA's is optimistic that the growth will increase to a little above 3% in the next few years. The central bank said the global environment has continued to pick up and improvements had been made in the domestic economy. 

According to RBA, the recent supervisory measures on the housing market should help address the risks associated with high and rising levels of indebtedness.

The housing market has been the challenge. If the RBA were to cut rates further, then the easier liquidity would drive property prices even higher.

The CoreLogic Hedonic Home Value Index, released yesterday it showed that in the April to June quarter, capital city dwelling values rose 0.8% on quarter and 9.6% on year.

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Australian Shares Edges Lower Amid Mixed Economic Data

The Australian stock market is edging lower today with investors treading cautiously ahead of the release of a raft of local and international economic data today.

In late morning trades, the benchmark S&P/ASX 200 Index is dropping 0.10%. The broader All Ordinaries Index is down 0.08% to 5,759.30. Among the major miners, BHP Billiton is plunged almost 1%, while Rio Tinto is up 0.2% and Fortescue Metals is adding 0.6%.

 

Oil stocks are also mostly higher after crude oil prices rose on Friday for a seventh straight session. Woodside Petroleum is adding 0.2% and Santos is advancing more than 1 percent, while Oil Search is lower by almost 1%.

Gold miners are mixed after gold futures extended monthly losses. Newcrest Mining is rising almost 1%, while Evolution Mining is down 0.6%.

The big four banks are also advancing. Commonwealth Bank, National Australia Bank and Westpac are up in a range of 0.2% to 0.9%. ANZ Banking is edging down less than 0.1%. 

In the currency market, the Australian dollar is higher against the U.S. dollar. In early trades, the local unit was trading at $0.7691, up from $0.7678 on Friday.

 

In economic news, the latest survey from the Australian Industry Group revealed that the manufacturing sector in Australia continued to expand in June and at a faster rate with a Performance of Manufacturing Index score of 55. That's up from 54.8 in May and it moves farther above the boom or bust line of 50 that separates expansion from contraction.

Australia will also see the inflation forecast from TD Securities, job ads from ANZ and the commodity price index from the Reserve Bank of Australia plus May figures for building approvals today.

 

 

 

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Largest Copper Mine in the World has Dropped its Production by 63% in Q1

The world's largest copper mine has dropped its production by a shocking 63% in Q1 this year when compared to the same period in 2016 due to long drawn out strike, which became the longest private sector mining stoppage in the Chile’s history.

The mine, located in the copper-rich Antofagasta region, in northern Chile, generated 97,103 tonnes of copper in the first quarter of the year, down from 265,597 tonnes a year earlier.

 

Before the strike, it was forecast to produce almost 1.1 million tonnes this year. That is equivalent to about 5% of the world’s total copper production.

While majority owned and operated by BHP which invoked force majeure due to the stoppage, other companies including Rio Tinto and Japanese Mitsubishi Corp also hold stakes in the mine.

Chile is the world's biggest copper producer and sales of the metal make up for about 60% its export earnings. But the country has lost some of its appeal to mining investors in recent months.

According to the latest annual global survey of mining executives released this week by the Fraser Institute, the nation tumbled in the rankings from the 11th place it held in 2015 to the 39th position and currently ranks below Peru, which occupies the 28th place.

 

 

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CEFC will Invest $20 Million on Lithium Mine to Support Power Stability in Australia

Clean Energy Finance Corporation will invest on a lithium mine to support  power stability in Australia as the market increasingly dependent on variable wind and solar power.

The government will make a $20 million investment as part of a $132 million secured bond issued by an offshoot of Pilbara Minerals, an ASX listed company that hopes to extract lithium and supply the market for lithium ion battery storage products for electricity and electric vehicles.

 

The lithium concentrate supplies to be produced by this project will help build Australia’s capacity to supply much needed resources for the clean energy technologies that are set to play a vital role in increasing the use of renewable in our future energy mix.

The move comes as the government looks to prove it is being technology neutral in its efforts to beef up power supply in tackling over whether that should include subsidies for coal fired power.

The proceeds of the bond issue together with $80 million raised in a share sale will underpin the $234 million required for the project's first stage of development. Construction is expected to start in early 2018.

The government also awarded a $2 million grant to Australian researchers developing ultra thin, screen printed batteries for use in both large scale energy storage and in cheap, portable devices.

 

 

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BHP $20 Billion Investment Mistake in Shale

BHP entered the shale business at the height of the fracking boom in 2011 and invested billions more developing the operations. The fall in oil prices since then has led to pre-tax writedowns of about $13 billion on the business. 

Activist shareholder and hedge fund Elliott Management, holding 4.1% of BHP's London-listed shares, has been trying to gain support from other shareholders to persuade BHP to sell the shale oil and gas business.

BHP Chairman Jac Nasser said that BHP's $20 billion investment in U.S. shale oil and gas six years ago was, in hindsight, a mistake. 

New York based Elliott has directed a barrage of criticism at the global miner since releasing a list of changes in April it wants the company to implement.

Its list includes an exit from shale, removal of BHP's dual London and Australian stock listings and greater emphasis on shareholder returns. Nasser would not comment on Elliott's proposal. But he defended BHP's performance, saying the company's shareholder returns were up 486% since BHP merged with Billiton Plc in 2001.

 

According to BHP Chief Executive Andrew Mackenzie that the company was considering divesting some shale acreage and believed that the assets were well placed for the future.

Australian wealth management group Escala and fund Tribeca Investment Partners have also campaigned for a revamp at BHP, calling for board changes and reviews of the energy operations.

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Citigroup to Increased Buybacks up to $15.6 billion of Common Stock

Citigroup plans to repurchase up to $15.6 billion of common stock over the next year and double its quarterly dividend to 32 cents per share, bringing total payouts to $18.9 billion.

The total payout is 54% more than the Fed allowed last year and about 1.25 times the profits that is expected the Citigroup to earn over the next four quarters. Analysts had expected Citigroup would win the right to increase payouts to roughly 1.12 percent of annual profits.

The payout projection comes on the heels of the Federal Reserve approving Citigroup's capital plan on Wednesday, making for the third consecutive year it has gotten a green light. The bank had failed in 2014 and 2012, significantly setting back its payback plans. 

 

Citigroup shares were up 2.3% in after hours trading at $66.68, compared with a stated net worth of $65.94 per share as of March 31.

The company have retained a significant amount of capital in excess of what is needed to prudently operate and invest. The bank can begin returning a higher level of capital to shareholders and improve its overall returns.

The recent strategy is another stepping stone for Citigroup’s recovery from losses in the financial crisis. Citigroup took three bailout infusions from the government in 2008 and 2009.

Citigroup built excess capital through additions from net income and by shedding assets that required capital support. It has sold an assortment of ill fitting assets and pulled out of about 20 consumer markets.

 

Already, the bank's stock has rebounded this year as investors have bet on a big capital payout. Citigroup stock has returned 10.3% so far in 2017, more than any of its big rivals.

The news of a better than expected payout will give the bank additional momentum as it prepares for a day of public investor presentations next month, at which it will detail growth initiatives.

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Petra Diamonds Shares Crash Falling Lowest in a Year

Petra Diamonds shares lost some of its shine Wednesday, falling to their lowest in a year, after the miner warned it expects production for the fiscal year ending June 30 to be lower than anticipated.

The company’s stock fell as much as 10% at the market open, and it was still trading low at -7.85% to 104.5 pence in late afternoon. The firm is talking to lenders about a possible breach of its debt covenants following a shortfall in production.

 

The diamond miner, known for some major recent findings, said that slower than anticipated build up of its expansion programs will cause output for the full year ending Friday to be about 8% to 9% lower than guidance of about 4.4 million carats.

Revenue also is expected to be 8% to 9% below market consensus, and so overall financial results for the year are forecast to be below market expectations. This means Petra is likely to be in breach of its banking covenants, the miner said, though it also noted that after initial constructive discussions with its lenders, it was confident the shortfall will not present an issue.

Petra, which owns the Cullinan mine that has produced the two largest diamonds in the British Crown Jewels, has borrowed heavily in recent years to expand its historic diamond mines in South Africa.

But that debt pile has helped the miner achieve interesting results. In fact, Petra said it was on track to achieve record revenue and production, even though those figures will be below market expectations.

 

The company, which operates four diamond mines in South Africa and one in Tanzania, also said its current operational run rate supports a 2018 target of around 5 million carats, a goal to be reached a year earlier than originally projected.

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Nasdaq Indexes Plunged Sharply

Nasdaq indexes plunged sharply causing Wall Street a massive declined overnight of 1.61%. The benchmark S&P 500 posted its biggest one day drop in about six weeks and closed at its lowest point since last month of 0.81%, Dow Jones Industrial Average fell 0.46% and  The Russell 2000 of small company stocks dropped 0.9%.

Technology stocks led a broad slide in U.S. stocks after a day of mostly choppy trading. Phone and utilities companies were among the big decliners after a sell off in bonds sent yields sharply higher. 

Computer memory maker Seagate Technology gave up 6.8%, while semiconductor manufacturer Advanced Micro Devices slid 4.8%, Netflix also fell, losing 4.1%.

Alphabet, Google's parent company, slid 2.5% after the European Union mandate the online search giant with a $2.7 billion fine. The EU alleges that the company breached antitrust rules with its online shopping service. Alphabet said it is considering an appeal. 

 

Bond prices fell. The 10-year Treasury yield rose to 2.20 percent from 2.13 percent late Monday. The bond sell off was triggered early Tuesday as investors reacted to remarks from European Central Bank President Mario Draghi, who expressed optimism over the future of the economy of the 19 country eurozone. 

And while Draghi did not say the ECB was ready to rein back its stimulus measures, investors took his remarks as a hint that a change of policy could be coming in the next few months.

 

 

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Binary Capital is Closing its New Fund Amid Controversy

Binary Capital is closing down its most recent fund after its co-founder Justin Caldbeck admitting to misconduct with female entrepreneurs.

Investors in Binary, known as limited partners, decided the fate of the fund in a meeting this week. Binary had raised about $175 million, but very little of that money had been invested. More than 50% of investors who voted at the meeting were in favor of winding down the fund.

Caldbeck apologized on Friday and resigned late Sunday after a report by The Information detailing his sexual advances to women seeking funding. This is the latest example of scandal, harassment and gender inequality in Silicon Valley, and it sparked calls for a technology industry code of conduct for venture capitalists and entrepreneurs.

Binary’s fate has hung in the balance since Caldbeck stepped down and Matt Mazzeo, a venture capitalist who joined San Francisco-based Binary as a partner in recent weeks, also resigned.

 

 

 

 

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DAX Lifted as IFO Business Climate Index in Germany Hits New Record

DAX climbed as IFO business climate index in Germany hits new record high. Currently trading at 12,837.25 points, up 0.83%. Commerzbank and Deutsche Bank have posted strong gains of 2.35% and 1.24% respectively. German Ifo Business Climate improved to 115.1, above the estimate of 114.6. 

The robust German economy has earned an approval from the business sector. The indicator has improved for five consecutive months, pointing to stronger optimism among German businesses. 

 

Ifo's two sub indices both beat forecasts, with the measure of current economic conditions rising to 124.1 in June from a revised 123.3 and the gauge of expectations improving to 106.8 from 106.5.

The Business Climate Index is based on ca. 7,000 monthly survey responses from firms in manufacturing, construction, wholesaling and retailing. In June, the index of manufacturing rose slightly. In wholesaling the business climate improved for the third month in succession to reach its highest level since December 2010. 

The index in retailing also improved notably. Retailers' optimism about the short-term business outlook reached its highest level since September 2015.But the index in construction fell.

Contractors marginally scaled back their assessments of the current business situation and business expectations, which nevertheless remain at a high level.

 

Major economic institutes and the German central bank have revised upwards their forecast for German growth in 2017 and 2018. German GDP grew 0.6% in the first quarter and has been the locomotive which has boosted growth in the eurozone. 

Analysts are closely monitoring how the ECB plans to respond to stronger economic conditions in the euro zone. The central bank has dismissed calls to tighten monetary policy, saying that it will not make any moves until inflation moves closer to the ECB's target of 2.0%. 

 

 

 

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Despite Italian Banking Bailout the Euro Remains Upswing

The euro mostly held onto the gains despite the news that the Italian government was going to rescue two of the country's regional lenders at the tune of 17 billion euros. 

The two banks, Banca Popolare di Vicenza and Veneto Banca were forced to seek government aid after they failed to raise capital from investors in 2016. After reviewing their books, the ECB in April said they needed about €6.4bn of new capital, prompting a search for ways to bridge the gap.

 

Previously, Italy sought to rescue the lenders through a precautionary recapitalization, using a mix of state and private funds as well as debt and equity write downs to finance the removal of bad debts. The private sector balked at the plan.

Italian banking woes were seen as contained for now, given the positive political developments and the relative strength of the Eurozone economy.

EUR/USD traded around 1.1200 after the release and the 7 month high, set earlier this month at 1.1296, could be tested if EUR buying momentum and typical end of month USD selling gather momentum. 

German IFO posted a reading of 106.8 better than the consensus of 106.4 and the previous reading of 106.5, showing a continued optimistic view of Eurozone Business confidence.

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Australian Stocks Jumped 0.6% Higher in Early Trade

Australian stocks, ASX 200 index climb 0.6% higher in early trade. With more than three quarters of the top 200 names are on rally, the uplift is spread across all sectors. 

Notable is a 6.4% jump in Metcash after the independent grocery wholesaler reported upbeat annual profits. Wesfarmers and Woolies, which are both up around 0.8%.

Major banks are up a uniform 0.5% and miners are also enjoying support, ticking off two major components of the market. CSL and Telstra are also higher.

The Australian dollar launched a spirited recovery after four days of losses. Prices moved inversely of front end US Treasury yields and alongside an advance in gold, hinting that soft US PMIs weighed against Fed rate hike bets that bolstered the relative appeal of the higher-yielding Aussie. 

More of the same may be on tap this week as data flow continues to undermine the case for further tightening but external political jitters remain a potent downside risk. 

 

 

 

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Commodities Weekly Outlook

Gold prices rose to one-week highs on Friday, boosted by the weaker dollar which fell amid persistent fears over prospects for further U.S. interest rate hikes this year.

Gold for August delivery closed up 0.71% at $1,258.31 on the Comex division of the New York Mercantile Exchange, after rising as high as $1,260.00 earlier.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.37% at 96.98 late Friday, posting its largest one day decline in three weeks.

Gold and the dollar typically move in opposite directions, which means if the dollar goes down, gold futures, which are denominated in the U.S. currency, will rise.

The precious metal is also highly sensitive to rising rates, which lift the opportunity cost of holding non-yielding assets such as bullion, while boosting the dollar.

 

Silver gained 1.13%% to $16.69 a troy ounce late Friday. While copper rose 1% to $2.624 a pound, platinum added 0.9% to $929.25 and palladium fell 3.1% to $853.23 an ounce.

Investors will be closely watching remarks this week by Fed Chair Janet Yellen on Tuesday for fresh indications on the timing of further rate hikes and signals on plans to trim the Fed’s balance sheet.

Market watchers will also be awaiting Friday’s euro zone inflation data and speeches by central bank heads at the ECB’s forum on central banking.

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Banking Stocks Traded Lower as State Gov. Announced New Tax on Big Banks

Australian Markets traded sideways today. The S&P/ASX 200 edged higher by 0.06%, buoyed by gains in its health care and telecommunications sub indexes which were up 1.03% and 1.25% respectively. Australian financials remained under pressure, with the sub-index edging lower by 0.58%.

Banking stocks traded mostly lower after the South Australia government announced a new tax on the nations big banks. Shares of ANZ declined 0.93% and NAB fell 0.95%. Westpac gave up earlier gains to trade 0.05% lower.

 

Losses in the banks were higher in the first minutes of trade, showing that the reaction may be overdone. The overall impact of the tax on the banks earnings is likely to be negligible but investors are worried about the possibility of other states introducing similar taxes.

In general terms this serves as a reminder that Australian shareholders generally and bank shareholders in particular, are in a period of heightened political risk that needs to be factored into investment decisions.  

The Australian dollar is hovering near more than a week lows at 75.53 cents in four straight sessions. It has also been pressured by an interest rate hike in the United States this month, while the RBA has made it clear it is in nor rush to tighten monetary policy. 

Also narrowed the rate differential between the two to plus 25 basis points, with some traders speculating the spread might turn negative if the US Federal Reserve continues to tighten further. 

 

 

 

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Atlas Iron in Australia delays New Iron Ore Mine

Atlas Iron delays the construction of its new mine due to the dropping prices of the commodity. The development of the Corunna Downs mine was announced when iron ore was trading at around $95 a tonne that is way back early this year. 

Since oversupply and weak demand from steelmakers around the world, prices have retreated to under $60 a tonne.

 

According to the company, they will proceed with the development when commodity market conditions improves as Corunna Downs remains an important project for Atlas to sustain its production base.

The mine was a key plank in efforts to rebuild the company's yearly production rate to 12 million tonnes, after the firm almost collapsed during a previous down cycle before being rescued by creditors.

Atlas was forced to suspend mining in April 2015 when it was losing $15 for each tonne mined. It faces higher costs than some other Australian producers because it uses road, not rail, to ship ore up to 230 kilometers (140 miles) to port. 

Within a year, the mines were back running, after 70% of Atlas was transferred to creditors in exchange for a 48% reduction in debt. Inventories of imported iron ore at Chinese ports last stood at 138.95 million tonnes. 

 

 

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Ethereum Plummeted 15% as Demand Rapidly Growing

Ethereum a new generation currency rival of bitcoin plummeted more than 15% overnight due to the growing demand and increased worries it may face a divisive debate on how to upgrade its network. 

It dropped as low as $303 before steadying at $328. Earlier this month the digital currency reached a record $402. 

 

The sharp fall comes after Ethereum shot up more than 3,000% this year, far surpassing bitcoin's already stellar 180% gain and coming close to beating bitcoin as the digital currency with the greatest market value.

It has grown in popularity for its ability to support applications, potentially becoming a structure for a decentralized, next generation internet.

Investors demand at the funding launch for Status clogged the Ethereum network. Online investors were also reportedly unable to withdraw funds from digital currency depositories known as Wallets.

Ethereum trading on Wednesday was also affected by an outage of the GDAX exchange run by Coinbase. Some traders online noted orders for ethereum being placed this afternoon at far below the $300 price. 

 

In the last several weeks, a surge in digital currency prices has contributed to a flood of investor demand, which has overwhelmed websites and attracted cyber attacks. Growing pains have affected both as well. Bitcoin's price fluctuated in the last few months as developers debated the best way to upgrade the network. 

News last week that two upgrade methods, BIP148 and SegWit2x, may be able to work together helped bitcoin recover from its lows of the month. Now, a flood of demand for Ethereum has increased similar concerns.

 

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Wall Street edges Lower as Energy and Financials Slump with Oil

Wall Street was weighed down by falling energy shares as oil prices fell and added to investor concerns about low inflation, while healthcare and technology stocks helped lift the Nasdaq Composite index.

Energy was the weakest S&P sector with a 1.6% decline after oil prices reversed course during the morning session and US crude touched its lowest point since August despite larger than expected declines in inventories.

Continued weakness in oil futures added to investor worries about inflation and as a result hurt cyclical such as banks and industrial.

The Dow Jones Industrial Average 57.11 points, or 0.27%, to close at 21,410.03, the S&P 500 lost 1.42 points, or 0.06%, dropping to 2,435.61 and the Nasdaq Composite added 45.92 points, or 0.74%, rising to 6,233.95.

The energy index has fallen 14.9% so far this year compared with an 8.9% rise for the S&P 500. Oil futures have fallen about 21% so far this year.

Investors looking for growth opportunities turned to Nasdaq, which contains many technology and biotechnology companies. Biotech and pharmaceutical investors have taken note. The Nasdaq Biotech Index is up 8% since Friday's close, its best three day run since November.

 

 

 

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Domestic Equities in China will Join MSCI's Global Benchmark Indices

Domestic equities in China will join MSCI’s benchmark indices. The decision, announced by the New York based index compiler. A move that should help the capital market of the world’s second largest economy edge towards becoming more globally integrated. 

After three failed attempts, it has finally succeeded and it will give China’s $6.9 trillion stock market a bigger role in everything. The Emerging Markets Index previously excluded mainland traded stocks due to concerns about restrictions on purchases by overseas investors and flawed rules in listed companies trading suspension. The gauge currently only includes shares of Chinese companies listed in Hong Kong or the US.

 

According to the index compiler, China’s A shares will initially represent a 0.73% weighting in the MSCI Emerging Markets Index and the weighting could increase further over time if China implements more changes in its market reform. 

The full inclusion of domestic Chinese stocks in the widely tracked MSCI Emerging Markets Index could pull more than $400 billion of funds from asset managers, pension funds and insurers into mainland China’s equity markets over the next decade.

MSCI made its decision after the Chinese regulators made it easier for foreign investors to access mainland equities through the two Stock Connect trading links between Hong Kong and Shanghai/Shenzhen and restricted the number of trading suspensions by listed companies. 

It had ejected inclusions over the past three years, citing concerns including capital controls and listed company abuse of the trading halt rules. 

 

However, months ago the MSCI moved to relax its investment criteria by cutting the number of stocks to 169 from 448 in a bid to address curbs on repatriating capital from China and concerns over the country’s high number of suspended stocks.

The revised proposal helped address these issues because the 169 stocks can be easily accessed by foreigners through the “Stock Connect” link launched in 2014 and significantly expanded in December.

MSCI said it planned to add the 222 stocks and will begin a review of the A-shares and include them in provisional indices beginning in August.

 

 

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Rio Tinto declined Glencore’s Bid to Buy its Thermal Coal Asset

Rio Tinto has rejected a bid from FTSE 100 rival Glencore to buy its coal mines in Australia, opting to stick with its initial buyer, Chinese-backed Yancoal.

The Anglo Australian group said that Yancoal was the preferred bidder because unlike Glencore it had already achieved regulatory clearances for the deal, meaning it could complete sooner.

Rio said it had received “additional information and confirmations” about how Yancoal would fund the acquisition, amid speculation that the company had yet to raise financing. Australia-listed Yancoal is majority owned by China’s Yanzhou, which is in turn owned by state-backed entities.  

 

Yancoal has revised its payment terms so that it will now make one single payment for the Coal & Allied business in New South Wales instead of a number of deferred payments, Rio said. They also revealed it had financial backing from Yankuang Group, its parent company's biggest shareholder, although this has yet to be approved by Yancoal's independent directors.

A bidding war broke out over the coal mines earlier this month when Glencore revealed it had tabled a $2.55bn offer for the assets, $100m more than the initial bid by Yancoal, which was announced in January.

 

Rio is backing out of coal mining to focus on iron ore and steel while China is looking to shore up its energy supply. Although the country is trying to cut back pollution from coal-fired plants, the commodity is expected to remain in long-term demand across Asia for the next two decades prompting Glencore’s interest in gatecrashing the deal.

In its offer earlier this month, Switzerland-based Glencore pointed out it already had mines adjacent to Rio’s operations in the Hunter Valley, offering potential savings if the two businesses were combined. It also has regulatory approval from Japan, which imports the bulk of the area’s coal.

 

Yancoal’s offer was the most attractive because it removes the deferred payment structure, can meet the timeline we have set for the transaction and has given us certainty regarding the outstanding regulatory approvals required.

Because Rio Tinto is 10pc owned by Chinalco, which is also backed by the Chinese government, the sale will count as a related party transaction. As such the deal must go before a vote by Rio Tinto shareholders in the UK and Australia next week.  

 

 

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Hedge funds Reducing Positions on Crude oil as Production Grows

Hedge funds and other money managers cut their combined net long position in the three major futures and options contracts linked to Brent and WTI by 51 million barrels.

According to data published by regulators and exchanges, fund managers cut their net long position for the second week running by a cumulative total of 91 million barrels.

 

Hedge funds have discounted the fact oil prices are already under than $50 per barrel and reassurances from OPEC ministers that global oil stocks will draw in the second half of the year.

Instead they have focused on the continued rise in the number of rigs drilling for oil in the United States and signs gasoline and diesel demand may not be growing fast enough to absorb the record fuel being produced by U.S. refineries.

The global oil stocks will draw down in the third quarter of 2017 as a result of OPEC’s output cuts. But global stocks are expected to rise again through 2018 as OPEC compliance deteriorates and supply from non-OPEC sources increases.

Bearish sentiment among oil traders has triggered a wave of short selling, with hedge funds adding 45 million barrels of extra short positions in crude.

 

There are signs hedge funds may have embarked on the eighth cycle of short selling in WTI since the start of 2015, though it is still too early to tell.

The only supportive factor for oil prices in the short term is that so many short positions have been established and there are relatively few long positions left to liquidate.

Conditions are in place for an eventual short-covering rally but the rebound may not come until there are clear signs global stocks are falling.

 

 

 

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Rating of Australia’s Major Banks Lowered by Moody’s Investors Service

Rating of Australia's major banks were lowered by Moody’s Investor Service due to the surging home prices, rising household debt and sluggish wage growth pose a threat to the lenders.

In a statement released yesterday by Moody’s,  Australia And New Zealand Banking Group, Commonwealth Bank of Australia, National Australia Bank and Westpac Banking were all downgraded to Aa3 from Aa2 as the risks associated with the housing market have risen sharply in recent years.

 

According to Moody’s, the tail risk represented by increased household sector indebtedness becomes a material consideration in the context of the very high ratings assigned to Australian banks. 

The Australian dollar fell as much as 0.5% following the announcement and was trading at 76.02 US cents at 6.37pm.

S&P Global Ratings last month downgraded the credit ratings of almost all of Australia's financial institutions on similar concerns about the risks of a property market downturn.

However, it spared the four biggest banks on the expectation of government support in the event of a crisis.

 

The combination of soaring house prices and stagnant wage growth has pushed the ratio of household debt to disposable income to 189% one of the highest levels in the world.

The Australian government has taken steps in recent months to cool the red-hot property market amid concerns that speculation in housing could ultimately hurt consumers, banks and the economy.

 

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Asian Stocks Gain Higher, Set for a Strong Week

Asian markets gain higher during opening, the dollar climbed above 111 yen Monday after Japan posted a surprise trade deficit for May.

The Nikkei Stock Average was up 0.6% in early trade, with a softer yen aiding a move back above 20,000 points. Australia’s S&P/ASX 200 was up 0.5%, Korea’s Kospi SEU 0.6% and Hong Kong’s Hang Seng Index gained 1%.

 

 

In Japan, economists had expected a modest trade surplus for May. Instead, the country reported its first deficit since January. Still, local stocks shrugged off the report as the exports data in Japan continue to reinforce the growth story for Japan’s economy.

Japan’s exports increased 14.9% for May from a year earlier, the biggest rise since January 2015, marking the sixth consecutive month of increases. But the figure came in lower than an 18.2% increase expected by economists.

Asian market could find index provider MSCI's annual market classification review a key event to follow. MSCI will decide tomorrow whether to include a group of China A-shares in its main emerging market index.

If approved, it would give investors easier access to the China markets, create more liquidity for the shares and prompt funds all over the world to pour billions into the country's stocks. For China, acceptance by MSCI would mark a key step for Beijing as it seeks to open up its financial markets and attract foreign capital. 

 

While, oil prices pulled back in Asia after ending in positive territory last week. July Nymex was down 0.3% at $44.60 a barrel, while August Brent fell 0.2% to $47.25.

 

 

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Amazon to Acquire Whole Foods for $13 Billion

Amazon to acquire US grocery retailer Whole Foods for $US13.7 billion. Whole Foods shares jumped 27% to $41.99 in New York, bringing them close to the transaction price. Amazon shares gained 3.2% to $995. 

The company has agreed to pay $42 a share in cash for the organic food chain, including debt a roughly 27% premium to the stock price. Whole Foods co-founder, John Mackey will continue to run the business. 

The transaction also may help Amazon sideline Instacart Inc, a start-up that has delivered grocery orders from Whole Foods stores in more than 20 states and Washington, D.C. 

The bid signals Amazon's growing intent to dominate groceries and raises risks for Australian retailers ahead of its local launch. Its latest acquisition, which is the biggest in Amazon's 20-year history and gives it a significant bricks and mortar presence, may alter the company's plans for its Australian retail launch, which it confirmed in April.  

The deal is subject to approval by Whole Foods shareholders. The upscale grocer has 460 stores in some of North America's most desirable locations. The two companies said Amazon would continue to operate these stores under the Whole Foods brand.

 

Amazon previously contemplated a takeover of Whole Foods last fall but it didn’t pursue a deal. The e-commerce company revisited the idea after Jana Patners one of the executive investor stepped in.

The deal is more about getting a distribution network for groceries. It has spent years trying to break into delivering groceries but hasn’t been as successful as in other categories. 

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Global Stock Market Latest Update

ASX (5,768.30, +0.09%) is on track for their biggest weekly gain in over two months, led by gains in defensive stocks and financials.

 

Dow (21359.90, -0.07%) was almost stable but has the potential to move up towards 21600 by mid of next week. 

The rise could be eventual and slow but overall near term looks bullish.

 

Dax (12691.81, -0.89%) has come off sharply and while below the important resistance of 13000, there is some scope of re-testing 12500-12400 in the medium term before possibly stating another leg of an upward rally.

Shanghai (3128.27, -0.13%) is also trading lower and could possibly test 3100 before again trying to move up. Immediate trend looks bearish.

 

 

 

Nikkei (19917.73, +0.43%) has the potential to move up towards 20100 in the next 2-3 sessions. Momentum could be slow but an eventual rise is expected while above 19700.

 

Nifty (9578.05, -0.42%) could find some support near 9550-9530 today from where it could bounce back to higher levels in the near term.

Only on a break below 9530, if seen would force us to change our current bullish view on Nifty.

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Tech Stocks in U.S have Tumbled Sharply

US tech stocks slid again overnight as investors continued a recent move away from the year’s best performing sector. Bearish analyst reports on the two tech titans contributed to the latest bout of selling. Both the S&P 500 and Nasdaq Composite fell, though tech shares pared some of their early losses into the close.

The declined follows the worst two day drop for the sector in nearly a year. But tech remains up 17% this year, almost twice the 8.7% rise for the overall S&P 500.

Shares of Google’s parent Alphabet closed down 0.8% as Canaccord Genuity downgraded its rating of the stock to hold from buy. Eventually, the downgrade triggered a broader tech selloff.

Apple shares ended 0.6% lower, paring earlier sharper losses. Microsoft declined 0.5% overnight, Facebook dropped 0.3% each also pared sharper early losses. 

Snap Inc who held its initial public offering earlier this year has dropped 4.9%. While the tech sector has fallen 4% in the past week, the overall S&P is only off about 0.2 percent.

 

 

 

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Unemployment Rate in Australia Declined to 5.5% Lowest in 4 Years

Unemployment rate in Australia fell to a lower than expected seasonally adjusted 5.5% in May from 5.7% in April, the Australian Bureau of Statistics said. It’s Australia’s lowest jobless rate in 4 years.

The number of people employed rose by 42,000, compared with an expected 10,000 rise. The number of people in full-time work increased by 52,100 in May, while those in part-time work fell by 10,100.

 

According to the bureau,  its seasonally adjusted workforce participation rate rose to 64.9% in May from 64.8% in April, and a consensus expectation of 64.8%.

The economy has added around 150,000 new jobs since January. Data supports the view that there is underlying strength in the economy even after Australian GDP grew at its slowest on year pace since 2009 in the first quarter.

CommSec chief economist Craig James said the positive employment trend would provide momentum for the economy, as May’s job creation follows almost 100,000 jobs being added across March and April.

The job market data now comes into line with upbeat business surveys and strong forward looking employment indicators.

 

RBA has its eye on the job market, but has indicated it will largely ignore the weak first quarter GDP data. Interest rates have been held at a record low since August last year and the RBA has indicated its preparedness to remain sidelined for some time yet as it allows inflation to rise slowly.

 

 

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Gold Moves Higher after Fed Raises Interest Rate

Gold broke a six-session losing streak, August gold slid to $1,272.70 after settling up $1,275.90 an ounce as consumer data was soft, retail sales and CPI posted declines of 0.3% and 0.1%, respectively. 

The Federal Reserve announces its benchmark rate, which is expected to increase by 25 basis points to 1.25 percent. The Fed is widely expected to raise interest rates by a quarter point to 1.25%, but there's still plenty of anticipation, as analysts will be focusing on the language in the rate statement and as well as the Fed's economic projections. 

The Fed rate statement will be cautious in tone, and dovish regarding additional rate hikes. A dovish message could pour cold water on a rate hike in September and boost gold prices. 

Earlier in the year, three rate hikes in 2017 seemed almost a given, but currently, the odds of a September move are just 28%. There are two key items which could affect gold prices. First, the Fed Economic Projections will detail forecasts of inflation, growth and unemployment, and most importantly, the rate hike path. 

 

With the US economy performing better in the second quarter, there's a strong likelihood that the Fed will not moderate its rate hike projections,which is good news for the dollar. 

Secondly, the markets will be looking for details regarding its plan to lower the $4.2 trillion balance sheet. If the Fed outlines a plan to reduce its holding in H2, the dollar could respond positively. 

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Stock Market in Australia Extends Rally

Australian stock market is higher today, extending gains from the previous session, following the positive lead overnight from Wall Street. In mid-day trades, the benchmark S&P/ASX 200 Index is adding 24.90 points or 0.43% to 5,797.70, off a high of 5,804.80. The broader All Ordinaries Index is rising 25.20 points or 0.43% to 5,827.00.

The AUD is lower against the U.S. dollar today after iron ore prices fell sharply. In early trades, the local unit was trading at US$0.7537, down from US$0.7550 on Tuesday. 

Gold miners are also advancing. Newcrest Mining is adding 0.4 percent and Evolution Mining is rising more than 1 percent. The major miners are mostly lower amid the sharp fall in iron ore prices. 

BHP Billiton is adding 0.7 percent, while Rio Tinto is losing 1 percent and Fortescue Metals is lower by more than 1 percent.

Among oil stocks, Oil Search is up 0.6 percent and Woodside Petroleum is rising 0.3 percent, while Santos is declining almost 1 percent. 

 

Westpac Bank revealed that consumer confidence in Australia ebbed again in June, as its index slipped 1.8 percent to a score of 96.2. That follows the 1.1 percent decline in May to 98.0. 

The index has declined in three straight months and continues to rest beneath the break-even line of 100 that separates optimists from pessimists.

 

Nevertheless, investors are cautious ahead of the release of Chinese economic data and the Federal Reserve's monetary policy decision later in the day. 

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DAX Index Closes Trade at 0.59% Higher

DAX index has closes trade at 0.59% higher. The index is currently at 12,757.75 points. On the release front, German ZEW Economic Sentiment dipped to 18.6, missing the forecast of 21.6 points. Eurozone ZEW Economic Sentiment improved to 37.7, beating the estimate of 37.2 points. In the US, the Federal Reserve is expected to increase interest rates by a quarter-point.

European stock markets were slightly lower on yesterday, as a result of sharp losses on the Nasdaq, which dropped 1.8% on last week session. Major technology stocks were all down by more than 3 percent. Key German financial stocks responded with losses, notably Deutsche Bank and Commerzbank.

The best performers of the session on the DAX were Lufthansa which rose 3.00% or 0.550 points to trade at 18.875 at the close. 

The worst performers of the session were Beiersdorf which fell 0.69% or 0.660 points to trade at 94.780 at the close. Deutsche Telekom declined 0.44% or 0.075 points to end at 16.880 and Henkel & Co was down 0.36% or 0.45 points to 124.65. 

DAX volatility index, which measures the implied volatility of DAX options, was down 6.39% to 12.60.

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Latest in Stocks

ASX 200 (5741, 1.1%) is up 63 points as it continues to push higher into late arvo trade. 

Its going from strength to strength today after defying the early pointer from futures trading that suggested the recent sell-off in tech stocks on Wall Street would send the local index lower.

 

Dow (21235.67, -0.17%) is slowly inching up towards 21600 and could possibly test 21400 on the upside this week. Support remains at 21000 and while the index is trading above 21000, the trend remains bullish.

 

Dax (12690.44, -0.98%) fell sharply yesterday instead of breaking above 12850. We could possibly see some trade within the 12650-12850 region in the near term before testing 13000.

Shanghai (3138.67, -0.04%) has enough scope on the upside towards 3160-3170 for the next couple of sessions.

 

Nikkei (19885.72, -0.11%) is holding above 19825 and could move up towards 20000 in the coming sessions. Near term looks bullish.

 

Nifty (9616.40, -0.54%) has been fluctuating within the 9700-96500 region and could possibly continue to do so for some more sessions. 

Immediate support is seen near 9600 which could extend to 9550 on the downside. Overall the index could be ranged sideways before rallying to higher levels.

 

 

 

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Japan PPI Came at 0% the Weakest Result in 9 Months

This morning, the Japan producer price index came in flat at 0% and it represents the weakest PPI result in nine months. Already last week, the growth rate had been revised down to 0.3% from 0.5%. 

April machine orders just collapsed at -0.31% m/m while markets had estimated an increase of 0.5 percent. This data is often used as a proxy for the capital expenditure. 

Yen fell 0.06% to 110.27 despite weaker machinery orders data than expected. Japan reported core machinery orders for April slipped 3.1% month-on-month, well below the 0.5% gain seen and up 2.7% on year, also less than the 7.3% jumped expected. 

The Japanese economy has shown some improvement in the first quarter, but Final GDP was a major disappointment. First quarter GDP was revised downwards to 0.3%, compared to 0.5% in the preliminary GDP report. At the same time, the economy has posted growth for five consecutive quarters the first time that has occurred in over 10 years. 

Japan has benefited from a stronger global economy, notably the manufacturing and export sectors. However, domestic consumption remains sluggish, and household spending contracted 1.4% on year in April. The Bank of Japan will hold a policy meeting on Thursday, and is expected to maintain its ultra-loose monetary stance in order to prop up inflation and domestic demand. 

 

Given that the economy has strengthened, policymakers may be looking to exit current policy and analysts will be looking for nuances which could point to a more hawkish monetary stance. If the central bank does hint at a tighter policy, the yen could gain ground.

The Federal Reserve will meet on Wednesday and the markets have priced in a rate hike, which would be the second increase in 2017. The likelihood continues to hover around the 90% level, so it would be a shock if the Fed did not make a move.

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Euro Inched Lower Ahead Of ECB Rate Decision

European session, EUR has inched lower and is trading at 1.1240. In economic news, German Industrial Production bounced back in April with a strong gain of 0.8%, which beat the forecast of 0.6%. There was more good news from Eurozone Revised GDP, which improved to 0.6%, edging above the estimate of 0.5%. 

Today’s highlight is the ECB rate meeting, with the markets expecting the benchmark rate to remain at a flat 0.00%. The US releases unemployment claims, which is expected to drop to 241 thousand.

Most investors are focus on ECB, which holds it monthly rate meeting later in the day. The central bank is not expected to announce any changes to current monetary policy. The benchmark rate has been pegged at 0.00% since March 2016. As well, policymakers are unlikely to make any changes to the quantitative easing program, which ends in December. 

However, the euro could still move if there are any surprises in the rate statement or from Mario Draghi, who will hold a follow-up press conference. On Wednesday, the euro briefly lost ground on reports that the ECB was planning to downgrade its inflation forecast to 1.5% annually for 2017, 2018 and 2019. 

 

Earlier in the year, inflation reached the ECB’s target of 2.0%, but this didn’t last long, and the May figure of 1.4% was well of this goal. Mario Draghi has preached caution and patience, and will reluctant to tighten policy without stronger inflation levels. 

Still, with the euro-area economy showing improved growth in 2017, the markets would like to see the ECB at least acknowledge that the economic picture has brightened, and will be looking for a more hawkish tone from the central bank, such as a removal of the bias towards easing. 

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Oil Prices Plunged Below $46 As Stockpile Surge

Crude Oil prices plunged below $46 per barrel and is poised to test target support near an upward sloping trend line that comes in near $44. Resistance is seen near the 10 day moving average at 48.56.  

Additional resistance is seen near the 200 day moving average at 49.59. Prices continue to form a topping pattern, which include a modified head and shoulder reversal pattern and a break of the neckline level at $44 could lead to a test of the August 2016 lows at 39.60.

Momentum has turned negative as the MACD index generated a crossover sell signal. This occurs as the spread crosses below the 9 day exponential moving average of the spread. 

The index moved from positive to negative territory confirming the sell signal. The MACD histogram is printing in the red with a downward sloping trajectory which foreshadows lower prices.

 

U.S. stockpiles puts up another obstacle for OPEC and other petroleum exporting countries, which have cut back their output in order to shrink global inventories by about 300 million barrels to the five-year average.

The imports of oil rose by 356,000 barrels a day, while exports dropped by 746,000 barrels a day.

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Global Stocks Update

Dow (21136.23, -0.23%) came off from resistance near 21230 and may test 21000 on the downside before bouncing back towards 21300 and higher in the medium term. Near term could see some consolidation or a corrective dip but overall long term looks bullish.

 

Dax (12690.12, -1.04%) is also in a short correction mode and could rise back soon towards 13000.Downside could be limited to 12600 just now.

 

Shanghai (3127.91, +0.83%) has risen sharply breaking the immediate resistance near 3120 instead of testing lower levels of 3050 as mentioned yesterday. 

While the index sustains levels above 3120, it could move higher towards 3170 else a re-test of 3070 is possible.

ASX (5644.7, -0.4%) on track for a fourth straight session in the red and a fall of more than 5 per cent since its recent high at the start of May.

 

Nikkei (19936.42, -0.22%) Resistance near 20200 has held well for which fell sharply in the last 2-sessions. 

It could test 19820 in the next 2-sessions before again bouncing back from there.

 

Nifty (9637.15, -0.39%) is in a corrective mode now and could extend losses to an extent of 9600-9550 levels. 

Thereafter a rise back towards 9700-9800 is possible in the near term.

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Economic Growth in Australia Declined 0.3% in Q1 of 2017

Economic growth in Australia dropped 0.3% in the first quarter, seeing the the year-on-year increase slow to just 1.7%, the weakest expansion since 2009.

The result was in line with market expectations but well below the 1.1% increase recorded in the Q4 of 2016. Economists have started growing cautious at slowing growth, figures potentially pointing to an inevitable recession. 


Australian Bureau of Statistics tracked 20 industries and 17 have a recorded growth during the Q1, with the best performers including finance and insurance services, wholesale trade and health care and social assistance. 

Agriculture, forestry and fishing decreased after strong growth in the previous two quarters, while manufacturing decreased for the tenth time in 11 quarter. Dwelling investment declined in all states, except Victoria and overall is the largest decline for Australia since June 2009. 

However, Gross Domestic Product (GDP) data were well received by the market, which, after poor net export figures on Tuesday, was primed for disappointment. The Australian dollar shot higher to be up 0.4 per cent at $0.7537. 

Data yesterday showed net exports as a percentage of GDP fell 0.7% points in the Q1, which prompted many economists to trim their forecasts for March quarter growth and offset some stronger inventories data that were released. 

 

According to the Reserve Bank of Australia, the economic growth is still expected to increase gradually over the next couple of years to a little above 3%.

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Gold Investing Sentiment Jumped to a New High

GOLD investing sentiment jumped to a new 2017 high in May but only with those existing precious metals investors. The balance of private investors buying gold over those who chose to sell rose at its fastest pace in more than two years. 

Despite gold's strong rally so far in June, equities and other risk assets remain the focus for most private investors. Buying gold as investment insurance is a long way from a crowded trade right now. The number of private individuals coming to the precious metals market for the first time stayed weak, slipping for the second month to its lowest level since gold investing prices bottomed at 6-year lows in December 2015.

This 'bear market' lack of new interest comes after the strongest run of gold investing demand in 5 years. It also contrasts with the underlying trend in gold prices. 

Retreating from April's geopolitical spike, last month's daily average gold price slipped 1.6% against the US Dollar and gold dropped 4.6% and 3.8% versus the Euro and Pound respectively. These discounts saw the number of investors starting or adding to their gold holdings rise over 28% from April, reaching its largest size since December 2016. 

The number of sellers meantime fell by one-third. It pushes gold investor a unique measure of sentiment based on actual trading, up to its highest level since December, reaching 55.3 from April's level of 52.1 and rising at its fastest pace since February 2015. 

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Osisko Shares Bounce after Acquiring Orion Mine’s Assets for $1.13 Billion

Osisko Gold shares bounce more than 10 percent after they decided to acquire a precious metals portfolio from Orion Mine Finance Group for $1.13 billion. The acquisition will result in Osisko holding a total of 131 royalties and streams, including 16 revenue-generating assets.

The company was trading up 9.7% to $15.80 in Toronto and almost 9.9% higher in New York to $11.72 on the news of the acquisition.

Osisko, created in June 2014 following the acquisition of Osisko Mining by Agnico Eagle Mines and Yamana Gold, said it will pay Orion $675-million in cash and the remaining $450-million in company shares for the assets.

The transaction gives the Canadian company a 9.6% diamond stream on the Renard diamond mine and a 4% gold and silver stream on the Brucejack gold and silver mine, in addition to a 100% silver stream on the Mantos Blancos copper mine in Chile.

Osisko’s flagship, Canada’s largest producing gold mine will continue to be the 5% net smelter return royalty on the Malartic mine.

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WTI Oil Extended Recovery Rally

WTI Oil extended recovery rally and hit session high at $48.40 in early Monday’s bullish acceleration. Oil price accelerated higher on fresh geopolitical instability. So far unable to sustain break above $48.00 barrier, as action was capped by falling hourly cloud.

However, rising uncertainty over geopolitical situation in the Gulf region would further boost oil price. Additional support comes from long-tailed daily candle left on Monday, which signaled strong downside rejection and failure to clearly break below lower pivot at $46.89

Extended recovery needs close above $48.74 to generate stronger reversal signal and open way for further retracement of $46.74 towards a cluster of strong MA barriers between $49.00 and $49.66.

Session low at $47.65 marks solid support which is expected to hold dips and keep near-term focus at the upside.

 

Break and extension below $47.40 would signal an end of recovery rally from $46.74 and shift near-term focus lower.

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Global Economy Lifted to 2.7% Growth This Year

According to World Bank, the economy will pick up speed this year and next, mostly lifted by commodity prices and a pickup in global trade. They estimate a 2.7% growth this year and 2.9% in 2018, a much better improvement from 2016’s 2.4% expansion.

But the environment worldwide is looking sunnier. Commodity prices are bouncing back from a freefall that began in 2014, taking down two years of growth. The bank sees oil prices rising 24 percent and non-energy commodity prices climbing 4 percent this year. 

World trade is expected to grow 4 percent in 2017, the fastest in three years. The bank sees the U.S. economy growing 2.1% this year, up from 1.6% in 2016, and the 19-country euro zone expanding 1.7% down a notch from 1.8 percent. 

Japan is expected to grow 1.5% fastest pace since 2013 and up from 1 percent last year. China’s deceleration will continue from 6.7 percent growth last year to 6.5 percent in 2017 to 6.3 percent in 2018 as the country moves away from unsustainable growth fueled by often wasteful investment and toward slower, steadier growth based on consumer spending.

 

The recovery of the global economy is still fragile and also faces long-term challenges such as productivity slump that vexes economists and constrains improvements in living standards.

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Production of Coal India Declines for the Second Month

Coal India Ltd.  production decline for the second month. Output fell 4.3 percent from a year earlier to 40.74 million metric tons, the lowest in three years for the month of May. 

Kolkata-based Coal India will focus on liquidating stockpiles for a few months. The company will be counting on higher demand from power plants, its biggest customers, to start growing.

Production will remain under pressure for some time because of subdued demand and high inventory. A recovery is possible if power plants start restocking after the monsoons.

Inventories at Coal India rose 19 percent during the year ended March 31 to 68.6 million metric tons. The company is targeting to bring it below 40 million tons.

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Bitcoin Price Climbed up to 8.5% after Withdrawal Restrictions End

Bitcoin continued its record breaking rally as China’s three biggest bitcoin exchanges are ending a self-imposed moratorium on withdrawals.

The currency rose as much as 8.5 percent to $2479.34 Thursday, the biggest intraday advance since May 25, when it reached a record high of $2,798.98. It has more than doubled since March amid optimism about wider acceptance among companies and consumers, regulatory approval in Japan and rising demand in Asia.

According to the Chief Executive Officer of BTC Bobby Lee, They are testing the functionality of withdrawals. OKCoin confirmed that it’s also testing the withdrawals. Both exchanges intend to place caps on withdrawal amounts.

Huobi has resumed coin withdrawals with a limit of 50 coins per transaction and 50 transactions per day. The exchange also placed limited on litecoin and ethereum withdrawals.

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Aussie Shares Plummet as Iron Ore Drops

The Aussie has dropped against all major developed counterparts this quarter and yet analysts are mystified at the currency’s capacity to cling to its post float average of about 75 U.S. cents even as Australia’s yield advantage evaporates. 

Stocks are lagging behind most of the rest of the world and swaps traders see the nation as the only major economy where interest-rate cuts are possible in the coming year. 

 

Iron Ore spot price fell 1.8 per cent to $US55.97 a tonne, a day after it tumbled 2.5 per cent. It’s a rough start to the month and reflects continuing concerns about oversupply and slowing demand in China. 

In addition, the Australian dollar is losing its yield advantage over the greenback with the difference between the two nation’s 10-year bonds at 18 points.  

Wall Street powered higher overnight seemingly unfazed by President Donald Trump’s decision to pull the US from the Paris climate agreement. All three key benchmarks were rising into the closing bell. The S&P 500 Index and the Dow Jones Industrial Average closed at all-time highs as banks rebounded. The Nasdaq Composite and Nasdaq 100 indexes also each advanced to fresh records.

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Berkshire Hathaway Acquired 200 Million Stakes in Lanxess AG

Berkshire Hathaway acquired a $200 million stakes in Lanxess AG. Lanxess shares jumped 2.9 percent to 65.06 euros by 0936 GMT after the news, even though the stock was trading without the rights to a 0.70 euro/share dividend for the first time.

In a regulatory filing, Lanxess said that Berkshire Hathaway’s General Reinsurance subsidiary took a stake that reached just over 3 percent on May 19. The shares held by General Re  whose total financial investments excluding cash holdings stood at about $22 billion at the end of last year, were worth about 180 million euros ($200 million) at that time.

General Re’s stake in Lanxess crossed the 3 percent threshold after Lanxess on May 11 beat consensus estimates for first-quarter earnings on strong sales of engineering plastics and synthetic rubber, but the company warned at the time that demand would soften later this year. 

Shares in Lanxess, a former unit of Bayer whose products include pesticide ingredients, construction pigments and leather chemicals, earlier this month reached four-year highs. The company has said that after recent acquisitions worth a combined 2.6 billion euros more strategic steps could be in the offing in the second half of the year.

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Stocks in USA Dropped Further

U.S. stocks dropped after JP Morgan and Bank of America warned of revenue weakness, offsetting gains in defensive plays.

JPMorgan blamed lower volatility for a 15 percent decline in trading revenue in the current quarter compared with last year, while Bank of America said trading revenue in the second quarter was on track to be 10 to 12 percent lower than last year.

 

Financials .SPSY rallied more than 20 percent in the wake of the U.S. presidential election on hopes of fiscal stimulus and deregulation under President Donald Trump, but they have struggled in recent weeks. The sector is now down 0.3 percent on the year.

Measures of market volatility are at rock-bottom, hitting trading desks at big banks. The U.S. stock market's main gauge of investor anxiety .VIX closed at its lowest level in over two decades on May 8 and has not topped its long-term average of 20 since November. It did, however, hit a seven-day high of 11.30 on Wednesday.

JPMorgan shares lost 2.1 percent while Bank of America was down 1.9 percent as the two biggest weights on the S&P 500. Goldman Sachs fell 3.3 percent, the biggest drag on the Dow. 

Energy stocks down 0.4 percent, also lost ground. Oil prices touched a three-week low as rising output from Nigeria and Libya fueled concerns that OPEC-led output cuts are being undermined. U.S. crude settled down 2.7 percent at $48.32 a barrel and Brent settled 3 percent lower at $50.1.

 

Dow Jones Industrial Average fell 20.82 points, or 0.1 percent, to 21,008.65, the S&P 500 lost 1.1 points, or 0.05 percent, to 2,411.81 and the Nasdaq Composite dropped 4.67 points, or 0.08 percent, to 6,198.52.

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Global Stocks Update

Dow (21080.28, -0.01%) was closed yesterday. As mentioned yesterday, 21200 is an important resistance for the near term. 

In case it breaks on the upside, the index could rally towards 21400-21600 else a fall back towards 21100 is possible in the coming sessions.

 

Dax (12628.95, +0.21%) is stable and may continues to remain sideways within 12800-12400 (broad region of trade for at least this week.

Shanghai (3110.06, +0.07%) looks bullish in the near term towards 3170. A small dip to 3070 is also possible before the index starts to rise higher.

 

Nikkei (19576.19, -0.54%) seems to be confused on which direction to take. Immediate movement within 19500-20000 is possible but only if it breaks on either side, can we confirm on further direction. 

For now, some sideways consolidation is possible.

 

Nifty (9604.90, +1%) has been rising in line with our expectation. 9700-9800 is on the cards for medium term.

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CRUDE Stalling at $50 Below, GOLD Push Higher while SILVER Break 50% Fibonacci Retracement

Crude oil has collapsed after the bounce following the short-squeeze move towards $52. Support is given at a distance 43.76. The technical structure suggests further strengthening.

In the long-term, crude oil has recovered after its sharp decline last year. However, we consider that further weakness are very likely. Strong support lies at 24.82 while resistance can now be found at 55.24 

 

Gold is pushing higher within uptrend channel. Hourly support is located at 1246. Stronger support is given at 1195. Expected to show further upside pressures.

In the long-term, the technical structure suggests that there is a growing upside momentum. A break of 1392 is necessary ton confirm it, A major support can be found at 1045.

 

Silver increases. Strong support is given at 15.63. Closest support is given at 16.20. Key resistance is given at a distance at 19.00. Expected to push towards 61.8% Fibonacci retracement around 17.75.

In the long-term, the death cross indicates that further downsides are very likely. Resistance is located at 25.11. Strong support can be found at 11.75.

 

 

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Unemployment Rate in Japan declined 2.8 Percent

The unemployment rate in Japan held at a multi-decade low in April as the ratio of jobs to applicants rose more than expected. Japan’s jobless rate held steady at March’s level of 2.8 per cent, at the lowest level since June 1994 for a third straight month, according to the Statistics Bureau. 

The job-to-applicant ratio inched higher to 1.48 from the previous month’s level of 1.45, marking the equal-highest level since March of 1974 and besting expectations of a more marginal rise to 1.46. 

 The latest readings continue to point to strong levels of employment and build on improvements from the first three months of 2017, as a Labour Force Survey released by the stats bureau in early May showed Japan’s jobless population fell 10.7 per cent year on year in the first quarter to 1.9m. 

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Global Market Review

Asian equity futures open to a mixed start today. Hong Kong is on holiday and markets in China are shut for a second day after the U.K. and U.S. were closed Monday, depressing volumes and limiting price movements

South Africa’s rand declined for a second day after President Jacob Zuma survived a bid by some members of his party to oust him.  Italian assets fell as former Prime Minister Matteo Renzi raised the prospect of an early election.

The key challenge for investors remains gauging the ability of the world’s economy to withstand rising borrowing costs. Despite the record highs posted by global equities, the rally in bond markets suggests traders are cautious. 

Fed Bank of San Francisco President John Williams reaffirmed his view that a total of three interest-rate increases makes sense for the world’s biggest economy this year.

 

Main Market  Movers:

  • The euro fell 0.2 percent to $1.1138 as of 7:41 a.m. in Tokyo. The yen was flat at 111.25 per dollar.
  • Gold was down 0.1 percent at $1,267.36 an ounce.
  • Treasury 10-year futures were at 126 1/4, up 2/32, after the market was closed Monday. The yield on 10-year Treasuries was 2.25 percent at the end of last week.
  • The rand fell 0.2 percent to 12.9959 per dollar, adding to the previous session’s 0.6 percent decline.
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WA Proposed an Iron Ore Levy to be Paid Advance

WA proposed an Iron Ore Levy to be paid in advance under the potential plan that would see the two biggest miners in the country to pay out an iron ore levy early in a one-off lump sum.

Instead of increasing the miners’ rental payments levied on iron ore, currently fixed at 25 Australian cents a ton, the companies would be asked to pay them out in advance.

 

The opposition National Party last week said in parliament that such a plan could raise as much as A$4 billion for the state.

Western Australia’s Labor administration, which ousted a Liberal National coalition in March, faces a daunting task in turning around its economy. The government has previously said that erasing a debt mountain of more than A$30 billion will take decades.

 

The plan would involve a lengthy process of negotiations. It would require agreement from both the state and the companies, and the federal government would also have to agree to the payment being exempt from the goods and services tax distribution system.

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Industrial Profits Climbed 14% in China

Industrial profits in China climbed to 572.8 billion yuan last month, according to the National Bureau of Statistics. That compares with a jump of 23.8 percent in March and an 8.5 percent increase from last year.

Output in the world’s largest manufacturing nation is booming on the back of stronger global trade and investment, handing producers better pricing power. China’s exporters are capitalizing on the improved demand amid concern that the global economy may slow in the longer term.

 

Industrial profits still maintain good growth as the industrial companies debt ratio fell to 56.2 percent as of the end of April, down 0.6 of a percentage point from a year earlier. The profits surged 24.4 percent to 2.28 trillion yuan in the first four months as 38 of 41 industries achieved better profits than last year.

Financing costs of companies are rising as financial expenses gained 4.2 percent last month year on year, 1.2 percentage points higher than March.

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Crude Oil Plummeted Sharply

 

Crude oil prices plummeted to below $50 a barrel after an extension to a global output agreement disappointed investors looking for more.

The Organization of Petroleum Exporting Countries (OPEC) reportedly have agreed on a nine-month extension to a production cut agreement, which was set to expire at the end of June.

 

Stocks in Tokyo and Sydney opened lower, with energy producers dropping the most. Oil held losses after falling the most in three weeks as OPEC stuck to the most predictable outcome in its plans to limit production.

Commodity currencies maintained losses against the dollar. The S&P 500 Index reached a fresh record on Thursday while the U.S. currency strengthened as retailer results boosted confidence in the American consumers’ ability to buoy economic growth