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Monday, 29 September 2014

Wall Street rallies but ends lower for week

Traders work on the floor of the New York Stock Exchange September 22, 2014. REUTERS/Brendan McDermid

(Reuters) - U.S. stocks ended higher on Friday, with the S&P 500 rallying back above a key technical level, but the advance was not enough to offset recent declines and major indexes closed out their worst week of the past eight.

The day's gains were broad. While all ten primary S&P 500 sectors ended higher on the day, energy .SPNY was the top advancer, up 1.3 percent alongside a 1 percent rise in the price of crude oil CLc1.

Much of the advance came after a read on second-quarter GDP showed that the economy grew at its fastest pace in 2-1/2 years.

Equity markets have seen bigger moves of late, including a selloff on Thursday that was the S&P's biggest one-day decline since July. In four of the past five sessions, the S&P posted a point move that was larger than its 14.6 point average over the past 250 sessions.

"It's interesting to see this kind of rebound so quickly, but it shows you how skittish the market is, with volatility higher in both directions," said Michael Mullaney, chief investment officer at Fiduciary Trust Co in Boston.

The S&P closed back above its 50-day moving average, which it had closed below on Thursday for the first time in more than a month. A protracted period under that level could have portended deeper losses ahead, but traders extended their recent trend of using market declines as buying opportunities. The S&P is about 1.4 percent below a record close hit earlier this month.

"Buyers are showing back up at the party," said Mullaney, who helps oversee about $11.7 billion in assets. "The bottom line is that the outlook is still very solid, so it isn't unusual to see traders come back in."

The Dow Jones industrial average .DJI rose 167.35 points, or 0.99 percent, to 17,113.15, the S&P 500 .SPX gained 16.86 points, or 0.86 percent, to 1,982.85, and the Nasdaq Composite .IXIC added 45.45 points, or 1.02 percent, to 4,512.19.

For the week, the Dow fell 1 percent, the S&P lost 1.4 percent and the Nasdaq shed 1.5 percent. It is the worst week for all three since the week ended Aug 1.

Nike Inc (NKE.N) jumped 12 percent to $89.50 in its biggest one-day advance since October 2008. The Dow component hit a record high a day after earnings topped expectations, prompting more than a dozen brokers to raise their targets on the stock.

Micron Tech (MU.O) jumped 6.7 percent to $33.83. It also reported better-than-expected results late Thursday.

On the downside, Universal Health Services Inc (UHS.N) fell 2.4 percent to $109.03 after it agreed to buy Cygnet Health Care Ltd in a deal valued at about $335 million.

About 70 percent of stocks traded on the New York Stock Exchange closed higher on Friday, while 65 percent of Nasdaq-listed names ended in positive territory.

About 5.18 billion shares traded on all U.S. platforms, according to BATS exchange data, below the month-to-date average of 6.05 billion

Reference: Ryan Vlastelica

Friday, 26 September 2014

Dollar stands tall, Asian shares end week on low note

 

A man looks at an electronic board displaying Japan's Nikkei average (top C) and the stock price indexes of various countries outside a brokerage in Tokyo September 4, 2014. REUTERS/Issei Kato

(Reuters) - Asian shares were poised to end the week on a sour note on Friday after a steep drop on Wall Street, while the dollar steadied close to multi-year highs.

European shares might escape some of the gloom, with financial spreadbetters predicting Britain's FTSE 100 .FTSE to open flat, Germany's DAX .GDAXI to open between 9 points lower and 9 points higher, and France's CAC 40 .FCHI to gain 4 to 5 points, on Friday.

"European equities are set to open flat, but as we've seen this week the opening sentiment has had little bearing on where markets have closed," Capital Spreads dealer Jonathan Sudaria said in a note to clients.

U.S. stocks ended sharply lower on Thursday as Apple Inc APPL.O broke under key technical levels after the tech giant withdrew an update to its new operating system. That pushed the S&P 500 .SPX to its biggest one-day decline since July.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS fell 0.8 percent on Friday, on track for a weekly loss of around 2.7 percent.

Japan's Nikkei stock average .N225 lost 0.9 percent, shedding 0.6 percent for the week and pulling away from Thursday's seven-year closing high.

Data released before the market opened showed Japan's annual core consumer inflation eased in August, in another sign that the Bank of Japan could be forced into additional easing steps to meet its 2 percent inflation goal sometime next fiscal year.

But renewed hope for the Japanese government's pension reforms limited losses and also checked the yen's gain earlier in the session. Welfare Minister Yasuhisa Shiozaki denied media reports that suggested Tokyo would delay reforming its $1.26 trillion Government Pension Investment Fund. (GPIF)

The dollar is on track for its 11th successive weekly rise, something it has not achieved in four decades.

"At the moment, the economy with strong business sentiment is that of the United States... The dollar is becoming the destination of funds that are escaping stimulus elsewhere," said Daisuke Uno, chief strategist at Sumitomo Mitsui Bank.

The yield difference between 10-year U.S. Treasuries US10YT=RR and German Bunds DE10YT=RR reached its widest in nearly 15 years on Thursday, keeping pressure on the euro.

The European unit edged down about 0.1 percent on the day to $1.2743 EUR=, after falling as low as $1.26955 on trading platform EBS on Thursday, its lowest since November 2012.

The dollar erased early losses and was about 0.3 percent higher on the day against its Japanese counterpart at 109.07 yen JPY=, though still shy of a six-year peak of 109.46 climbed a week ago.

Brent crude LCOc1 was slightly up on the day at $97.01 a barrel, but set for its third weekly fall in four, as hefty supplies capped price gains and offset concerns that rising tensions in the Middle East could disrupt supply.

Spot gold XAU= added about 0.2 percent to $1,224.80 an ounce, after rebounding off Thursday's session low of $1,206.85 an ounce, which was its weakest level since Jan.2. It looked set to snap a three-week losing streak, though dollar strength kept it in danger of breaking below the key $1,200-an-ounce level.

Reference: Lisa Twaronite

Wednesday, 24 September 2014

Short sellers target China, this time from the shadows

 

An investor is seen in front of an electronic board showing stock information at a brokerage house in Taiyuan, Shanxi province in this file photo dated February 12, 2009.  REUTERS/Stringer

 

(Reuters) - Short-sellers who profit from stock price declines have resumed targeting Chinese companies after a three-year lull, but many of the researchers who instigate the strategy are now cloaked in anonymity, shielding themselves from angry companies and Beijing's counter-investigations.

Three reports published this month separately accused three Chinese companies - Tianhe Chemicals, 21Vianet and Shenguan Holdings - of business or accounting fraud. All three companies said the allegations were baseless but their shares were hit by a wave of short-selling by clients of the research firms and then by other investors as the reports were made public.

The reports were written by research firms that did not publicly disclose names of research analysts or even a phone number.

In the last wave of short-selling that peaked in 2011 and wiped more than $21 billion off the market value of Chinese companies listed in the United States, the researchers advocating short-selling were mostly public.

Carson Block of Muddy Waters, one of the most prominent short sellers, openly accused several Chinese companies of accounting fraud. Block said in 2012, according to several media reports, that he moved to California from Hong Kong because he had received death threats.

"If you have researchers who are based in China, it makes sense to operate anonymously because some of the mainland Chinese companies have a history now of retaliating against people who do negative research," said short-seller Jon Carnes in an interview with Reuters.

Carnes's research firm Alfred Little has the best track record among short sellers, according to data compiled by Activists Shorts Research that shows the share performances of companies it targeted.

Carnes has said he was threatened by representatives of one of the companies he reported on in 2011. His researcher Kun Huang was jailed in China for two years and then deported.

Kun, a Chinese-born Canadian, told the New York Times after returning to Vancouver this year that he was charged with criminal behaviour and convicted in a one-day private trial.

A series of incidents in recent years has highlighted China's growing willingness to investigate, detain and prosecute people for crimes involving the use of information for commercial purposes. Short-selling has particularly irritated the authorities, financial industry analysts have said.

In 2012, China's state news agency Xinhua described the short-selling reports as malicious and aimed only at making quick money. In an editorial, the agency said short-sellers did find genuine problems at some companies but that they later unfairly targeted quality Chinese firms.

Now, research firms are becoming more adept at using online tools to mask their locations and identities, said John Hempton, an Australia-based short seller at Bronte Capital.

"It's getting more anonymous, because the attitude of the Chinese authorities is becoming more and more dangerous," said Hempton.


THE TIANHE ATTACK

This month's round of short-selling began with the publication of a report by Anonymous Analytics, which describes itself as a "faction" of the hacker group Anonymous, against Hong Kong-listed Chinese company Tianhe Chemicals Group..

Anonymous Analytics said Tianhe "vastly misrepresented the size and scope of its business, and has produced false and misleading statements to the market." The research group said its findings were based on "months of due diligence, field research and analysis". It said the analysis included government and State Administration for Industry and Commerce (SAIC) documents, and that it also conducted interviews with clients, competitors and former employees of Tianhe.

Tianhe said in a statement it "unequivocally denies and vigorously refutes the groundless allegations in the report" while Hong Kong stock exchange authorities, contacted by Reuters, refused comment.

Tianhe requested that its shares be halted from trading on Sept 2, the day after the Anonymous report.

The same day, another research group, Emerson Analytics, accused Hong Kong-listed sausage casing maker Shenguan Holdings Group Ltd of doctoring its books, and said its report was based on government and SAIC documents, company filings, and an analysis of the casing industry.

"In 2013, Shenguan inflated its revenue by at least 10-15 percent and hid part of its raw materials costs (the actual cost is about 124 percent higher than the reported amount). This bloated its (earnings) margins from our estimated 19.8 percent to a reported 52.4 percent," Emerson said.

Shenguan said in a statement that the report contained errors and misleading statements.

The company also requested a halt in trading of its shares.

On Sept. 10, Trinity Research Group published a report on Nasdaq-listed Chinese data centre company 21Vianet Group Inc saying it had "overwhelming evidence that the company is committing accounting and securities fraud". It said the report was based on a six-month investigation by a team of accountants, lawyers, telecom industry executives and insiders, as well as former employees, current and former customers and current and former service providers of the company.

In a public statement and in a letter to shareholders from its CEO, 21Vianet called the report malicious and baseless. Its shares fell as much as 35 percent before recovering slightly after the company statement.

None of the research reports listed contact names or telephone numbers - only e-mail addresses. The groups declined to disclose their location or give other details when contacted by Reuters.

In the previous short-selling wave, several Chinese firms were delisted as their share values sank at the cost of billions of dollars in destroyed investor capital.

But the very success of the shorting campaign also hastened its end: Chinese stocks began underperforming their respective peers, while the cost of borrowing shares to short skyrocketed, cutting into profit margins.

At the same time Chinese law enforcement began moving against the due diligence investigators on whom shorters relied to dig up dirt on Chinese firms.

The recent short-selling shows these traders have discovered a new way to take on Chinese companies, relying on anonymity, public information, and less upfront costs, allowing them to profit more quickly and more safely than before, according to China-based short sellers who declined to be named.

"The incentive structures are such that you're going to see a lot of frauds (among Chinese companies), and a lot of takedowns," said Hempton at Bronte Capital. "This will be a feature of Chinese capital markets until those incentives change."

Reference:
Lawrence White and Pete Sweeney

Monday, 22 September 2014

Europe must 'boost demand' to revive economy, US warns

 

Jack Lew

Mr Lew has previously said the US had an "immense stake in a prosperous Europe"

The US Treasury Secretary has urged eurozone countries to "boost demand" in order to reduce unemployment and avoid deflation.

Jack Lew was speaking at a meeting of the G20 group, which includes several of the world's largest economies.

Earlier this month, the European Central Bank introduced new measures to stimulate the area's flagging economy.

However it has stopped short of adopting the policies favoured by its US counterpart, the Federal Reserve.

As well as launching an asset purchase programme, through which it will buy debt products from banks, the ECB cut its benchmark interest rate to 0.05%.

The bank has been under pressure to kick-start the eurozone economy, as manufacturing output has slowed and inflation has fallen to just 0.3%.

"Europe is going to need to solve its problems and resolve differences it has internally," Mr Lew told reporters at the meeting in Australia, "but what's clear from the US experience is that the combination of taking action to boost demand in the short run and make structural changes for the long run is an important combination, and it shouldn't become a choice between the two.

"You really need to pursue both."

Mr Lew also expressed concern about the political tensions between European countries, and the effect this may have on pushing through urgent policies.

"The concern that I have is that if the efforts to boost demand are deferred for too long, there is a risk that the headwinds get stronger, and what I think Europe needs is more tailwinds in the economy," he cautioned.

 

 

Reference:

http://www.bbc.co.uk/news/business-29300509

Friday, 19 September 2014

UK markets bounce after Scotland rejects independence

 

Scot7

 

(Reuters) - Investors in British financial assets breathed a sigh of relief on Friday, after a Scottish vote against independence spared them prolonged and unprecedented uncertainty.

Stocks were called to open up by more than 1 percent, sterling rose to a two-year high against the euro, and currency market volatility - which had reached historically high levels ahead of Thursday's vote - quickly subsided.

Shares in companies based in Scotland, such as Royal Bank of Scotland (RBS.L) and Lloyds (LLOY.L), were expected to rise as much as 3 percent.

Scotland's vote against independence ended a fraught two weeks for markets that had seen the value of sterling fall sharply after some polls suggested the 307-year old union was on the brink of collapse.

The bounce for sterling was less pronounced than some analysts had forecast, though. The currency fell back after its initial gains to trade just 0.3 percent higher against the dollar.

The vote not only keeps Britain intact but also reduces the likelihood of its leaving the European Union, potentially a much greater risk for markets and something Scottish independence might well have precipitated, analysts said.

"The 'no' vote removes the huge political and economic uncertainty of untangling the 307-year-old union. A large downside risk to UK growth has lifted," HSBC strategists said in a note on Friday.

London blue-chip stock futures FFIc1 and spread-better calls pointed to a 1.2 percent rise when markets open later on Friday.

The cost of insuring against big swings in sterling over the next week more than halved to 5.675 percent GBPSWO= from a close on Thursday of 11.8 percent. Volatility had risen to levels not seen since the collapse of Lehman Brothers in 2008 and the unusually uncertain UK general election of 2010.

Sterling itself, already pushed up on Thursday by speculation that Alex Salmond's nationalists had fallen short of the majority needed for independence, rose to a two-year high against the euro, with the single currency trading as low as 78.10 pence EURGBP=D4.

It came off its peak against the dollar above $1.65, but was still up a third of one percent on the day at $1.6460 GBP=D4.

Market-based UK interest rates rose, as investors bet there will now be less impediment to the Bank of England's raising rates as planned, perhaps as early as next year.

The yield on 2-year and 10-year gilts rose in early trade by around 2 basis points to 0.90 percent and 2.61 percent respectively GB2YT=TWEB GB10YT=TWEB.

"While there are lots of political questions to be answered, in terms of extra devolution, the economic questions will gravitate back to monetary policy," said RBC economist Sam Hill.

Reference: Jamie McGeever

Thursday, 18 September 2014

Scottish independence referendum poll: the latest tracker

scotland-collage2_3026734b[1]


Scottish voters will have their say on the future of the 307-year-old union between Scotland and England all day on Thursday. Betweem 7am and 10pm, the record 4.3 million people - 97 per cent of the population - who registered will be able to vote yes or no to Scottish independence. Some politicians have already voted including Nicola Sturgeon, Deputy First Minister and Gordon Brown. The campaign has been hard-fought by both sides, with passion and tension reaching fever-pitch on the last day of campaigning on Wednesday. It is also a significant day as 16 and 17-year-olds have been given the vote for the first time in Scotland.

On the eve of Scotland's historic referendum, polls showed support for staying in the UK just ahead of backing for independence, but tens of thousands of citizens were still agonising over which way to vote on Thursday.

Leaders and supporters of both sides took to the streets on Wednesday for a final day of campaigning in a country gripped by excitement and hope balanced by a strong measure of dread and concern. Voters will be asked to answer "Yes" or "No" to the question: "Should Scotland be an independent country?" A "Yes" vote would spell the end of the 307-year-old union with England and the break-up of the United Kingdom – as well as economic uncertainty.

Three surveys – from pollsters ICM, Opinium and Survation – showed support for independence at 48 per cent compared with 52 per cent backing for the union. They found 8 to 14 per cent of Scotland's 4.3 million voters were still undecided before polls open at 7am on Thursday.

Reference: By Myles Burke

Tuesday, 16 September 2014

RBS CEO says relocation wouldn't mean Scottish jobs go

 

(Reuters) - Royal Bank of Scotland's Chief Executive Ross McEwan said the bank's plan to relocate to England if Scots vote for independence doesn't mean it will move operations out of the region or cut jobs.

"This is a technical procedure regarding the location of our registered head office. It is not an intention to move operations or jobs," McEwan said in a memo to staff seen by Reuters.

"Our current business in Scotland, including the personal and business bank, IT and operations, human resources and many other functions, are here because of the skills and knowledge of our people, and the sound business environment. So far, I see no reason why this would change should we implement our contingency plans," McEwan said.

Reference: Matt Scuffham

Monday, 15 September 2014

EUR/USD weekly outlook: September 15 - 19

 

EUR/USD weekly outlook: September 15 - 19

A study by the San Francisco Fed published on Monday indicated that central bank officials see rates rising sooner than markets expect.

The Fed was expected to cut its asset purchase program by another $10 billion at its upcoming policy meeting next week which would keep it on track for winding up the program in October, and to start raising interest rates sometime in mid-2015.

Data on Friday showing that U.S. retail sales rose in August and another report showing that consumer sentiment rose to a 14-month high in September underlined the view that the economic recovery is deepening.

The single currency has remained under pressure since the ECB unexpectedly cut rates to record lows on September 4 and unveiled new easing measures in a bid to shore up inflation in the euro area.

The euro rose to two month highs against the weaker yen on Friday, with EUR/JPY up 0.56% in late trade. For the week the pair gained 2.17%.

The yen fell to more than six year lows against the dollar on Friday amid expectations for more stimulus from the Bank of Japan.

BoJ Governor Haruhiko Kuroda said Thursday that the bank would be prepared to immediately loosen monetary policy or implement other measures if its 2% inflation target becomes difficult to meet.

In the week ahead, investors will be focusing on the outcome of Wednesday’s Fed policy meeting. Fed Chair Janet Yellen was to hold a press conference following the meeting. Tuesday’s report on the ZEW German business sentiment index will also be closely watched.

Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets. The guide skips Friday as there are no relevant events on this day.

Monday, September 15

In the euro zone, Germany’s Bundesbank is to publish its monthly report.

The U.S. is to release reports on manufacturing activity in the Empire State and industrial production.

Tuesday, September 16

The ZEW Institute is to release its closely watched report on German economic sentiment, a leading indicator of economic health.

The U.S. is to produce data on producer price inflation.

Wednesday, September 17

The euro zone is to release revised data on consumer price inflation.

The U.S. is to produce data on consumer prices. Later Wednesday, the Federal Reserve is to announce its federal funds rate and publish its rate statement. Fed Chair Janet Yellen is to hold a press conference following announcement.

Thursday, September 18

The U.S. is to produce a flurry of economic data, including reports on initial jobless claims, building permits, housing starts and manufacturing activity in the Philadelphia region.

Thursday, 11 September 2014

Shares sag but sterling gains as Scotland poll eases nerves

 

         A man walks through the lobby of the London Stock Exchange August 5, 2011.REUTERS/Suzanne Plunkett

Sterling rose off multi-month lows on Thursday as a poll showing that most Scots intend to vote against independence next week alleviated concerns over the future of the UK, but equities slipped on an unexpected rise in U.S. jobless claims.

UK financial stocks with strong business ties to Scotland such as insurer Standard Life (SL.L) and Royal Bank of Scotland (RBS.L) outperformed. But broader European stock markets were pegged back due to the continuing uncertainty over the issue.

Equities were also hurt after the number of Americans filing new claims for unemployment benefits unexpectedly rose last week, which weighed on U.S. equity futures DJc1 SPc1.

The pan-European FTSEurofirst 300 index .FTEU3 edged down by 0.2 percent, while the MSCI World Index .MIWO00000PUS, which tracks stocks from developed economies, was flat.

The poll on behalf of the Daily Record newspaper showed 47 percent intend to vote in favor of independence while 53 percent will vote against. Other recent surveys had put the rival campaigns neck-and-neck.

"There's a bit of uncertainty priced in around Scotland, but nowhere near as much as it should be," said Edmund Shing, global equity fund manager at BCS Asset Management.

Sterling was up by 0.2 percent at $1.6242 GBP=D4, having recovered on Wednesday from $1.6051, its lowest since mid-November last year, after the latest Survation poll was released. The euro eased 0.2 percent to 79.560 pence EURGBP=D4, below a three-month high of 80.66 pence struck on Wednesday.

The latest Scottish survey also pushed down Spanish bond yields as it was seen as lessening the risk that a breakaway Scotland could embolden a similar bid by Spain's wealthy Catalonia region.

Still, the cost of hedging against more sterling weakness for the next week, which covers the Scottish referendum, jumped to a 13-month high of 11.725 percent. GBPSWO=R

DOLLAR RISES AGAINST YEN

The dollar powered to a fresh six-year high against the yen on Thursday.

Against a basket of major currencies .DXY it traded at 84.3268, near a 14-month high of 84.519 reached on Tuesday. Barring a turnaround on Friday, it was on course for a ninth consecutive week of gains as expectations grow that the U.S. Federal Reserve will raise interest rates in 2015.

Brian Hennessey, portfolio manager of the Alpine Dynamic Dividend Fund, said that while the Scotland vote was creating some near-term uncertainty, the broader global economic backdrop remained reassuring for markets.

"The macroeconomic backdrop is favorable, with the labor market improving steadily in places like the U.S, Germany and the UK," said Hennessey.

U.S. stocks ended higher overnight, which helped underpin Asian stock markets. Japan's Nikkei stock average .N225 added 0.8 percent to close at an eight-month high.

Chinese consumer prices rose less than expected in August, climbing 2.0 percent from a year earlier, down from 2.3 percent in July and below market expectations of 2.2 percent.

However, the China data also provided more evidence of economic slowdown and some economists said Beijing might announce fresh stimulus measures.

The Chinese inflation data pushed London copper prices to their lowest level in almost three months, while gold also traded near a three-month low.

Brent crude fell to a 17-month low below $98 a barrel on Thursday, down for the sixth straight session as worries over ample supply and weak demand outweighed concerns that conflict in the Middle East could curb oil production.

Reference: Sudip Kar-Gupta

Tuesday, 9 September 2014

Investment Implications of an Economy That, Yes, Is Still Improving

 

IMG_1234 newspapers

Overview

  • Last week ended on a sour note with a weaker-than-expected jobs number, but stocks reversed and rallied by the close on Friday.
  • Outside of the jobs report, other economic releases painted a consistently positive picture.
  • This, in turn, suggests short-term interest rates could rise, the dollar strengthen, and commodity prices fall.
Weak Jobs Report Ends the Week on Sour Note

Last week ended on a sour note with a weaker-than-expected jobs number, but stocks reversed and rallied by the close on Friday. Overall, however, stocks were essentially flat for the shortened week: The Dow Jones Industrial Average was up 0.23% to close the week at 17,137, the S&P 500 Index rose 0.20% to 2,007 and the Nasdaq Composite Index edged up 0.04% to 4,582. Meanwhile, the yield on the 10-year Treasury rose from 2.34% to 2.46%, as its price correspondingly fell.

It is important to note that a weak August payroll report is not indicative of a softening U.S. economy. In fact, while the U.S. economy still faces a number of structural issues, most cyclical factors suggest the economy should be relatively strong through the end of the year. This, in turn, suggests short-term interest rates could rise, the dollar strengthen and commodity prices fall.

But Other Releases Paint a Brighter Picture

In August, the U.S. economy created 142,000 net new jobs, well below what economists and analysts expected and the weakest number this year. However, we believe the modest report was mostly a reflection of seasonal weakness and is likely to be revised higher. Average monthly non-farm payroll gains are above the 200,000 level, consistent with a decent economic expansion, even as structural headwinds remain.

Indeed, outside of the jobs report, other economic releases painted a consistently positive picture. An important economic indicator, the Institute for Supply Management’s manufacturing survey, showed that new orders reached their highest level since 2004, while the service component of that survey hit a nine-year high. In addition, the auto sector, benefiting from continued low interest rates, witnessed a surge in sales to 17.45 million annualized, the best level since early 2006.

Reference: Russ Koesterich

Monday, 8 September 2014

FTSE slips further from highs on Scotland opinion poll jitters

 

LONDON - Britain's top share index slipped further away from a 14-1/2 year high on Monday, with the first opinion poll lead for supporters of Scottish independence raising political uncertainty and hurting investors' sentiment.

People pass electronic information boards at the London Stock Exchange in the City of London October 11, 2013. REUTERS/Stefan Wermuth

Companies more exposed to Scotland were among the worst hit. Weir Group, Royal Bank of Scotland, Lloyds, Standard Life, SSE and Aberdeen Asset Management, down 1.3 to 2.8 percent, were among the top decliners on the benchmark FTSE 100 index.

With less than two weeks to go before the Sept. 18 vote, the poll put the "Yes" to independence campaign on 51 percent against the "no" camp on 49 percent, overturning a 22-point lead for the unionist campaign in just a month, a YouGov survey for the Sunday Times newspaper said.

The British government was scrambling to respond by promising a range of new powers for Scotland if it chooses to stay within the United Kingdom.

"With uncertainty hated by investors, the latest poll in Scotland is heaping pressure on investors. The future for British banks, Lloyds and RBS, is raising questions, whilst the key question of currency remains significantly up in the air," Keith Bowman, equity analyst at Hargreaves Lansdown, said.

"For now, with the vote less than two weeks away, the UK stock market faces a difficult time, with investors playing cautiously, booking profits where possible.”

The blue-chip FTSE 100 index was down 0.4 percent at 6,829.64 points by 0747 GMT after hitting a 14-1/2 year high last week. The index is up just 1.3 percent so far this year.

However, some analysts said that a weaker sterling following the political uncertainty would be good for the FTSE 100 index. The UK currency fell 1 percent against the dollar to hit a near 10-month low early on Monday.

"The increasing possibility of a ‘yes’ will weaken sterling further, in our view, and this could be good news for UK equities in aggregate, with a majority of revenues derived from abroad," Gerard Lane, equity strategist at Shore Capital, said.

"We favour those names with U.S. economic exposure as it appears to us that the U.S. has the quickest economic momentum."

Among individual sharp movers, Associated British Foods fell 4 percent despite maintaining its annual earnings guidance, with a good finish to the year from discount fashion chain Primark offsetting continued weakness in the group's sugar operations.

"Shareholders are so accustomed to ABF upgrading profit forecasts that today's strong trading update without a material upgrade to estimates may mean some profit taking after a near doubling of the share price over the past year." Neil Shah, analyst at Edison Investment, said.

Reference: Atul Prakash

Wednesday, 3 September 2014

Japanese Yen Mostly Lower After Services Data

 

Many Japanese coins on the banknotes

Japanese yen is mostly lower today, following the release of the latest services PMI data. Additionally, expected changes to the government’s investment fund are expected in the coming weeks, and that is also having an impact.

The latest Japanese services PMI data showed a drop to 49.9 in August. This is down from the July reading of 50.4. Even though composite PMI climbed, the concern about services PMI is still weighing on the yen

Also affecting the yen right now is an expected change to the Government Pension Investment Fund. This fund is expected to become more aggressive in the coming months, and could even include currencies. This would raise demand for currencies other than the yen. The Fund is huge, and, as a result, has quite a lot of influence.

These factors, plus continued easing efforts by the Bank of Japan, have the yen mostly lower today. The main exception is against the US dollar. After plunging dramatically against the greenback in earlier trading, the yen is now moving a little bit higher. But the yen fell so much yesterday and overnight that it’s going to be quite the slog.

At 10:39 GMT USD/JPY is down to 105.0660 from the open at 105.0915. EUR/JPY is up to 138.1325 from the open at 138.0270. GBP/JPY is up to 173.1900 from the open at 173.0855.

Reference: Miranda Marquit

Monday, 1 September 2014

FOREX-Euro struggles near lows, hamstrung by ECB and Ukraine turmoil

 

LONDON, Sept 1 (Reuters) - The euro hit a year-low against the dollar on Monday, as investors added to bets against the single currency before a policy meeting this week and as worries about the crisis in Ukraine kept alive risks to the euro zone's economic recovery.

The euro fell as far as $1.3119 in Asia, reaching lows not seen since early September 2013. It last traded at $1.3128, flat on the day. It hit a five-week low against the British pound of 78.96 pence, down 0.2 percent on the day and was trading not far from recent three-week lows against the yen.

Ukrainian President Petro Poroshenko warned a "full-scale war" was imminent if Russian troops continued an advance in support of pro-Moscow rebels as Europe and the United States threatened Russia with new sanctions.

Analysts said the risk to euro zone growth posed by the Ukraine conflict and stubbornly low inflation should keep the pressure on the European Central Bank to provide further stimulus at some stage, if not this week.

"There are a many reasons to continue selling the euro," said Lutz Karpowitz, currency strategist at Commerzbank (Xetra: CBK100 - news) . "First of all, the escalating situation in Ukraine, which might lead to further sanctions, thus increasing the risk of the euro zone economy being affected by the crisis. Even (Taiwan OTC: 6436.TWO - news) more importantly is the ECB rate meeting."

While Commerzbank does not expect the ECB to announce asset purchases, or quantitative easing, when the governing council meets on Thursday, the uncertainty about further policy action is likely to keep the euro on the defensive, Karpowitz added.

The euro started September on a subdued note after posting its second straight month of losses versus the greenback in August, when it slid 1.9 percent following a 2.2 percent drop in July. In fact, speculators' short positions against the euro are near their highest in two years.

Analysts at Barclays (LSE: BARC.L - news) said it was too soon for the ECB to announce new policy measures, given that the two most powerful policies announced in June are not yet deployed. ECB announced targeted long-term repo operations and asset-backed securities purchases in June that are set to be deployed in coming weeks.

"But a minority of market participants expect new policy at this week's meeting. As a result, inaction may be greeted by temporary relief from euro depreciation, but we would see any short-term rallies as a selling opportunity," they wrote in a note.

The euro held steady above a near two-year low versus the Swiss franc after the head of the Swiss National Bank (SNB), Thomas Jordan said it stood ready to intervene in the currency market to defend its cap on the franc.

The euro last stood at 1.2063 francs, staying above last week's low of 1.2049 on trading platform EBS, its lowest level versus the Swiss franc since late 2012. The SNB introduced a 1.20 per euro cap in 2011 to prevent the franc's strong appreciation from further hurting the economy, although it has not had to defend the cap for the last two years.

Despite the global political tension, there was no meaningful safe-haven bid for the yen. That saw the dollar edge up 0.1 percent to about 104.15 yen.

The U.S. Labor Day holiday on Monday could dampen market activity. Moves among major currencies were subdued ahead of policy reviews by central banks in the euro zone, Japan, Britain, Canada and Australia, all of which are coming up this week.

 

Reference: Anirban Nag