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Friday, 29 May 2015

Tech, healthcare lead Wall St. higher; Nasdaq hits record

Traders work on the floor of the New York Stock Exchange May 20, 2015. REUTERS/Brendan McDermid


U.S. stocks ended sharply higher on Wednesday and the Nasdaq logged a record high close, led by a rebound in technology and healthcare stocks and optimism that Greece would avoid defaulting on its debt.

Reports that Athens and its creditors were near a deal pushed the euro higher against the dollar, partly reversing recent moves. EU officials, however, dismissed Greek claims an aid agreement was being drafted.

Investors said U.S. stocks were oversold in the previous session, when concerns about Greece and foreign exchange pushed Wall Street to its steepest fall in three weeks.

The S&P has inched up to a handful of record high closes in May. But the stock market has failed to make what some traders see as meaningful gains, in part because they are concerned about when the Federal Reserve will start to raise interest rates for the first time since 2006.

“People felt yesterday was an overreaction and I would agree,” said Peter Jankovskis, co-chief investment officer at OakBrook Investments in Lisle, Illinois. “The fact that the market has been staying at its peaks for as long as it has, with only modest pullbacks, is fairly encouraging.”

The Dow Jones industrial average .DJI rose 121.45 points, or 0.67 percent, to end at 18,162.99 points. The S&P 500 .SPX gained 19.28 points, or 0.92 percent, to 2,123.48 and the Nasdaq Composite .IXIC added 73.84 points, or 1.47 percent, to 5,106.59.

It was the S&P's strongest day since May 14 and the Nasdaq's strongest since late January, lifting it to its first record close since April 24.

Nine of the 10 major S&P 500 sectors ended higher, with technology .SPLRCT up 1.82 percent and the health .SPXHC index up 1.13 percent.

Broadcom (BRCM.O) surged 21.8 percent on news the chipmaker was in talks to be bought by Avago Technologies (AVGO.O). Avago jumped 7.76 percent.

Gilead Sciences Inc (GILD.O) rose 2.45 percent and led gains on the S&P health index.

The energy sector .SPNY was off 0.11 percent as the rising dollar weighed on oil prices. The Dow Jones airlines index .DJUSAR broke a 5-day losing streak to rally 2.23 percent.

Michael Kors (KORS.N) dropped 24.19 percent after the handbag maker reported its slowest quarterly revenue growth since going public.

Peers Coach (COH.N) fell 3.28 percent, Kate Spade (KATE.N) was off 4.66 percent and Fossil (FOSL.O) dropped 6.47 percent on Michael Kors' report of lower tourist traffic, weak watch demand and shipping delays due to West Coast port disruptions.

Advancing issues outnumbered declining ones on the NYSE by 2,242 to 808, for a 2.77-to-1 ratio on the upside; on the Nasdaq, 1,927 issues rose and 845 fell for a 2.28-to-1 ratio favoring advancers.

The S&P 500 posted 23 new 52-week highs and 4 new lows; the Nasdaq Composite recorded 85 new highs and 50 new lows.

About 5.8 billion shares changed hands on U.S. exchanges, below the 6.2 billion daily average for the month to date, according to BATS Global Markets.

Reference: NOEL RANDEWICH

G7 finance chiefs ponder flagging growth amid Greek crisis fears




G7 ministers and central bank heads convened on Wednesday to discuss how to revive global growth and China's increasing clout, while keeping a close eye on the protracted talks to avoid a Greek default.

Although the Greek crisis is not on the official agenda for the three-day meeting in the German city of Dresden, it will be discussed on the sidelines.

The United States is likely to use the talks, running through to Friday, to press Europe to reach a funding-for-reforms deal with Greece.

U.S. Treasury Secretary Jack Lew said he feared a miscalculation could lead to a new crisis which could have consequences for the wider world and said Greece's creditors may have to give some ground.

"The challenge for the Europeans, the political and economic institutions -- the IMF -- is to show enough flexibility," Lew said in London.

The threat of a Greek default, rising oil prices and bond market turmoil are helping fuelinvestor nervousness.

Canadian Finance Minister Joe Oliver was in more confident mood on Greece. "Decisions have to be made but they are going to be made, I think, with knowledge of the consequences," he told Reuters.

"SERIALLY DISAPPOINTING"

Oliver, like the host nation Germany, wants to focus on how to revive global growth that he said had been "serially disappointing".

A German official said one key to sustainable investment was through solid government finances, which could prove a challenge to nations battling big deficits.

"I expect tomorrow a clear recognition from the deliberations that the necessary reforms will be advanced. Of course it is clear that the economic challenges are very different from country to country," the official said.

Oliver said one way to boost growth was to relax labor laws and make it easier for firms to lay off workers, while acknowledging "that's what gets people demonstrating in the streets".

There have been widespread protests in Greece against austerity measures imposed at the insistence of creditors.

Greece is now scrambling to strike a deal with its international lenders before an IMF loan falls due on June 5.

Greek officials have said there may not be enough money to meet a series of June bills to the IMF totaling 1.6 billion euros without outside help -- raising the prospect of default.

"The notion that the risk is completely contained, that there's no contagion, I think that it's a mistake to think that a failure is of no consequence outside of Greece. We don't know the exact scope," Lew said.

SOFT POWER

The G7 -- which groups the United States, Japan, Canada, France, Italy and Britain -- must also grapple with the rise of a power not even present: China.

German Finance Minister Wolfgang Schaeuble told Reuters last week that officials could talk informally about the increased importance of the Chinese yuan.

The inclusion of the yuan in the International Monetary Fund's currency basket would mark another stage in China's rise as a global economic player, requiring the United States to accept a dilution of its power in international finance.

Having ignored U.S. urgings not to sign up to a China-led development bank, European G7 members have signaled an openness to add the yuan to the basket of currencies which makes up the IMF's Special Drawing Rights (SDR) -- a virtual currency that is used for lending to countries in financial difficulty.

"We're not expecting specific decisions at the G7 (on this subject), but it is a question in people's heads and about which there will be discussions," said a French official.

The United States and Japan are more cautious.

Including the yuan in the basket would increase China's influence at the IMF, an institution Washington was instrumental in designing and through which it has projected "soft power" for the last 70 years.

The IMF said on Tuesday that the yuan, also known as the renminbi, was no longer undervalued after its recent gains, but Beijing should quicken progress to a floating exchange rate.

Reference: PAUL CARREL AND DAVID LJUNGGREN

Thursday, 28 May 2015

In new trend, European fund firms become banks in all but name

The Thames Barrier is seen across the River Thames with the Canary Wharf business district seen in the background in London September 7, 2014.  REUTERS/Toby Melville


Australian Symon Drake-Brockman is on the front line of a revolution in European finance.

The former head of global debt markets at Royal Bank of Scotland now runs Pemberton Asset Management in London's genteel Belgravia, several miles from the "Square Mile" City of London financial district where bankers work.

He spends his days making deals in partnership with British insurer Legal&General but by lending, rather than investing, its cash.

Drake-Brockman is one of a growing number of financiers who are teaming up with insurers and pension funds to build loan books to rival banks, turning some fund firms into banks in all but name.

"We operate more like a lender ... we are constantly meeting with borrowers, developing relationships in a similar way to how we would if we were sitting within RBS or ING, where I was before," Drake-Brockman said.

"You will see a number of us develop what I would consider as large regional lending businesses, where the scale of what we do will be not dissimilar to some of the banking groups active in mid-market corporate lending," he added.

Investors in the United States already out-lend domestic banks by buying huge volumes of corporate, municipal and government bonds and the European Commission is looking to broaden Europe's sources of funding in a similar way by launching a Capital Markets Union to lessen the region's reliance on bank finance.

EU Financial Services Chief Jonathan Hill is due to set out an action plan for the project this autumn, with a view to laying foundations for a union by 2019.

Drake-Brockman believes private firms like Pemberton will be responsible for 20-50 billion euros ($21.8 billion-$54.6 billion) of lending in Europe by 2025, as asset managers opt to lend more of the trillions of euros they manage for pension funds and insurers.

Strict capital reserve rules aimed at preventing a sequel to the 2007-09 financial crisis mean blue-chip banks, once dubbed "masters of the universe" because of their dominance of European lending, cannot supply debt as freely as before.

Public pension funds, insurers and other institutional investors are now stepping into the breach, supported by some regulators and spurred on by record low interest rates and sub-zero yields on many staple bond investments. [ID:nL5N0Y43J8]


"GREAT OPPORTUNITIES"

The banking retreat has seen lending to businesses fall by more than a quarter since a 2008 high to 4.31 trillion euros, data from consultants EY showed.

By contrast, demand for private debt has more than tripled in size since 2006 to $465 billion at end-June 2014, figures from data provider Preqin showed.

In a separate report studying the investment intentions of 263 public pension funds, Preqin found almost two-thirds wanted to raise their exposure to European private debt in the next year.

With non-bank lending to corporates in Europe below 20 percent, compared with 70 percent in the United States, even a move to 30-40 percent would equate to "very, very significant growth", said Drake-Brockman.

Jo Waldron, director of alternative credit at M&G, the 260- billion-pound ($400-billion) asset management arm of global insurer Prudential, is another player helping to fill a gap in the market for money left by capital-constrained banks.

    "We're certainly seeing great investment opportunities ... coming for asset managers because there were areas of the financial markets that banks once dominated and now no longer do in the same way," she said.

    After setting up a private finance group in 1997 with four people, M&G now has more than 90 people striking deals across the private debt spectrum, from social housing to student accommodation and leasing.

The London Pensions Fund Authority, which runs a 4.8-billion-pound pension fund for around 250,000 people, last week appointed Apollo Global Management to oversee its maiden allocation to alternative credit, including private lending.

"We have been vocal in the past year about increasing our exposure to illiquids and alternative assets. It is an area that we are keen to grow," an LPFA spokesman said.


    SAFE OR SORRY?

Not everyone is happy to see the attempt by asset managers and insurers to replace banks in Europe's private debt market.

The Group of 20 (G20) economies' regulatory task force, the Financial Stability Board (FSB), has debated whether asset managers and funds, like banks, are "too big to fail".

This reflects broader worries that a further accumulation of fund firm assets resulting from a push into lending could make financial markets less stable. [ID:nL5N0W639I]

Critics claim investors who put cash into funds that make loans to private or corporate borrowers are particularly vulnerable because unlike banks, the fund responsible for assessing credit risk bears no loss in the event of a default and unlike depositors, they don't get their money back.

There are fears that a part-time approach to lending could lead funds to write loans for borrowers otherwise unable to secure finance through other means, increasing the possibility of losses for pension funds who have stumped up the cash.

"Direct lending was a popular hedge fund strategy in 2005 and in the aftermath of the credit crunch, we saw banks had kept all the top quality borrowers," said Alasdair Macdonald, head of the UK portfolio advisory team at pension consultant Towers Watson.

"New entrants who thought they were taking market share were actually only accessing lesser quality borrowers and when things downturned, those funds suffered disproportionately," he said.

The International Monetary Fund has also warned that large flows of money into relatively illiquid asset classes has raised risks of "fire-sales" if investors opt to exit similar positions at the same time.

At Reuters' Global Financial Regulation Summit this month, the chair of the International Organization of Securities Commissions (IOSCO) said the case that big asset managers pose systemic risks had yet to be made. [ID:nL3N0Y35IP]

Fund firms themselves insist they have all the necessary skills to spot good borrower from bad. The bigger challenge for alternative lenders in Europe, however, is trust, said Pemberton's Drake-Brockman.

"Borrowers may not love banks for one reason or another (but) in a market where you can source funding from distressed funds, hedge funds and special situations funds, they are not clear who is the reliable long-term business partner and who is an opportunistic credit fund."

Reference:  Sinead Cruise and Simon Jessop

Asian shares drop, Dollar hits 13-year high versus Yen

Pedestrians walk past an electronic board showing the stock market indices of various countries outside a brokerage in Tokyo April 10, 2015.  REUTERS/Yuya Shino


Asian shares shed gains on Thursday as the Chinese, Hong Kong and Australian markets slipped, while the dollar scaled a 13-year peak against the yen as it rallied on expectations the U.S. Federal Reserve will raise rates this year.


MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS slipped about 0.6 percent. 

The CSI300 index .CSI300 of the largest listed companies in Shanghai and Shenzhen fell 1.6 percent, while the Shanghai Composite Index .SSEC lost 1.4 percent. Hong Kong's Hang Seng index .HSI shed 1.4 percent. 

Australian shares gave up early gains, with the S&P/ASX 200 index .AXJO down about 0.3 percent, after weaker than expected business spending data suggested that rate cuts were failing to energize the economy as hoped.

Japan's Nikkei .N225 bucked the downtrend, as the weaker yen helped keep the index on track for its 10th consecutive rise, which would give it the longest winning streak since February 1988. It rose 0.7 percent after refreshing an intraday 15-year high. 

"I thought the market would see a correction given the straight days of gains, but contrary to my initial view, it's being lifted by the weak yen," said Masashi Oda, chief investment officer at Sumitomo Mitsui Trust Bank.

The dollar hit a 13-year high against the yen, rising as higher as 124.30 JPY=, and was last up 0.4 percent at 124.12.

The dollar's latest rally was sparked by remarks from Federal Reserve Chair Janet Yellen, who said last Friday that she expected the central bank to raise rates this year as the U.S. economy was set to recover from a sluggish first quarter. 

By contrast, many investors expect the Bank of Japan to take additional easing steps later this year, when the Fed is expected to start raising rates.

"Longer term, little stands in the way of further JPY losses," said Greg Moore, senior currency strategist at RBC in Sydney.

An index tracking the dollar against a basket of six major currencies hit a one-month high of 97.775 .DXY and was last down slightly on the day at97.289, as the euro recovered from recent lows on hopes of a deal for Greece.

The euro changed hands at $1.0905 EUR=, slightly higher on the day and above a one-month low of $1.0819 touched on Wednesday. 

Although there are conflicting reports on the talks, some investors are betting on the kind of last-minute deals that have prevented a default since Greece's debt crisis began more than five years ago.

Greek officials spoke optimistically on Wednesday of reaching a cash-for-reforms deal, with economy minister George Stathakis saying Greece and its international creditors have converged on key points.

But German Finance Minister Wolfgang Schaeuble said there was not much progress in the debt talks and that he was surprised by the upbeat tone from some Greek government officials.

Uncertainty over whether Greece can get the support it needs to make payments to the International Monetary Fund on June 5 is likely to keep investors cautious for now.

Crude oil prices recovered after a two-day slide, although the firmer dollar kept markets under pressure.

Brent crude futures LCOc1 climbed about 0.7 percent to $62.51 a barrel, while U.S. crude futures CLc1 were up 0.3 percent at $57.69 per barrel.

Reference: Jacqueline Wong and Richard Borsuk

Wednesday, 27 May 2015

Exclusive: CME developing European gold futures contract

Gold bars from the vault of a bank are seen in this illustration picture taken in Zurich November 20, 2014.   REUTERS/Arnd Wiegmann


The Chicago Mercantile Exchange (CME) is developing a European gold futures contract to serve customers in London, three sources familiar with matter said.
The contract would mirror existing futures traded on CME's New York COMEX platform, which has a 100 ounce contract size and typically trades volumes of between 15 million and 20 million ounces daily.
That is the world's most liquid gold contract, essentially setting the benchmark for bullion futures globally.
"The CME has been working on a loco (deliverable in) London futures contract for a while," one source familiar with the matter said.
"Comex futures are deliverable at Comex warehouses, instead with London futures you would take delivery at your London vault," the source added.

"Potentially they would see a lot more futures being delivered if customers could have London gold."
The CME declined to comment.
The size of a typical London Good Delivery gold bar is 400 ounces, or 12.4 kg. However, customers could take deliveries of 100 ounces.

The good delivery is a set of rules set by industry body the London Bullion Market Association descibing the weight and purity of gold bars used by traders in the London bullion market.
London's gold market is primarily over-the-counter, meaning that trades take place privately between two counterparties rather than on an exchange. That gives greater flexibility in terms of price, size and delivery terms, but less transparency.
However spot market volumes have dropped to their lowest in a year, with slowing interbank trade and ebbing liquidity making customers reluctant to transact. Several banks withdrew from the commodities sector due to tighter regulation and credit constraints resulting from the financial crisis beginning 2008.

CME Group, jointly with Thomson Reuters, took over the administration of the silver benchmark in August 2014 following sweeping reform of precious metals benchmarking.
That was triggered by a regulatory push for more transparency following the 2012 Libor interest rate-rigging scandal saw banks stop acting as both data providers and market makers.
The exchange also introduced a physically settled kilobar contract in Hong Kong earlier this year, but this has failed to garner significant trading volumes.

Reference: Clara Denina and Jan Harvey

Faster ECB money-printing excites investors





The European Central Bank will accelerate the pace of money printing to buy government bonds over the next two months, one of its top officials said, while voicing concern about recent swings on bond markets.


The comments from Benoit Coeure, initially made in private on Monday at a conference attended by one of Britain's richest hedge fund managers Alan Howard, some of his peers and academics, sent markets into a flurry when they were published on Tuesday.


Anticipating a flood of yet more euros onto the market, the single currency tumbled when the ECB released its Executive Board member's remarks, sending European shares rising to near multi-year highs.


Coeure said the speed of the recent spike in bond yields, was worrisome and that the ECB could "moderately" increase its buying in May and June so that it did not fall below its monthly buying target. He said, however, that the two were not linked.


Other central bankers chimed in with support for the ECB's fledgling scheme to buy 60 billion euros a month of chiefly government bonds, a programme known as quantitative easing.


"The Eurosystem is ready to go further if necessary ...," Christian Noyer, who as governor of the Bank of France also sits on the ECB's decision-making Governing Council, said in Paris.


The excitable market reaction, pulling the euro down below $1.12 and paring back the returns or yields on government bonds, illustrates how critical money printing is to confidence.


An ECB spokesman said that the intention had been to publish Coeure's speech immediately but that an error delayed it until Tuesday morning.



DARK CLOUD


Money printing is already helping to boost bank lending and buoy price inflation, although both stay at low levels.


Fresh data on Tuesday showed that euro zone prices were flat year-on-year in April, ending four months of falls.

Consumer prices across the 19-country euro zone rose 0.2 percent month-on-month while core inflation, which excludes energy and unprocessed food, was 0.2 percent for the month of April, and 0.7 percent year-on-year.


Nonetheless, the euro zone, shaken by a debt and banking crisis, remains fragile.


The mood among German analysts and investors, for instance, deteriorated far more sharply than expected in May as bumpy financial markets made the outlook for Europe's largest economy uncertain.


German think tank ZEW said on Tuesday its monthly survey of economic sentiment fell to 41.9 points from 53.3 in April - far below even the lowest forecast in a Reuters survey.

But there are some signs of hope that one of the biggest clouds hanging over the currency bloc, Greece, may be about to lift.


Greece's labour minister said Athens would soon strike a deal with its foreign backers to unlock further loans to the cash-starved country.


Greece's new leftist government has been in talks with its European and International Monetary Fund lenders over the past four months about the release of around 7.2 billion euros ($8.1 billion) in loans.


Asked on Greek TV when Athens would reach the cash-for-reform deal, Labour Minister Panos Skourletis said: "De facto, in the coming days."


"There's a deadline, which is June 5," he said - the date on which Greece's next repayment of a loan to the IMF falls due. "We all know that if there is no solution, let's say until then, in relation to funding, things will be difficult."


Reference:  Balazs Koranyi and Jan Strupczewski

Tuesday, 26 May 2015

Europe stocks stumble, dollar lifted by U.S rate view

Traders work at their screens at the stock exchange in Frankfurt January 23, 2015. REUTERS/Pawel Kopczynski

European shares fell in thin trade on Monday while the dollar powered ahead after U.S. Federal Reserve Chair Janet Yellen indicated that the central bank was poised to raise interest rates this year.

Investor concerns about Greece's debt problems and a poor regional and local election result by Spain's ruling People's Party also weighed on the euro and European shares.

The pull-back in European stocks mirrored losses on Wall Street on Friday after Yellen suggested the Fed was ready to act if the economy kept improving as expected, though a raft of recent data has suggested it is growing only modestly in the second quarter. She said delaying a policy tightening until employment and inflation hit its targets risked overheating the economy.

The benchmark French CAC 40 index shed 0.8 percent. Trading volumes were thin as several markets including Germany, the United Kingdom and the United States were shut for holidays.

Spain's IBEX equity index fell 2.3 percent after voters in regional and local elections on Sunday punished Prime Minister Mariano Rajoy's ruling PP for four years of austerity while Greece's ATG share index fell 2 percent.

"The Greek debt warning and the Spanish election outcome are weighing on the markets, said Naeem Aslam, chief market analyst at AvaTrade.

After four months of talks with its euro zone partners and the IMF, Greece's leftist-led Syriza government is still scrambling for a deal that could release up to 7.2 billion euros ($7.9 billion) in remaining aid to avert bankruptcy.
 

RESURGENT DOLLAR

In foreign exchange markets, the dollar index, which measures the greenback against a basket of other major currencies, rose 0.3 percent to a one-month high of 96.475.
 
Against the yen, the dollar traded near a two-month high of 121.78, jumping from a low of 120.64 after Yellen's comments and as stronger-than-expected underlying U.S. inflation supported the Fed's case for an interest rate hike later this year.

Data on Friday showed the U.S. Labor Department's gauge on core consumer goods prices rose by 0.3 percent last month, bringing the year-on-year rise to 1.8 percent, the highest since October.

"I would expect rate expectations to continue to rise and for the dollar's uptrend to continue as a result," said Marshall Gittler, head of global FX strategy at IronFX Global.

The euro was weaker, falling to a one-month low of $1.0959 with some traders citing the victory of anti-austerity parties in Spain and Greece's financial crisis as factors.
 
In the most explicit remarks so far about the likelihood of default if negotiations fail, Greece's interior minister said Athens cannot make debt repayments to the IMF next month unless it manages to reach a deal with its lenders.

Oil prices dipped toward $65 a barrel as a rallying dollar and profit-taking took their toll.

Brent was down about 0.4 percent at $65.01 after dropping 2.1 percent for the week

Reference: Anirbar Nag

Monday, 25 May 2015

Dollar back in vogue on CPI boost, Yellen's comments

U.S. one-hundred dollar bills are seen in this photo illustration at a bank in Seoul August 2, 2013. Picture taken August 2, 2013. REUTERS/Kim Hong-Ji

The dollar was firm near a two-month high against the yen on Monday and held gains against the euro after stronger-than-expected underlying U.S. inflation supported the Federal Reserve's case for an interest rate hike later this year.

Fed Chair Janet Yellen's comments that the central bank was poised to raise rates in 2015 also shored up sentiment towards the dollar, traders said.

With markets closed in many European holidays for a holiday, the dollar index .DXY, which measures the greenback against other major currencies, was up 0.2 percent at 96.266, a one-month high.

Against the yen, it traded near a two-month high of 121.78 JPY=, jumping from a low of 120.64 on Friday, helped by a rise in U.S. Treasury yields US10YT=RR. A move above 122.04 would take it to an eight-year peak against the yen.

"I would expect rate expectations to continue to rise and for the dollar's uptrend to continue as a result," said Marshall Gittler, head of global FX strategy at IronFX Global.
 
Data on Friday showed core U.S. CPI increased 0.3 percent in April on rising housing and medical care costs. It was the largest rise in the core CPI since January 2013 and followed a 0.2 percent gain in March.

"Whether the dollar can breach the 122.04 yen threshold depends on upcoming U.S. data. While a June rate hike is no longer a likelihood, upbeat indicators that would back up Friday's CPI numbers will fan hopes that the Fed will provide hints at the June meeting on when it might hike rates," said Junichi Ishikawa, analyst at IG Securities in Tokyo.

The euro was down 0.2 percent at $1.0995 EUR=, having touched a one-month low of $1.0964 in the Asian session. Some cited victory by anti-austerity parties in Spain as a factor.
 
The euro hit a three-month peak of $1.1468 on May 15, but has since fallen back on factors including prospects of aggressive bond purchases by the European Central Bank, persisting Greek debt woes and revived demand for the dollar.

The U.S. economy's recovery has not been as robust as many expected, dashing market expectations earlier in the year for the Fed to raise rates in June and prompting investors to push back their expectations to September or later.
 
Nevertheless, bits and pieces of upbeat data released this month have shown that the economy still stands above those of other developed economies such as the euro zone and Japan.

"The flow is shifting back in favour of the dollar, hurt recently by spotty economic data and receding likelihood of an early rate hike. Comments by policymakers have also helped," said Koji Fukaya, president of FPG Securities in Tokyo.

"A June hike had gone out the window with sentiment for tightening in September and even later receding at one point, but such pessimism has ebbed," he said.

Reference: Anirban Nag

China to launch first stock index options soon: state media

shanghai_skyline 3

The China Financial Futures Exchange (CFFEX) will soon launch the country's first-ever stock index options, state media reported on Monday, giving investors more hedging tools as the government steps up financial market reforms.

The first batch of stock index options would be based on China's blue-chip CSI300 index .CSI300 and SSE50 .SSE50 index as well as the small-cap CSI500 .CSI500, the reports quoted CFFEX Chairman, Zhang Shenfeng, as telling a financial forum over the weekend.

Stock index options will be the third product to be launched by the CFFEX, set up in 2006 to help develop China's financial derivatives markets. The exchange now trades stock index futures <0#CIF:> and government bond futures <0#CTF:>.

"Innovation in China's derivatives market is still at an early stage," Zhang was quoted as saying by the official Shanghai Securities News. "However, the markets have huge potential and promising prospects."The Securities Times, another official paper, said the new options will help investors manage volatile equity market risk but will not divert much investment from existing products as the scale of trade in new products is usually controlled in the initial stages.
 
Buyers of options contracts have the right, but not the obligation, to buy or sell an underlying asset at an agreed upon price during a certain period of time. They allow investors to hedge their investments but may also expose speculators to heavy losses.

China's financial reforms, including the launch of a slew of new financial products, are gathering pace one-and-a-half years after Beijing pledged to let markets play a "decisive role" in the world's second-largest economy.
 
The need to generate growth in a slowing economy is partly behind the reforms, but so is the desire to integrate Chinese markets with their global counterparts in order to raise China's international status.
 
This year alone, regulators have approved many new exchange traded derivatives, such as individual stock options listed on the Shanghai Stock Exchange, and allowed firms to issue asset-backed securities (ABS) by simply registering with regulators

Reference: Lu Jianxin and Pete Sweeney

Friday, 22 May 2015

Trend Lines

forex picture 1

Basic Trading Concepts Defined

Trend lines and trend channels are excellent tools for measuring and monitoring market direction and sentiment. Trend lines capture the very core of price movements by connecting multiple hit points which allow Forex traders to distinguish patterns and trends. Forex traders can use trend lines for a wide variety of purposes such as:

1. Capitalize on opportunities in the Forex market

2. Exact trade decisions (entry, stop loss, take profit)

3. Trade management (trail stop loss movement)

4. Monitor for breaks

5. Monitor for bounces

6. Filter out setups with less probability

7. Determine the trend

8. Identify chart patterns

9. Generally as support and resistance levels

 

What is a trend line?

A trend line is a line which connects multiple highs or lows on a chart. The best trend lines have 3 hits or more. A trend line with 2 hits is in theory a potential trend line. When connecting the highs and lows, the trend line either has no angle (horizontal line) or various angles varying from shallow to steep. Read more here about the differences between horizontal and angled trend lines.

 

What is a trend channel?

A trend channel consists of 2 trend lines, one connecting tops and one connecting bottoms. The best channels have 3 hits or more as well; a channel with 2 hits is not yet “established”. The angle of the bottom and the top of the channel are equal to each other.

 

Where to start?

Forex traders need to take the trend line key and start connecting 1 point with another. Usually a bottom is connected with another support point; whereas a top is connected with another resistance point.

The trader can repeat the process and place multiple trend lines on one chart (same pair and time frame); there is really no limit as long as the trader can manage to read and understand the chart. The trader can draw more trend lines on other time frames as well for additional information (if the trader uses multiple time frame analysis). Here is an example of a chart “overloaded” with trend lines:

Forex traders usually use 1-3 trend channels on all time frames. The main reason is practical: channels with parallel lines at the top and bottom are rarer than trend lines because both sides need multiple hits. The process of drawing a channel is the same as drawing a trend line, with one major difference: traders need to check the accuracy of both lines.

Once a Forex trader starts drawing trend lines, the chart could quickly fill up with trend lines in dozens of directions, which defeats the importance of keeping trading simple and effective. In the next section I will show you how to examine trend lines and decide which ones have the most value.

 

Distinguishing better trend lines

There are multiple ways Forex traders are able to identify better trend lines. Here is the list:

1. Relevance or proximity to price

2. Number of hits

3. “Neatness” of a trend line

4. Broken lines

5. Distance between hits

 

Relevance or proximity to price

A trend line that is “miles” away from current price levels is not relevant for current analysis or trade setups and therefore will only clutter the charts. The best practice is to place lines on the chart which are not too far away and have a chance of playing a role in your analysis or plan.

 

Number of hits

Trend lines with 2 hits are usually not interesting unless price is close by. In these cases there is a chance that price will hit the trend line and “respect” it, which in turn creates a 3rd hit (and therefore becomes an “established” trend line). If price is far away then trend lines with 2 hits can be ignored for the time being.

Trend lines with 3 hits or more are the most interesting trend lines. These trend lines are “established”, which means the market confirms the existence of this support or resistance line. These trend lines create decision spots on the charts.

 

Neatness of a trend line

The best trend lines connect the high and lows of candles with each other. However if a Forex trader follows this guideline then many trend lines would have only 2 hits. To increase the number of hits on a trend line, Forex traders need to decrease the neatness of a trend line by not only using highs and lows of candles. This means that trend lines “cut” through part of the candle. Preferably only the wick of a candle is placed beyond the trend line but even placing part of the candle outside the trend line perimeter is acceptable. However, in most cases, placing an entire candle or group of candles on the opposite side of the trend line is not accepted and would make the trend line less valuable.

 

Broken lines

In many cases broken trend lines will eventually be removed but it is a good practice to be patient and leave the broken trend lines on the charts for a while. Often the market retests broken trend lines and they offer extra confluence points.

 

Distance between hits

A new hit on the trend lines is only counted when there is sufficient distance between 2 hits. A new hit is not valid if the candle high or low is too near the previous high and low. In the most extreme example, traders cannot count a trend line to have 2 hits if the candles are next to each other. The fact that both candles hit the trend line counts as 1 hit.

Reference: Chris Svorcik

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Shares subdued by mixed China, euro zone PMI data

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World shares hovered near record highs on Thursday after downbeat Chinese manufacturing data put pressure on Beijing for more stimulus and the Federal Reserve signaled an increase in U.S. interest rates is still some way off.

European markets opened largely subdued, however, as disappointing German purchasing manager data (PMI) offset an improvement in France. That left the region's main bourses <0#.INDEXE> down as much as 0.6 percent and investors preferring bonds.

The euro gained to $1.1150. Top euro zone leaders will meet later in Latvia, where Greek premier Alexis Tsipras hopes the broad outline of a cash-for-reforms deal will be accepted, staving off a default.

Worries over Athens' finances have escalated this year as the country's new government has pushed back on austerity imposed as part of its bailout packages.

"I think it is coming to a head," said Alvin Tan, a currency strategist at Societe Generale in London. "It looks like it will be difficult for Greece to make it through June without a new cash disbursement, so I think we are coming to the point where a deal is needed very soon, probably within the next two weeks."

The dollar .DXY lost ground as minutes from the Federal Reserve's April meeting bolstered the view that the Fed is not ready to raise U.S. rates. Its policymakers thought a move in June would be premature, leading traders to push back expectations for a rate increase to the turn of the year.

The European Central Bank, which recently started a 1 trillion-euro stimulus program, will release the minutes of its most recent meeting at 1130 GMT. The meeting was held before this month's bond sell-off, so the main focus is likely to be whether the ECB is concerned about funding Greece's banks.
 
FRAGILE CHINA

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS ended little changed in Asian trading.
 
South Korean, Hong Kong and Malaysian shares slipped, while Australian stocks jumped on bargain hunting and emerging Asian currencies took advantage of the softer dollar.

Tokyo's Nikkei .N225 ended almost flat after touching a 15-year high. High-flying Chinese shares climbed another 1.2 percent as the third straight monthly contraction in Chinese factory activity bolstered stimulus bets.

"Under the current environment, any excuse seems good enough to cause a rally," wrote Gerry Alfonso, director of Shenwan Hongyuan Securities Co in Shanghai.

The recent surge in euro zone bond yields has stalled this week, partly in response to ECB policymakers saying the central bank would ramp up its bond buying for the next two months.
 
German 10-year yields, the benchmark for euro zone borrowing costs, were 1 basis point lower on Thursday at 0.62 percent, down from 2015 highs of 0.80 percent reached earlier this month.

Italian, Spanish and Portuguese 10-year yields were 3-4 bps lower at 1.82 percent IT10YT=TWEB, 1.76 percent ES10YT=TWEB and 2.40 percent PT10YT=TWEB, respectively.

In commodities, U.S. crude CLc1 rose 17 cents to $59.15 a barrel as a rebound following days of losses continued. Oil prices had bounced on Wednesday after a five-day decline, but a large supply overhang and concerns over a strong dollar capped gains. [O/R]

Hopes of future China stimulus helped lift copper of three-week low. Gold XAU= held in a range near $1,200 an ounce.

Reference: Marc Jones

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Thursday, 21 May 2015

5 Lessons Every Stock Trader Must Learn- Basic Trading Concepts

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Lesson 1: Penny Stocks Will Ruin You

Yesterday I came across an article that I thought was quite insightful and well written. What really jumped out at me was Scott's opinion of penny stocks because it's one that I share. There are lots of ways to make money investing but I am convinced that penny stocks will never get me to my financial goals. I prefer to manage my risk by working only with true growth stocks. The sooner you learn to steer clear of penny stocks the better as far as I'm concerned!

 

Lesson 2: Know Your Trading Personality

In my role as a Meetup coordinator for IBD® I am constantly exposed to people who employ all kinds of different investing methods. For the last 20 years I've thought of myself as an investor but recently it occurred to me that I've actually become a trader. If you're wondering what the difference is, it really boils down to the goals and methods being used.

I simply don't have the stomach to sustain the types of double digit losses that investors might see over the life of their positions. Also, I don't have the patience to sit in a position for more than 8 weeks at a time so long term involvement doesn't really interest me. Knowing that, I've committed myself to planning all of my positions from the perspective of a trader instead of as an investor.

 

Lesson 3: Have A Process

My trading process has been methodically put together through years of classroom training as well as trial and error. Earlier this week I released a video that describes the structure of my process:

Building A Watch List & Planning A Trade from Amin Hemani on Vimeo.

No matter what process you decide to use, it's only going to work if you stick with it. The moment you start to stray or take liberties, you've increased your risk along with your chances of losing money.

 

Lesson 4: Have the Right Tools

In that video we discussed the most important tools in my process. If you have the same trading personality as me then the core tools I use should prove effective. Here are just a few that have returned on the investment for me!

Investors Business Daily - Pay no attention to the dated website, IBD is perhaps the best data company in the business. If you work with growth stocks in any capacity whatsoever, they are a must have.

Tom Gentile - Tom is one of the few people in the investment industry that I would consider a mentor. I first met Tom when he was with Optionetics and I was instantly impressed with his market knowledge. What impressed me even more was how he put his knowledge into an actionable process. Switching from analysis to action is perhaps one of the most important lessons I learned from him. You can also follow Tom on Twitter to get a closer look.

ValueLine - I look to Value Line to help me get beyond what the charts are showing me. Typically I keep my process as data centric as possible so that I can stop my emotions from influencing me. Once I get to the bottom of my funnel and I'm doing side by side comparison's of the greatest growth stocks out there - I've got to dig deeper on their fundamentals. Value Line gives me the objective analysis I need to verify the under currents.

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Lesson 5: Remain Disciplined And Organized

This lesson is easily overlooked which is why I think it's so important to mention it. There's a common denominator among masters of a profession. Whether you consider; athletes, business people, artists, crane operators, journalists, or any other profession for that matter, the best performers always bring a high level of commitment to the table. At this point in my career, trading stocks is my profession so I make every effort to produce with an equal level of commitment.

In an effort to help others stay organized, I put together a handy little spreadsheet that includes formulas for my core criteria. It can be easily updated as the health of a stock changes too. If you would like a copy, just email me at investorspotlight@gmail.com and I'll send one over for you ASAP.

Reference: Amin Hemani  http://investorspotlight.blogspot.com

See also our Free Weekly Newsletters: http://www.tradingprofits4u.com/

Japan shares set fresh 15-year high, dollar holds gains after Fed minutes

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Japanese shares hit a new 15-year high on Thursday on hopes that its long-moribund economy was finally coming to life, but weak China factory activity capped stock market gains in much of the rest of Asia.

The dollar held on to broad gains after minutes from the Federal Reserve's April meeting minutes contained no major surprises.

Tokyo's Nikkei .N225 gained 0.5 percent a day after the release of stronger-than-expected GDP data.

But, reflecting the overall more somber mood with overnight losses on Wall Street and persistent weakness in China, MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS were effectively flat. South Korean and Hong Kong shares slipped, while Australian and Indonesian stocks gained.

The Shanghai Composite Index .SSEC rose 0.8 percent after the flash HSBC manufacturing PMI showed Chinese factory activity contracting for the third month in May.
 
Weak Chinese readings feed concerns about cooling demand from the global powerhouse, but at the same time they often shore up Chinese stocks by fueling expectations that policymakers will role out extra monetary stimulus.

The closely-watched Fed meeting minutes showed many officials believed it would be premature to hike interest rates in June, which did not take the markets by surprise.

The U.S. economy has shown signs of strength - the latest being this week's upbeat housing data - but overall recovery has not been as robust as expected. The economy grew by a modest 0.2 percent in the first quarter.
 
"A 'few' participants anticipated that the economy could make enough progress toward the dual mandate (of full employment and stable prices) to warrant a June rate hike, although 'many' thought it unlikely that the data available by the June FOMC meeting would justify a hike. We maintain our view of a first hike in September," strategists at Barclays said.

Treasuries yields spiked earlier in the month along with a rout in euro zone bonds, but the two bond markets have recently shown signs of decoupling.

The surge in euro zone bonds stalled this week, partly in response to European Central Bank policymakers saying the central bank would ramp up its bond buying.
 
The dollar fetched 121.09 yen JPY=, not too far from a two-month peak of 121.49 struck overnight. The euro hovered near a two-week low of $1.1062 EUR=, having slid from a three-month peak of $1.1468 touched late last week.

The Australian dollar rose 0.4 percent to $0.7904 AUD=D4, putting some distance between a two-week trough of $0.7861. A sharp drop in prices of iron ore, Australia's main export commodity, has weighed on the Aussie.

In commodities U.S. crude CLc1 rose 15 cents to $59.13 a barrel. Oil prices had rebounded on Wednesday after a five-day decline, but a large supply overhang and concerns over a strong dollar have weighed on the market. [O/R

Reference: Shinichi Saoshiro

Wednesday, 20 May 2015

Dollar hits two-month high vs yen, buoyed by U.S. housing data

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The dollar hit a two-month high versus the yen on Wednesday after strong housing data offered signs that the U.S. economy may be recovering from a weak first quarter.

The dollar rose as high as 120.98 yen, its strongest level since March 20, before paring some of the gains to trade at 120.86 yen, up 0.1 percent on the day.

Data on Tuesday showed U.S. housing starts jumped to their highest in nearly 7-1/2 years in April and building permits soared.

After retreating broadly in recent weeks on doubts about the pace of the U.S. recovery, the dollar has regained some ground this week, especially with the euro and sterling encountering renewed selling.

The dollar was also looking better positioned against the yen on technical charts, having risen above trendline resistance near 120.30 yen on Tuesday.

"There are (dollar) offers all the way up ... but we see a grind higher now to 122/123," said Jeffrey Halley, a currency trader for Saxo Capital Markets in Singapore.

The yen showed limited reaction to data showing Japan's economy expanded at its fastest pace in a year in January-March, with an annualized rate of 2.4 percent. Growth was inflated by inventory as business investment failed to gather momentum.
 
There were some moves recently towards renewed yen-selling, even as the dollar was trapped in a range against the yen, said Shinji Kureda, head of currency trading for Sumitomo Mitsui Banking Corporation in Tokyo.

When the euro bounced recently due to the squaring of short euro positions, which had been a popular bet, some market participants started to see the attraction of selling the yen instead, he said.

"Amid some moves to shift toward yen-selling, we are finally starting to see a break toward the topside of the (dollar/yen) range," Kureda added.
 
Against a basket of six major currencies, the dollar stood at 95.343 .DXY. The index has risen about 2.4 percent this week after falling for five straight weeks.

The euro eased 0.1 percent to $1.1141 EUR=, staying on the defensive after tumbling on Tuesday as the European Central Bank indicated it would accelerate the pace of money printing to buy government bonds over the next two months.

ECB executive board member Benoit Coeure said the speed of the recent spike in bond yields was worrisome and that the ECB could "moderately" increase its buying in May and June so that it did not fall below its monthly buying target.

Other central bankers later chimed in, with Christian Noyer saying the "Eurosystem is ready to go further if necessary".
 
The euro had slid 1.6 percent on Tuesday, with traders saying a break below the 100-day moving average around $1.1170 had added to the downward momentum.

"We saw an onslaught of selling in EUR/USD in this move, led by leveraged and real money," analysts at CitiFX wrote in a note to clients.

Sterling nursed its losses from Tuesday, when sellers took aim at the currency after Britain's annual consumer price inflation fell below zero for the first time in more than half a century.

On Tuesday it had skidded to its lowest in over a week against the greenback, reaching a trough of $1.5447. On Wednesday it traded at $1.5514 GBP=D3

Reference: Masayuki Kitano and Ian Chua

Equities gain, euro slumps as ECB eyes faster bond buys

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The dollar gained 1.5 percent against the euro and was broadly ahead for a second day, while U.S. Treasuries prices fell after data showed that U.S. housing starts in April rose to the highest in nearly 7-1/2 years.

Oil prices slumped more than 3 percent, partly because of the dollar rally.

Wall Street's Dow Industrials index closed at an all-time high, though other major U.S. stock indexes mostly eased in choppy trading, unsettled by disappointing Wal-Mart results and fears the housing data might encourage Federal Reserve policymakers to move sooner on interest-rate hikes.

"There really is a lot of fear about the threat of higher interest rates," said Jake Dollarhide, chief executive officer of Longbow Asset Management in Tulsa, Oklahoma. "It's not an 'if' story. It's a 'when' story."

Wal-Mart's (WMT.N) shares ended down 4.4 percent at $76.43. The retailer was the biggest drag on the Dow and the S&P 500 after reporting slower-than-expected U.S. same-store sales growth.
 
The Dow Jones industrial average .DJI rose 13.51 points, or 0.07 percent, to end at a record 18,312.39.

The S&P hit a record intraday high of 2,133.02 before ending down 1.37 points, or 0.06 percent, at 2,127.83. The Nasdaq Composite .IXIC dropped 8.41 points, or 0.17 percent, to 5,070.03.

European markets shot up to near multi-year highs after senior ECB policymaker Benoit Coeure talked of adjusting the bank's bond-buying program.
 
He said the speed of the recent spike in bond yields was worrisome. It has effectively wiped out the benefits of quantitative easing, he said, and the ECB could "moderately" increase its buying in May and June, and possibly in September.

His comments pushed the euro back below $1.12 for the first time in a week. The FTSEurofirst 300 .FTSE ended up 1.7 percent. Gains of more than 2 percent on Germany's DAX .GDAXI and the CAC 40 in Paris .FCHI outpaced a 0.38 percent rise on London's FTSE .FTSE.

European bond yields tumbled, with benchmark 10-year German Bunds down 4 basis points at 0.61 percent after going as low as 0.55 percent.
 
The dollar index .DXY was last up 1.15 percent, getting a lift against other major currencies from the U.S. housing data. The euro last traded off 1.5 percent at $1.1147.

Treasuries were also hurt by large offerings of corporate bonds, with yields on the 10-year note last at 2.2797 percent on a price decline of 14/32.

Oil prices fell more than 3 percent, with U.S. crude off for a fifth straight day, on the dollar's rally, as well as on evidence the United States and top oil exporter Saudi Arabia were pumping more than the world needed.

Brent LCOc1 fell $2.25 to $64.02 a barrel while U.S. crude's front-month contract CLc1 settled down $2.17 at $57.26.

Reference: Michael Connor

Tuesday, 19 May 2015

Which broker to choose

Newsletter 33

Basic Trading Concepts Defined

One of the biggest challenges facing traders is the choice of a broker. There is a wide variety and many various kinds of services—so this is not a simple decision. The choice you make will influence your profits as well as the success you have in your career.

After perusing the earlier articles in this section, you should better understand the actual role of a broker and the different types that you have to choose from. However, it is important to check out all of the brokers that you are interested in through the Broker reviews that Tradingfo offers.

 

Demo account

One of the most effective ways to give a trading platform and a broker's services a dry run is to set up a demo account with that broker. These accounts are free, and they show you the commission structure, the practices of the broker, and the services available.

The majority of brokers even offer fictitious money in demo accounts to give you some practice. These accounts pose you no risk, and the process is just the same as when you are working with a real account.

This article shows you the different elements to consider when selecting a broker for your investments.

Regulated Status

Is the broker licensed by such relevant oversight organizations as the SEC, FSA or CNMV?. This will ensure that your broker does not commit fraudulent transactions and stays within the rules.

Check if the broker is regulated under financial authorities, such as the FSA or FCA.

Segregated Account

Ask if the broker you are considering stores your money in an account separate from the main company account. This is the best practice, and it is what most reputable brokers do. This way, if the broker ends up bankrupt or has to close his doors, your trading money is safe in its own account.

Check if the broker holds your funds in a segregated account.

 

Broker Costs

Examine the structure of costs with your broker. Common costs include commission costs, commission structure, fees for inactivity and the overnight rate of interest. Commission costs will slowly bring your account downward. All brokers have commission structures, so make sure that yours are as reasonable as possible.

Costs and commissions vary from one broker to the next. Check which commission structure the broker uses.

Broker Accounts

Some brokers offer margin accounts, while others only offer cash accounts. Margin accounts allow you to borrow with an investment, so find out the amount of leverage your potential broker offers, and see if his offering matches what you need for your investments.

Check what type of leverage and margin the broker offers.

Spread – Some brokers offer a fixed spread, while others offer a variable one. Find out the overall spreads for the products that you are interested in. The majority of brokers market the lowest spreads they are able to offer. The lower the spread, the higher your chance of profiting from a particular trade.

Find out the overall spreads for the products that you are interested in. 

Market Access

Some brokers take the opposite their client's position, while others put a client trade right on the exchange. Find out which one your broker does.

Find out which type of broker it is—such as MM, STP or ECN—to find out what business model the broker uses.

 

Requirements for Deposit

Each broker has a different rule for this, so you'll want to know what your potential broker requires. Some require $20,000, while others don't require any minimums at all. You may find that commission structure is more costly with a lower minimum, so make sure to keep both of those factors in mind.

Find out what the required minimum deposit is for the broker to be in line with your investment needs.

Paying dividends

Will the broker credit your account when companies release their dividends? When you are looking at stocks, this is an important question. The majority of brokers do offer dividend payout, and you are entitled to dividends in some cases, even if you don't actually own physical stock. Some traders look at payouts when they’re putting their whole strategies together, so make sure that you find out about this.

Find out if the broker pays dividends when you are holding stocks.

Withdrawals and Deposits

If you’re facing a margin call, you will need to know how long it will take for a deposit to register in your account. Also, you might need money from your brokerage account, so find out the withdrawal process as well.

Find out how much time deposits and withdrawals take.

Customer Service

You need a broker who responds quickly to your needs. This is a good reason to set up a demo account, because it gives you a chance to use the entire organization. Review the contact information for the customer service desk, as well as the hours when you can call in. If you find that your Internet goes down when you are sitting in a big position, you will need it resolved quickly. You can look at this by calling your broker or sending a quick email.

Contact the broker to test their customer service practices.

 

Types of Brokers

Retail investors have access to four different types of brokers.

Full-service brokers – These are brokerage firms that give you a whole suite of financial services, including market analysis, trading tools and investment advice. They help traders find profitable opportunities in the market. These are the most expensive brokers, but you also get the most in terms of services.

Full-service brokers offer complete financial packages. However, this is the most expensive type of broker.

Discount Service Brokers – These brokers also manage client trades, but they offer fewer services than a discount service broker does. This type of broker can save you 92% in comparison to a full-service broker.

Deep-discount brokers also manage client trades but offer fewer services and are a cheaper alternative than full-service and discount service brokers.

Online Discount Broker – This sort of broker allows you to handle all of your services online, giving you complete control over your positions.

Online discount brokers give you complete control over your investments and are the least expensive option for your investments.

 

Types of Accounts

As stated previously, you can have either a cash account or a margin account.

Cash account – Some brokers will require cash accounts in order for their customers to trade. They require the customer to pay—in full and on the established day—the full amount of the transaction costs. These accounts are usually required for Full-Service Brokers and Discount Service Brokers.

Discount Service Brokers – This is the most active type of account, allowing clients to borrow money from the broker to gain leverage on their trades or transactions. You will usually find Margin accounts in Online Discount Brokers. Trading on margin is risky as it allows you to trade expensive products with high amounts of leverage.

 

Bottom Line

This overview gives you a look at the various criteria you should have in mind when selecting a broker. The choices you make will influence your ability to make profits off your trades. The more experience you have with trading, the less assistance you are likely to need from your broker. Make sure that you give your investments the very best chance by choosing a combination of service, commission and security.

Reference: Jack Maverick

PS: Jack Maverick is a long term trader who developed a very interesting strategy which makes him a profit “every day”. Appealing to you? 

Find out more here

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We research key- information Forex, How to place a trade, Managing your Risks, Investing in Shares and lots more.

Weak data puts dollar index on track to fall for fifth week

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The dollar index slipped on Friday, putting it on track to fall for a fifth week, the longest stretch of declines in four years, as disappointing data on domestic factory activity and consumer sentiment stirred doubts about the U.S. economic growth.

Earlier, this measure of the greenback against a group of currencies including the euro and yen .DXY bounced from a four-month low as buying emerged with lower European bond yields, and as traders booked profits on this week's gains in other currencies against the greenback.

"The dollar is oversold. The data weren't all that great, but the story is people still see the Federal Reserve raising interest rates later this year," said Kathy Lien, managing director at BK Asset Management in New York.

The euro was up 0.2 percent to $1.1431 EUR=, a tad below a three-month high of $1.1445 on Thursday and about 9 percent higher than a 12-year low of $1.0457 reached on March 16. That was the day the European Central Bank embarked on its 1.1 trillion euro bond-buying program, to which President Mario Draghi reiterated his commitment on Thursday.

The euro's rebound was partly helped by improved euro zone data and rising inflation expectations.

On the other hand, dollar bulls have been disappointed by a recent spate of U.S. data. First-quarter growth has been lackluster and there has been little evidence of a rebound in the second quarter.
 
On Friday, data on New York state manufacturing and readings on industrial output fell short of expectations, while a private gauge on U.S. consumer sentiment unexpectedly fell to its lowest in seven months in early May.

This down shift in the U.S. economy has helped stem a recent global bond market rout, which has narrowed the yield gap between Bunds and U.S. Treasuries and helped revive the euro.

The gap between 10-year Bunds DE10YT=RR and Treasuries US10YT=RR narrowed to 153 basis points, from around 180 bps about a month ago, making the euro more attractive to investors.
 
[GVD/EUR]

Against the yen, the dollar was up 0.1 percent at 119.24 yen JPY=, shaving its weekly loss to 0.5 percent.

The sterling was little changed at $1.5781 GBP=D4, leaving it with a weekly gain of 2.1 percent.
 
The Aussie dollar AUD=D4 fell 0.4 percent to $0.8044 after hitting a near four-month high of $0.8164 on Thursday.

Reference: Richard Leong

Monday, 18 May 2015

Global gold demand plateaus as Chinese jewellery buying falls

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Global gold demand eased 1 percent in the first quarter, an industry report showed on Thursday, as a drop in Chinese jewellery demand narrowly outweighed a recovery in Indian buying and Western appetite for bullion-backed funds.

In its Gold Demand Trends report for the period, the World Gold Council said Chinese jewellery buying fell 10 percent in the first three months of the year.

That was sparked by uncertainty over the direction of prices, as well as strength in Chinese equities and fears of a slowdown in Chinese growth, it said.

"The rampant strength of the equity market is clearly diverting attention away from gold," WGC head of market intelligence Alistair Hewitt said. Over the course of the year, Chinese gold demand is still expected to grow, he said, to between 900 and 1,000 tonnes, a similar level to that forecast in India.

Despite the drop, China was the world's biggest consumer of gold jewellery, coins and bars in the first quarter, the WGC figures showed, with offtake of 272.9 tonnes.
 
India, historically the world's number one gold buyer, saw a 22 percent rise in jewellery demand in that period, though demand for bars and coins fell 6 percent. Last year the market was curbed by official restrictions on imports, including a rule that 20 percent of imported gold had to be re-exported.

"We've seen a nice percentage element of growth, but we're probably just getting back to where India's gold market has been over the last five years," Hewitt said.

"More importantly, looking ahead, India's gold market is returning to a more normal environment, as opposed to the volatility that it experienced as the government implemented restrictive policies like the 80:20 rule."
 
Overall demand for jewellery, the biggest segment of gold demand, fell 3 percent in the first quarter, with consumption also declining in Hong Kong, the Middle East, Turkey and Russia.

Partly offsetting the impact of that, gold-backed exchange-traded funds -- investment vehicles which issue securities backed by physical metal -- saw their first quarterly inflow since late 2012 in the first quarter, of 25.7 tonnes.
 
That helped lead to a 4 percent rise in investment demand, despite a drop in buying of small investment products like coins and bars, consumption of which fell 10 percent.

The drop was particularly noticeable in Russia, Turkey, and the Middle East, although Chinese purchases of these products edged higher.

Central bank gold demand was almost unchanged at 119.4 tonnes. On the supply side of the market, gold recycling fell 3 percent while mined gold output edged up 2 percent year on year.

Reference: Jan Harvey

U.S. factory, consumer confidence data darken second-quarter outlook

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U.S. industrial production fell for a fifth straight month in April due in part to a further decline in oil and gas drilling, painting a lackluster picture of economic growth in the second quarter.

The economy's struggle to pick up steam after a dismal first quarter was underscored by other data on Friday showing a sharp drop in consumer confidence in early May and only a mild rebound in factory activity in New York state.

Coming on the heels of weak retail sales and producer inflation data this week, Friday's reports suggest the Federal Reserve will probably not raise interest rates anytime soon.

"It means in the next month or so we are unlikely to see a massive rebound in growth momentum. These are not the numbers that would inspire confidence in the Fed to tighten policy," said Millan Mulraine, deputy chief economist at TD Securities in New York.

Industrial output slipped 0.3 percent after a revised 0.3 percent drop in March, the U.S. central bank said. Economists had forecast industrial production edging up 0.1 percent after a previously reported 0.6 percent fall in March.

A plunge of 14.5 percent in oil and gas well drilling pushed mining production down 0.8 percent last month. It was the fourth straight monthly decline in mining output.

Crude oil prices have fallen by about 50 percent since last June, resulting in a sharp drop in well drilling activity.

Companies like Schlumberger (SLB.N), the world's No. 1 oilfield services provider, and Halliburton (HAL.N) have slashed their capital spending budgets for this year. Caterpillar Inc (CAT.N) has cut its 2015 profit outlook and warned that lower oil prices would hurt its energy equipment business.

"We see a further drop in mining investment over the next few quarters and are not convinced that business investment ex-mining will be strong enough to sufficiently offset this drag," said Michelle Meyer, a senior economist at Bank of America Merrill Lynch in New York.
 
The economy was slammed earlier in the year by bad weather, port disruptions, the strong dollar and deep spending cuts by energy firms.

The government reported last month that GDP expanded at a 0.2 percent annual pace in the first quarter. But trade and inventory data published after the GDP snapshot suggested the economy actually contracted.

In a separate report on Friday, the University of Michigan said its consumer sentiment index fell to 88.6 early this month from a reading of 95.9 in April.

U.S. stock indexes were little changed, while prices for longer-dated U.S. government bonds rose. The dollar fell marginally against a basket of currencies.
 

DOLLAR DAMPENS MANUFACTURING

Last month, utilities production tumbled 1.3 percent, also contributing to the weakness in industrial output. Manufacturing production was unchanged after gaining 0.3 percent in March.

Manufacturing, which accounts for about 12 percent of the economy, has been dampened by the strong dollar. Even as the dollar rally fades, manufacturing is unlikely to rebound much because of the challenges in the energy sector.

In a separate report, the New York Fed said its Empire State general business conditions index rose to 3.09 in May from -1.19 in April, which had been the first negative read for the index since December.
 
Economists polled by Reuters had expected the index to rise to 5.0 this month. A reading above zero indicates expansion.

Manufacturing output in April was restrained by a 0.9 percent drop in machinery production.

Industrial capacity use fell to 78.2 percent last month, the lowest since January of last year, from 78.6 percent in March.

Officials at the Fed tend to look at capacity use as a signal of how much "slack" remains in the economy and how much room there is for growth to accelerate before it becomes inflationary.

Reference: Lucia Mutikani

Friday, 15 May 2015

Bumper European earnings trend built on sound foundations

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European companies have enjoyed their strongest quarter for four years and an improving economic backdrop and a supportive euro currency should ensure that they maintain their momentum.

With more than four fifths of companies in the STOXX Europe 600 index now having reported first quarter results, StarMine data show that 61 percent have met or beaten forecasts. Their earnings have grown by seven percent from the same quarter in 2014.

Telecoms, discretionary consumer goods and energy sectors were among the top performers, with more than 70 percent of those companies meeting or beating analyst predictions in the first three months of the year.

European companies' earnings per share (EPS) are likely to grow by 5.4 percent in 2015, against a rise of 4.6 percent predicted in early March, according to Thomson Reuters Datastream.

Some analysts said the number was likely to go even higher and that forecasts were not fully reflecting the positive trend.

"We are surprised that the consensus number for 2015 earnings growth has not moved significantly higher, given the strength of the tailwinds behind earnings," said Robert Parkes, equity strategist at HSBC Global Research.

"This leaves scope for further upside surprises on earnings in rest of 2015," he added.
 

BRIGHTER ECONOMIC PROSPECTS

The price-to-earnings (PE) ratio for the STOXX Europe 600 index has fallen to 15.7 times from an 11-year high of 16.5 a month ago, Datastream figures show. The index has changed little in the past month, indicating that the decline in the ratio is mainly as a result of a pick-up in earnings expectations.

Although there is some nervousness due to a 7 percent rise in the euro against the dollar since mid-April and a 27 percent recovery in oil prices over the last two months, analysts said the region's brighter economic outlook and improved margins would be the main influences on earnings.
 
"A lot of investors (we've spoken to) have been dismissive of the first-quarter earnings performance, linking it to one-offs, the oil price, foreign exchange," said Emmanuel Cau, strategist at J.P. Morgan.

"But the fact is European growth was much better than expected in the first quarter. Everything is pointing up ... That should be a very healthy backdrop for profit margins."

Cau added that action by the European Central Bank was also starting to have a positive effect on the economy.

The ECB earlier this year announced plans to buy 60 billion euros of bonds per month from March in a programme to run to September 2016 and boost the region's economy.
 
Wednesday's data showed the eurozone grew at its strongest rate since the second quarter of 2013, while France's economy expanded at its fastest pace in two years.

There are some signs that investors are gradually becoming more positive on the earnings prospects. The number of analyst upgrades have overtaken downgrades for the first time this year, with 52 percent analysts upgrading their EPS forecasts for 2015, against 28 percent at the start of the year.

"I am pretty positive on the second quarter earnings as leading economic indicators are pointing towards a gradual recovery in Europe," said Christian Stocker, equity strategist at UniCredit in Munich.

"A recent hike in oil prices and currency moves are not likely to have any material adverse impact on the earnings as many European companies such as airlines tend to hedge oil and the euro is still much weaker than the year-ago level."

Reference: Atul Prakash

Asian shares edge down but poised for weekly rise

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Asian shares edged down slightly but were still on track for a solid weekly rise, as investors awaited more U.S. data later in the session for clues on the timing of the U.S. Federal Reserve's interest rate hike.

MSCI's broadest index of Asia-Pacific shares outside Japan was slightly lower, but still poised to gain about 0.6 percent for the week. Japan's Nikkei stock index added 0.5 percent, set for a 1.5 percent weekly rise.

On Wall Street, all three major indexes gained more than one percent, and the S&P 500 closed at a record after U.S. economic data painted an improving employment picture, but subdued producer price inflation quashed bets that the U.S. central bank would raise interest rates sooner rather than later this year.

"It is some comfort that labor at least seems to be progressing well in Q2," said Elsa Lignos, senior currency strategist at RBC. "But it will take more than one slightly better jobless claims number to turn USD around."

Friday's slated U.S. releases include industrial production for April and the University of Michigan's preliminary May reading on consumer sentiment.

"We never expected the Fed to tighten next month but we were hoping that they would set the stage for a move in September." said Kathy Lien, managing director at BK Asset Management in New York. 
 
"However if data continues to miss, they may refrain from signalling a change in monetary policy three months forward," she said in a note to clients.

The dollar was treading water, trying to stay afloat after sinking to a nearly five-month low on Thursday against a basket of rival currencies.

The dollar index edged down 0.1 percent to 93.391. It fell as low as 93.133 on Thursday, its lowest since late January, pressured by a resurgent euro, which scaled a nearly three-month peak of $1.1445. The common currency last stood at $1.1406, steady from late U.S. levels.
 
The dollar was buying 119.31 Japanese yen, about 0.1 percent higher on the day.

Spot gold traded near a three-month high and was on track for its biggest weekly gain in four months on receding expectations of a U.S. hike, and as the greenback's weakness made it more appealing to investors holding other currencies.

It was down about 0.2 percent on the day at $1,219.30 an ounce but was on track for a weekly rise of more than 2 percent.
 
"Gold's break over the technical 200-day moving average of $1,218 triggered further buying from momentum investors," said HSBC analyst James Steel.

Crude oil futures edged down but were set to end the week slightly higher, buoyed by the weaker dollar, forecasts of lower U.S. crude output, and a pick-up in global demand.

U.S. crude shed about 0.2 percent on the day to $59.74 a barrel but was on track to rise for a ninth week, which would be the benchmark's longest winning streak since 1983.

Front-month Brent was down about 0.1 percent at $66.65 but was on track for a weekly rise, after its 1.6 percent drop last week interrupted a month-long rally.

Reference: Lisa Twaronite

Thursday, 14 May 2015

Dollar sags after weak data, bonds resume retreat

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The U.S. dollar was broadly lower on Thursday after poor U.S. retail sales figures proved a huge disappointment to those expecting a strong American economic rebound from a weather-weakened first quarter.

Spreadbetters expected higher bond yields resulting in a slightly lower open for Britain's FTSE, Germany's DAX and France's CAC.

Investors reacted by pushing back the likely lift-off date for a rate hike by the Federal Reserve, giving gold a steer to five-week highs above $1,218 an ounce.

Yet in a bizarre turn, German and U.S. bond yields still surged to their highest in over five months as a vicious selloff extended to its 10th session.

"Global rates markets have seemingly nowhere to hide," said Bill O'Donnell, head of Treasury strategy at RBS. "Rates flows illustrated that the resolve of sellers is still unyielding."

The startling rise in yields has made equities look more expensive in comparison to debt and kept Asian share markets subdued. Australian, Singaporean and Thai stocks declined, while Chinese and South Korean shares posted modest gains. Japan's Nikkei underperformed and fell 1 percent.

"I think the market is starting to price in an end of super-easy monetary policy around the world," said Takashi Hiroki, chief strategist at Monex Securities in Tokyo.
 
The rise in bond yields would be among the biggest concerns for the market, Hiroki said, noting that U.S. Federal Reserve Chair Janet Yellen and billionaire investor Warren Buffett have warned that stock valuations would be expensive if interest rates rise.

MSCI's broadest index of Asia-Pacific shares outside Japan was virtually flat.

Moves were far wilder in bond markets.

Yields on German 10-year paper jumped to 0.727 percent, the highest close since early December, having been as low as 0.599 percent at one stage on Wednesday.
 
The selling spilled over into markets globally, with 10-year Treasury yields also ending at five-month highs. That performance was all the more bearish given an auction of new paper had drawn strong demand during the session and the data was so disappointing.

Headline U.S. retail sales were unchanged in April as autos and fuel fell back as expected, but what really hurt was that other sectors failed to bounce. The core control measure of sales favored by economists was flat in the month, confounding forecasts for a healthy rise of 0.5 percent.

Investors reacted by pushing back the likely lift-off date for a hike by the Federal Reserve. While Fed officials keep insisting that a hike could come from June onward, markets are not convinced it will be able to move at all this year.

With higher rates seeming ever more distant, investors bailed out of long U.S. dollar positions and took its index down to 93.589 , bringing losses to nearly 7 percent from a 12-year peak of 100.390 set in March.
 
Against the yen, the greenback slid to a two-week trough of 119.03, while the euro came within a whisker of a two-month peak of $1.1392 set last week. It last stood at $1.1362.

A star performer was the New Zealand dollar which flew higher after domestic retail sale data blew away all expectations with a record rise of 2.7 percent.

The kiwi was up at $0.7529 , a dramatic turnaround from a two-month trough of $0.7318 hit earlier in the week.

In commodity markets, oil gave back a little of its recent hefty gains after weak U.S. data raised prospects of lower global demand.

U.S. crude futures were off 19 cents at $60.31 a barrel, while Brent lost 16 cents to $66.65


Reference: Shinichi Saoshiro

Wednesday, 13 May 2015

Trend lines

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Basic Trading Concepts Defined

Trend lines and trend channels are excellent tools for measuring and monitoring market direction and sentiment. Trend lines capture the very core of price movements by connecting multiple hit points which allow Forex traders to distinguish patterns and trends. Forex traders can use trend lines for a wide variety of purposes such as:

1. Capitalize on opportunities in the Forex market

2. Exact trade decisions (entry, stop loss, take profit)

3. Trade management (trail stop loss movement)

4. Monitor for breaks

5. Monitor for bounces

6. Filter out setups with less probability

7. Determine the trend

8. Identify chart patterns

9. Generally as support and resistance levels

 

What is a trend line?

A trend line is a line which connects multiple highs or lows on a chart. The best trend lines have 3 hits or more. A trend line with 2 hits is in theory a potential trend line. When connecting the highs and lows, the trend line either has no angle (horizontal line) or various angles varying from shallow to steep. Read more here about the differences between horizontal and angled trend lines.

 

What is a trend channel?

A trend channel consists of 2 trend lines, one connecting tops and one connecting bottoms. The best channels have 3 hits or more as well; a channel with 2 hits is not yet “established”. The angle of the bottom and the top of the channel are equal to each other.

 

Where to start?

Forex traders need to take the trend line key and start connecting 1 point with another. Usually a bottom is connected with another support point; whereas a top is connected with another resistance point.

The trader can repeat the process and place multiple trend lines on one chart (same pair and time frame); there is really no limit as long as the trader can manage to read and understand the chart. The trader can draw more trend lines on other time frames as well for additional information (if the trader uses multiple time frame analysis). Here is an example of a chart “overloaded” with trend lines:

Forex traders usually use 1-3 trend channels on all time frames. The main reason is practical: channels with parallel lines at the top and bottom are rarer than trend lines because both sides need multiple hits. The process of drawing a channel is the same as drawing a trend line, with one major difference: traders need to check the accuracy of both lines.

Once a Forex trader starts drawing trend lines, the chart could quickly fill up with trend lines in dozens of directions, which defeats the importance of keeping trading simple and effective. In the next section I will show you how to examine trend lines and decide which ones have the most value.

 

Distinguishing better trend lines

There are multiple ways Forex traders are able to identify better trend lines. Here is the list:

1. Relevance or proximity to price

2. Number of hits

3. “Neatness” of a trend line

4. Broken lines

5. Distance between hits

 

Relevance or proximity to price

A trend line that is “miles” away from current price levels is not relevant for current analysis or trade setups and therefore will only clutter the charts. The best practice is to place lines on the chart which are not too far away and have a chance of playing a role in your analysis or plan.

 

Number of hits

Trend lines with 2 hits are usually not interesting unless price is close by. In these cases there is a chance that price will hit the trend line and “respect” it, which in turn creates a 3rd hit (and therefore becomes an “established” trend line). If price is far away then trend lines with 2 hits can be ignored for the time being.

Trend lines with 3 hits or more are the most interesting trend lines. These trend lines are “established”, which means the market confirms the existence of this support or resistance line. These trend lines create decision spots on the charts.

 

Neatness of a trend line

The best trend lines connect the high and lows of candles with each other. However if a Forex trader follows this guideline then many trend lines would have only 2 hits. To increase the number of hits on a trend line, Forex traders need to decrease the neatness of a trend line by not only using highs and lows of candles. This means that trend lines “cut” through part of the candle. Preferably only the wick of a candle is placed beyond the trend line but even placing part of the candle outside the trend line perimeter is acceptable. However, in most cases, placing an entire candle or group of candles on the opposite side of the trend line is not accepted and would make the trend line less valuable.

 

Broken lines

In many cases broken trend lines will eventually be removed but it is a good practice to be patient and leave the broken trend lines on the charts for a while. Often the market retests broken trend lines and they offer extra confluence points.

 

Distance between hits

A new hit on the trend lines is only counted when there is sufficient distance between 2 hits. A new hit is not valid if the candle high or low is too near the previous high and low. In the most extreme example, traders cannot count a trend line to have 2 hits if the candles are next to each other. The fact that both candles hit the trend line counts as 1 hit.

Reference: Chris Svorcik

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