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Tuesday, 31 May 2016

Global shares set for monthly gains, dollar's rally stalls

A worker shelters from the rain as he passes the London Stock Exchange in the City of London at lunchtime October 1, 2008.  REUTERS/Toby Melville/File Photo

Global shares steadied at one-month highs on Tuesday, on track for a third straight month of gain, while the dollar's recent rally to two-month peaks on expectations the U.S. interest rates could rise next month took a breather.

European shares fell, hit by a drop in Volkswagen whose shares retreated after the German carmaker reported first-quarter earnings, although the region's stock markets were set for their best monthly performance since late 2015.

The pan-European STOXX 600 and FTSEurofirst 300 indexes were in the red, having hit peaks in early trade. The broader MSCI world equity index, was up a tad at 1,676.96 points, its highest since late April.

U.S. stock futures pointed to a firm start on Wall Street where trading will resume after the Memorial Day holiday. Earlier, Japan's Nikkei index ended 1 percent higher, extending a 1.4 percent rally in the previous day. It is up 3.4 percent for May, thanks to a subdued yen.

The dollar index, which tracks the greenback against a basket of six major currencies, was flat at 95.524, off a two-month high of 95.968 struck on Monday, but still on track for a 2.6 percent gain for the month -- its best in six months.

The dollar has risen recently on expectations of higher U.S. rates. Fed Chair Janet Yellen said on Friday that the central bank should hike rates "in the coming months" if economic growth picks up and the labor market continues to improve.

"The question for me here is whether the dollar can carry on rallying on the prospect of the Fed raising rates faster over the next 18 months than is priced in, as opposed to rallying only on expectations of a move in June or July," said Kit Juckes, macro strategist at Societe Generale.

Investors are awaiting key data this week before taking fresh positions. May's U.S. private-sector ISM manufacturing data, due on Wednesday, and non-farm payrolls report on Friday will be scrutinized and solid readings could further heighten expectations for a move as soon as the Federal Reserve's next policy meeting on June 14-15.

Economists predict the jobs report will show that U.S. employers added 170,000 jobs, slightly more than they did in April. Hourly wages are expected to show a 0.2 percent increase from the previous month.

CHINESE YUAN EYED

Investors were also keeping an eye on the weakening Chinese yuan with worries about growth in the world's second-largest economy creeping back. The yuan was on track for its second largest monthly fall on record after the central bank softened its midpoint to a 5-year low.

"The prospect of higher U.S. interest rates will, in due course, test both the global markets and China's policy to manage its currency," said Jade Fu, investment manager at Heartwood Investment Management.

"In an environment of dollar strength, the People's Bank of China may well be forced to further depreciate the renminbi, risking the possibility of a one-off currency intervention."

In the commodities sphere, moves in crude oil futures were limited before Thursday's meeting of the Organization of the Petroleum Exporting Countries. Most analysts did not expect any changes in the group's flat-out production.

There was no Monday settlement for U.S. crude futures because of the Memorial Day holiday. They were up 0.5 percent at $49.58, lifted by the start of the peak demand summer driving season in the U.S.

Brent crude futures were lower at $49.36 a barrel, on rising output from the Middle East, but poised for a gain of nearly 3 percent for the month.

Reference: ANIRBAN NAG

Asia shares firm but set for monthly loss

A businessman is reflected in an electronic board displaying Japan's Nikkei share average outside a brokerage in Tokyo, Japan, April 18, 2016.  REUTERS/Toru Hanai

Asian shares recovered from a wobbly start on Tuesday, but remained on track for a monthly loss, while the dollar edged away from recent peaks scaled on expectations the U.S. Federal Reserve will raise interest rates as soon as next month.

MSCI's broadest index of Asia-Pacific shares outside Japan gained 0.4 percent, poised to end the month down 1.9 percent.

Japan's Nikkei stock index slipped 0.5 percent after rallying 1.4 percent in the previous session. It is up 2.9 percent for May, thanks to a tailwind from a weaker yen.

Data released earlier in the session showed Japanese industrial output unexpectedly rose 0.3 percent in April, suggesting production is holding up despite weak exports and the impact from a series of earthquakes that struck southern Japan during that month.

China's CSI 300 gained 2.1 percent and the Shanghai Composite advanced 1.9 percent, on track for monthly losses of 0.7 percent and 2.1 percent respectively.

Hong Kong's Hang Seng index gained 0.9 percent, heading for a decline of 1.2 percent in May.

Underpinning Asian sentiment, European shares hit one-month highs on Monday amid otherwise light trade with markets in London and New York closed for public holidays.

"The focus will be on U.S. data," Bernard Aw, market analyst at IG in Singapore, wrote in a note. "Investors will be keen to see if U.S. data this week will corroborate the Fed’s slightly optimistic tone."

The dollar has surged recently on expectations of higher U.S. interest rates after Fed Chair Janet Yellen said on Friday that the central bank should hike rates "in the coming months" if economic growth picks up and the labour market continues to improve.

Against that backdrop, the May U.S. private-sector ISM manufacturing data, due Wednesday, and non-farm payrolls report on Friday will garner even more attention than usual. Solid readings could further heighten expectations for a move as soon as the Federal Reserve's next policy meeting on June 14-15.

Economists predict the jobs report will show that U.S. employers added 170,000 jobs, slightly more than they did in April. Hourly wages are expected to show a 0.2 percent increase from the previous month.

The dollar index, which tracks the greenback against a basket of six rival currencies, held steady at 95.574, not far from a two-month high of 95.968 and up nearly 2.7 percent for the month.

Against the yen, the dollar was little changed at 111.080. But it rose to as high as 111.455 in the previous session, its loftiest peak in a month, and is on track to notch a gain of 4.4 percent in May.

The euro was also flat at $1.11470 but hovered near a 2-1/2 month low of $1.1097 hit in the previous session. It is set to end the month 2.7 percent lower.

Moves in crude oil futures were limited ahead of Thursday's meeting of the Organization of the Petroleum Exporting Countries. Most analysts did not expect any changes in the group's production.

There was no Monday settlement for U.S. crude futures because of the U.S. Memorial Day holiday. They were up 0.5 percent at $49.55 on Tuesday, lifted by the start of the peak demand summer driving season in the U.S. They are set for an 8 percent jump in May.

Brent crude futures were steady at $49.73 a barrel, poised for a gain of 3.3 percent for the month.

While a softer dollar on Tuesday gave gold a boost, the recent recovery in risk sentiment pushed the precious metal to its biggest monthly decline since November.

Spot gold climbed 0.7 percent to 1,213.00 per ounce, but was headed for a slide of 6.2 percent for the month.

Reference: LISA TWARONITE

Monday, 30 May 2016

European shares hit one-month high, dollar firms on Yellen's hike hint


European shares hit one-month highs on Monday, while the dollar index rose to a two-month peak after Federal Reserve Chair Janet Yellen suggested that an interest rate hike in the United States may be around the corner.

The Fed should raise rates "in the coming months" if growth picks up and the labour market continues to improve, Yellen said on Friday. St. Louis Fed President James Bullard chimed in, saying on Monday, global markets appear to be "well-prepared" for a summer rate hike, although he did not specify a date for the policy move.

The probability of a rate increase at the Federal Open Market Committee's June 14-15 meeting rose to around 34 percent from 26 percent on Thursday, according to CME's Fedwatch programme. Bets on an increase at the July 26-27 policy meeting edged up to 60 percent, more than double the level of a month ago.

Against a basket of currencies, the dollar was up 0.4 percent at 95.879, while the euro struggled near 2-1/2 month lows of $1.1097 hit in the Asian session.

The euro zone's blue-chip Euro STOXX 50 index was 0.1 percent higher, while Germany's DAX was up 0.3 percent, hitting a one-month high. Trading volumes are expected to be thin as the London and New York markets are closed for a public holiday.

While higher U.S. interest rates would sap global liquidity, Wall Street and European investors took Yellen's comments in their stride, as they suggested the world's largest economy was strong enough to weather another rate hike, following from the December hike.

"The return to U.S. rate hike expectations have reopened the possibility of short-term outperformance for European stocks," said Didier Duret, global chief investment officer at ABN-AMRO Private Banking, adding investors were keeping an eye on the dollar for it to break recent ranges.

The rise in European markets came after Japan's Nikkei stock index ended up 1.4 percent, as the yen weakened to a one-month low and expectations rose that the government would delay a sales tax hike scheduled for April next year.

Japanese Prime Minister Shinzo Abe said he would delay the increase by 2-1/2 years, Masahiko Komura, vice president of the ruling Liberal Democratic Party, told reporters on Monday, echoing what a government source told Reuters on Sunday.

One uncertainty, however, is how markets would react if a postponement of Japan's sales tax hike were to lead to a downgrade of the country's sovereign rating.

"What would be scary is if there were to be a downgrade. I think equities would fall if that happens. That remains a risk," said Satoshi Okagawa, senior global markets analyst for Sumitomo Mitsui Banking Corporation in Singapore.

EYES ON US DATA

This week investors will keep an eye on the all-important U.S. non-farm payrolls and the Institute for Supply Management surveys. The May jobs report is due on Friday and a solid reading could heighten expectations for a June move.

Economists expect U.S. employers to have added 170,000 jobs this month, slightly more than they did in April. Hourly wages are expected to show a 0.2 percent increase from the previous month.

Crude oil futures remained shy of the $50 per barrel level after marking weekly gains, feeling some pressure from the stronger U.S. dollar that made it more expensive for holders of other currencies.

Brent crude slipped to $49.10 a barrel, after gaining 1 percent last week. U.S. crude was down 0.3 percent at $49.18 after rising about 3 percent for the week.

The dollar's strength took a toll on spot gold, which dropped 0.9 percent to $1,201 an ounce. It plumbed a low of $1,199.60 earlier in the day, its lowest since late February.

Reference: ANIRBAN NAG

FTSE set for biggest weekly gain since mid-April

A worker shelters from the rain as he passes the London Stock Exchange in the City of London at lunchtime October 1, 2008.  REUTERS/Toby Melville/File Photo

The FTSE 100 was set for its biggest weekly gain for six weeks on Friday, trading flat and consolidating recent gains after a sharp rally to a one-month high.

The commodity-heavy FTSE 100 .FTSE was up 1.7 percent on the week, buoyed by an oil price rally to more than $50 a barrel for the first time this year, as well as a rise in banks.

The index hit its highest level since April 29 on Thursday having risen more than 2 percent in three days.

The FTSE 100 was down 5 points, or 0.1 percent, at 6,260.65 by 0723 GMT, having broken out of a 220-point range that has persisted for most of May.

Some have cited the declining chance of Britain leaving the EU in a referendum next month, according to recent polls, as supporting recent gains, although the persistent uncertainty has subdued investment in British assets.

Traders said a speech by Federal Reserve Chair Janet Yellen later in the day might be the next catalyst for markets.

"We've had a decent move upwards over the last week or so, helped by the rise in crude above 50 bucks. But if some of these commodity-related stocks and financials start to tail back off again, then the overall market could drift heading into the weekend," TJM Partners head of trading, Manoj Ladwa, said.

"With the headwinds of a possible interest rate hike from the Federal Reserve, and the EU referendum in June, there might not be a huge amount of new money coming into the market."

The source of much of the strength of this week, oil & gas stocks failed to make much headway. Oil futures slipped back from $50 a barrel, on concerns that higher prices could reactivate shuttered crude output.

The biggest faller on the index was outsourcing firm Capita (CPI.L), down 2 percent after it was cut to "underperform" by Exane BNP Paribas.

The top risers were in the mining sector which rose 1.2 percent, helped by a slight rebound in copper from substantial falls so far this month.

Reference: ALISTAIR SMOUT

Friday, 27 May 2016

Global funds raise cash, bond holdings on Brexit, Fed fears

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., May 9, 2016. REUTERS/Brendan McDermid/File Photo

Global investors have raised their holdings of cash and bonds, citing fears about potential shock waves from a Brexit vote rippling beyond Britain and the increased likelihood of a rise in U.S. interest rates this summer.

Fund managers polled by Reuters in the United States, Europe, Britain and Japan raised cash allocations to 6 percent in May, the highest level since January when global equity markets were in free-fall. They also increased their bond exposure to 37.8 percent from 37.6 percent in April.

The monthly poll showed that investors trimmed their equity allocation to 46.4 percent, citing worries about Britain's June 23 referendum on membership of the European Union, and the growing expectation that the U.S. Federal Reserve would raise interest rates in June or July.

"Over the short term, the greatest risk is a Brexit," said Nadege Dufosse, head of asset allocation at Candriam, arguing that while the strongest impact would be on euro zone and UK equities, a global "risk off" move was also likely.

"Brexit risk is at the top of our geopolitical concerns and we believe it may have a material impact on European risk assets," agreed Giordano Lombardo, group chief investment officer and chief executive of Pioneer Investments.

"We prefer to keep a cautious stance."

The survey of 58 fund managers and chief investment officers was conducted between May 16 and May 25.

During this period, online and telephone polls of UK voter intentions for the upcoming referendum on EU membership have given differing accounts of support for the 'Leave' and 'Remain' camps. This has clouded the view for investors, especially with a significant number of voters seemingly still undecided.

In the Reuters asset allocation poll, 20 out of 22 respondents who expressed a view thought that a victory for the 'Leave' camp would have repercussions beyond UK markets, hammering European stocks and the euro.

Several respondents worried that a vote to leave could set a bad precedent, bolstering anti-EU forces across the continent.

"Both European equities and the euro will face a major structural challenge that will undermine the foundations of the integration process in Europe," said asset allocators at Unigestion.

Although some managers thought that downside risks were already factored in, others, such as Peter Lowman, chief investment officer at UK-based wealth manager Investment Quorum, reckon financial markets are still underplaying Brexit risks.

"Short term, an exit is likely to affect global market sentiment," he said, adding this could explain the reduction in equity exposure of the last few weeks.

HAWKISH FED?

Investors are also cautious as the U.S. Federal Reserve is expected to raise interest rates this summer following more hawkish comments from Fed policymakers in recent days, and an improvement in U.S. economic data.

As recently as early May, a Fed rate hike in June seemed off the agenda, but that probability now stands around 26 percent, according to the CME Group's FedWatch calculator, while market participants see a 50-50 chance of a July move.

As the Reuters poll was carried out during the period when Fed policymakers were signaling a more hawkish stance, it is perhaps not surprising that 87 percent of respondents who expressed a view expected the Fed to raise rates in 2016 after standing pat since December.

"We expect a June or July rate hike with another toward the end of the year," said Trevor Greetham, head of multi-asset at Royal London Asset Management.

"The U.S. economy is picking up again according to business surveys, the unemployment rate is low and inflation is likely to rise in the second half of the year on oil price base effects."

Some investors expressed fears that Yellen may have to tighten policy more quickly than expected if U.S inflation begins to pick up in earnest.

ON EDGE

Within global equity portfolios, investors raised U.S. equity exposure to 39 percent, the highest since November 2015, and held UK equities steady at 11.1 percent.

They cut Japanese stock holdings by 2.7 percentage points to 18.1 percent, the lowest since November 2015, whilst slightly raising euro zone equities to 18.8 percent.

However, fund managers said it was difficult to get too bullish given sluggish economies and volatile politics in emerging and developed markets.

"We have a backdrop of rather modest corporate profitability, and valuations in some sectors or markets which appear quite fully valued," said Mark Robinson, chief investment officer at wealth manager Bordier & Cie (UK). "It is therefore not surprising to see markets on edge."

Developed stocks have had a decent run since the February trough, and in May the S&P 500 .SPX is up around one percent and European equities .FTEU3 have risen almost two percent. But emerging markets .MSCIEF are faltering, having shed more than 3 percent in May.

"We don't see many catalysts for further sustained rallies of risk assets in this phase," said Pioneer's Lombardo. "Global economic growth is decent, but not impressive, and fiscal policy, which could be a positive catalyst, is still too timid."

Reference: CLAIRE MILHENCH

Asia stocks edge up after U.S. data, dollar consolidates month's gains

Employees of the Tokyo Stock Exchange (TSE) work at the bourse in Tokyo, Japan, February 9, 2016. REUTERS/Issei Kato

Asian stocks pulled ahead on Friday after U.S. data continued to put the economy in a positive light, while the dollar was on the defensive against major peers.

MSCI's broadest index of Asia-Pacific shares outside Japan gained 0.2 percent to a two-week high. The index was on track to rise 2.2 percent this week.

Japan's Nikkei .N225 nudged up 0.4 percent, buoyed by prospects of Tokyo delaying a sales tax hike, helping to extend gains for the week to 1.5 percent.

China and Shanghai Composite .SSEC indices both slipped by 0.1 percent, set for declines of 0.6 percent and 0.3 percent respectively for the week.

The Hong Kong Hang Seng index .HSI was also down 0.3 percent, but remains on track for a jump of 2.4 percent for the week.

The Dow Jones Industrial Average .DJI inched down 0.1 percent and the S&P 500 .SPX ended flat overnight after rising strongly for two days as advancing utilities offset declines in materials, banks and other cyclical industries.

U.S. data on Thursday showed durable goods orders, pending home sales and initial jobless claims coming in strong, while capital goods orders and the Kansas City Fed manufacturing survey were weak.

"The markets have been attentive to clues on U.S. economic conditions. Positive data will signal that conditions may be ripe for a rate hike as soon as in the June Federal Open Market Committee (meeting)," said Bernard Aw, market analyst at IG in Singapore.

"Market participants will be hyper-sensitive to U.S. data, with next week's inflation data and employment data to be scrutinised," he said.

The dollar rose 0.2 percent to 109.92 yen JPY= after losing 0.4 percent overnight. It is on track for a fall of 0.2 percent for the week.

The euro treaded water at $1.1183 EUR= following Thursday's 0.3 percent gain, but is set for a weekly loss of 0.4 percent.

The dollar index was nearly flat at 95.236 .DXY after slipping 0.3 percent overnight, pulling away from a two-month high of 95.661 scaled on Wednesday. It's poised for a 0.1 percent loss for the week, but up 2.3 percent this month.

The greenback had rallied earlier in the week on growing expectations the Federal Reserve will raise interest rates as soon as June or July, supported by a series of comments from Fed officials seemingly backing such a move.

The financial markets are now looking to the revisions of U.S. first quarter GDP data and comments from Fed Chair Janet Yellen at a Harvard University-sponsored event later on Friday.

"Given the uniformity of comments from policymakers, we don't think Yellen will throw cold water on rate hike expectations and could in fact reinforce them," wrote Kathy Lien, managing director of FX strategy at BK Asset Management.

"Economists are also looking for first quarter GDP growth to be revised higher so today's pullback in the dollar should be temporary."

The Australian dollar slipped after rising overnight on a modest upgrade in domestic capex data. The Aussie, which fell to a near three-month low of $0.7145 on Tuesday amid a slide in commodities, was last down 0.1 percent at $0.7216 AUD=D4.

In commodities, crude oil went into consolidation mode after prices hit $50 a barrel overnight for the first time in seven months.

Brent crude was down 0.8 percent at $49.21 a barrel after surging to as high as $50.51 on Thursday. It's headed for a 1 percent gain for the week.

U.S. crude also slipped 0.4 percent to $49.13 after climbing to as $50.21 in the previous session, and is set for a weekly rise of 2.9 percent.

Wildfires in Canada's oil sands area, unrest in the Nigerian and Libyan energy sectors, and a near economic meltdown in OPEC member Venezuela have knocked out nearly 4 million barrels per day in immediate production, sparking a buying frenzy in crude futures.

The rise in risk appetite this week has weighed on gold, with the precious metal headed for its biggest decline in nine weeks.

Spot gold XAU= slipped 0.6 percent to $1,213.10 per ounce, close to an eight-week low of 1,211.30 seen earlier in the session, and on track for a slide of 3.1 percent for the week.

Reference: Shinichi Saoshiro

Thursday, 26 May 2016

Don't lie, don't cheat, don't start rumors, says new FX code

Currency signs of Japanese Yen, Euro and the U.S. dollar are seen on a board outside a currency exchange office at Narita International airport, near Tokyo, Japan, March 25, 2016.  REUTERS/Yuya Shino

New FX Conduct Code

The first global code of conduct for currency trading has banned dealers from lying and starting false rumors as part of a raft of new guidelines aimed at rebuilding trust in the world's biggest financial market.

The document, launched on Thursday after evolving from a handful of regional codes used previously, focuses largely on the detail of how banks deal with clients' orders and what market participants can and cannot say to one another.

On those issues alone, it includes dozens of individual directives organized under 11 broader "principles", as well as an extended annex of specific examples of appropriate and inappropriate formulas for discussing market moves.

But it leaves the big issue of governance, and how the code will be policed, for further work over the next year. The issue of high-speed electronic trading, which has changed the face of the industry over the past decade, is also left for later.

The code is part of the industry's response to charges of market manipulation and misuse of confidential customer order information which saw seven of the world's top banks fined around $10 billion at the end of a huge global inquiry last year.

"The foreign exchange industry has suffered from a lack of trust," Reserve Bank of Australia Assistant Governor Guy Debelle, who chaired the panel of 21 central banks working on the document since last July, told reporters on a conference call. "The market needs to rebuild that trust."

Sharing of confidential client order information via FX traders' electronic chatrooms with names such as "The Cartel" and "The Bandits' Club", particularly around the benchmark currency rates known as the 4 o'clock London fix, was central to the scandal.

On top of the bank fines, dozens of traders were fired and the setting of daily market benchmarks was rethought.

But many traders say that the resulting fear of talking freely about the market has increased the risk of trading and discouraged some of the speculation which made the market able to swallow large orders easily without volatile moves in prices.

The code specifies, for example, that information contained in banks' research can only be shared after it is published, and client order information can only be shared "sensitively" and if there is a "valid reason" for doing so.

MARKET COLOR

Perhaps the most nebulous area of communication surrounds "market color", which traders have said in the past led to banks and clients revealing details of particular orders which were moving currencies at a given time.

Whether banks' senior management and even Bank of England officials condoned this degree of information-sharing has been a grey area in the row over market manipulation, and formed part of a number of traders' defense cases.

According to the Code, the seeking and sharing of market color is appropriate as long as it is "properly aggregated or anonymized and restricted to seeking information on market liquidity and sharing market views and opinions without disclosing specific trading positions or intention to trade."

Discussion of broad types of clients is appropriate, but use of language that would allow the listener to deduce the identity of the client concerned is not.

Among other things, participants are also expressly banned from lying to others or starting rumors about reasons for market moves that they know to be untrue, in aid of moving the broader market.

David Puth, head of global settlement bank CLS and chair of the panel of 35 banks and other participants who contributed to the work, told Reuters he hoped the code would allow the $5 trillion a day market to grow again after a static three years hampered by doubts over what is allowed and what isn't.

"I hope the work we have done will lead to an (overall) increase in volume. It is certainly a goal and I do feel that the code will lead to a more smooth-flowing market," he said.

Reference: Patrick Graham

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Wall Street rallies as higher oil boosts energy stocks

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., May 24, 2016.  REUTERS/Brendan McDermid

Wall Street opened higher on Wednesday, extending gains from Tuesday, as oil prices rose and investors got more comfortable with the prospect of an interest rate hike as early as this summer.

Oil rose toward $50 a barrel on Wednesday for the first time in seven months on expectations of shrinking supply due to well fires in Canada and other disruptions.

Comments from policymakers in recent days have raised expectations of a rate hike in June, much sooner than previously thought.

"We've had some good economic data and investors are coming around to the fact that higher rates in a small measured dose isn't the end of the world, but is a measure of confidence in the economy," said Andre Bakhos, managing director at Janlyn Capital LLC in Bernardsville, New Jersey.

Traders are now pricing in a 37.5 percent chance for a June rate hike, up from just 4 percent last week, according to CME Group's FedWatch tool.

At 9:36 a.m. ET (1336 GMT) the Dow Jones industrial average .DJI was up 93.58 points, or 0.53 percent, at 17,799.63, the S&P 500 .SPX was up 10.14 points, or 0.49 percent, at 2,086.2 and the Nasdaq Composite .IXIC was up 17.40 points, or 0.36 percent, at 4,878.46.

Nine of the 10 major S&P sectors were higher, with the energy index's .SPNY 0.76 percent rise leading the gainers.

Oil majors Exxon (XOM.N) and Chevron (CVX.N) were up about 0.7 percent.

So far in 2016, the S&P 500 is up about 2 percent, while the Nasdaq is down 3 percent.

Wall Street surged more than 1 percent on Tuesday and the Nasdaq had its strongest day in three months.

Fed speakers scheduled to speak later on Wednesday include Federal Reserve Bank of Philadelphia President Patrick Harker, Minneapolis Fed Chief Neel Kashkari and Dallas Fed Chief Robert Kaplan.

Easing concerns over several major global risks helped stock markets worldwide rise robustly for a second day.

Traders say several polls show Britain will vote strongly to stay in the European Union, while Euro zone finance ministers agreed with Greece and the International Monetary Fund on a deal that will address Athens' requests for debt relief.

Shares of Computer Sciences (CSC.N) soared 31.9 percent to $47.10 after Hewlett Packard Enterprise (HPE.N) said it would spin off and merge its struggling IT services business with the company. Hewlett Packard Enterprise was up 12.6 percent at $18.24.

Alibaba Group (BABA.N) was down 2.6 percent at $78.89 after the company said it was being investigated by the U.S. SEC over whether its accounting practices violated any federal laws. Yahoo (YHOO.O), in which Alibaba own a stake, was down 2.2 percent at $36.68.

Sarepta Therapeutics (SRPT.O) jumped 24 percent to $22.87 after the FDA delayed its decision on the company's muscle-wasting drug.

Apparel retailer Express (EXPR.N) slumped 15.2 percent to $13.59 after its results missed expectations.

Advancing issues outnumbered decliners on the NYSE by 1,884 to 735. On the Nasdaq, 1,437 issues rose and 717 fell.

The S&P 500 index showed 24 new 52-week highs and no new lows, while the Nasdaq recorded 44 new highs and five new lows.

Reference: TANYA AGRAWAL

Wednesday, 25 May 2016

Global stocks climb as Brexit, Grexit risks ease

People walk through the lobby of the London Stock Exchange in London, Britain August 25, 2015.  REUTERS/Suzanne Plunkett/File photo

Easing concerns over several major global risks helped stock markets rise robustly for a second day on Wednesday, underpinned by gains in oil and metals prices and data showing the U.S. economy can deal with a hike in interest rates.

Traders say several polls showing Britain will vote strongly to stay in the European Union in a referendum in June have done more than just support sterling, up 5 percent in trade-weighted terms from lows hit in April.

A new debt deal for Greece also looked to have headed off the risk of another round of uncertainty over its finances and even its future in the euro zone after a funding crisis a year ago, pushing European stock markets higher across the board.

"The agreement should ensure that Greece remains little source of negative headline risk throughout the rest of the year," Deutsche Bank analysts said in a note.

"The big question over the next 12 months is how quickly capital controls can be lifted and the economy can gradually return toward a path to normality."

Greek banks .FTATBNK were up about 1 percent, while the European banking index .SX7P rose 2 percent. Shares in Alpha Bank (ACBr.AT), Eurobank Erasias (EURBr.AT), Caxiabank  and Deutsche Bank rose between 1.8 percent and 4.4 percent.

The chances of a June or July rise in U.S. interest rates, close to zero at the start of the month, have revived in the past 10 days, boosting the dollar and again raising the issue of how able financial markets globally are to absorb the increase.

MSCI's broadest index of Asia-Pacific shares outside Japan, however, rose 1.8 percent, their best one-day gain since late March. Japan's Nikkei .N225 closed up 1.6 percent as exporters got a boost from a weaker yen.

Hong Kong's Hang Seng index .HSI gained 2.4 percent, but China shares surrendered early gains and slipped into the red amid concerns about sluggish growth in the world's second-largest economy.

Policy sensitive two-year U.S. notes were yielding 0.9264 after rising to a 10-week high of 0.930 percent and upbeat U.S. home sales supported the view that the economy there at least may be strong enough to deal with a rise in rates.

Several bookmakers shortened the odds on Britain voting to stay in the European Union to 1/7, indicating around an 85 percent chance of that outcome. Sterling touched a 3-week peak of $1.4665 in response, while implied volatilities on sterling options GBPVOL= fell to their lowest in almost a month.

The dollar was steady against a basket of currencies, close to a two-month high. .DXY

"If the UK votes to remain it would give the green light for the Fed to resume rate hikes in July assuming that they haven’t already raised rates before the referendum," said Lee Hardman, a currency strategist with Bank of Tokyo-Mitsubishi in London.

Many emerging market currencies felt the dollar's heat but the Turkish lira jumped 1.6 percent off near four-month lows on Tuesday after investor-friendly deputy prime minister Mehmet Simsek kept his post in the government.

Oil held firm, helped by a rise in overall risk appetite and expectations of a drawdown in U.S. crude inventories.

U.S. crude futures CLc1 rose 1.3 percent to $49.25 per barrel, having hit a 7-1/2-month high of $49.45. Brent crude futures LCOc1 gained 1.3 percent to $49.24 per barrel.

Reference: PATRICK GRAHAM

Dollar nears 10-week high on Fed views; global stocks rally



The dollar hit is highest against the euro in nearly 10 weeks on Tuesday, while U.S. bond prices dipped as expectations grew that the Federal Reserve could raise interest rates soon.

Surprisingly strong data on U.S. new home sales in April supported the view the economy may be strong enough for the Fed to raise interest rates as early as June.

Last week, the Fed surprised investors when the central bank's meeting minutes opened the door to a rate hike as early as June.

World stock indexes rallied, led by shares of financial companies, which benefit from rising interest rates, as well as technology and other growth-oriented sectors.

The euro was down 0.7 percent against the dollar at $1.1136 and hit its lowest level since March 16.

"A re-pricing of Fed tightening expectations is the principal driver of the U.S. dollar's resurgence," said Richard Franulovich, senior currency strategist at Westpac Banking Corp in New York. "Markets will wax and wane, but generally speaking, the thrust will be towards dollar gains."

MSCI's all-country world stock index  was up 1 percent, while the pan-European FTSEurofirst 300 index .FTEU3 of leading regional stocks ended up 2.3 percent.

The Dow Jones industrial average .DJI was up 246.88 points, or 1.41 percent, to 17,739.81, the S&P 500 .SPX had gained 31.39 points, or 1.53 percent, to 2,079.43 and the Nasdaq Composite .IXIC had added 99.63 points, or 2.09 percent, to 4,865.42.

While higher borrowing costs can be a negative for the stock market, equity investors may be hopeful about prospects for the broader U.S. economy.

"I think investors are becoming more comfortable with an early rate hike because even if the Fed does raise rates in June, it will remain extremely accommodative," said Art Hogan, chief market strategist at Wunderlich Securities in New York.

In the U.S. Treasury market, the rally in stocks and robust new home sales data weighed on bond prices. The two-year yield touched two-month highs, but prices bounced off session lows after robust demand at a $26 billion note auction.

Benchmark 10-year Treasury notes were down 5/32 in price for a yield of 1.859 percent, up 2 basis points from Monday.

Investors will watch Fed Chair Janet Yellen's appearance at a panel at Harvard University on Friday, the same day as they take in a revised estimate of U.S. first-quarter growth.

Oil prices gained as investors awaited crude oil inventory data from the United States that was expected to show a shrinking supply overhang.

Brent futures rose 61 cents to $48.96 a barrel, while U.S. crude futures rose more than 1 percent to settle at $48.62 a barrel.

The strong dollar took a toll on gold, which fell to a four-week low. Spot gold was down 0.9 percent at $1,236.81 an ounce, off a session low of $1,235.35.

Reference: CAROLINE VALETKEVITCH

Tuesday, 24 May 2016

Risk aversion shores up yen, commodity currencies sag on declining oil

Japanese 10,000 yen notes line up in Tokyo, in this February 28, 2013 picture illustration.  REUTERS/Shohei Miyano/File Photo

The yen held on to gains on Tuesday, shored up by investors' risk aversion and receding expectations that Japan will weaken the currency after a fresh warning by the United States last week against intervention.

Commodity-linked currencies such as the Australian and Canadian dollars were on the back foot, weighed down by a continuing decline in commodities like crude oil.

The euro treaded water at 122.545 yen EURJPY=R after sliding 0.8 percent overnight.

The dollar was nearly flat at 109.350 yen JPY=, having fallen to as low as 109.120 on Monday when it shed nearly one percent.

The greenback had risen to a three-week high of 110.590 late last week as prospects of the Federal Reserve hiking interest rates as early as June were revived.

But the dollar has given back a large part of its gains to the yen after a weekend G7 meeting of central bankers and finance ministers concluded with the United States warning Japan against intervening to weaken the yen, a rift that is perceived as preventing Tokyo from acting.

Dollar/yen showed little response after Japanese Finance Minister Taro Aso said in parliament that it would be good if the pair settled around 109 yen.

A decline in global equities at the start of the week has given an added lift to the safe-haven yen, which recently soared to an 18-month high of 105.55 to the dollar after the Bank of Japan stood pat on monetary policy.

Hawkish comments from Fed officials overnight such as St. Louis Fed President James Bullard and San Francisco Fed President John Williams have done little to support the dollar against its Japanese counterpart.

"The yen gained as risk aversion overcame the Fed officials' hawkish views. Upward pressure on the yen was stronger due to weaker stocks and falling commodities," said Junichi Ishikawa, FX analyst at IG Securities in Tokyo.

"That said, the dollar index has stood tall overall amid a significant rise in the two-year U.S. Treasury yield. Trades preparing for a potential Fed rate hike in June are likely to continue."

For further clues on the likelihood of a U.S. rate hike in June or July, the markets will sift through comments from Fed Chair Janet Yellen, who is due to speak on Friday at a Harvard University-hosted panel event.

In addition to the prospect of the U.S. central bank raising rates, the dollar could also look to BOJ monetary policy for potential support.

"There is a good probability of the yen being sold on expectations toward the BOJ easing at the June 15-16 policy meeting. And with the market again trying to price in the possibility of a Fed hike in June or July, monetary policy divergence is likely to become a temporary theme," wrote Shusuke Yamada, chief FX strategist at Bank of America Merrill Lynch in Tokyo.

The greenback fared better against its other peers amid expectations the U.S. central bank would tighten monetary policy sooner than the markets had expected.

The euro inched down 0.1 percent to $1.1211 EUR=, edging back toward a seven-week trough of $1.1180 struck last Thursday.

The dollar index was effectively unchanged at 95.318 .DXY, not too far from a two-month high of 95.502 touched last week.

The Australian dollar dipped 0.4 percent to $0.7196 AUD=D4, hovering just above a 2-1/2-month low of $0.7175 plumbed last week.

The Canadian dollar stood near C$1.3174 per dollar CAD=D4, a six-week trough hit on Monday.

U.S. crude oil CLc1 has slid for the past four sessions on the back of a stubborn global glut.

The Nikkei .N225 lost 0.7 percent and MSCI's broadest index of Asia-Pacific shares outside Japan  fell 0.4 percent.

Reference: SHINICHI SAOSHIRO

Asian stocks near 11-week lows, dollar bounces on Fed rate view

A woman clad in a kimono is reflected in an electronic board displaying Japan's Nikkei share average outside a brokerage in Tokyo, Japan, April 18, 2016. REUTERS/Toru Hanai

Asian shares stumbled to near 2-1/2-month lows on Tuesday and the U.S. dollar pared some of its recent losses as investors worried about the likelihood of a U.S. interest rate increase in coming weeks.

MSCI's broadest index of Asia-Pacific shares outside Japan slid 0.5 percent, taking its losses to more than 7 percent so far this month and nearing its lowest levels since March 9.

Financial spreadbetters at IG expected Britain's FTSE 100 .FTSE to open 0.3 percent lower, Germany's DAX .GDAXI 0.2 percent and France's CAC .FCHI 0.4 percent.

"The market seems to be taking a cautious stance ahead of the Fed Chair Janet Yellen's speech later this week," said Jung Sung-yoon, a foreign exchange analyst at Hyundai Futures.

A string of comments in recent weeks by Federal Reserve officials and minutes of the last Fed meeting have put a possible rate hike firmly on the table for June or July, reviving the dollar but cooling appetite for riskier assets, even if markets are not totally convinced a tightening will come so soon.

Philadelphia Fed President Patrick Harker said on Monday that a hike in June is appropriate unless data weakens, while St. Louis Fed President James Bullard said holding rates too low for too long could cause financial instability.

With economic growth across emerging markets showing fresh signs of flagging - ratings agency Moody's expects growth in G20 emerging markets to ease to 4.2 percent in 2016 compared to 4.4 percent last year - investors are growing more bearish on the outlook for stocks.

Shares in China .SSEC and Japan .N225 led regional markets down with 0.7 percent losses each, though some investors were wary of chasing markets lower after their recent retreat.

Yang Hai, analyst at Kaiyuan Securities, said trading will likely remain dull for a while as economic sluggishness discourages investor participation.

"The current economic environment doesn't justify a sustainable rebound. In addition, regulators are reducing leverage in the asset management industry so money is not flowing in."

The dollar trimmed some of its losses against the yen after skidding nearly 1 percent in the previous session to a low of 109.12. It was last up 0.04 percent at 109.40 yen JPY=, moving back toward Friday's three-week high of 110.59.

Data on Monday showed Japan posted a trade surplus for the third consecutive month, and a Group of Seven finance ministers' meeting concluded on Saturday with a U.S. warning to Japan against intervention to weaken the yen.

But overall, the dollar was bolstered by growing bets that the Fed was gearing up to raise interest rates sooner than many investors had expected, despite signs of persistent global weakness.

"The yen gained as risk aversion overcame the Fed officials' hawkish views. Upward pressure on the yen was stronger due to weaker stocks and falling commodities," said Junichi Ishikawa, FX analyst at IG Securities in Tokyo.

"That said, the dollar index has stood tall overall amid a significant rise in the two-year U.S. Treasury yield. Trades preparing for a potential Fed rate hike in June are likely to continue."

Fed Chair Janet Yellen will appear at a panel at Harvard University on Friday, a day on which investors will also see the second estimate of U.S. first-quarter growth. Markets also await comments from other Fed officials this week, as well as data on new home sales, durable goods orders and consumer sentiment.

The dollar index, which tracks the U.S. unit against a basket of six major counterparts, was up a shade at 95.33, still within sight of Thursday's peak of 95.520, its loftiest level since March 29.

The euro edged down 0.1 percent to $1.1210 EUR=, holding above last week's low of $1.1180, its weakest since late March.

Crude oil futures stabilised after dropping on Monday as Iran vowed to ramp up output and as the number of rigs drilling for crude in the United States held steady after declining for eight straight weeks.

U.S. crude CLc1 slipped 0.2 percent to $47.91 a barrel, while Brent was off 0.3 percent at $48.21.

Reference: SAIKAT CHATTERJEE

Monday, 23 May 2016

Wall Street opens flat as focus turns to Fed speakers

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., May 16, 2016.  REUTERS/Brendan McDermid

Wall Street opened little changed on Monday as investors awaited speeches by U.S. Federal Reserve officials this week for clues on the timing of the next interest rate increase.

The Fed surprised investors when the central bank's minutes released last week opened the door to a rate hike in June, roiling financial markets.

San Francisco Fed President John Williams said on Monday that two-to-three rate hikes this year were reasonable and that inflation was on track to meet the Fed's goal of 2 percent in the next year or two.

St. Louis Federal Reserve President James Bullard also said a relatively tight labor market in the United States may put upward pressure on inflation, raising the case for higher interest rates.

The probability for a June rate hike rose to 30 percent on Friday from about 4 percent at the start of the week, according to CME Group's FedWatch site.

"Focus remains on the Fed's next move and as you take a look at all the economic indicators we got last week, it certainly suggests that the economy is improving," said Peter Cardillo, chief market economist at First Standard Financial in New York.

"This is going to keep the market in a tight trading range."

At 9:37 a.m. ET (1337 GMT) the Dow Jones industrial average .DJI was down 16.84 points, or 0.1 percent, at 17,484.1, the S&P 500 .SPX was down 1.75 points, or 0.09 percent, at 2,050.57 and the Nasdaq Composite .IXIC was up 8.23 points, or 0.17 percent, at 4,777.79.

Apple's (AAPL.O) 1.3 percent rise provided the biggest boost to the Nasdaq.

Six of the 10 major S&P sectors were higher, with the material index's SPLRCM 0.83 percent rise leading the gainers.

Monsanto (MON.N) rose 6.8 percent to $108.11 after German drugs and crop chemicals group Bayer (BAYGn.DE) offered to buy the U.S. seeds company for $62 billion in cash.

Philadelphia Fed chief Patrick Harker speaks on the economic outlook in Philadelphia at 6:30 p.m. ET.

This week will see Fed speakers, including Fed Chair Janet Yellen, present their views on the economy that could provide more clarity on the pace of rate hikes.

The S&P 500 eked out gains last week after three straight weeks of losses, while the Nasdaq snapped a four-week losing streak on Friday. Despite gains, the Dow ended its fourth consecutive week in the red.

Brent oil prices fell for a fourth consecutive session on Monday after Iran insisted it would not freeze crude output, returning investor attention to a global glut. [O/R]

Tribune Publishing (TPUB.N) fell 12.7 percent to $12.42 after it rejected Gannett's (GCI.N) latest takeover offer.

American Capital (ACAS.O) was up 2.4 percent at $16 after investment company Ares Capital (ARCC.O) said it would buy the company in a deal valued at $3.4 billion. Ares was down 1.6 percent at $14.95.

Declining issues outnumbered advancing ones on the NYSE by 1,342 to 1,240. On the Nasdaq, 1,243 issues rose and 957 fell.

The S&P 500 index showed four new 52-week highs and no new lows, while the Nasdaq recorded 16 new highs and five new lows.

Reference: TANYA AGRAWAL

IMF researchers say Japan monetary easing has benefits for Asian economies



Japan's extraordinarily easy monetary policy, a source of friction with the United States for pushing the yen’s value down, has had some positive effects on emerging Asian economies, including increased growth and equity prices, International Monetary Fund researchers have found.

The IMF findings were released in a paper on Friday, as Group of Seven finance ministers and central bank governors began meeting in Japan, where divergent views on Japan’s monetary policy and currency market interventions were expected to be a hot topic.

The paper claims to be the first to model the spillover effects of Japan’s qualitative and quantitative easing program (QQE) on Southeast Asian countries.

QQE was launched in 2013 and targets both government bond purchases as well as other assets, such as exchange-traded funds and real estate investment trusts. The program has helped push down the yen from 82 to the dollar in 2012 to 119 to the dollar by August 2015. Japanese equity prices surged and inflation also strengthened during this period.

Despite Southeast Asian currencies rising against the yen, they mirrored some of these effects, study authors Giovanni Ganelli, and Nour Tawk said.

"Our results show that implementation of QQE in Japan, when estimated by a positive shock to Japanese equity prices, consistently caused an increase in equity prices across emerging Asian countries, as well as an appreciation of their currencies,” they wrote.

"Most (Southeast Asian) countries experienced an increase in output and a temporary increase in inflation. Capital inflows surged in many countries.” They argue that while most existing research uses interest rate changes as proxies for quantitative easing, this transmission channel is broken in Japan because rates have been at the zero bound for an extended period.

Instead, they use stock market surges and increases in the monetary base as proxies for QQE.

CONFIDENCE

The researchers said that Japan’s QQE caused a significant increase in equity prices in emerging Asia, with increases in the 2 to 5 percent range for China, Indonesia, Malaysia, Singapore, Thailand, and Indonesia. And while nearly all countries surveyed experienced an appreciation of their currencies versus the yen as a result of QQE, it had a “generally positive” impact on growth in emerging Asian countries, with statistically significant increases in Indonesia, Malaysia, the Philippines and Thailand.

The authors suggested that a shift away from domestic goods to Japanese goods did not occur across the region. They also said that another reason for the increased growth in these countries may have been increased confidence prompted by rising equity prices, which overcame the effects of their higher exchange rates. This was particularly true of China, which has strong trade linkages with Japan, the researchers said.

The yuan rose against the yen, but China saw a mild positive effect on GDP, though not significant, the authors said. But China likely benefited from lower input costs from Japanese components used in Chinese manufactured goods, as well as higher equity prices. “In other words, despite the depreciation of the yen and the appreciation of the RMB (yuan), the overall spillover impact of QQE on China’s GDP was not negative, due to increased confidence as illustrated by the increase in equity prices, and a reduction in import costs” wrote Tawk and Ganelli, who is the deputy head of the IMF’s Japan office. The paper does not represent the IMF’s staff policy view on currencies, but it may provide some ammunition for Japanese Finance Minister Taro Aso as he seeks to persuade his G7 counterparts to back Japan’s monetary policy and currency interventions.

Reference: DAVID LAWDER

Sunday, 22 May 2016

Must Know Basic Trading Rules


Basic Trading Concepts Defined

Most professional traders will concur that discipline, dedication; education and experience are the key ingredients to success in the financial markets. Even though the four are quite easy to understand, they are nevertheless not that easy to implement when it comes to trading.
Financial markets seem to have a set of unwritten rules—you can choose to follow or ignore them at your own peril. This can make or break your overall success. Here are some of the essential rules for trading which need to be in your bones.  

Trading is a business, not a gambling game

You should not view trading as a game; you should treat it as what it is—a serious business. Once you start taking it seriously, your mind-set will start changing, and you will gain control over your investments. You will also become fully prepared for whatever the market throws at you.
There is a thin line between betting on the markets and investing. You are betting when you have no apparent reason or plan as to what you are doing. When there is a reason and an idea behind your trading, you can call yourself an investor or trader.
Unless you treat trading as the serious business that it is, success won’t come your way.

Create a Trading Plan

Once you've gotten rid of the “gambling game” perspective and you’ve committed to treating trading like a serious business, a trading plan is required—every trader needs one. Come up with your own trading rules and stick to them no matter what. You can never achieve much if you lack self-discipline. Discipline is a hard practice to master. Rules are made to be broken, and you will surely break your own rules from time to time. Have a rule in place that helps you to avoid this from happening again. A rule that some traders find helpful is to stop trading for the day after they have suffered a big loss or they feel particularly emotional.
Before opening a trading position, one must always have a detailed plan and a reason for that trade. Look back at historical charting data to find your perfect entry and exit points. Discover where your trade can go wrong or what events can have an impact on your trading position, and act accordingly.
Set up your own trading rules and stick to them, no matter what
 
You Can Never Predict the Future

When trading, you must be clear about the fact that you can never predict the future. You must think in terms of probability. You must commit yourself to being successful in this business. Create a trading plan that clearly specifies
1) all the items you intend to trade with,
2) your method of trading, and
3) the market you intend to trade in.
Since trading is unpredictable, think in terms of probabilities and be careful with every decision you make.

Educate yourself

Embark on reading and researching as much as you can. Knowledge is a hidden secret to success. Professional traders who boast of having years of trading experience will concur with this, and that is why they never cease to learn.
This is one of the great challenges when trading. People change, and so do the financial markets—and thus trading is a constant learning curve. Like anything in life, the more knowledge and information you gain, the higher your chances of success.
Read and research as often as possible. Never cease to learn new things from the markets, yourself and experienced traders.  

Never invest money that you can’t afford to lose

Losing money is a painful experience. The idea of losing money in itself can make any person squirm. Trading is about risking money, and you should never risk money that is destined for rent, food, bills, etc.
Your trading approach and trading psychology will drastically change when using money that, if lost, does not have an effect on your lifestyle. In short, investing money you cannot afford to lose is a sure path to financial suicide.
Never let emotions control you in any way. Banish greed from your emotional and mental makeup. Don’t trade only because you’ve seen a friend make large profits on a certain trade—it may never go the same way for you.
In trading, there is no place for emotions. Therefore, just like greed, fear isn’t something that should accompany you when you’re placing a trade. It must be said again: Do not let emotions influence your trading. Emotional stability is the key for a successful trader.
Trading doesn’t tolerate emotions. Don’t let greed and fear control your decision-making. Money meant for bills and mortgage should never, ever be invested.  

Embrace patience

Trading may be boring at times. You need to be patient as you wait for the right opportunities. Don’t give up or quit—these are the times when good things may be about to happen.
Consider professional traders, for instance. Most will sit in front of their computer screens for hours on end, monitoring the markets, and they’ll maybe place one or two trades a week. This requires patience and discipline that some people might not have.
Although trading may be boring at times, employ patience when you monitor the markets.

Learn from, and accept, your losses

As a business person, you should always be aware of the fact that losses are part of trading, however difficult and emotional they may be. When you accept your losses and learn from them, you will find that you are able to cut your losses, and not allow them to get out of hand.
One of the reasons why people make irrational decisions and take irrational actions is simply because they fail to accept and learn from their losses. Most traders find themselves to be unsuccessful in the first year; most may take several years to master the art of trading.
Losses are part of trading; accept them, learn from them, and move on.

Adding to a losing trading position

This is when a trader keeps on holding back, instead of withdrawing from a trade that’s losing. Most new traders tend to add to their positions when they are in a losing trading position. As they continue averaging down, their losses increase.
Adding to a trading position must be done when you are actually in profit, as the markets have a tendency to keep going in that direction. Most traders stay in a losing position because of two main reasons:
o   The trader doesn’t want to admit that he or she is wrong
o   The trader doesn’t want to lose money
In most cases, a bearish market (downward-moving market) will always tend to go on being bearish, and in a bullish market (upward-moving market), there are high chances that the market will continue on being bullish. The solution is to:
o   Admit you are wrong
o   Place stop loss outside trading ranges
o   Don’t be too confident, particularly when you’ve just made a very profitable trade
Adding to a trading position when you are losing money may not be the wisest idea. Cut your losses short and let your profits run.

Limit your risk

Always make use of a "stop loss". A stop loss is sort of a predetermined risk that a trader should be willing to accept when venturing into the financial markets. Utilizing a stop loss is one of the best methods of giving you control of a set percentage of your total risk. It is also a good way to alleviate mental stress, making you feel comfortable with your trade.
Failure to use a stop loss could be a disaster waiting to happen. Most professional traders will never risk more than 1% to 2% of their total account size on any given trade, with a maximum of 10% on all combined trades.
Money Management is an essential part when trading. Even if you have a profitable strategy, if you do not have funds in your account, the strategy is useless. We have provided an in-depth "Money Management Module", explaining how to integrate money management into your trading strategy.
Limit your losses as much as possible. Use a stop loss, and do not exceed more than 10% of your total account size in all combined trades.

Start small

You only need a small amount of money to get started trading in the financial markets. Later, you can trade with large amounts of money once you start making consistent profits.
Most professional traders start with the minimum trade size possible during their first year. This usually equates to 1 lot in trading size. Once they have become more confident in their trading strategies and their feel for the markets, they increase their trading size accordingly.
Start small until you start generating consistent profits; then increase your trading size.

Keep a record of your trades

Having a daily routine every time you interact with the markets is a key component to becoming a disciplined trader. Maintaining a trading journal is one of the trading activities that are necessary ingredients to professional trading success. The best traders in the world have regular and consistent ways of recording and logging their trades. A trading journal reflects both a trader’s past mistakes and her victories, which are an invaluable resource of lessons to help the trader learn, grow and improve. A journal provides you with perspective, and it keeps you on track to professional trading.
Keep records of every single detail when you are trading. This will help you become disciplined and learn from your mistakes.
 
Bottom Line
To become successful, there are no specific rules and no holy grail that will help you. Discipline, experience and consistency are what make a successful and outstanding trader.
The above-mentioned basic trading rules are very important; that is, each and every individual rule is significant. But when they are all used together, with due discipline, you would be surprised at how useful they can be.

Reference: Jack Maverick

Friday, 20 May 2016

Lacking new ideas, G7 to agree on 'go-your-own-way' approach



A rift on fiscal policy and currencies is likely to set the stage for G7 advanced economies to agree on a "go-your-own-way" response to address risks hindering global economic growth at their finance leaders' gathering on Friday.

As years of aggressive money printing stretch the limits of monetary policy, the G7 policy response to anemic inflation and subdued growth has become increasingly splintered.

Finance leaders gathering in Sendai, northeast Japan, sought advice from prominent academics, including Nobel Prize-winning economist Robert Shiller, on ways to boost growth in an informal symposium ahead of an official G7 meeting on Friday.

Participants of the symposium agreed that instead of relying on short-term fiscal stimulus or monetary policy, structural reforms combined with appropriate investment are solutions to achieving sustainable growth, a G7 source said.

If so, that would dash Japan's hopes to garner an agreement on the need for coordinated fiscal action to spur global demand.

Germany showed no signs of responding to calls from Japan and the United States to boost fiscal stimulus, instead warning of the dangers of excessive monetary loosening.

"There is high nervousness in financial markets" fostered by huge government debt and excess liquidity around the globe, German Finance Minister Wolfgang Schaeuble said on Thursday.

But G7 officials have signaled that they would not object if Japan were to call for stronger action using monetary, fiscal tools and structural reforms - catered to each country's individual needs.

That means the G7 finance leaders, while fretting about risks to outlook, may be unable to agree on concrete steps to bolster stagnant global growth.

"I expect there to be a frank exchange of views on how to achieve price stability and growth using monetary, fiscal and structural policies reflecting each country's needs," Bank of Japan Governor Haruhiko Kuroda told reporters on Thursday.

BREXIT HIGH ON AGENDA

The risk of a British vote to exit the European Union in a June referendum, or Brexit, will be high on the agenda at Friday's G7 session on the global economy.

"A Brexit could, in the short-term, lead to turbulence in financial markets," the G7 source said.

In second-day talks on Saturday, the G7 finance leaders will discuss, among other topics, the need to boost cyber-security.

While policymakers have long spoken about the need to enhance cyber-security as financial transactions become increasingly global, there is a growing awareness among G7 leaders that they need to take prompt action, sources familiar with the group's discussions say.

A cyber theft that hit a Bangladesh central bank account in February has led SWIFT, the global financial network that banks use to transfer billions of dollars every day, to warn that it was aware of a number of cyber incidents where attackers had sent fraudulent messages over its system.

Reference: LEIKA KIHARA

Asian shares poised for weekly loss, Fed talk lifts dollar

An employee of the Tokyo Stock Exchange (TSE) works at the bourse at TSE in Tokyo, Japan, February 9, 2016.  REUTERS/Issei Kato

Asian shares edged up on Friday but were on track for a weekly loss, while the dollar was poised for a winning week on bets the U.S. Federal Reserve could raise rates as early as next month.

MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.6 percent, though still down 0.3 percent for the week and off 4.2 percent so far this year.

Japan's Nikkei stock index .N225 erased earlier losses to trade up 0.2 percent, extending gains for the week to 1.6 percent as the yen recoiled against the resurgent dollar.

Chinese stocks also rose with both the CSI 300 .CSI300 and the Shanghai Composite .SSEC indices up 0.1 percent, on track for weekly gains of 0.3 percent and 0.7 percent, respectively. Hong Kong's Hang Seng .HSI added 0.9 percent, on track for a rise of 0.5 percent for the week.

Wall Street fell on Thursday with the Dow Jones industrial average .DJI and the S&P 500 .SPX both touching roughly two-month lows before paring losses.

The New York Fed's William Dudley, a permanent voting member of the central bank's rate-setting committee, said there was a strong sense among Fed officials that markets were underestimating the probability of policy tightening and that the bank was on track for a rate hike in June or July.

Dudley said he was "quite pleased" investors had apparently increased bets that a rate hike would come soon.

"The Fed has regained the upper hand here," strategists at Brown Brothers Harriman said. "Moreover, the response by the dollar and the interest rate markets suggests monetary policy still matters."

Dudley's comments came a day after minutes of the Fed's April meeting revealed that most policymakers felt a rate increase might be appropriate as early as June.

Markets are pricing in a 32 percent chance of a rate hike in June, according to the CME FedWatch tool, up from 15 percent on Tuesday. A majority now expect a rate hike at the July meeting.

"Despite the increasing certainty (of a rate move), risk appetite stayed on the side-lines. US and European equities were sold," Bernard Aw, market strategist at IG in Singapore, wrote in a note. "Investors are worried that if there is a rate hike in June, the economy may not be able to support it."

The dollar index, which gauges the greenback against a basket of other major currencies, was steady at 95.259 .DXY after reaching as high as 95.502 overnight, its loftiest since March 29. The index is poised for a 0.7 percent weekly gain.

The dollar also held firm against the yen at 109.985 JPY=EBS, up 1.2 percent for the week. It hit 110.39 overnight, its highest since April 28, before the sell-off in equities led some investors to seek the safe-haven Japanese currency.

The euro was also little changed $1.12080 EUR=, nursing its drop to a more than seven-week low of $1.1180 overnight. It was down 0.9 percent for the week.

The sterling advanced as strong retail sales data reduced chances of an interest rate cut by the Bank of England, and polls showed growing support for Britain to remain in the European Union.

The pound was holding steady at $1.4602 after touching a 3-1/2-week high of 1.4663 overnight.

Currencies are likely to be a topic at the G7 finance leaders' meeting in Japan on Friday and Saturday. The meeting could expose a rift on issues ranging from currency to fiscal policies within the group of advanced economies.

Continuing fears about supply outages in Canada and Nigeria bolstered crude oil even as the prospect of a U.S. rate hike prompted some investors to take profits after recent gains.[O/R]

U.S. crude Clc1 added 1.3 percent to $48.78 a barrel, up 5.6 percent for the week, while Brent crude LCON6 advanced 0.8 percent to $49.25, up nearly 3 percent for the week.

The dollar's gains weighed on gold, setting the precious metal on track for its biggest weekly decline in eight weeks.

Spot gold XAU= rose 0.1 percent after losing 2 percent over the previous two sessions, on track for a drop of 1.4 percent for the week.

Reference:  Lisa Twaronite

Thursday, 19 May 2016

Behind Japan's FX intervention threats, a calmer view of the yen



Publicly, Japanese policymakers have railed against the yen's rapid appreciation to 18-month highs, putting investors on high alert against possible intervention in currency markets.

Behind the scenes, though, those running economic policy have told Reuters they're not so worried that the yen will derail efforts to revive exports and the economy.

Those more sanguine views suggest markets might be overestimating the likelihood of intervention.

"I don't think you can simply say the yen's rise is a bad thing," one government official told Reuters, declining to be named due to the sensitivity of the matter.

International differences over currencies could be a focus at a meeting of Group of Seven finance leaders in Japan this weekend.

And to be sure, concerns about the strong yen are real. The safe-haven currency rallies during periods of market anxiety and uncertainty, having done so even after the central bank's unexpected shift to negative interest rates this year.

Toyota Motor (7203.T) President and CEO Akio Toyoda has warned foreign exchange losses could wipe as much as 935 billion yen ($8.5 billion) from the automaker's operating profit this year, noting that each 1 yen move against the dollar affects its operating profit by 40 billion yen.

When an economic heavyweight like Toyota reports such severe currency effects, the government must be seen to act.

So far, Finance Minister Taro Aso's response has been to condemn rapid rises in the yen and threaten to step into the foreign exchange market - despite international objections to currency intervention.

However, the view is spreading among economic officials close to the Prime Minister's Office that the yen in its recent range of 105-109 to the dollar would not upset economic recovery.

At 110 to the dollar on Thursday, the yen is trading considerably weaker than its comparative purchasing power of 103, according to valuations that look at consumer price ratios between countries.

Even in the Finance Ministry, which runs Japan's currency policy, few officials express concern that the yen's strength will stifle growth.

Rather, Japan's currency mandarins fret more over the speed of exchange rate moves than the actual level. A Finance Ministry official told Reuters that Aso, while warning against volatility, has not commented on the exchange rate, which Aso says is set by the market.

A POINT OF CONTENTION

At a meeting of the Group of 20 big economies last month, Aso told U.S. Treasury Secretary Jack Lew of Tokyo's "strong concern" over "one-sided" yen rises. Lew fired back that he saw no "disorderly" moves in the market that might justify intervention, and said it was vital to avoid "beggar-thy-neighbour exchange rate policies".

While a Lew-Aso divide may attract headlines from this weekend's meeting of G7 finance ministers and central bankers in Sendai, northern Japan, officials expect the group to paper over differences by repeating general calls for exchange rate stability.

The yen has swung wildly since late 2012, when Prime Minister Shinzo Abe came to power promoting easy-money "Abenomics" policies to boost Japan from two decades of deflation and fitful growth. The yen sank 37 percent to 13-year lows on massive Bank of Japan (BOJ) yen-printing by June 2015.

This month, it rebounded 19 percent to 105.55, its strongest since October 2014, spurred by the BOJ's surprise decision not to ease policy further.

Some market participants worry about a knock-on effect of a higher yen hitting profits, battering stock prices further, and undoing more of the gains of "Abenomics".

"There is growing unease about the outlook for the Japanese economy, which has been supported by the weak yen," said Shingo Ide, chief equity strategist at NLI Research Institute.

Market participants think 100 yen to the dollar is the 'red line' for Japan's policymakers, a Reuters survey of some 70 currency strategists found this month.

An Abe adviser, Yale University professor emeritus Koichi Hamada, told Reuters last week that if the yen strengthened to 90-95 to the dollar, "Japan would have to intervene, even if it angers the United States."

Reference: IZUMI NAKAGAWA

Dollar jumps after Fed minutes signal possible June hike


The U.S. dollar hit its highest level against the euro in more than three weeks on Wednesday and crossed 110 yen for the first time in nearly three weeks after Federal Reserve meeting minutes signaled a June interest rate hike was on the table.

The Fed will likely raise interest rates in June if economic data point to stronger second-quarter growth as well as firming inflation and employment, according to minutes from the U.S. central bank's April policy meeting released on Wednesday.

Fed funds futures, based on the CME Group's FedWatch tool used to gauge the probability of rate hikes, moved to price in a 34 percent chance of a June hike, up from 19 percent in morning trading. The probability for a September hike rose to 68 percent from 57 percent, while the probability of a December hike rose to 80 percent from 74 percent.

"Investors are now increasing the possibility of a June hike," said Chris Gaffney, president of EverBank World Markets in St. Louis. "The Fed is saying that the markets are too pessimistic."

The euro EUR= was last down 0.8 percent at $1.1220, its lowest level since April 25, and was set to post its biggest one-day percentage drop against the dollar in five weeks.

The dollar gained 1 percent against the yen to a nearly three-week high of 110.23 yen JPY= and was set to post its biggest daily percentage gain against the Japanese currency in more than a week.

The greenback was last up 0.66 percent against the Swiss franc at 0.9866 franc CHF= after hitting a nine-week high of 0.9874 franc.

Gaffney said traders were giving the minutes more credibility as a signal for a June rate hike, given that they preceded strong April U.S. inflation and housing starts data as well as a push higher in oil prices.

The June 2016 Fed fund futures contract price dropped 2 basis points after the minutes were released, marking the largest one-day drop since late February.

The dollar could rally further if U.S. data continues to come out strong and reinforces expectations of a June rate hike, said David Gilmore, partner in FX Analytics in Essex, Connecticut.

The dollar index, which measures the greenback against a basket of six major currencies, hit a nearly five-week high of 95.198 .DXY. The index was set to post its biggest daily percentage gain in five weeks.

Reference: SAM FORGIONE

Asian shares sag on revived U.S. rate hike views; oil up

A woman clad in a kimono is reflected in an electronic board displaying Japan's Nikkei share average outside a brokerage in Tokyo, Japan, April 18, 2016. REUTERS/Toru Hanai

Asian shares weakened on Wednesday in the wake of accelerating U.S. inflation and comments from Federal Reserve officials that rekindled prospects of an interest rate rise as early as June.

Japanese shares and the yen were volatile, with markets digesting surprisingly strong annualized 1.7 percent growth in the January-March quarter that may be masking pockets of weakness.

European markets were seen opening lower, with financial spreadbetters expecting Britain's FTSE 100 .FTSE to open 0.3 percent lower, France's CAC .FCHI to trade down 0.4 and Germany's DAX .GDAXI to start the day with a 0.6 percent decline.

"Confused? Markets certainly are, up one minute and down the next as speculation about the U.S. economy continues to divide opinion, along with speculation about the number of possible rate rises the Fed might decide upon over the course of the remainder of this year," Michael Hewson, chief market analyst at CMC Markets in London, wrote in a note.

MSCI's broadest index of Asia-Pacific shares outside Japan lost 1.1 percent.

After swinging between gains and losses, Japan's Nikkei 225 .N225 ended the day flat, as the yen JPY=EBS gave up gains seen immediately following the GDP data to slip 0.1 percent to 109.26 per dollar.

"The yen strengthened a bit because growth was stronger than many had expected," said Ayako Sera, market strategist at Sumitomo Trust and Banking. "But looking at the details, there were still some concerning areas, including capital spending."

Markets are now looking to Prime Minister Shinzo Abe's meeting with his coalition party leader, where he could discuss postponing a planned sales tax hike to support the flagging economy.

China's CSI 300 .CSI300 slipped 1.1 percent and the Shanghai Composite index .SSEC lost 1.6 percent. Hong Kong's Hang Seng .HSI also slid 1.6 percent.

Wall Street sold off on Tuesday, with the S&P 500 .SPX losing 0.94 percent, after U.S. consumer prices recorded their biggest increase in more than three years in April as gasoline prices and rents rose.

Other data on Tuesday showed housing starts and industrial production rebounded strongly last month, adding to the case for an early rate hike.

U.S. interest rate futures <0#FF:> posted large declines with the December 2016 contract falling the most in two-and-a-half months to price in a 70-80 percent chance of a rate hike by then, with a 50 percent chance of a move priced in by September.

The rate-sensitive two-year U.S. Treasury notes yield, which touched a three-week high of 0.847 percent earlier on Wednesday, was last trading at 0.835 percent.

A few Federal Reserve policymakers repeated their mantra that there could be at least two rate increases.

Atlanta Fed President Dennis Lockhart, seen as a policy centrist on the board, said on Tuesday that he still assumes there will be two to three rate hikes, a view echoed by San Francisco Fed President John Williams.

Dallas Fed President Robert Kaplan, seen as a hawk, said he will push for an interest rate hike in June or July.

"Since the strong retail sales data last Friday, the Fed has clearly started a communication campaign to urge markets to price in a hike in June, even though markets have not gone there yet," said Tomoaki Shishido, fixed income analyst at Nomura Securities.

"They set (Fed Chair Janet) Yellen's speech on June 6, just after the next payroll data and just before the blackout period will start before the next policy meeting. They wouldn't have to do this if they have no plan to raise rates in June," he added.

Expectations of further inflation are stoked by a recent recovery in oil prices, which hit seven-month highs on Tuesday, on expectations of a drawdown in U.S. crude stockpiles and a new wildfire threat on Canadian oil supplies.

U.S. crude futures CLc1 advanced 0.3 percent to $48.45, after climbing as high as $48.76 per barrel late on Tuesday.

International benchmark Brent crude LCOc1 climbed 0.2 percent to $49.40, lingering near the 6-1/2-month high of $49.75 hit on Tuesday, and up more than 80 percent from a 12-year low of $27.10 struck in January.

The U.S. dollar rose on the rising expectations of a Fed rate hike, but gains were capped as many market players looked to the Group of Seven finance chiefs meeting later this week.

The dollar index, which tracks the currency against a basket of six major peers .DXY =USD rose 0.2 percent to 94.778.

The euro EUR= slipped 0.3 percent to $1.12845.

The dollar's gain weighed on spot gold XAU=, which dropped 0.5 percent to $1,273.40 an ounce.

Reference: HIDEYUKI SANO

Wednesday, 18 May 2016

FTSE reaches two-week high as Taylor Wimpey surges

A worker shelters from the rain as he passes the London Stock Exchange in the City of London at lunchtime October 1, 2008.  REUTERS/Toby Melville/File Photo

Britain's top equity index rose to a two-week high on Tuesday, with housebuilders helping the index higher after Taylor Wimpey announced a special dividend payout to lead gains in the sector.

The blue-chip FTSE 100 index was up 0.3 percent at 6,167.77 points by the close, having hit its highest level since the start of May in early trade.

Taylor Wimpey was among top gainers, rising 4.7 percent after the company promised investors a larger payout than previously expected, underpinned by strong demand for property in Britain.

"Taylor Wimpey is clearly confident in its prospects given its very positive upgrade to financial targets and its dividend," said Laith Khalaf, senior analyst at Hargreaves Lansdown.

Rival housebuilding stocks also advanced, with Berkeley gaining 2.5 percent while Barratt Developments advanced 2.4 percent.

Support services group DCC rose 3.1 percent after it said it expected to see more profit growth in the current financial year, having posted a 35.5 percent rise in full-year operating profit.

The FTSE remains down around 1 percent so far in 2016, and is 13 percent below its April 2015 record high, with world stock markets having lost ground since then due to concerns about a slowdown in China, the world's second-biggest economy.

Traders added that uncertainty ahead of next month's referendum on whether Britain should stay in the European Union was also curbing the near-term progress of the FTSE.

A new poll by TNS gave the "Leave" campaign a lead, which some traders said pulled the FTSE 100 off highs, although an ORB telephone poll showed the "In" campaign 15 percentage points in front.

Investors have slashed holdings of UK equities to the lowest level since November 2008 on fear Britons will vote next month to leave the European Union, a monthly survey by Bank of America Merrill Lynch (BAML) showed on Tuesday.

"I wouldn't be inclined to buy into the FTSE, this side of the referendum," said Horizon Stockbroking director Kyri Kangellaris.

Data also showed that British inflation slipped in April for the first time since September last year.

Reference: SUDIP KAR-GUPTA

Dollar pares losses after upbeat Japan GDP lifts yen

Light is cast on a U.S. one-hundred dollar bill next to a Japanese 10,000 yen note in this picture illustration shot February 28, 2013.   REUTERS/Shohei Miyano/Illustration/File Photo

The yen firmed against the dollar on Wednesday after data showed Japan's economy unexpectedly expanded at the fastest pace in a year in the first quarter, but later gave up most of its gains on views that more stimulus is needed to keep growth on track.

Japan's economy expanded by an annualised 1.7 percent in January-March, easily beating the median market forecast for a scant 0.2 percent increase and rebounding from a 1.7 percent contraction in the previous quarter, the Cabinet Office data showed.

While some investors pared bets on further stimulus after the better-than-expected headline figure, many noticed the details of the GDP report were not consistently bright.

"The yen strengthened a bit because growth was stronger than many had expected," said Ayako Sera, market strategist at Sumitomo Trust and Banking. "But looking at the details, there were still some concerning areas, including capital spending."

Chief Cabinet Secretary Yoshihide Suga told a news conference after the data that Japan is making steady progress towards beating deflation but private consumption continues to be weak with the effect of a sales tax hike in 2014 remaining. He reiterated that there is no change to Japan's plan to raise the tax again next year.

Many analysts said Japan narrowly dodged recession, defined as two straight quarters of contraction, because of the boost from the extra day in a leap year. The Bank of Japan chose to hold policy steady at its last meeting, but many still believe it will muster additional easing steps as early as next month.

Some 80 percent of analysts surveyed by Reuters from May 11-17 expect the BOJ to take action, including a combination of cutting negative interest rates further and boosting its purchases of government bonds, exchange-traded funds and corporate bonds.

The dollar fell as low as 108.73 yen after the GDP release, but then clawed its way back to a session high of 109.39 yen. It was last down slightly at 109.20.

Overnight, the U.S. currency briefly spiked to 109.65 yen, its highest since April 28, after data showed U.S. consumer prices rose the most in more than three years in April. But it drifted off the high as U.S. equities flagged and nudged down Treasury bond yields.

The euro slipped 0.2 percent against the yen to 123.22.

Against the dollar, the euro was 0.3 percent lower at $1.1284 after closing little changed against the dollar overnight.

The pound slipped 0.2 percent to $1.4431. Sterling spiked to $1.4524 overnight after a pair of polls showing the "In" camp well ahead in the run-up to Britain's June 23 referendum on European Union membership.

The gains were later trimmed by lower-than-expected UK inflation data.

The Australian dollar slipped 0.6 percent to $0.7282, giving back some of the previous session's rally on minutes of the Reserve Bank of Australia's (RBA) May policy meeting, which encouraged markets to pare back the chances of a cut in interest rates.

Reference: LISA TWARONITE