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European equity close: Solid close to wrap up a great week

Closing changes for the main European equities

  • UK FTSE 100 +0.4%
  • German DAX +0.6%
  • French CAC +0.3%
  • Italy MIB +0.4%
  • Spain IBEX +0.9%
On the week:
  • UK FTSE 100 +1.3%
  • German DAX +2.3%
  • French CAC +1.1%
  • Italy MIB +1.1%
  • Spain IBEX +1.7%
Given the gains in the euro and (especially) the pound on the week, the performance was particularly impressive.
The FTSE 100 is right at the 55-day moving average:
Closing changes for the main European equities

US August advance retail sales +0.4% vs +0.2% expected

Retail sales for August 2019:

  • Prior was +0.7% (revised to +0.8%)
  • Ex autos 0.0% vs +0.1% expected
  • Prior ex autos 1.0%
  • Ex autos and gas +0.1% vs +0.2%
  • Prior ex autos and gas +0.9%
  • Control group +0.3% vs +0.3% expected
  • Prior control group +1.0% (revised to +0.9%)
The headline is on the strong side and the prior was revised higher as well. Digging into the control group, that was in-line with estimates and the prior was revised a tick lower. Building material sales rose 1.4%.
Overall, the consumer remains very strong and that is going to give the Fed some pause. A cut next week is a done deal but there’s a very good case for Powell to push back against an October cut.
A look at the control group with the 6-month moving average shows how surprising it is that the Fed is cutting.
retail sales control group

Is there anything more to the rebound in the pound?

The pound has rallied by more than 4% against the dollar after falling below the 1.2000 level at the start of last week

The pound has rallied by more than 4% against the dollar after falling below the 1.2000 level at the start of last week

The pound has been remarkably solid in the past two weeks of trading. While there is some reason to be mildly optimistic as parliament succeeded in turning the Brexit delay bill into law, is it really worth 4% (give or take, minus out dollar weakness today) of optimism when put together with other Brexit developments?
As much as I am skeptical about the pound’s strength, the overwhelming rally today has got me thinking a little. Is it just all about short covering and positioning flows during the quiet period before October strikes?
My previous take was that the range for cable will settle between 1.20 and 1.25 during this period but as we move closer to the upper extreme, this is something to look at in case we observe a potential breakout.

(more…)

BREAKING :China to add soybeans, pork to tariffs exemption list – state media

Xinhua reports on the latest developments

  • Says to support companies purchasing US soybeans, pork
I don’t think this comes as too much of a surprise as it has been touted heavily since yesterday already. This is just the official confirmation of the reports that have been out and about over the past 24 hours.
Nonetheless, it will still keep the “feel good factor” in US-China trade relations throughout this week but we’ll see how things go when both sides sit down face-to-face in October.

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The ECB adds to the growing list of central banks to have cut rates this year

Expect the list to grow longer towards the end of the year

Rates

We had three rate cuts yesterday and two new entrants (highlighted) to the list this year. Turkey continued with their Erdogan-style rate cuts but it was the ECB that stole the spotlight as it reduced its deposit facility rate by 10 bps.
Joining them is the Danish central bank as they cut their key rate by 10 bps as well – mirroring the ECB – and that takes the tally above to 38 rate cuts this year.
Expect the list to expand further as we’re nowhere near close to the bottom just yet.