Varchev Finance: Trading day in one post – 12.06.2018

Asian stock market: Asian markets drifted higher on Tuesday as a landmark meeting between U.S. President Donald Trump and North Korean leader Kim Jong Un began in Singapore and ahead of central bank meetings in the coming days. Japan’s Nikkei 225 rose 0.58 percent, but was off a session high touched earlier in the morning as the Japanese currency inched off its intraday low. Other markets in the region were little changed. South Korea’s Kospi rose 0.25 percent after trading both above and below the flat line, and Australia’s S&P/ASX 200 tacked on 0.24 percent. Over in greater China markets, Hong Kong’s Hang Seng Index added 0.16 percent, with the energy and service sectors leading gains. On the mainland, the Shanghai composite gained 0.15 percent. The high-profile Trump-Kim summit — the first meeting between sitting leaders of both countries — is currently underway, but analysts have said they expect little direct impact on the markets. “Aside from the photo opportunities that today brings, from a financial markets perspective, today ranks as a ‘meh,'” Robert Carnell, Asia Pacific head of research at ING, said in a morning note. He added that developments in the trade arena “is a far, far bigger existential global threat.”

FX market: The pound sterling is hanging on to gains made against the dollar this week, and if a European Union (EU) withdrawal bill is passed next week, a positive trajectory lies ahead, analysts said Friday.”We have been arguing that the political uncertainty is curtailing our enthusiasm for the pound, but that might be changing. Market participants may soon be able to trade on macro-fundamentals again,” said Derek Halpenny, European head of global markets research at MUFG in a client note. “If we get beyond Tuesday/Wednesday without any major surprise in parliament and if the EU accepts the document now in its possession the prospects for the pound will suddenly brighten again.” The current outlook also reflects relief that domestic political uncertainty hasn’t deteriorated further, Halpenny said. Sterling saw small gains from its lowest point in more than six months — 1.3241 at the tail end of May — going into the first week of June, reaching 1.3438 against the dollar on Thursday before slipping to 1.3400 at 1:20 p.m. London time Friday. The currency is down 10 percent since the U.K.’s June 2015 vote to leave the EU, but analysts expect much of that loss to be regained with eventual interest rate rises and a Brexit deal that is accepted by all parties. A Reuters poll from last week forecast sterling reaching $1.35 in six months and $1.41 in a year. This is still shy of the post-Brexit peak of $1.43 reached in mid-April amid expectations that the Bank of England would raise interest rates in May. It ended up voting to leave rates unchanged, although its Monetary Policy Committee recently signaled a likely rate rise in August. The all-important EU withdrawal bill has undergone numerous changes and was defeated 15 times in the U.K. Parliament’s House of Lords. Next week will see the final stage of its passage through the legislature. Protracted Brexit negotiations and disagreements have plagued the pound, as politicians failed to reach a consensus over some of the thorniest issues that need solving: the question of the Irish border and the customs union, and the trade area encompassing all EU member states that enables the free movement of people and goods. Uncertainty remains, as rifts in Prime Minister Theresa May’s Conservative party could see some of its ranks voting with the Labour party to defeat the government’s bill. Labour and some of those Conservative parliament members favor establishing a new customs arrangement to avoid friction with the EU when the U.K. officially leaves in March 2019.

Commodities market: The global oil producers’ recent comments on their intention to leave the abatement agreement continue to keep the raw material close to $ 65 a barrel. The Organization of Petroleum Exporting Countries (OPEC) is expected to meet on June 22 at the headquarters in Vienna, along with the non-OPEC Russia, to discuss production policy. There seems to be nothing to get the gold out of lethargy. During the Asian session, the metal barely moved, as the disputes between the US and Canada did not make the traders push the button. Over the last few years, the prices of agro-cultures have moved in a downward direction, with most of the main agro-cultures consolidating at record low prices. In 2018. consumption is expected to reach record values, and this will lead to a “shortage” of some raw materials. The risk that the United States may impose more trade sanctions may lead to greater price uncertainty. In the event of a trade war between the US and China, soybean crops will initially lose value but then quickly return the losses. From a purely technical point of view, it is clear that this devaluation has already begun, with soybean’s price close to key levels of support. This gives good opportunity for long positions with excellent risk / reward ratio.

European stock market: It is an extremely crucial week for Europe. Expectations for the direction of the euro remain mixed, despite talks on ending the QE policy by the ECB. Central bankers have signaled that they will prepare the end of the four-year monetary stimulus program this week, but the presentation of the single currency and the indices may remain under pressure due to the latest structural policy developments in the EU. Economic analysts do not expect interest rates to rise on Thursday, but the press conference 45 minutes after the announcement will be followed shortly to hint at the future of the quantitative easing program. The major indices will open up in green areas, and today, apart from the events surrounding Brexit, there are no other major economic news that could influence stock markets. Traders remain under pressure in anticipation of the EU’s response, Canada and the company for the failed G7 meeting. News came out that Daimler will return 774,000 diesel cars to Europe due to concerns about diesel emissions. This will certainly affect the company negatively, and may cause a downward trend in car makers, which in turn can make DAX heavy in the first hours of trade. Anyway, the tradition will be preserved and real market moods will be revealed in the afternoon, just after the lunch break of UK traders. This time coincides with a pre-market in the US, when trading volumes will soar.

U.S. stock market: Technology stocks are starting to dominate the S&P 500 Index as they did during the 1990s dot-com years. The ratio between an S&P 500 variant that excludes technology and telecommunications companies and the original index shows as much. Last week, the indicator fell to its lowest level since February 2001. “Even half a dot-com run is eye-catching,” Jim Paulsen, Leuthold Group Inc.’s chief investment strategist, wrote Friday in a report with a similar chart.

Economic calendar for the European and U.S. trading sessions:
11:30 UK – Claimant Count Change
11:30 UK – Average Earnings + Bonuses
12:00 Germany – ZEW Economic Sentiment
14:20 USA – OPEC Monthly Report
15:30 USA – Core CPI
15:55 USA – Redbook
21:00 USA – Federal Budget Balance

 Trader Aleksandar Kumanov

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