Dear Fellow Trader,
What a fantastic result for England on Saturday!
Is football coming home? Plenty think it is… and after that performance, the nation got a boost in confidence, that’s for sure.
Let’s see what the guys can do against the Danes on Wednesday.
In the meantime, let’s see what’s been going on in the markets… and what’s in store for this week.
Before we do that, take a second to grab your place at our Momentum Stocks webinar.
It’s free to attend and we’re seeing great results from trading some of the world’s best-known stocks with a strategy that’s outperforming the Dow Jones.
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OK, let’s get to the markets...
US closed for Independence Day
In the US, it’s Independence Day celebrations today so all US markets closed.
Movements will therefore be slightly more restricted.
But also bear in mind with the US closed, that any unexpected news could see greater moves than would otherwise be the case.
Far East markets were lower overnight with the Nikkei down 0.6% whilst Chinese indices were mixed.
Global markets failed to respond to the rally in US equities after Europe shut Friday.
But the Dow Jones is within spitting distance of its record high set on 10th May.
If it can break that, then there could be another big leg higher.
That would be great news for our Momentum Stocks strategy that focuses on Dow stocks and rides them for bursts of momentum.
NOTE: Check out how we’re trading Dow stocks in our FREE webinar on this stock market trading strategy. Register here.
Review of last week’s key action
FTSE -12 -0.2% DOW +352 +1% NASDQ +279 +1.94% DAX +42 +0.27% NIKKEI -283 -0.97%
Another record closing high on US equities last Friday as employment data came in better than expected.
The addition of 850,000 new jobs in June was 125K more than expected but not so hot that it might push the Fed to react in a negative way (i.e. by raising interest rates).
The last quarter and half year finished last Wednesday with the broad- based S&P500 going out with the fifth straight monthly gain – a record on each occasion.
The current run of seven straight daily gains for the S&P is its best winning run since 1997.
Despite this record run, there are signs that some investors are getting a little nervous with the extent of the moves in the first 6 months of the year.
The skew index, as reported in the FT last week, measures the difference between the cost of using options to protect against a big market fall (put) versus the right to benefit from a rally (call).
This difference has hit record highs which implies fear is greater than the greed factor.
This is not the same as the VIX which simples measures the aggregate of individual at-the-money volatilities across all options.
The FTSE had a lacklustre week as did other European indices – in part due to the rebound in GBP and the Euro versus the US Dollar.
Perhaps the bid by Fortress for Morrisons will fire up the food retailing sector.
EURUSD -0.71 -0.6% GBPUSD -0.45 -0.32% USDJPY +0.23 +0.2%
The Euro finished lower against the US Dollar and Sterling in the first half of the year, contrary to most analysts’ expectations.
The focus on the reflation trade and jump in bond yields caught some investors out as concern mounted over the surge in inflation in western economies.
The Fed applied its comfort blanket to good effect as bond yields backed off but the US Dollar has not fallen back to levels seen at the start of the year.
Gold +6 +0.34% UK OIL UNCH US OIL +1.12 +1.51% Bitcoin +2,200 +7%
Gold had a shocker of a month in June as the jump in the USD resulted in a sharp sell-off as gold slumped $137 or 7.2%.
Despite the jump in inflation across developed economies, central bankers are all convinced that it is only temporary and will reverse – not something that Gold fans want to hear.
Oil ended unchanged last week following the inconclusive end to the Opec meeting last Thursday / Friday.
Demand remains strong, hence why crude is still close to a three year high but Opec failed to agree on an increase in the cartel’s production.
As a result OPEC will meet again today (Monday) by videoconference to address some members concerns.
Bitcoin settled down last week with little negative news.
Buyers pushed Bitcoin back to the middle of its recent trading range between 30,000 and 40,000.
Data / events for the week ahead
FOMC (rate setting committee of the federal Reserve in the US) minutes are probably the highlight of the week.
Monday
US Markets closed in observance of Independence Day celebrations.
OPEC Another round of talks between Opec members to agree production increases.
Tuesday
Australia Monthly policy meeting of RBA. Despite the renewed lockdown for almost half the population, the central bank is likely to reduce some of the emergency economic stimulus measures as the Australian economy powers ahead.
Analysts do not expect a pre-emptive move in rates as the governor of the central bank wants to avoid a rally in the Aussie dollar.
Expect AUD crosses to be sensitive to the news although by the time we are awake the news will be a couple of hours old.
Germany ZEW economic sentiment. A survey of institutional investors and analysts. Optimism has been building for months but some signs this may be slowing. Consensus is for 75 which would be lowest level for three months. Euro / Euro equities sensitive.
US ISM Services. A survey of purchasing managers in the services sector, which dominates the economy. Anything above 50 means sector is expanding. The reading has been above 60 for past 3 months which suggest its red hot. Another 60+ reading expected.
Wednesday
EU Update to economic forecasts for EU member states, with upgrades expected as economies recover ground post pandemic.
US FOMC minutes. Release of minutes from the last FOMC meeting.
The committee surprised markets by signalling a policy shift suggesting that the first interest rate rises would be in 2023 rather than 2024 as previously advised.
So, the markets will have a chance to find out what was behind the committee’s thinking. USD and equities will be sensitive to this release.
Following the last meeting on June 16th equities went into a tail spin for a few days but recovered sharply the following week as Fed officials sounded more dovish about rates.
Thursday
US Crude oil inventories – a day late due to federal holiday on Monday
G20 Finance ministers and central bankers meeting for 2 days – remotely.
Friday
UK, Eurozone Central bankers speaking at Global Forum on Productivity, in Venice.
So, that’s about it for the week ahead.
I’ll be back in touch with more news and views on trading the markets…
In the meantime, check out our free stock market trading webinar.
It’s free to attend and there are different times to choose from.
Click here to get your place.
Regards,
Jerry Miller
Managing Director
Trendsignal
