Monday, August 2, 2021
Dollar Flat, but Bullish Bets Continue Ahead of Jobs Data
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US Yields are About to Bottom Out
The dollar starts off the week on a weaker footing, however there is a great chance that bearish pressure will ease as we get closer to Friday. At the meeting last week the Fed left the door open for rumours about a hawkish policy shift in August and the key missing piece that may boost the odds of such an outcome is an upside surprise in the NFP report this Friday.The number of new jobs created in the economy (aka Payrolls) has taken center stage in the post-pandemic period in terms of impact on the Fed decisions. It is expected to post decent 900K gain. Stronger-than-expected Payrolls reading will likely fuel speculations that the Fed will hint about QE tapering during Jackson Hole Conference in August. In this case, the market will start to price in decreasing demand in the Treasury market (as a result of slowing Fed purchases) and given the passage of Biden infrastructure plan, which will be financed with new debt, investors may start to quit Treasuries en masse.Recall that long-term Treasuries saw a strong rise in demand over the past two months (yield-to-maturity slid from 1.75% to 1.20%), however, neither weakening of global economic expansion, nor increased covid-10 risks, which were cited as primary catalysts of the move, didn’t started to materialise. According to JP Morgan, investors continue to fit bearish narratives into the Treasury bond rally similarly to the situation when they explained the Treasury sell-off caused by the actual rebalancing of Japanese investors before the end of the fiscal year (when the 10-year Treasury yields rose from 1.0% to 1.75% in 1Q) by sharply increased inflation expectations and growing risks of economy overheating. The investment bank points to the interesting fact that the latest slump in bond yields was not accompanied by a corresponding increase in open interest in Treasury futures, that is, investors did not make new bets on the deterioration of economic situation, but only adjusted the previous ones.The sell-off in long-dated Treasuries earlier this year was accompanied by rebound in the dollar index from 89.5 to 93 points. The new wave of Treasury bond sales will most likely also provide strong support to the dollar.Preparations for this week's NFP report kicks off with today's ISM and Markit Manufacturing indices of activity. It is especially interesting to look at the dynamics of the sub-indices of employment and prices - the first will tell you what to expect from the NFP in the production sector, the second - whether the effect of delays and supply bottlenecks, as well as excessive strong demand, which slow down the economy, are disappearing. The key indicators of the report are expected to extend rise, i. e. the rate of expansion of activity in the sector remained positive in July. A weak report, in my opinion, will have a material impact on the market and will likely fuel more USD downside.The ADP report and non-manufacturing PMI from ISM are due Wednesday. This time ADP lays down a more conservative estimate of job growth - only 700K (versus 900K NFP). Also pay attention to the hiring component of the ISM index - last month it was in the depressed zone and it is essential to see a rebound to expect strong NFP figure. The greenback are risk assets are expected to post pronounced reaction on release of the reports.
from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/us-yields-are-about-to-bottom-out"
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from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/us-yields-are-about-to-bottom-out"
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CVS Health: Estimated Q2 2021 Revenue Report
American Pharmaceutical giant CVS Health Corporation (CVS) is scheduled to announce earnings reports on Wednesday, August 04, 2021 prior to the market opening. The report is for the fiscal quarter ending June 2021.
In 2021, CVS Health will be on the Fortune 500 , a list of companies based on gross income that Fortune magazine makes each year. This year CVS Health was ranked 4th with revenues of around $268,706 million, profits of $7.179 million and total assets of $230.715 million.
For the fiscal first quarter ended March 31, 2021, CVS reported a 3.5% increase in total revenue over the previous year driven by growth across all segments. Revenue to $69.1 billion from $66.8 billion a year earlier; adjusted earnings per share $2.04 ; The health care and drugstore chain reported net income of $2.22 billion, or $1.68 per share, up from $2.01 billion, or $1.53 per share, over the previous year. The effective income tax rate is 25.1% for the three months ended March 31, 2021. For this second quarter earnings report estimate, the consensus EPS forecast from Zacks Investment Research, based on 9 analysts’ estimates, was $2.07. The reported EPS for the same quarter last year was $2.64.
The company has raised its guidance for the year expecting 2021 earnings to be between $6.24 and $6.36 per share and after adjustment between $7.56 and $7.68 per share. This reaffirms that full-year cash flow from operations is projected to range from $12 billion to $12.5 billion. This is understandable given that COVID-19 vaccines and testing help increase revenues and offset a weak cold and flu season. Vaccines and testing, on the other hand, also attract foot traffic. About 9% of new customers who receive tests via CVS also fill out new prescriptions at pharmacies. But all of this also relies heavily on pharmaceutical sales to drive revenue growth, as the pandemic-related sales boom may not last forever.
The company has become a major provider of Covid-19 vaccines (Covid-19 vaccines, tests and prescriptions). The service has helped drugstore chains attract customers. CVS takes up a larger percentage of the prescription drug market and its healthcare benefits segment is now growing at a fairly strong pace. In fact, the company has turned some drugstores into HealthHubs, a store model that includes more services like sleep apnea testing and mental health appointments with clinical social workers.
In the first quarter of 2021, CVS is fully integrated with health insurance company Aetna after a massive $69 billion acquisition, generating more than $69 billion in revenue. In 2020, revenue grew by $12 billion over the previous year. This integration brings together various parts of the CVS business into the healthcare ecosystem. This will strengthen the company’s fundamentals going forward.
Technical Level
#CVS stock has surpassed its 4-year average high of 84.00 in May 2021 by printing a fresh peak at 90.59 right around the 61.8%FR retracement level (pull from 113.65 peak to 51.77 low). ). Total 2021 H1 equity price growth hit +21% more at the June close ( 83.45 ) around the 50.0% retracement, back below its yearly high average price. ATH price printed in July 2015 at 113.65 . For July 2021, the price was still slightly corrected before closing at 82.29 .
After scoring an annual high of 90.59the value of this asset is overvalued and has since been corrected by -9%. The long-term return on its shares is likely to be lower than its business growth, which averaged 4.3% over the last three years and is forecast to grow 4.38% annually over the next three to five years. But overall these equity positions are still technically consolidating, in the area of the average yearly high within the Kumo. This is reinforced by the validation of the RSI which has been flat in the 50 area for some time (currently at 46.96); MACD histogram is thinning towards neutral levels, but equity prices are still above the 200-day moving average in an ascending aisle. A price move above the resistance at 84.26 will target 87.27 and a top of 90.59. As long as the resistance holds, the price bias is likely to form a corrective wave for 79.
Tipsrank provides a strong buy rating based on 19 analysts who rated CVS Health’s shares in the last 3 months. The average price target is $97.06 with a forecast high of $108.00 and a forecast low of $83.00. The average price target represents a 17.85% change from the last price of $82.36. Meanwhile, Zacks Equity Research gave a rating of #3 hold for CVS Health.
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Ady Phangestu
Analyst – HF Educational offfice – Indonesia
Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.
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Inheritance tax planning: using Aim shares to cut your inheritance tax bill
Business Property Relief (BPR) was an important survivor of chancellor Rishi Sunak’s spring Budget in early March. The tax break can be a valuable tool in planning for inheritance tax, but had been tipped for the chop.
Yet as it turned out, the chancellor made no mention of BPR, leaving people free to continue using it, at least for now.
The basic idea of BPR is that if you leave business assets to your heirs – such as a business you have started, or its assets – these should be treated differently from an inheritance tax perspective to the rest of your estate. In practice, the rules relating to businesses and inheritance tax can get quite complicated, but one aspect of BPR is valuable to a potentially wide audience, including people who have never started a business in their lives.
This is because unquoted shares in a company fall within the remit of BPR. Crucially, “unquoted” has a broad definition – it includes companies listed on the Aim market, the junior market of the London Stock Exchange.
As a result, in the right circumstances, Aim shares will not count as part of your estate for inheritance tax purposes; no tax is thus due on these assets, even if your estate exceeds the threshold at which your heirs would normally have to pay 40% tax.
Don’t buy Aim stocks just for the tax breaks
The first important point to make here is that not allowing “the tax tail to wag the investment dog” is a golden rule of financial planning. In other words, it never makes sense to invest simply for tax reasons. Aim shares, after all, carry their own risks – there is not much point in investing in the hope of securing a 40% tax saving if you lose 100% of your capital.
This caveat aside, however, where you own Aim shares as part of an investment portfolio carefully structured according to your attitude to risk and your financial goals, they can be a useful way to plan for inheritance tax. Aim shares are usually also eligible for individual savings accounts (Isas), within which income and capital gains are tax-free too.
Just make sure you understand the rules. First, BPR comes with a two-year qualifying period – you must have held qualifying Aim shares for two years before your death for the assets to fall out of your estate for inheritance tax purposes.
There is a wrinkle here: they do not need to be the same Aim shares. If you owned shares in one qualifying company for 18 months before selling up and reinvesting the proceeds in another qualifying company, the latter would get BPR after six months.
Second, not all Aim shares qualify for BPR. Certain sectors of the market, including financial services and property, typically don’t. HMRC publishes a guide to what qualifies and what doesn’t, but you’ll need to check each share to be certain, or take professional advice. Roughly two-thirds of Aim shares currently qualify, but the list changes all the time as companies come and go, or change their activities.
How to build an Aim portfolio
How you make use of the Aim BPR tax break in practice depends on your personal circumstances and how hands-on you want to be. It is certainly possible to build your own portfolio of Aim stocks, but you will need to be confident in your ability to choose investments wisely and to stay on top of the tax rules.
The alternative is to pay a stockbroker or financial adviser to do the job on your behalf, or to work with a firm that specialises in building tax-efficient investment portfolios. Firms such as Octopus, Unicorn and Wealth Club, for example, offer specialist inheritance-tax portfolio services.
Either way, the normal rules apply when seeking professional advice. Only work with fully regulated firms – those authorised by the Financial Conduct Authority. And do your due diligence – look into firms’ specialist qualifications, compare their charges (they can be steep, even by financial industry standards, for this particular service), and make sure you feel comfortable with them before handing over your money.
Remember that the government could change the rules at any point
More broadly, you should also be mindful of the potential for tax reforms in the future that torpedo any strategy you devise today. The fact that the chancellor let BPR off the hook in March does not mean he will not change the rules in the future. Given that the Office for Tax Simplification has recommended reform of inheritance tax, BPR remains a likely candidate for an overhaul.
One final point to make is that BPR is not the only inheritance tax relief available on investments. The Enterprise Investment Scheme (EIS) also comes with an inheritance tax advantage: investments in the EIS of up to £2m a year achieve exemption from the tax after two years.
However, the EIS is an initiative designed to boost investment in small, early-stage companies; the tax benefits on offer reflect the elevated risk profile of these businesses, so you must be prepared for the possibility of losses.
As with Aim shares, never invest in companies with EIS status just to get a tax break – and if you do decide the EIS is for you, think about how to build a portfolio of qualifying companies.
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Improve your odds of investment success with these three stocks
How much should you allocate to a great investment idea? Over 60% of the Large Cap Active Global Equity portfolios in a popular fund database have more than 50 stock holdings. That implies an average investment of around 2% of the portfolio and, say, 3% for the best ideas.
Almost 40% of the database is made up of funds holding more than 80 stocks, which tend to invest even less than 2% in individual investments. This seems quite low, especially for a best idea, which is where John Kelly comes in.
Kelly was a scientist working on noise reduction in long-distance telephone signals at the famous Bell Labs in the 1950s. But it turns out that his algorithm was useful for sizing gambling bets appropriately for a given set of probability-weighted outcomes. The “Kelly criterion” calculates the portion of funds you should place on a bet, with probability-weighted win/loss outcomes, to maximise your long-term return.
Playing with probabilities
We know that investments can be winners (or not) and we can estimate the degree and probability of the win. So the Kelly criterion is useful for investment decision-making as well as Las Vegas.
Let’s say we have a great investment idea with a 75% chance of 30% upside, but a possible 10% downside. Kelly suggests you invest two-thirds of your available funds with an expected return of 20%.
Interestingly, by working the Kelly criterion backwards, we can infer what a portfolio manager thinks of his or her best ideas given the amount invested. For example, a 3% position (roughly 2.5 times the average weight in an 80-stock portfolio) implies that the manager sees the idea as having equal upside and downside but with an upside probability of 51.5%. This does not sound very convincing, and of course the manager is unlikely to agree with that range of outcomes and probabilities. So why not concentrate the portfolio on the few best ideas and forget about the rest? That is what we do. Here are three stocks that we hold with real conviction:
Growth potential in the cloud
Alphabet (Nasdaq: GOOGL) is a well-known internet service provider; the search engine and YouTube form the foundation of the company. Alphabet’s ability to continue to grow its share of advertising revenue is underappreciated, while you might not realise that it has a large cloud- computing business, an area that offers long-term growth.
DaVita (NYSE: DVA), provides dialysis treatments for patients suffering from end-stage renal disease (ESRD). Costs and a rise in client mortality owing to Covid-19 have been a problem, but the market does not appreciate the likely margin improvement as costs normalise. The transfer of patients from Medicare to Medicare Advantage (under the US healthcare system) also offers the potential for margin improvement.
Consider also NVR (NYSE: NVR), a housebuilder in the US with a geographically focused operation (some rivals spread themselves too thin) and a policy of not buying land. This allows it to benefit from economies of scale in construction and minimise the capital employed in the business, improving returns on capital, an important gauge of profitability. It is an unusually shareholder-friendly company.
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Premium Bonds: a better bet for savers when interest rates are low
Cash is a crucial part of a portfolio. It provides you with reserves to draw on for large planned or unplanned expenses, and it allows you to take advantage of any major buying opportunities in the markets. How much cash you hold as part of your investments – as opposed to what’s in your current account to cover routine outgoings – will vary depending on the size of your portfolio, the level of your regular, reliable income and whether you are expecting any major outlays in the next couple of years, but many people keep between 5% and 10% of their assets in cash.
Unfortunately, cash also seems dull. The interest you can earn is usually modest compared to the potential returns on other assets. At present, with inflation likely to stay high and interest rates firmly on the floor, you are guaranteed to lose money in real terms: UK inflation was 2.4% in June, compared with a best rate of about 0.5% on an easy access account and 1% if you lock your money up for a year. So the temptation today to move your cash into higher-yielding investments is huge. The problem is that investments with a higher potential return carry more risk to your capital, and the point of cash is to have complete security and easy access.
Popular, but normally not attractive
However, there is one popular investment that probably looks better in today’s conditions than usual: the government-backed National Savings & Investments Premium Bonds. These don’t pay interest – instead they run a monthly prize draw, with an annual prize rate that varies over time to reflect what’s available on savings accounts. This rate is now 1%, down from 1.4% last year. The tax-free prizes range from £25 (where each £1 Premium Bond has a roughly one in 35,000 chance of winning) to £1m (about one in 55 billion). You can save up to £50,000 and there’s no notice period for withdrawals.
That 1% prize rate doesn’t represent the typical return, because it’s skewed by the handful of large prizes. Your expected return depends on how many bonds you hold. A saver who has £1,000 is unlikely to win anything in a year. One with £35,000 will average one £25 prize each month (an annual rate of 0.85%) – but around half of savers will do worse.
Lumpy returns like this make Premium Bonds fairly unattractive in normal conditions. But with interest rates so low relative to inflation, even the unlucky won’t end up much worse off than with a savings account. The capital is safe and there is a tiny probability of a bigger payoff. Very few investments that have that risk profile. So long as the prize rate stays competitive against savings, Premium Bonds can be a simple way to make cash a little more exciting without adding risk.
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Quarterly Earnings Preview: Alibaba, Eli Lilly and Fidelity
Alibaba Group (#Alibaba), a Chinese multinational technology company with market cap of over $530B, specializing mainly in core commerce (retail and wholesale operating platform), cloud computing (big data analytics, machine learning platform, database, storage and content delivery network, security, management and application), and digital media and entertainment (Youku, Tudou etc), is scheduled to announce its earnings for the fiscal Quarter ending June 2021 on 3rd August, before market open.
Despite suffering the first-ever losses from operations due to the anti-monopoly fine levied by the government in China, Alibaba Group continued to surpass consensus estimates in many aspects in the quarter ended March 31st this year. This includes annual active consumers and mobile monthly active users (MAUs) exceeding 800 million (an increase of 32 million (q/q) and 85 million (y/y)) and 900 million (an increase of 23 million (q/q) and 79 million (y/y)) respectively, $28.60B in revenue (an increase of 64% compared to the same period last year), as well as non-GAAP net income and diluted earnings per share (EPS) achieving an increase of 18% (y/y) and 12% (y/y). Adjusted EBITDA has also recorded gains of 18% (y/y) to $4.563B.
Market participants remain optimistic over the upcoming quarterly earnings announcement. Consensus estimates for sales stood at 209.1B, up 11.58% (q/q) and 35.96% (y/y) respectively. In addition, EPS is expected to hit $14.32, up 38.76% (q/q), but slightly below the same quarter in the previous year, by 3.37%. Nevertheless, taking into consideration the positive factors such as strategic business model for consumer growth and retention, new retail strategy which involves seamlessly online and offline digital commerce infrastructure and high-frequency delivery fulfilment services, improved domestic and international logistics and consistent growth of international commerce retail business (Lazada, Ali Express) and so on, market participants remain positive towards the outlook of the Alibaba Group.
Even so, it is still important to keep in mind that some negative factors that could provoke international tensions and block the expansion of Chinese tech companies, as well as the company’s rocky political standing which may hinder its future growth, should also not be ignored.
The weekly chart shows that the #Alibaba share price is traded within a descending wedge, leaving the highest point at $319.27 seen on 27th October 2020, and consecutively lower highs at $274.27 (or FR 23.6%) and $230.86 (near FR 50.0% and SMA-100). Breaking below these points, the company’s share price continues its losses to below FR 61.8%, or $202.20. Both RSI and Stochastics Oscillator display that the price remains stable in a range below 50.0, but above the oversold zone.
From the Daily chart, the #Alibaba share price remains pressured below resistance zone $202.00 (or FR 61.8%) and $207.50 (FE 61.8%; all FE levels are constructed following connection of the highest point seen last year, $319.27, the subsequent lowest point seen in late December of the same year, $211.19, and a rebound high at $274.27 (also corresponds to the weekly FR 23.6%).
Based on the estimates offered by analysts, the #Alibaba share price is just slightly above the low estimate ($192.33), and over 80% have voted for a “Buy” in a poll since July. If the price breaks above $202.00-$207.50, with a bullish candlestick closing strongly above the upper line of the descending wedge as well, there is potential for the price to extend towards the next resistance $224.50 (FR 50.0%) and $246.90 (FR 38.2%).
Nevertheless, if the said resistance zone remains, $166.20-$170.40 may serve as a critical support to watch. A successful bearish breakout will also mean a break to the price structure, thus opening up an opportunity for another slump towards the psychological price level $150.00 and the low seen in May 2019, $147.91.
Eli Lilly
Eli Lilly and Co. (#EliLilly) is an American pharmaceutical company with a diversified drugs profile which was founded in 1876. Similar to Alibaba Group, it is set to release its earnings report on 3rd August, before market open.
In general, Eli Lilly does not seem to be a compelling candidate in terms of sales and EPS growth. In the previous quarter, both reported sales and EPS missed consensus estimates, with the former stood at $6.8B (versus $6.9B) while the latter stood at $1.87 (versus $2.12). Despite being involved in selling a wide range of drugs, lower realized prices driven by increased competition among peers and increased rebates to gain wide commercial access, lower-than-expected demand for its Covid-related drugs, reducing price in international markets as well as continued negative impact from the pandemic has curbed the company’s growth.
Market expectations remain flat for the upcoming Q2 announcement. Sales is expected to achieve $6.6B, down 2.94% (q/q), but up 20% (y/y); EPS, on the other hand, is expected to hit $1.89, up slightly from the previous quarter by 1.07%, but remaining flat as in the same quarter last year. It is currently ranked as #4 (Sell) by Zacks.
In near term, following the FDA’s emergency approval to supply a wider range of antibody medicine for Covid-19, the number of sales of these drugs remains on an observation list in which a better-than-consensus performance may improve market sentiment. Any development in the pandemic situation shall also directly affect the company’s performance.
From technical perspective, the points $101.18 (2019 lows) and $129.16 (the lowest seen in the latter half of 2020), together with the January 2021 high $217.73 and the $178.52 (resistance turned support), form bigger and smaller (aqua) Fibonacci expansion trend levels respectively. Currently, the #EliLilly share price is traded within an ascending wedge, slightly below $250 (median estimate of 17 analysts, or bigger FE 61.8%). Breaking above this level, the share price may extend higher to test the two FE 100.0%, first the smaller FE ($267.10) and next the bigger FE ($295.10) to the high estimate of the analysts, $300.00.
Oscillator indicators in both Weekly and Daily chart display the #EliLilly share price at an overbought zone. The downside risk is that the earnings result will not perform up to par, which may lead to the share price tumbling towards $233.25 (smaller FE 61.8%). Breaking this level may indicate the possibility for the share price to extend its losses towards $217.73 (or January 2021 high), $210.00 and $195.00 (or the low estimate offered by analysts, $190.00).
Fidelity National Information Services
Fidelity National Information Services, Inc. (#FIS) has been established for over 50 years, engaging in the segments merchant (electronic payments, eCommerce and mobile wallet), banking (digital solutions, fraud and risk management, payment network, item processing and output services solutions) and capital markets (buy-and sell-side solutions) in over 140 countries. The company will also release its earnings report for the fiscal quarter ending June 2021 on August 3rd, before market open.
In Q1 2021, FIS reported sales revenue at $3.2B, slightly down 3% from the previous quarter, but up 5% as compared to Q1 2020. The figure is at par with market expectation. Most of the revenues came from the software license fees and processing, transaction fees, technology and professional services that it provides.
On the other hand, EPS stood at $1.30, exceeding consensus estimates by $0.05. FIS has been doing well in the last year, with reported sales revenue at 12.6B (same as consensus estimates) and EPS at $5.46 versus consensus estimates at $5.41.
For the upcoming announcement, sales revenue is expected to hit $3.4B, up 6.25% (q/q) and 13.33% (y/y), respectively. As for EPS, according to Estimate Momentum, analysts’ sentiment remains optimistic as it has been projected at $1.55 for the past month and kept unchanged. If this scenario happens, the EPS would be up 19.23% (q/q) and 34.78% (y/y), respectively.
A buy rating is given by a majority of analysts on FIS stocks. Fundamentally speaking, the company is seen as undervalued at a more than 25% discount to the current market price, by using the Discounted Cash Flow (DCF) model. Looking forward, as its cryptocurrency exchange continues to expand, FIS will also benefit from its card-to-crypto processor Worldpay. In addition, its Modern Banking Platform which offers advanced components that serve open, powerful and scalable banking systems has helped banks to continue staying ahead of market changes. This suggests that market demand towards services offered by the company may increase further in the future, thus benefiting its stock price.
The weekly chart shows that the #FIS share price remains traded within an ascending triangle, with the recent highest point formed at $158.18 seen in the week of 9th February last year. Together with $160.50 (or FE 61.8%), these price levels contributed to a major resistance.
In general, $89.88 (lowest low formed on 15th March last year), $121.66 (higher low formed on 24th January this year) and the latest, highest low $141.42 (which also corresponds to 100-SMA) contribute to the three key points which connect together to form an ascending trendline of the triangle. Currently, the company’s share price is traded at the low estimate ($150.00) as offered by 29 analysts. RSI remains neutral (55.13) while Stochastics oscillators approach the overbought zone.
In between FE 0.0% ($119.20) and FE 61.8% ($160.50), prices are subdivided into Fibonacci retracement levels, which extend from the lowest seen in late January ($121.66) to the session high formed in late April ($155.93) this year. The level at which FR 23.6% and SMA-100 meet is the nearest support. If the bears successfully break the support, the next support levels to focus on are $145.00, $141.42 (highest low of weekly ascending triangle structure), $142.85 (FR 38.2%), and $138.80 (FR 50.0%).
At the upside, a break above the resistance $151.50 may indicate the share price will extend its bullish momentum towards the highest point of the year ($155.93), and later on the weekly FE 61.8% ($160.50).
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Larince Zhang
Regional Market Analyst
Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.
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Dollar Weakens Ahead of Key Payrolls Data
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Daily Market Outlook, August 2nd, 2021
Daily Market Outlook, August 2nd, 2021 Overnight Headlines China's July Manufacturing Weakens Amid Export Weakness China Backs State-Owned Enterprises With $32Bln In Rescue Funds China To Keep Open-Up, Ensure Security In Overseas IPO: Xinhua Japan Defence Min Calls For Greater Attention To ‘Survival’ Of Taiwan Australia’s Queensland Lockdown To Be Extended Until August 8th Fed’s Kashkari Warns Delta Variant Could Slow Jobs Recovery Fed’s Brainard: Labor Market Hasn’t Satisfied Goals For Reducing QE Fauci Warns On Covid-19 That ‘Things Are Going To Get Worse’ US Senators Make Final Tweaks To Infrastructure Bill, Passage This Week World’s Biggest Pension Fund Cuts US Bond Weighting By Record Dollar Holds Near One-Month Low As Investors Eye U.S. Jobs, RBA China Government Bond Yields Slip As Coronavirus Concerns Rise Oil Prices Slide On Worries Over China Economy And Higher Crude Output Asian Stocks Climb As China Shares Bounce Back, Japan Rallies HSBC Restores Interim Divi As Q2 Profit Soars On Reserve Releases Square To Acquire ‘Pay Later’ Company Afterpay For $29Bln Vonovia To Make New Deutsche Wohnen Offer At 53 Eur/Shr The Day Ahead Earlier this morning, the release of our July Lloyds Business Barometer survey showed the level of business confidence fall for the first time since the start of the third national lockdown in January. Overall business confidence declined by 3 points to 30%, reflecting a decline in firms’ own trading prospects (28% vs 30%) and a fall in optimism regarding the economy (32% vs 36%). However, a broader sign that firms remained confident about the outlook, albeit a little less than in June, firms’ hiring intentions picked up for a sixth consecutive month – from 17% to 18% – to reach its highest level since November 2018. The first half of the week sees somewhat of a lull in the calendar. July manufacturing PMI readings for the UK, France, Germany and the Eurozone as a whole, are final readings. Revisions are typically not that meaningful and it is likely that the surveys continue to show that rates of activity remain solid, albeit with headwinds from supply chains and labour shortages continuing to persist and resulting in firms not being able to fully meet client demand. Across the pond, the US ISM manufacturing survey is likely to show a similar theme. In June, the headline measures printed an above-60 outturn for a fifth consecutive month – consistent with a rapid pace of activity. However, the employment component dropped below the key-50 level signalling a drop in employment and highlighting the challenges that US manufacturing firms are currently facing in increasing their workforces. The extent to which this dynamic has continued, and is feeding through into inflation, will be closely watched.The Week Ahead Week Ahead-U.S. non-farm payrolls key for market direction The U.S. has a busy data calendar this week, but July non-farm payrolls will be the most important release by far. The market is expecting a strong result, with 900,000 jobs added, unemployment to fall to 5.7% from 5.9% and average hourly earnings to rise 0.3% month-on-month. A stronger-than-expected outcome would fan expectations the Federal Reserve will have to be more aggressive in tapering monetary stimulus, while weaker numbers will fuel concerns that global growth is slowing. Other key U.S. data in the week ahead includes factory orders, ISM manufacturing, ADP jobs, trade data and ISM non-manufacturing. Euro zone data includes final manufacturing and services PMIs, EZ retail sales and German industrial production. UK PMIs will also be released this week.In Japan, PMIs and Tokyo CPI are due. China data includes July Caixin manufacturing and services PMIs following slower growth in the official NBS measures. Chinese July trade and FX reserves data are also due. Australia data includes building approvals, trade and retail sales. New Zealand's main release is Q2 employment, while Canada has PMIs, trade and employment data due. Week Ahead-BOE and RBA meet, China may try to calm markets The Bank of England and Reserve Bank of Australia meet this week in very different settings. The BOE will debate how the opening of the UK economy will impact growth and inflation, while the RBA will discuss what should be done to offset the severely negative impact of the greater Sydney lockdown. Recent data showing UK inflation is rising has convinced some BOE MPC voters to signal policy may have to tighten sooner than later, but the doves on the policy committee are expected to dominate for now. The RBA meets on Tuesday, as Sydney remains in an extended lockdown due to the fast-spreading Delta variant of the coronavirus. The RBA tapered slightly in July, saying that from September they would reduce their bond buying to A$4 billion a week from A$5 billion. The majority of those polled by Reuters believe the RBA will reverse that decision and delay the tapering. Markets were rattled last week when China cracked down on publicly traded companies in the tech and education sectors. Emerging market equities were hit hard, with the EM ETF down over 5% at one stage before recovering most of the lost ground after China regulators tried to allay investor fears. Investors will keep a close eye on developments in China and emerging market moves after a highly volatile week.CFTC Data Bullish USD Speculative Sentiment Builds Data up to Tuesday July 27 and were released on Friday July 30. The tentative step towards building a bullish USD position by speculative traders reporting futures positioning via the weekly CFTC data last week developed more strongly in the reporting week through July 27th. Aggregate net USD longs, reflecting total positioning in the major currencies, rose USD2.6bn to total USD3.56bn. This is the largest aggregate USD long position since early March last year and suggests a broad positioning and sentiment shift is developing in favour of the USD. Investors are turning increasingly bearish on the JPY, AUD and modestly so this week the GBP. Net JPY shorts remain within the range of positioning seen since the spring and increased only modestly this week (USD483mn) to total USD6.8bn. However, the net JPY short represents the biggest single currency position across the currencies we monitor in this report now. Net AUD shorts increased modestly (USD281mn) but represent the second-largest conviction short against the USD at the moment. Net GBP shorts rose USD195mn to USD493mn this week as gross long positioning dropped sharply. Elsewhere, the USD saw a significant short-covering lift against the EUR, with net EUR longs dropping USD1.12bn to USD5.6bn—or the equivalent of 38k contracts (the lowest since last March). Net CAD longs were slashed USD592mn to USD426mn. Gross shorts declined but gross longs fell significantly as investors turned less constructive on the CAD. Modest Net NZD longs were more or less halved in the week (falling USD112mn) to USD99mn. Investors trimmed net MXN shorts slightly, however (falling USD44mn to USD661mn), while net CHF longs (USD1.2bn) increased slightly (USD70mn) after falling in the past three weeks. Beyond the major currencies, speculators added USD394mn to their net gold longs to USD35.9bn (or just under 200k contracts net), keeping positioning within the range seen since February. Meanwhile, natgas net shorts rose to the highest since last March while prices continued to rise to around $4, the highest since late 2018G10 FX Options Expiries for 10AM New York Cut(Hedging effect can often draw spot toward strikes pre expiry if nearby) EUR/USD: 1.1800-15 (1.1BLN), 1.1900 (1.4BLN) USD/CHF: 0.9000 (250M). EUR/GBP: 0.8500 (210M) AUD/USD: 0.7360 (524M), 0.7400 (1.2BLN) NZD/USD: 0.6875 (200M), 0.6900 (209M) USD/CAD: 1.2550 (559M) USD/JPY: 109.50 (225M), 109.75 (310M)Technical & Trade ViewsEURUSD Bias: Bearish below 1.1950 Bullish above EUR/USD opened 1.1864 and traded in a 1.1859/1.1872 range Heading into the afternoon it is trading at the session high Risk assets were buoyant in Asia with the AXJ index +0.65% and Eminis +0.50% EUR/USD support is around 1.1820 where the 10 % 21-day MAs converge Fibo resistance is at the 38.2 of the 1.2266/1.1752 move at 1.1948 EUR/USD likely to consolidate before trending higherGBPUSD Bias: Bearish below 1.40 Bullish above. Touch softer in a tight 1.3888-1.3902 range with only moderate flow Buoyant markets cap USD - E-mini S&P +0.55%, Nikkei +1.7% and AsiaxJP +0.5% UK may offer 32 million vaccine booster shots from September - The Telegraph If true a major weapon in the fight against the Delta variant... Charts; 5, 10 & 21 daily moving averages climb - mixed momentum studies Net bullish setup, despite Friday's dip- 1.3819/21 21 & 10 DMA's key support 1.3981 upper 21 day Bollinger and 1.3991 61.8% June July fall cap at present Break would open the door to 1.4090 76.4% retracement of June July fallUSDJPY Bias: Bullish above 109 Bearish below USD/JPY does little in thin, sluggish trade, range 109.61-77 EBS Spot well within 109.29-110.12 daily Ichi cloud, 100/55-DMAs 109.60/110.00 Some offering interest above, especially pre-110.00, bids towards 109.00 Few notable nearby option expiries today, 109.50-70 total $347 mln only US yields remain soggy, Treasury 10s @1.223%, risk on, Nikkei +1.7@ @27,742 Crosses quiet, EUR/JPY 130.11-20, GBP/JPY 152.26-56, AUD/JPY 80.36-60, heavy Japan July mfg PMI 53.0, flash 52.2, output growth picking upAUDUSD Bias: Bearish below .76 Bullish above AUD/USD opened 0.7340 and traded in a 0.7330/50 range Heading into the afternoon it little changed at 0.7340/45 Dip to 0.7330 was due to the weak Caixin PMI that followed the weaker official PMI China SSEC started off negative before turning around late morning Asian equity markets were buoyant with AXJ index +0.65% and Eminis +0.55% AUD/USD support at last week's 0.7317 low and trend low at 0.7289 Resistance is at the 21-day MA at 0.7411 and break eases downward pressure RBA decision tomorrow a key event as Sydney lockdown weighs on economy
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Market Update – August 2 – USD consolidates at lows
Market News Today – USD up from 1-month lows (USDIndex 92.00 from 91.75 on Friday) – Chinese & Asian stock markets rise, despite weak Chinese PMI and other Asian data. US equity markets closed lower on Friday (-0.54% USA500 4395) led by -7.56% fall for AMZN. Yields closed the week down at 1.239%. Overnight – HSBC beat earnings significantly, adding to the good news from other European banks. AUD housing market still hot, JPY consumer confidence ticks up and German Retails sales bounce back significantly. Gold is down again at 1808, and USOil is down to, but up from a test of 72.00, earlier.
Week Ahead – Another key week to start the month – We have the RBA, BOE, CAD Jobs and NFP along with a raft of PMI data.
European Open – DAX and FTSE 100 futures are up 0.5% and 0.4% respectively, U.S. futures are posting gains of 0.5-0.6%, after an upbeat session across the Asia-Pacific region overnight. In FX markets both EUR and Sterling are little changed against the Dollar, with EURUSD at 1.1873 and Cable at 1.3909. China jitters eased and there was some progress on the US infrastructure (much reduced) spending plan, which helped to underpin sentiment. Virus developments in Asia continue to cause some worries, but for Europe at least the hope is that advanced vaccination campaigns will allow economies to get through this wave without the type of restrictions that could seriously hurt the recovery. Central banks are still cautious though as there are still lingering risks and that will likely also keep the BoE in wait and see mode this week.
Today – EU, UK, US Manufacturing PMI (Final), US ISM Manufacturing PMI Earnings: AXA, Heineken,
Biggest FX Mover @ (06:30 GMT) AUDNZD (+0.19%) Has moved up from 1.0517 (2021 and 33 week lows) on Friday. Weak breach of 21 EMA earlier, Faster MA’s aligned higher, MACD signal line & histogram under 0 line but moving higher, RS 55, neutral but rising, Stochs rising and already into OB zone. H1 ATR 0.0008, Daily ATR 0.0051.
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Dollar Down Near One-Month Low Ahead of RBA Policy Decision
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Dollar holds near one-month low as investors eye U.S. jobs, RBA
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Sunday, August 1, 2021
George Iacobescu: the man who transformed London
George Iacobescu was in his early forties when his boss, Paul Reichmann, founder of the Canadian developer Olympia & York, sent him to London to investigate the possibility of building in the city’s Docklands. It was 1986, the year of Big Bang, and the area had been designated an enterprise zone by Margaret Thatcher. Iacobescu walked from his hotel in Mayfair, along the river to Canary Wharf, says The Sunday Times. What he found made him think of The Long Good Friday – the gangster movie starring Bob Hoskins and Helen Mirren. “I saw 500 years of history along the Embankment and then I arrived here and there was nothingness,” he relates. “I went back and said: ‘Don’t touch it’.”
An architectural revolution
London’s recent history might have been very different had Reichmann taken his scout’s advice. Indeed, having overcome his initial doubts, Iacobescu became the “visionary” who quite literally put Canary Wharf “on the map”, says the Financial Times – eventually becoming “synonymous with the Docklands financial district”. He transformed London’s skyscape, presiding over what he now calls the biggest architectural revolution in the capital “since John Nash designed the West End”. But, more than that, he helped cement London’s emergence as a modern financial powerhouse to rival Wall Street. Former Lloyds of London chairman Peter Levene compares him to the PM who backed the project. “Rather like Margaret Thatcher, the one person who came up with solutions was George.”
Born in 1945 to a family of dissidents in the oppressive regime of Nicolae Ceausescu’s communist Romania, Iacobescu grew up in a world of such dire economic mismanagement and stark shortages that families “were allowed one light bulb per apartment”, says The Independent. When his mother-in-law went to hospital for an operation, she had to bring her own lightbulb for the operating table. Iacobescu’s father was a doctor who, like most people in the country, failed to prosper and his own career path was set early. His first job involved carrying pails of concrete to the tenth floor of a building site. But, ultimately, “Romania’s economic disaster provided the means of his deliverance.” The need for foreign currency was great and “the country had little to export apart from its people”, fuelling an underground trade. Iacobescu emigrated in 1975, says The Sunday Times. He fled to Montreal and spent another two years lobbying to get his fiancée out, “eventually resorting to a successful hunger strike outside the UN building in New York. “A chance encounter at a party got him a job with Olympia & York.”
Will Canary Wharf survive?
It hasn’t always been plain sailing, says the FT. The Canary Wharf project bankrupted debt-ridden O&Y, but Iacobescu joined the new company that took on the scheme and eventually rose to run it. Now 75, he is preparing to hand over responsibility of the Canary Wharf Group to Shobi Khan, who joined as CEO last year. The cigar-chomping Iacobescu will be a tough act to follow, says The Independent. A courteous, avuncular figure, “he’s the patriarch whom the lowliest security guards approach with problems”.
The pandemic has placed a question mark over the future of Canary Wharf, says The Times. But the man isn’t having any of it. “Working from home is a fad,” he declares. “There is a logic to having an office. There is a culture, there is competition, there is creativity, there is dating, there is learning…We’re all chemically made to be together.”
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How the government can give our start-up businesses a hand up
For three decades, the UK has stuck to the view that the government shouldn’t try to invest directly in companies. It didn’t have the expertise to “pick winners” and was far too easily swayed by political considerations. Over the last year, that has changed. At the height of the Covid-19 crisis the chancellor, Rishi Sunak, decided that, with venture-capital money drying up, he should step in and help companies that otherwise might go bust. The Future Fund ended up spending £1.1bn, taking stakes in more than 1,500 companies.
What government can offer
The chancellor has decided he likes his new toy so much that he’s going to play again. The Breakthrough Fund will put £375m into start-ups to help them grow and expand. There is nothing wrong with that in principle, but, the exceptional circumstances of Covid-19 aside, there is no shortage of money available for new firms in the UK. In 2020 there was a record £15bn of venture-capital (VC) funding for new businesses. The UK ranks third globally for VC investment, behind only the US and China, and well ahead of India, Germany and France. The money is there if you can make a convincing investment case. The government could instead offer something unique: regulatory and legal reforms. No one else can make that happen.
Firstly, we could exempt new companies from employers’ national insurance for the first three years. The first three or four staff are often the crucial point at which a new venture transitions from being a hobby, or a form of self-employment, to a properly functioning business. But it is dauntingly expensive, and adding a specific tax onto every staff member’s salary only makes it worse. It would be easy to suspend that for the first three years. While we are at it we could exempt new companies from employment protection as well so founders didn’t have to worry about being hauled before a tribunal if the first few staff didn’t work out. It would encourage firms to hire – as well as creating more jobs.
Secondly, we could suspend business rates for the first five years to make an office or workshop cheaper. Again, getting an office is a crucial first step in turning a start-up into a proper business, but at precisely that moment we hit new companies with a huge new tax and one that bears no relation to whether they are making any money or not. If we held off for a few years, a lot more companies would have the chance to grow to a size where they could easily afford rates.
Thirdly, we could introduce start-up visas to make it easier to hire talent from around the world. We are already reforming the immigration rules so that the system encourages higher-earners, with better qualifications, into the country, instead of just anyone who happens to be born in the European Union. We could tweak that so that a start-up could, within its first three years, bring in any staff from around the world that it needed. And while we are at it, we could offer automatic visas to anyone who wanted to come to the UK to start a company, subject only to a minimum amount of investment, or funding from a UK-registered venture-capital firm. There is no point in keeping out people who want to create jobs and wealth in this country.
A regulatory fast track
Finally, how about fast-track regulatory approvals for start-ups? In many industries, from life sciences, to finance and professional services, to emerging technologies such as artificial intelligence, to robotics, to drones and driverless vehicles, it is getting a product or service through all the regulatory hoops that really takes time. Why not mandate faster approval times for companies less than three years old by simply bumping them to the head of the queue? A fintech launch, for example, might be able to get a banking licence in half the time, or a biotech launch gets its drugs to the market in three years instead of ten. A big company might be able to afford to sit around for years to get all the appropriate licences. A new one could easily run out of cash before it happens.
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