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Markets and Rates - July 5, 12 (6th comment today)

Markets & Rates - July 5, 12

Markets and Rates - July 5, 12 (6th comment today)

08:45 A.M

ETX Capital calls FTSE 100 up 1 point, DAX down 9 and CAC-40 down 1

Regional markets are to open largely flat, as market participants adopt a level of caution by <a class="inlineAdmedialink" href="#">moving</a> to the sidelines ahead of central bank decisions due around lunch time today. Asian markets fell overnight, which places some pressure on European markets at the open. The BOE is up first with its policy decision, where another round of QE is expected to be shot through the system. The ECB follows shortly after, with consensus calling for a 25 basis point rate cut. Both outcomes appear to be priced-in, so the reaction by markets may be subdued. It will be the ECB’s post-rate announcement press conference which will be the next major catalyst for markets. Also today, Ireland is back to test the <a class="inlineAdmedialink" href="#">debt</a> markets with an auction, its first since the country’s bailout in September 2010.

Ishaq Siddiqi - Market Strategist - ETX Capital -

09:00 A.M

With the testimony of former CEO of Barclays Bob <a class="inlineAdmedialink" href="#">Diamond</a> in front of the Treasury select committee out of the way and the US rejoining market action after yesterday’s Independence holiday all eyes with be on the eagerly awaited central bank meetings of the ECB and the BOE with both expected to undertake growth stimulus measures.

Ahead of these important gatherings Spain will tap markets with several bond auctions this morning. With investors having been willing to take on more risk since the last EU summit almost two weeks ago it needs to be seen if yields especially in the 10 year notes which have been tumbling by almost an entire percentage point from its peak a couple weeks ago are still attractive enough to <a class="inlineAdmedialink" href="#">investors</a> in order to draw sufficient demand.

Generally there is plenty of data out today with German factory orders expected to consolidate at low levels with risk to the downside as most recently German data has been disappointing indicating that similar to China and the US the European financial crisis is increasingly taking its toll with no end in sight. In the US centre stage are expected to take the weekly jobless claims and the ADP employment change index ahead of tomorrow’s US Non-Farm Payrolls with trading volume most likely on the low to moderate side as not all traders are back yet from their holiday break. Today’s central bank meetings will be crucial especially with many considering equity markets at an important crossroad.

With markets having staged an impressive recovery in the last couple of weeks, should these meetings disappoint it wouldn’t be too surprising that after a short period of ‘risk on’ investors and traders would be feeling once again propelled to become more risk averse potentially reversing some or all of the recent gains.

Markus Huber - Head of German HNW Trading - ETX Capital -

12:00 P.M

European markets have picked up the pace a little today, registering marginal gains ahead of policy announcements by the BOE and ECB. Expectations are for both to ease monetary policies, with the BOE set to pump GBP50 billion worth of QE and the ECB to cut rates by 25 basis points.

Both outcomes are somewhat priced-in however, so the reaction could be rather dull. That said, the market has responded well to recent headlines indicating that policymakers are making a concentrated effort to spur growth and stem the debt crisis. For that reason, a priced-in rate cut and GBP50 billion QE both could be enough to warrant some form of euphoria, helping markets to build on recent gains in the near-term.

Conversely, failure to act by the ECB will dampen confidence, hit markets and suggest the central bank is reverting back to old habits of the Trichet days by lagging on policy action. The post rate setting announcement press conference will be the major focus, where the expected rate cut will take up the bulk of ECB chief Mario Draghi’s speech. The tone is expected to dovish, with markets looking for guidance over what role the ECB will take following last week’s measures announced at the EU summit.

Barclays shares are under pressure after two ratings agencies adjusted their view on the bank in light of the recent Libor manipulation charges. S&P revised its outlook on Barclays to negative from stable, while Moody's changed the standalone rating to negative on concerns about senior management resignations at the bank. The rating agency action comes a day after former CEO Bob Diamond appeared before the UK Treasury Select Committee on Libor scandal.

Elsewhere, Ireland successfully returned to debt markets, selling EUR500 million of 3-month T-bills, with yield set at 1.80%. Spain’s bond auction results were decent on the whole, but failed to cheer the market, hitting the euro and weighing on the IBEX-35 index and the 10-year bond yields.

With auctions and central banks out of the way, the attention will turn to the US, where its back to business as usual after the July 4 public holiday. US stock futures are currently indicating a flat open, and the mood could quickly sober as participants face a slew of data, with the ADP monthly jobs report -- widely seen as precursor to Friday’s key nonfarm payrolls up first, followed by weekly initial claims and the ISM non-manufacturing survey for June.

Ishaq Siddiqi - Market Strategist - ETX Capital -

14:00 P.M

Les valeurs de rendement font leur révolution !

Thème peu à la mode en ces temps chahutés, les valeurs de rendement sont souvent assimilées exclusivement aux valeurs des telecom et des utilities. Mais selon l’équipe de gestion de Sycomore AM, le vivier des valeurs de rendement est bien plus large, avec des opportunités par exemple dans les secteurs de la santé ou des pétrolières.

Mais qu’entend-on par valeurs de rendement ? Dès lors qu’une société délivre un dividende supérieur à la moyenne des dividendes versés au marché, cette société peut déjà être qualifiée de valeur de rendement. Si les sociétés disposent en plus d’un potentiel de croissance, conjugué avec la capacité de maintenir cette distribution de dividende, la solidité et la présence de peu de dette au bilan, alors ces sociétés rentrent dans les critères d’une société de rendement.

Prenons quelques exemples, Total, dont le rendement actuel est de 6,5% avec un PE de 7, peut compter sur un cours durablement élevé du baril de pétrole. Elle est aujourd’hui à son plus bas niveau de valorisation depuis 10 ans. Dans un autre secteur, Sanofi délivre un rendement de 5% avec un PE de 10. Le groupe est solide, avec une croissance bénéficiaire et aucune dette au bilan. Quant au groupe Vivendi, bien qu'il risque sans doute de souffrir encore sur sa division telecom France, il devrait être capable de maintenir un dividende de l'ordre de 7%, probablement minoré de moins de 20% dans le pire des scenarii". Enfin, Marr, Midcap Italienne leader des produits frais à destination des cafés restaurants hôtels, offre un rendement de 7% avec un PE de 10. Ce groupe familial extrêmement bien géré a développé un business model résilient, et procède en petites acquisitions faciles à intégrer.

Emeric Préaubert, gérant Sycomore AM

17:00 P.M

Global financial markets were under pressure today, with stocks on both sides of the Atlantic and the euro currency surrendering early gains to trade lower toward the end of the European session, as aggressive central bank action prompted concerns that a global recession was deepening.

The BOE pumped more GBP50 billion worth of more QE, while the ECB cut interest rates to 0.75%, both outcomes in line with expectations – the surprise was that the ECB also cut its deposit rate to zero. The bigger surprise however was China unexpectedly cutting interest rates for the second time in less than a month, while Denmark’s central bank also joined in, cutting the deposit rate to negative at -0.2% for the first time.

One of the main drivers behind today’s reversal was ECB chief Mario Draghi’s post-rate cutting press conference, which saw the central banker flag downside growth risks and no real talk of new unconventional measures. Draghi gave a bleak picture of the EMU, saying the ECB's fear of a broader slowdown across the Eurozone had materialized, justifying its decision to cut its benchmark interest rates to historic lows.

It was however China’s move to cut interest rates that really spooked the markets. Though markets expected China to cut rates again soon, most anticipated the next cut wouldn’t be as soon as today’s and was likely to be delayed until the end of this month or even next.

The aggressive move by China suggested to markets that the country is likely to see a further slowdown in activity in the months ahead, sapping demand for key trading partners [such as the UK and Europe] across the globe. Commodity prices have been smacked on these concerns, with Gold off around $12. The move also signalled to markets the start of a more aggressive easing cycle by China.

Jobs data was better than expected from the US, with the ADP monthly jobs report – widely seen as precursor to tomorrow’s payrolls report -- topping market estimates by showing the US economy added 176,000 jobs versus expectations for 108,000. Weekly jobless benefits fell last week, also indicating modest improvement in the sluggish labour market.

Both data points bode well for tomorrow’s key monthly jobs report, instilling a degree of confidence. A strong payrolls outcome would be just what the market needs to end on a cheery note this week, so we could see a rebound at tomorrow’s European open ahead of the figures.

Already we have seen the US stocks and European markets trim losses as we head into the European market close, suggesting today’s selloff looks to be overdone to some degree.

Ishaq Siddiqi - Market Strategist - ETX Capital -

18:00 PM

Mario Draghi envoie des signaux mitigés aux marchés

La réaction de la Banque Centrale Européenne était vivement attendue par les marchés. La décision de l’institution d’abaisser son principal taux directeur de 0.25% à 0.75%, un niveau historiquement bas afin de stimuler les demandes de crédit des agents économiques européens, sonne comme le dernier acte complétant le dispositif de secours défini lors Sommet Européen. Après les différentes négociations (et concessions, puisqu’Angela Merkel a fini par céder sur la recapitalisation directe des banques par le MES) qui ont permis les avancées prometteuses du Sommet Européen, Mario Draghi ne pouvait pas faire moins qu’un nouveau un geste d’assouplissement en faveur d’une baisse du coût du crédit. Ce contexte de taux ultra accommodant pour les débiteurs est encouragé par « le relâchement des pressions inflationnistes » en zone euro selon Mario Draghi.

Si la baisse des taux directeurs en vue de soutenir l’économie était souhaitée, l’annonce de Mario Draghi n’a pas galvanisé les marchés boursiers aujourd’hui. Son discours sur les perspectives économiques à l’échelle européenne n’a rien d’enthousiasmant : le ralentissement de la croissance est désormais acté dans les pays « cœurs » de l’eurozone. Les perspectives de croissance resteront exposées à une tendance baissière. Qui plus est, le président de la BCE fait à demi-mot l’aveu d’une certaine impuissance de l’institution face à la conjoncture macroéconomique. En affichant ses interrogations sur le réel impact des mesures non conventionnelles (LTRO notamment) mises en place par la BCE et en confirmant qu’il n’y aura pas d’autre opération de ce type à court terme, Mario Draghi semble se recentrer sur les simples fondamentaux du mandat de la BCE. Un message qui peut sembler contradictoire avec les premiers mois de présidence de Mario Draghi à la tête de l’institution.

Conséquence, les indices européens font grise mine : -1.5% pour le Cac40, -1.15% pour l’Eurostoxx50 dans la foulée de la conférence de presse du Président de la BCE. De son côté, la monnaie unique perd 1.25% face au dollar, la parité EUR/USD s’établissant de nouveau sous le seuil de 1.2450.

Ce commentaire est signé Fabrice Cousté, DG de CMC Markets France


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Jeudi 5 Juillet 2012

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