European stocks book a loss as rate-hike signals intensify

European stocks on Monday finished in negative territory, kicking off the week lower as rising expectations the U.S. Federal Reserve will lift interest rates later this year poked the air out of a recent rally.

The Stoxx Europe 600 index SXXP, -0.15%  lost 0.2% to close at 343.20, pulling back after a 1.1% climb last week.

The pan-European benchmark settled 0.5% higher on Friday, after Fed Chairwoman Janet Yellen, at a closely watched speech at Jackson Hole, Wyo., said the U.S. economy is improving, seen as a sign of confidence in economic growth world-wide. However, the central-bank boss also hinted a rate increase is on the cards in coming months, which weighed on U.S. markets on Friday and dragged stocks in most of Asia and Europe lower on Monday.

Read: Here’s what the Fed’s rate should be, using rule footnoted in Yellen speech

“The Fed is about to tighten the screw again on cheap money and one step closer to bringing the monetary policy to its normal path. This is not the kind of news that the equity traders are going to cheer and hence we are seeing this kind of reaction in the market,” said Naeem Aslam, chief market analyst at ThinkMarkets, in a note.

“The most important data which is standing between the Fed and another rate hike is the upcoming U.S. [nonfarm payrolls] number due this week on Friday,” he added.

The nonfarm-payrolls data is one of the most highly anticipated monthly economic reports, as it reveals the health of the U.S. labor market and helps the Fed set its path for monetary policy.

The dollar strengthened against most major currencies after the Yellen’s speech and continued its march higher on Monday. The euro EURUSD, -0.1698%  slipped to $1.1175, down from $1.1197 late Friday in New York.

Movers: Shares of Alstom SA ALO, +2.86%  gained 2.9% after the French infrastructure company late Friday said it signed a €1.8 billion deal to design and build 28 new high-speed trains for U.S. rail operator Amtrak.

Roche Holding AG ROG, +0.46%  rose 0.5% after the Swiss drugmaker said it had received an “emergency use authorization” from the U.S. Food and Drug Administration for its Zika test.

Oil companies were heading lower, tracking a sharp decline in oil prices. Crude oil CLV6, +0.38%  slid 1.7% to $46.85 a barrel as doubts grew that the Organization of the Petroleum Exporting Countries will reach a deal to freeze production next month. Shares of Eni SpA ENI, -1.03%  dropped 1%, Total SA FP, -0.93% TOT, -0.39%  lost 0.9% and Repsol REP, -1.32%  gave up 1.3%.

Other Indexes: Germany’s DAX 30 index DAX, -0.41%  slid 0.4% to 10,544.44, while France’s CAC 40 index PX1, -0.40%  gave up 0.4% to finish at 4,424.25.

Meanwhile, U.K. markets were closed for a local bank holiday.
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Market’s Tight Range Signals Sharp Move

Pundits are obsessing over the CBOE Volatility Index, saying its very low levels suggest the stock market is near a top. While the VIX is useful at finding market bottoms, it is not that good at finding tops. The indicator, in fact, has been even lower during rallies in the past and higher when the market actually did find its peaks.

More interesting is that the Standard & Poor’s 500 index is now in its tightest percentage range since September 2014, which was just ahead of a sharp correction to the downside. Granted, the Ebola scare was in the news then — which could have affected trading — but the tight range did indeed portend the explosive move that followed.

While the S&P 500 itself now trades in a tight 2% range since early July, the so-called Bollinger Bands suggest that noose has tightened further (see Chart). These trading bands, named after their discoverer John Bollinger three decades ago, are a mainstay of any technical analysis and charting software package. They draw an envelope above and below trading action based on volatility rather than a fixed value or percentage, allowing them to expand during volatile times and contract when things are quiet.

When the bands are as narrow as they are now — roughly 1.5% — they tell us the market is preparing for a significant move. Bollinger posited that volatility cycles from high to low and back to high again, much like price does. Thus a quiet market will likely give way to something more exciting. Unfortunately, the bands themselves cannot tell us the market’s likely direction. We will need other tools to make that forecast.

Bands this narrow are a rare occurrence. The S&P 500 saw bands this tight in 2006 and 2012 — and did suffer corrections both times. However, the previous occurrences in 1993 and 1995 instead saw steep continuations of the bull market that was already in effect.

Why is the market so tight? There are many theories, from the end of the summer to the unusual political season. Yet the most likely explanation is uncertainty about the Federal Reserve’s timetable to raise short-term interest rates. Opinions on the merits of a rate hike are quite strong on both sides.

From a charting point of view, the reason does not matter. All we need to know is that the market is very quiet right now — almost too quiet — and that cannot last.

To be sure, other indexes such as the Nasdaq 100 and the small-cap Russell 2000 are narrow but not at historical levels. The large-company S&P 100 and the Dow Jones Industrial Average mirror the S&P 500, and that is enough for me to conclude that the market is poised to move.
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PRECIOUS-Gold hits one-week low on U.S. rate hike prospects

Gold fell on Monday to its lowest in over a week as the dollar strengthened after comments from U.S. Federal Reserve officials increased bets on a U.S. rate hike this year.

 FUNDAMENTALS
* Spot gold was down 0.3 percent at $1,337.12 an ounce at 0101 GMT, after touching a low of $1,334.20, a level not seen since Aug. 12.
 * U.S. gold dropped 0.4 percent to $1,341.20 an ounce.
 * The Fed is close to hitting its targets for full employment and 2 percent inflation, the Fed's No. 2 policymaker Stanley Fischer said on Sunday in comments that did not address when the U.S. central bank should next raise interest rates.
 * New York Fed President William Dudley said last week a rate hike would be possible at the Fed's next policy meeting in September, though interest rate futures contracts indicate that market is pricing in about 50/50 odds of an increase in December.
 * Amid conflicting signals from the Fed in recent days, central bankers from around the world will gather from Aug. 25 for an annual meeting in the mountains of Jackson Hole, Wyoming, with Chair Janet Yellen due to speak the following day.
* Japanese companies overwhelmingly say the government's latest stimulus will do little to boost the economy and the Bank of Japan should not ease further, a Reuters poll showed, a setback for policymakers' efforts to overcome deflation and stagnation.
* The dollar index, which tracks the greenback against a basket of six major rivals, was up 0.3 percent in early trade at 94.796, pulling away from last week's low of 94.077, which was its weakest since June 24.
* Hedge funds and money managers again decreased their bullish positions in COMEX gold and silver contracts in the week to Aug. 16, U.S. Commodity Futures Trading Commission (CFTC) data showed on Friday.
* Physical gold demand in Asia improved modestly this week as consumers returned to the market ahead of upcoming festivals in India and China when demand is usually high.
 * For the top stories on metals and other news, click or

 MARKET REPORT
* Asian shares slipped on Monday and the dollar pulled away from last week's lows on expectations that a signal might emerge on interest rate hikes from the Fed gathering. DATA AHEAD (GMT) 1230 U.S. national activity index July
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Key benchmarks hover near flat line

Key benchmark indices trimmed losses in mid-morning trade. At 11:16 IST, the barometer index, the S&P BSE Sensex, was down 12.37 points or 0.04% at 27,698.15. The Nifty 50 index was currently down 1.20 points or 0.01% at 8,508.90. The Sensex fell 64.31 points, or 0.23% at the day's low of 27,646.21 in mid-morning trade, its lowest level since 19 July 2016. The index rose 53.67 points, or 0.19% at the day's high of 27,764.19 at the onset of trading session. The Nifty fell 20.30 points, or 0.24% at the day's low of 8,489.80 in early trade, its lowest level since 19 July 2016. The index rose 15.30 points, or 0.18% at the day's high of 8,525.40 at the onset of trading session.

The market breadth indicating the overall health of the market was positive. On BSE, 1,285 shares rose and 908 shares fell. A total of 169 shares were unchanged. The BSE Mid-Cap index was currently up 0.6%. The BSE Small-Cap index was currently up 0.55%. Both these indices outperformed the Sensex.


In overseas stocks markets, Japanese stocks led losses for Asian equities after Bank of Japan (BOJ) Governor Haruhiko Kuroda dashed hopes for so-called helicopter money or ultra-aggressive easing measures. The Nikkei 225 was currently off 1.32%. According to a media interview, recorded mid-June but broadcast yesterday, 21 July 2016, Kuroda ruled out the idea of using helicopter money -- or directly underwriting the budget deficit -- to combat deflation. The BOJ is scheduled to review monetary policy at a two-day meeting on 28-29 July 2016. US stocks edged lower yesterday, 21 July 2016, with the Dow Industrial Average snapping a nine-day string of gains, as a hot equity market cooled ahead of key central-bank meetings across the globe.

Meanwhile, the European Central Bank (ECB) held rates unchanged after a monetary policy review yesterday, 21 July 2016, and emphasized that it intends to keep rates at current or lower levels for an extended period and that its program of monthly bond buys would run until at least March 2017, and possibly beyond.

Stocks of companies involved in oil exploration & production activities witnessed mixed trend. ONGC (down 0.11%) and Oil India (down 0.04%), edged lower. Reliance Industries was up 0.45%.

In the global commodities markets, Brent futures for September settlement were currently up 8 cents at $46.28 a barrel. The contract had fallen 97 cents or 2.06% to settle at $46.20 a barrel during the previous trading session.

Cairn India rose 2.58% to Rs 181.15 after the company reported a surge in bottom line on sequential basis in Q1 June 2016. Cairn India's normalised net profit jumped 88% to Rs 360 crore on 10% rise in net revenue to Rs 1885 crore in Q1 June 2016 over Q4 March 2016. Revenue increased on account of a significant rise in Brent crude prices on sequential basis. Net profit rose sequentially driven by higher EBITDA but was partly offset by higher depreciation, depletion and amortization (DD&A) charges and forex losses.

Mr Sudhir Mathur, CFO and acting CEO of Cairn India said that the company delivered a resilient performance, registering 88% increase in profit for the quarter on sequential basis. The company has taken significant measures to drive cost efficiency and rationalize capital investment, resulting in free cash generation in a lower-for-longer oil price environment.

Cairn India said that it will remain focused on monetizing its Rajasthan resource base in FY 2017. An estimated net capex spend of $100 million is proposed for FY 2017, 20% of which is for exploration while balance will be invested primarily to develop RDG Gas and for completion activities of Mangala EOR. The aim will be to maintain production from Rajasthan asset at FY 2016 level. Efforts are underway to further improve the economics of key projects that includes Bhagyam & Aishwariya EOR, Barmer Hill and Satellite fields, at low oil price and invest in their pre-development activities to ensure project readiness for development with grant of extension of PSC. The company maintains its flexibility to raise capital investment as oil prices improve and aims to generate a healthy cash flow post capex so as to retain the ability to pay dividends.

Shares of most public sector oil marketing companies (PSU OMCs) declined. BPCL (down 0.98%) and HPCL (down 0.19%), edged lower. Indian Oil Corporation was up 0.13%.

Aviation stocks edged higher after crude oil prices declined overnight. Jet Airways India (up 1.43%), SpiceJet (up 1.28%) and InterGlobe Aviation (up 1.23%) edged higher. Lower crude oil prices benefit aviation firms as jet fuel prices, which typically constitute about 50% of airlines' operating costs, are directly linked to international crude oil prices.

Metal shares were mixed. JSW Steel (down 0.8%), Hindustan Copper (down 0.72%), Hindalco Industries (down 0.71%), Tata Steel (down 0.68%), Bhushan Steel (down 0.48%) and Steel Authority of India (down 0.11%), edged lower. Hindustan Zinc (up 0.54%), Jindal Steel & Power (up 0.81%), NMDC (up 1.15%), National Aluminium Company (up 1.47%) and Vedanta (up 2%), edged higher.

Meanwhile, copper price edged lower in the global commodities markets. High Grade Copper for September 2016 delivery was currently down 0.44% at $2.2485 per pound on the COMEX.
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Gold sinks to 3-week low amid renewed Fed rate hike bets

Gold prices extended overnight losses in North American trade on Wednesday, sinking to a three-week low amid renewed expectations for a Federal Reserve interest rate hike later this year.
Gold for August delivery on the Comex division of the New York Mercantile Exchange fell by as much as 1.2% to touch a session low of $1,316.00 a troy ounce, a level not seen since June 30. It last stood at $1,318.70 by 12:38GMT, or 8:38AM ET, down $13.60, or 1.02%.

A recent string of upbeat economic reports, including June housing starts, retail sales, ISM manufacturing and employment were all much better than expected, suggesting that economic growth regained speed in the second quarter.
The bullish data could allow the Federal Reserve to raise interest rates later this year, but much will depend on policymakers' assessment of the impact on the U.S. economy of Britain's June 23 vote to leave the European Union.

Interest rate futures are currently pricing in a 47% chance of a rate hike by December, compared with less than 20% a week ago and up from 9% at the start of this month.
Gold is sensitive to moves in U.S. rates. A gradual path to higher rates is seen as less of a threat to gold prices than a swift series of increases.
The dollar climbed to a fresh four-month high early on Wednesday, boosted by Fed rate hike hopes.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.15% at 97.22, up from levels of around 96.00 just a week ago and the most since March 10.

A stronger U.S. dollar usually weighs on gold, as it dampens the metal's appeal as an alternative asset and makes dollar-priced commodities more expensive for holders of other currencies.
The yellow metal remained supported amid speculation central banks in Europe and Asia will step up monetary stimulus in the next few months to counteract the negative economic shock from the Brexit vote.

Expectations of monetary stimulus tend to benefit gold, as the metal is seen as a safe store of value and inflation hedge.
The precious metal is up almost 25% for the year to date, boosted by concerns over global growth and as market players pushed back expectations for the next U.S. rate hike.
Also on the Comex, silver futures for September delivery slumped 42.5 cents, or 2.12%, to trade at $19.58 a troy ounce during morning hours in New York, while copper futures dropped 2.9 cents, or 1.28%, to $2.234 a pound.
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METALS-London copper treads water, waits for directional cue

London copper was little changed on Tuesday, as the dollar held steady and markets awaited fresh signals for direction.

FUNDAMENTALS

* Three-month copper on the London Metal Exchange traded down 0.1 percent to $4,935 a tonne by 0042 GMT, after closing the previous session up 0.4 percent even as prices dipped to the lowest in four sessions at $4,852.25.
* Shanghai Futures Exchange copper edged up 0.3 percent to 38,330 yuan ($5,720) a tonne in the overnight session.
* ShFE nickel rallied 2.5 percent overnight, in line with LME nickel’s Monday gains on the back of a drop in supply from Philippines. LME nickel traded flat on Tuesday.
* Home price rises in China slowed in June for a second straight month, adding to fears that a construction-led rebound in the economy may not be sustainable.
* Germany’s economy will rebound in the coming months after a weak second quarter and any impact from Britain’s decision to leave the European Union in the near future could be limited, the Bundesbank said in a monthly report on Monday.
* Rio Tinto on Tuesday maintained its full-year iron ore shipment guidance from its Australian mines of roughly 330 million tonnes, subject to weather conditions.
* As Congo’s mining heartland endures mass layoffs at big mines caused by low commodity prices, small-scale mining is helping to fill the deficit.
* For the top stories in metals and other news, click or

MARKETS NEWS

* U.S. stock prices rose on Monday, with the Dow Jones Industrial Average and S&P 500 posting record closes amid upbeat company earnings, while oil fell on worries about growing supply and traders brushing off a failed coup in Turkey.
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Weekly Forex Technical Report for Prominent Currency Pairs

AUD/USD ( 4 HOURLY )

RECOMMENDATION: SELL

The primary trend of AUD/USD is bearish on charts and price is trading below the trend line in its 4 hourly chart. In 4 hourly chart the price is sustaining below 200 day SMA and taking resistance of 50 day SMA on the downside indicating downtrend of the pair. It is having an important resistance at the level of 0.7405 and support at the level of 0.7245. If it breaks its support level on the downside and sustains below it then we can expect it to show further bearish movement in the pair.

INDICATORS:-

MACD is sustaining in its negative territory indicating the bearish trend in the pair.
RSI is sustaining in its selling zone indicating the upcoming bearish trend in the pair.

STRATEGY: AUD/USD is looking bearish on charts for next few trading session. One can go for sell on higher level strategy for this pair for intra day to mid term positions in it.

EUR/USD ( DAILY )

RECOMMENDATION: SELL

SUMMARY:
The primary trend of EUR/USD is bearish on charts and price is trading below the trend line in its daily chart. In daily chart the price is sustaining above 200 day SMA and taking resistance of 50 day SMA on the downside indicating downtrend of the pair. It is having an important resistance at the level of 1.1375 and support at the level of 1.1280. If it breaks its support level on the downside and sustains below it then we can expect it to show further bearish movement in the pair.

INDICATORS:-
MACD is sustaining in its negative territory indicating the bearish trend in the pair.
RSI is sustaining in its selling zone indicating the upcoming bearish trend in the pair.
STRATEGY: EUR/USD is looking bearish on charts for next few trading session. One can go for sell on higher level strategy for this pair for intra day to mid term positions in it.
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Crude Oil Futures Tumble Nearly 4 Percent on Smaller-Than-Expected Inventory Draw

According to the U.S. Department of Energy, crude inventories fell 2.5 million barrels in the week to July 8, less than analysts’ expectations for a decrease of 3 million barrels.
Distillate stockpiles, which include diesel and heating oil, rose 4.1 million barrels, the largest build since the week ended January 9 and much more than expectations for a 256,000-barrel increase, the EIA said. Gasoline stocks rose unexpectedly by 1.2 million barrels, compared with forecasts for a 432,000 barrel drop.
August Comex Gold futures recovered after an earlier loss, driven higher by a weaker U.S. Dollar, profit-taking in the U.S. equity markets and accommodative monetary policies. The dollar traded lower against the Japanese Yen, Canadian Dollar and Euro, but managed to post gains against other majors like the Australian and New Zealand Dollars and the British Pound. However, as a trade-weighted basket of currencies, the September U.S. Dollar Index broke after it failed for a second day to breakout to the upside.
The USD/JPY posted a choppy, two-sided trade on Wednesday before traders decided to take it lower. Initially, it firmed after the opening, but lost ground after China released a mixed trade balance report. However, the Forex pair held on to losses after stocks began to break off their highs.
Lower demand for higher-risk assets put pressure on the AUD/USD and NZD/USD after several days of gains this week. Technical factors also contributed to the losses as several oscillators and indications reached overbought territory.
The short-covering rally driving the GBP/USD
GBP/USD (GBP/USD)
1.32260.0109(0.83%)
08:47:59 (GMT)
Start trading  No Clear Signal
Bid: 1.3224
Ask: 1.3228
Open: 1.3117
High: 1.3274
Low: 1.3105
 
 higher this week came to an end on Wednesday as investors took profits and squared positions ahead of Thursday’s Bank of England monetary policy decision. Earlier in the week, shorts covered aggressively following the announcement of a new U.K. prime minister. This brought some relief to investors because it eliminated a key political obstacle that had been created in late June when the U.K. voted to leave the European Union.
On Wednesday, the Bank of Canada held its benchmark interest rate steady at 0.50%, the same level it’s been at since last summer. In its decision, the central bank said, “The fundamentals remain in place for a pickup in growth” in the economy.
The Canadian economy “grew by 2.4 percent in the first quarter but is estimated to have contracted by 1 percent in the second quarter, pulled down by volatile trade flows, uneven consumer spending, and the Alberta wild fires.

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What Gold, Silver, And Bitcoin Are Telling Us About Stock, Bonds, And Currencies

Summary

1- Gold and silver bull markets.

2- Bitcoin - a validation of weak fiat paper currencies.

3- Currencies all move lower.

4- Bonds - interest rates are not going up. They are going lower.

5- Stocks - it is a bad time to be overvalued.

2016 has been a year for trading rather than investing. Over the first six weeks of the year, the S&P500 dropped 11.5%. By the end of the first quarter, it was back up and closed at the end of March with a 0.77% gain. At the end of June, the critical equity index had posted a 2.69% gain on the year. Those who held their noses and bought the dip that took the market to lows on February 11 profited handsomely, so far.

So many retirement and investment accounts mirror the performance of the S&P 500 index and the index put in a respectable performance after the carnage seen during the first month and a half of this year. However, there are some ominous signals that the second half of the year could be difficult for equity markets. In fact, other markets could be telling us that dark clouds are gathering, and stocks could be in real trouble in the weeks and months ahead. It is an excellent time to take stock of those stock positions, in a couple of weeks your portfolio results for 2016 could look a lot different than they do today.

Gold and silver bull markets

Fear and uncertainty have gripped markets across all asset classes in 2016 increasing volatility. The action in precious metal markets has been a direct result of the volatile nature of the political and economic landscape around the world.

Early in the year, the gold market gave the first indication that something was underfoot. Gold rallied out of the gate in 2016 while many other commodity markets had yet to make significant multi-year lows.
As the weekly chart highlights, COMEX gold futures opened 2016 around the $1060 per ounce level. Last week gold traded to highs of over $1375 per ounce, the highest level since March 2014. The over 29% increase in the price of gold has been a sign that investors and traders have sought safe-haven assets for their capital.
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