NEFS Market Wrap Up Week 4

Week Ending 15th November 2015

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NEFS Research Division Presents:

The Weekly Market

Wrap-Up

NEFS Market Wrap-Up

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Contents Macro Review 3 United Kingdom

United States Eurozone

Japan Australia & New Zealand

Canada

Emerging Markets

10

China India

Russia and Eastern Europe Latin America

Africa South East Asia

Middle East

Equities

17

Financials Oil & Gas

Retail Technology

Pharmaceuticals Industrials & Basic Materials

Commodities

Energy Precious Metals

Agriculturals

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Currencies 26

EUR, USD, GBP AUD, JPY & Other Asian


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THE WEEK IN BRIEF

Unemployment

falling

Unemployment is now at its lowest level since

2008 in the UK, as it dropped 0.3% over the

third quarter to 5.3%, continuing the trend it has

set over the past two years, falling from 7.8% in

August 2013. This reflects the increasing

strength of the UK labour market, which is

contributing to a healthier look to the UK

economy. Meanwhile, Australian

unemployment surprised many by decreasing

0.3% for the month of October alone. Coming in

well below forecasts, unemployment is now at

5.9% in the economy. The US labour market is

also looking strong; impressive employment

data at the end of last week detailed a fall in the

unemployment rate to 5.0%, as well as a better

than expected non-farm payrolls report. Despite

some mixed data for the US this week, with

disappointing retail sales, the world’s markets

still wait on the potential for a rate hike by the

Fed.

Chinese inflation

remains low

CPI inflation for China hit 1.3% this week,

remaining well below the stated inflation target

of “around 3%”, continuing a trend of low

inflation. While low fuel prices are dragging

down inflation rates across the board, there is

some concern in China over domestic demand,

which appears to be slackening, with growth

rates declining considerably in recent times.

Eurozone growth

disappoints

This week we found out that the growth rate for

the region fell to 0.3% for the third quarter of this

year, coming in worse than most forecasts and

down from 0.4% in the previous quarter. Weak

international trade has been blamed for pulling

down growth in Germany and Italy in particular.

The news comes as further evidence of the

fragility of the recovery in the Eurozone, and

gives even greater impetus to the case for

stimulus in the Eurozone. Mario Draghi again

signalled that he is ready to extend monetary

loosening, it seems only a matter of time before

further QE is implemented by the ECB.

Commodity prices

plummet

The price of oil fell closer towards $40 this

week, while the price of other commodities also

dropped. OPEC has maintained their

production of oil, which has driven down prices

as supply continues to outstrip demand. In fact,

signs of weakening demand, particularly from

China, are having an effect on most

commodities. Precious metals have fallen

considerably; gold, silver, platinum and

palladium have all declined over the week. Of

course, the strength of the dollar and looming

US rate hike have also been major contributors

to the lower prices, and with the US economy

looking strong in comparison to a weakening

global economy, it seems that low commodity

prices are set to stay for the time being.

Jack Millar

NEFS Market Wrap-Up

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MACROREVIEW

United Kingdom

A report published by the British Chambers of

Commerce has stated that UK export growth

has fallen to its lowest level since 2009. British

exporters have been particularly hit by a strong

pound due to the recent slowdown in many

emerging economies, which has negatively

impacted an already fragile and price-sensitive

exporting goods sector. This is going against

the government’s pledge to double the value of

exports to £1 trillion a year by 2020. The report

estimates that at the present rate of progress it

will take until 2034 to achieve that target.

Indeed, UK trade has long been a source of

concern, running a trade deficit every year

since 1997. However David Cameron has

recently been explicitly targeting and forming

ties with emerging economies. After signing

£30bn worth of trade deals with China, this

week he announced £9bn worth of deals

between the UK and India.

Despite the present strong pound providing

difficulties for manufacturing exporters it cannot

be regarded as solely negative. The exporting

services sector has a healthy surplus which is

growing, as illustrated below. Services are not

as price-sensitive as goods, so the strength of

the pound should not have a significant impact.

In addition, an increase in the value of sterling

pushes down the cost of imported goods and

energy, a significant contributor to the current

zero inflation. This supports the growth of

disposable incomes and consumer spending.

Therefore, as long as the pound doesn’t

become significantly overvalued, it can be

regarded as an economic stimulant. The

concern is that the trade balance on goods has

shown a long term downward trend, with a weak

outlook for projected improvement.

In other news, the unemployment rate fell to

5.3% in the third quarter, down from 5.6% in Q2

and its lowest level since April 2008. This

follows recent trends in the UK labour market of

record employment and rising wages. Britain’s

working age employment rate is at 73.7%, its

highest level since records began. However

earnings grew slower than expected, at only 2%

compared 3.2% in the previous quarter,

demonstrating why the Bank of England is

hesitant on an early interest rate rise.

Nevertheless, strong domestic performance is

needed to outweigh weak foreign demand. As

a result the outlook for growth remains positive,

albeit modest.

Matteo Graziosi


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United States

Much of the data over the last few weeks has

concerned the labour market due to its effects

on inflation and as such, interest rates. This

week’s focus is on both consumers and

producers. Consumer data is particularly

important at this time of year as the US heads

into the crucial holiday shopping season.

Moreover, fourth-quarter GDP growth will hinge

largely on consumer spending (consumer

spending is 70% of the US economy) as

manufacturers take a hit from the weakening

global economy.

Data from the Census Bureau showed month

on month retail sales grew at 0.1%, missing

estimates of 0.3%. Retail sales remained static

in the previous month, as shown in the graph

below. Elsewhere, preliminary data on

consumer sentiment, a level of a composite

index based on surveyed consumers, reached

a four-month high as it rose by 3.1 from last

month to 93.1, beating a forecast of 91.3. The

survey of approximately 500 consumers asks

respondents to rate the relative level of current

and future economic conditions. Financial

confidence is a leading indicator of consumer

spending. The growth in confidence was due to

a firming labour market and lower fuel prices.

Moving onto the producers, the producer price

index (PPI) fell by 0.4% month on month,

slightly lower than last month’s drop of 0.5%.

This was also lower than the predicted gain of

0.2%. The producer price index is a leading

indicator of consumer inflation as the higher

costs of goods and services from producers are

typically passed on to the consumer.

Deflationary pressures at the producer level

seem to counteract encouraging signs from

consumer data for a rate hike in December.

Laura Rosner, a US economist at BNP Paribas

said, “It is a fragile environment to be raising

rates. It confirms why the Fed is likely to move

very slowly because the inflation outlook

remains uncertain and fragile.”

Next week we have data on the US consumer

price index (CPI), a core component of inflation.

The Fed’s target inflation rate is at 2% but it is

generally thought that monetary policy affects

inflation with a two-year lag. The Federal Open

Market Committee’s (FOMC) meeting minutes

will be released on Wednesday, which will

provide us with in-depth insights into the

economic and financial conditions that

influenced their vote on where to set interest

rates.

Sai Ming Liew

NEFS Market Wrap-Up

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Eurozone

It was announced this week that the GDP of the

Eurozone as a whole grew by 0.3% in the last

quarter, in the three months up to September.

As we can see from the graph on the EU GDP

growth rate below, this is slightly smaller than

the 0.4% recorded in the last quarter and 0.5%

in the first quarter of 2015; EU GDP growth is

below the markets forecasts. This is the also the

smallest growth in GDP this year. Within the

Euro area GDP growth was less than expected

in a large proportion of the countries including

Italy and Germany. France’s economy

expanded at a faster rate than expected,

however only grew 0.3% during the last quarter,

while the Finnish and Greek economies actually

shrunk during the quarter leading up to

September by 0.6% and 0.5% respectively.

Since these figures were released by Eurostat,

European stock markets have begun to decline

with the disappointing news; the CAC and DAX

are both in the red. The lower-than-expected

GDP growth rate is likely to increase the

chances of the European Central Bank

increasing the level of the stimulus in the 19

countries of the Euro area.

In other news, this week the Eurozone trade

surplus increased to €20.2 billion in September

of 2015 from €17.4 billion last year. Euro area

exports to other counties increased by 1%

whilst imports from outside the Eurozone

declined by 1% annually. However, compared

to the previous month, exports grew by 1.1%,

exceeding import growth of 0.5% in the Euro

area – Eurozone exports rose to €173.4 billion

from €171.8 billion in September 2014 while

imports decreased to €152.8 billion from €154.4

billion in the previous year. Germany, France,

Netherlands and Italy take up a large proportion

of total trade with the Euro area. Germany's

trade surplus rose to €15.4bn in September

from €15.2bn in the month before, whilst there

was a €0.5bn jump in Italy's surplus to €2.7bn,

while France's trade surplus declined to €2.0bn

from €2.4bn. The increase in the Eurozone

trade surplus was larger than economists

expected, they predicted that the trade surplus

for the 19 countries of the Euro area would be

€19.3 billion.

Kelly Wiles


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Japan

This week Japan’s current account surplus was

reported to have increased four-fold in the

period between April and September compared

to the previous year. The ¥8.69 trillion surplus

quadrupling has been on the back of a weak

Yen and the continuing slide in crude oil prices.

Lower energy prices have been very significant

for Japan, as the nation has been dependent on

energy imports since the earthquake and

tsunami struck in 2011. In value terms, the

Finance Ministry reported that the imports of

crude oil fell by 34%.

The upward trend in the current account, as

shown by the black line on the graph below,

under the backdrop of weak household

consumption is further evidence of the mixed

signals in Japan’s economic recovery. While

many of the recent improvements in current

account have been due to falling oil prices, the

inception of Abenomics has played a significant

role in weakening the Yen. The currency has

depreciated roughly 40% against the US dollar

since early 2012, which has been hugely

beneficial for Japanese businesses.

With Japan Inc. seeing record profits, PM

Shinzo Abe and his government have put

pressure firms to play their part in reflating the

Japanese economy. This pressure may finally

be bearing fruit as regular wages increase for

the seventh consecutive month. However,

adjusted for inflation wages increased by just

0.5% in September compared with the previous

year. Yoshitaka Suda, an analyst at Nomura

Holdings Inc. expects that “wages will probably

continue to rise as corporate profits are

improving and supply-demand conditions in the

labour market are tight”.

According to Bank of Japan board member

Yukata Harada, the wage growth required for

BOJ to achieve its inflation target would be 3%

– well above the current trend. Academics and

business representatives also think that more

needs to be done, as a panel called for a sharp

hike in the minimum wage at the Council of

Economic and Fiscal Policy meeting on

Wednesday. Representatives wanted

increased base pay for employees and a

reduction in corporation tax to below 30%.

Corporation tax is currently 34.6% in Japan –

one of the highest rates across advanced

economies. Both of these proposals should

increase the pay packets of workers. The

central bank will need to see earnings growth to

stimulate household consumption, boost

consumer confidence and ultimately reflate the

economy following its two decades of deflation.

Loy Chen

NEFS Market Wrap-Up

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Australia & New

Zealand

Positive sentiments spread this week as

Australia’s unemployment rate fell from 6.2% to

5.9%, the lowest rate of unemployment since

April 2014, as shown on the graph below. The

number of jobs created outperformed the

15,000 forecast at 58,000. Meanwhile, work

ethic is on the rise, as the monthly hours worked

in all jobs increased by 1.2%. Improvements

have largely been in the 15-24 year old bracket,

which had previously been the drag on the

labour market. New South Wales set the path

to improvement as unemployment fell by 0.3%

with Victoria experiencing a reduction to 5.6%,

however, South Australia still has the highest

unemployment rate at 7.5%.

The uncertainty over rate cuts has settled after

this news was released. JP Morgan’s Tom

Kennedy agreed that it’s unlikely that rates will

be cut in the December meeting. An

unexpected turn of events after the rise in

variable home loan rates by Australia’s Big Four

banks. This is because a fall in unemployment

results in a rise in income, increasing

consumption and creating a potential increase

in inflation, therefore a cut in rates may push the

inflation rate above the 2-3% target.

Elsewhere, New Zealand’s RBNZ financial

stability report came out on Tuesday. The

report mentioned the “heavily indebted dairy

sector” which has seen debt triple to $34.5

billion over the past 10 years as farmers

exceeded borrowing levels. Incomes in the

dairy market are low due to lower international

prices, especially in milk, however the report

stated that, despite this, banks “have the

wherewithal (money) to cope with their current

level of dairy debt”.

Auckland’s housing market also took the

spotlight. Prices have risen 27% faster than the

rest of the country over the last 3 years. The

report stated that Auckland is missing around

20,000 houses, as population growth overtakes

the rate at which houses are being built.

Increasing immigration, low interest rates and a

shortage of supply are continuing to put

pressure on the market. There are concerns

over the size of loans given to homeowners,

and the Bank proposed to change its policy on

“high loan-to-value ratio (LVR) lending”- a

measure of how much a bank is willing to lend

against a mortgaged property compared to the

value of the property.

Monetary easing in Europe and Japan are

encouraging investment in riskier assets. As a

result, high and rising asset prices are making

the economy more vulnerable, especially when

interest rates return to their normal level.

Meera Jadeja


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Canada

Last week, Statistics Canada announced that

44,400 new jobs were created in Canada in

October, which was over four times more than

the figure that economists were expecting.

However a report published by Capital

Economics this week states that they expect

unemployment to actually increase from 7% to

7.5% by the end of 2016, despite last week’s

hopeful figures.

This comes as Canada, a country which is

largely dependent on resource exports, is still

struggling to adjust to the new environment of

low oil prices. This has meant that energy firms

have cut back on both their investment and

hiring, as business confidence has been

affected. The charts below show the crash in

the oil price towards the end of 2014, which

contributed a large part to Canada’s temporary

recession earlier this year. The Bank of

Canada’s policy response to the recession has

been monetary easing, and interest rates have

been lowered to 0.5% in the hope of stimulating

growth.

The report by Capital Economics also draws

attention to the fact that the number of high-

paying jobs in Canada have been declining for

the first time since the 2008 crisis. This includes

professional, scientific, technical, and energy-

related jobs. The key point to note is that

although Canada is creating more jobs, the

majority of these are temporary, part time, or

low paying. If the economy continues to

struggle, then this labour market slack will add

to the downward pressure on inflation. CPI

(Consumer Price Index) inflation is already at

1%, which is on the lower boundary of the Bank

of Canada’s target range of 1–3%. The Paris-

based Organisation for Economic Co-operation

and Development (OECD) predicts that the

possibility of a rise in Canada’s interest rate (the

target for the overnight rate of interest) will be

likely at the end of next year. The OECD also

predicts that Canada’s relatively weak

economic outlook will turn around only towards

the end of 2016.

Shamima Manzoor

Source: Bloomberg

NEFS Market Wrap-Up

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EMERGING MARKETS

China

The National Bureau of Statistics published the

consumer price index (CPI) for October 2015

on Monday this week. The CPI measures the

change in prices of services and goods

purchases, and compares it to the prices in the

same month one year earlier. Hence, consumer

prices are accounting for the majority of overall

inflation. In October yearly CPI went up by 1.3%

compared with October 2014. Looking at the

increase in M2 money supply, which is closely

linked to interest rates, which grew about 13.5%

in October, the relatively low inflation rate is

surprising at first sight. But taking the actual

value of new loans into account, only 514 billion

yuan provided to consumers and businesses

which is just a little more than half the value

forecasted.

Muted inflation gives the PBOC room for further

easing. According to last Friday’s third-quarter

Monetary Policy Implementation Report,

China’s central bank will maintain a stable

policy and thereby create a neutral monetary

and financial environment for economic

restructuring. Furthermore, the PBOC said the

economy faces downward pressure and

inflation is likely to be low. As could be seen in

the graph, China’s inflation rate has remained

low since 2014.

“The moderation of CPI has definitely opened

up room for the PBOC to ease further,” said Zhu

Qibing, a Beijing-based analyst at China Minzu

Securities Co. “But this year, the effectiveness

of monetary policy in boosting demand has

been limited. So even if the central bank has

room, it may not cut interest rates again until

next year.”

A low inflation rate is actually a bad sign for

China’s trade balance. If China’s inflation rate is

lower than the inflation rates of other currencies

then this results in a relatively higher value of

the RMB, as the exchange rate adjusts to

increased domestic prices. Imports would

become cheaper and domestic goods would

become more expensive for foreign consumers.

Hence, relatively low inflation rates lead to an

appreciation of the RMB. As a result, the export

sector, which is currently the driving force of

China’s GDP growth, faces some risk of a

downturn if the RMB is affected. However, as

most of the major currencies faces similar

trends, this risk seems relatively small,

especially as the PBOC continues to artificially

depreciate the RMB. Consequently, this week’s

published trade balance shows that China has

exported even more than in the previous month.

Alexander Baxmann

Figure 1 Inflation rates October 2010 - October 2015


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India

Data released on Thursday by the Central

Statistics Office showed that industrial output

slowed to its weakest rate since May, whilst

inflation accelerated to 5%, its highest level in

three months. The information reveals the

substantial challenges facing policy makers

looking to boost growth, as well as perhaps a

reason for current uncertainty regarding the

popularity of the dominant party.

Industrial production, a measure of output in the

manufacturing, mining and utilities sectors, rose

3.6% from a year earlier, falling short of the

predicted 5.0% increase. The slowdown can be

primarily accredited to subdued performance by

manufacturing and non-durable goods

segments, reflecting that during the current

festival period, durable consumer goods are

generally in higher demand.

Consumer inflation rose to 5%, surpassing an

expected rate of 4.8%. Inflation is measured

using the consumer price index which observes

the price changes in a specific bundle of goods.

Food and beverages is the most important

category, accounting for almost half of the

index, which also weighs up housing and

transport. The rate has been driven up mostly

by rising food prices, following a drought for the

second straight year in much of rural India. The

detrimental impact of a 14% rain shortfall is

reflected in the inflation rate as it varied

between rural and urban areas where rural

India saw a much higher price rise of 5.5%. The

diagram below illustrates that this trend has

been consistent throughout the year.

Prime Minister Modi’s attempts to prune a

subsidy regime which has long supported the

rural economy will not be welcomed in light of a

surge in the prices of items like lentils and

pulses, which rose significantly by 42%. This

could have worrying political implications for the

government, whose popularity has been

waning as of late following social unrest and a

bruising election defeat in Bihar, India’s third

most populous state. However, analysts believe

that this is not a cause for concern and that

inflation is in line with expectation given the time

of year. It’s also expected that the rate will

moderate once festival demand eases.

The fall in industrial output will strengthen calls

for another reduction in the interest rate before

the end of the year, but the uptick in inflation is

likely to encourage policy makers to take a

cautious stance. The Reserve Bank of India

(RBI) expects inflation to soar to 5.8% in

January and, considering the looming rate hike

by the Federal Reserve, it seems that the

interest rate will remain at 6.75% when the

RBI’s decision is announced on the 1st

December.

Homairah Ginwalla

NEFS Market Wrap-Up

12

Russia and Eastern

Europe

News released this week logged a shrink in

Russia’s economy of 4.1% in the third quarter,

which was comparatively better than the 4.6%

decline in the second quarter of 2015, as shown

in the graph below. While this is without doubt

a good first step on what is a long road to

recovery, opinions are split as usual.

With oil prices still dangerously low and inflation

hovering at the 15% rate, the Central Bank of

Russia concedes that the “lowest point of

deceleration of investment activity has not yet

passed”. The Bank went on to specify the weak

areas, releasing figures showing a 0.4%

decrease in month-on-month investment in

fixed capital – obviously this is not indicative of

growth coming anytime soon.

Slightly more optimistic is emerging markets

economist Liza Ermelenko’s news that the third

quarter improvement was driven by the

industrial sector. This indicates that Russia may

be adaptable and able to rekindle economic

growth in the long run without relying too heavily

on oil production. As expressed last week, this

could be a chance for Russia to restructure and

correct economic flaws that simply were not

sustainable. She explains that the “worst of the

recession appears to be over.”

In addition, sector news was released giving us

a better understanding of the specific shortfalls

rather than just the broad picture we have seen

so far. Services has been falling, due to the high

level of inflation that remains looming over

consumers. Agriculture and investment,

conversely, are up with the former seeing a 4%

increase as a result of the imported foods ban,

which encouraged domestic production.

Slightly more positive estimations come from

Sberbank, which predicts that we will see 12%

nominal wage growth after deleveraging stops

in 2016 and households start to borrow again.

Ultimately, Russia is starting to look up to some

extent, and it seems that the worst is over. With

Russian equities exceeding the MCSI

Emerging Markets index this year it seems

much more likely that investment will hike in

2016. However, if oil prices continue to fall then

this could hinder investment. The IMF have

highlighted $40/barrel as a worrying level for oil

price, saying that economic recovery is unlikely

if prices fall below it. While the current futures

price, then, of $40/barrel is slightly concerning,

we can only hope that the price stability

forecasted comes to fruition and that economic

prosperity for Russia is just around the corner.

Tom Dooner


13

Latin America

Over the last few months we have seen the

Federal Reserve’s pursuits to increase interest

rates repeatedly dampened. Each time there

was a sign of hope, new figures such as poor

US jobs growth rates have been reported,

causing confidence and momentum to be lost.

However, last Friday’s Non-Farm Payroll

results were much stronger than predictions,

with 271,000 job creations. This is important as

it hints at the overall health level of the US

economy. This result reinforced the Fed's

conviction to increase interest rates, pushing

equities markets down and bonds yields up as

well as strengthening the dollar. Regardless of

what the decision may be, it will have significant

effects on other economies, especially

developing ones.

For example let’s take the case of the Mexican

economy. This is seen by recent months, the

Mexican Peso has depreciated around 13%

and could see future, more significant changes

in the coming months, which would be

beneficial for Mexico as they are net exporters

to the US. Imports are currently at $214,800M

while exports are worth circa $294,000M and so

the further depreciation would see exports

increase, as they are relatively cheaper for US

consumers when compared to domestically

produced goods. While a depreciating

exchange rate would also cause the price of

imports to increase, impacting on production

costs for Mexican producers, the net effect

should be positive for the economy,

Another country that has recently been heavily

affected by the dollar is Brazil, whose currency

has lost around 50% over the last year on the

dollar, causing the country to post a record

trade surplus, despite its poor recent economic

performance.

The Fed’s decision as to increase the interest

rate may be a defining the path for many

economies around the globe. This not only

holds for developing countries but developed

economies as well, as is the case of Europe.

With an average growth of around 0.25% for the

second quarter of 2015, an increase in interest

rates by the Fed may hinder European

countries on their way to recovery. Euro/Dollar

parity may be approaching for the first time

since 2002. Furthermore, in the coming

months, monetary stimulus seems certain to be

on the cards, with Draghi outlining clear intent

to ramp up the ECB’s current QE programme.

If one thing can be said, it’s that exciting times

lie ahead in the FX markets and emerging

markets, as many look forward to the first Fed

rate rise in nearly 10 years.

Max Brewer

NEFS Market Wrap-Up

14

Africa

Despite the International Monetary Fund (IMF)

confirming Kenya as the most successful

economy in Sub-Saharan Africa, the country

has become unable to repay foreign debts.

Kenya has struggled for many years with

unsustainably high levels of debt, however

latest figures show government debt to have

expanded to 49.8% of GDP (see graph).

Instead of facing IMF imposed sanctions, the

country has asked for a reform of its economy.

National Treasury Cabinet Secretary Henry

Rotich has proposed various austerity

measures to gradually reduce the country’s

debt and ensure all future repayments are met

on time. Measures include new taxes, freezing

public sector recruitment, wage reviews and a

purge on ghost workers in county governments.

Whilst Kenyan IMF representatives and

politicians believe these changes will be

effective, many fear otherwise. The resulting

increased unemployment will worsen the social

situation, similar to the process we have seen

recently in Greece. Higher taxation will

decrease consumption, leading to lower

economic activity and a reduced standard of

living. Finally, a fall in government social

spending will lessen the quality of government-

provided services, limit new employment

potential and reduce infrastructural investment.

However if effective, the country will see easier

lending, leading to new investment in the

economy.

Six years after Zimbabwe got rid of its old

currency and adopted the Zimbabwean Dollar,

a recent appreciation of the Dollar has let the

country fall back into crisis. Exports have been

made globally uncompetitive, especially in

Southern Africa, which has been detriment in

Zimbabwe’s balance of trade. Imports are now

much cheaper which has caused deflation,

consequently reducing consumption and

increasing the value of government debt. A

large rise in investors from the underground

market has worsened the deflation by deterring

foreign investment. As a result, more than 80

businesses in Zimbabwe shut last year, and

only 34% of Zimbabwe’s manufacturing

capacity is being used. However some would

still argue in favour of the change to the

Zimbabwean Dollar, despite its repercussions.

The Dollar forces fiscal discipline on the

government and requires inspections of the

Zimbabwean economy by international boards,

hence increasing accountability and

responsible spending. It is also argued that the

economy’s lack of competitiveness is due to the

heavy trade and business regulations imposed

by the Mugabe-led government, and thereby

the Dollar is simply being used as a scapegoat

for deeper political issues.

Charlotte Alder


15

South East Asia

For the past few years economists have

branded the Philippines as the “sick man of

Asia” due to long periods of unequal growth,

poverty and unemployment. Now, GDP growth

has risen to an average of 6.7% per year,

shown in the graph below, which is staggering

when compared with the other South East

Asian countries, one being Singapore, who just

avoided technical recession.

After decades of political corruption scandals,

including the Priority Development Assistance

Fund Scam, in which members of congress

received more than $6 billion dollars, President

Aquino has set the path for good governance

and it seems the Philippines are ready to reap

the benefits. Traditionally the Philippine

economy has relied on remittances from the

US, Middle East and Asia, which is essentially

money coming in to the country from workers

who have migrated to seek employment. Last

year, $24.3 billion was sent home by over ten

million overseas workers, which accounted for

8.5% of the country’s GDP, whilst providing

greater stability against global shocks such as

a possible US interest rate hike.

Usually, a 0.6% fall in remittances would cause

major alarm bells to ring for their economy, but

after 16 years of economic growth and an

increasing number of people in work, the

government is now viewing this slowdown with

more optimism.

The IT services industry is expanding rapidly

and has been the driving force behind this

economic growth, with revenues growing at an

annual rate of 25% between 2007 and 2012. In

addition to this, the Philippines is one of the

“youngest” countries in Asia, with population

expected to reach 142 million in the next 30

years. If economic growth is stable, it could

attract investments from around the world,

therefore giving them increased

competitiveness compared with other countries

such as Vietnam and Malaysia, due to the

combined factors of their ability to speak

English and rapidly rising youth.

However, the real test is whether the Philippine

government can provide the right infrastructure

and investment to educate this young

population to succeed in this highly skilled IT

industry. With infrastructure spending well

under 5% of GDP, the government will need to

act quickly given that competitors such as

Vietnam are set to see their manufacturing

industry peak after the Trans-Pacific

Partnership terms were released last week.

Alex Lam

NEFS Market Wrap-Up

16

Middle East

As NBAD celebrates 40 years of success in

Egypt, more and more banks in the country are

raising the interest rates on their three-year

saving certificates by around 2%. This move is

expected to support the currency and also

increase the likelihood of a central bank rate

hike next month. Meanwhile, the lending and

deposit levels of Saudi banks are expected to

be affected in the next few quarters, owing to

the impact of the lower oil prices filtering down

to lower public spending, higher government

drawdowns from bank deposits and banks

subscribing to governments' domestic

borrowing programme. Furthermore, more

limited lending opportunities for banks are

anticipated, given the government’s publicly

announced plans to postpone some investment

not currently underway, as well as the strong

correlation between economic activity and

government spending.

As a result of the recent decline in oil prices, oil,

gas and related sectors are expected to see a

dip in the creation of new jobs in UAE and

Middle East. However, given the build-up

towards Expo 2020 in UAE, the FIFA World Cup

2022 in Qatar and increased focus on

infrastructure development, UAE and other

Middle East Countries might see an increase in

employment with increasing number of jobs

being generated over the next few months,

especially in the construction sector.

Not only that, people already a part of the

existing workforce are expected to benefit, and

may see an increase in their salary by about

8.5% in 2016, with the highest adjustment

expected among those who hold in-demand

positions and add value to the company.

Businesses are actively seeking skilled

professionals for new roles and to fill open

vacancies thus driving salary rises well above

average for in-demand roles. Hard-to-fill roles

are experiencing higher than average pay rises

due to the increased competition for these

candidates.

Kuwait is planning to increase spending on

infrastructure in 2016, as OPEC’s fifth-largest

producer seeks to offset the impact of lower oil

prices on economic growth. The government of

Kuwait aims to reduce current spending, which

typically includes subsidies and wages, to

shore up public finances. Estimates predict that

Kuwait's economy may expand by 1.2% this

year, and by 2.5% in 2016, whereas growth in

Saudi Arabia is expected to slow down from

3.4% to 2.2% in 2016.

Sreya Ram


17

EQUITIES

Financials

The financial equities markets have struggled

this week, partly due to the falling commodities

prices, with the NASDAQ Financial 100 Index

falling 3.5% this week. On Friday George

Osborne announced that £13bn of former

Northern Rock loans and mortgages would be

sold off, with £3.3bn going to the UK challenger

bank, TSB, and the rest going to US equity firm,

Cerberus. Furthermore, the fierce competition

of the asset management industry was

highlighted today as Blackrock and Charles

Schwab both cut exchange traded fund fees as

they try and win over more customers.

I have mentioned in my previous articles the

trend of restructuring in the banking industry,

most notably Deutsche Bank, Credit Suisse and

Standard Chartered in recent months. This

week, Italian bank, UniCredit [BIT: UCG],

showed it would be following a similar fashion.

Low interest rates and a sea of regulations have

meant the biggest bank in Italy is having to cut

18,200 jobs by 2018, which amounts to 14% of

the workforce. This is part of a cost cutting

project, which aims to reduce costs by €1.7

billion by 2018. Most of the costs will be saved

through commercial and retail banking in

Germany and Austria, while the Ukrainian

branch of the business will be sold off. This

news has seen the bank’s share price fall 9.2%

since Wednesday, however, at this share price

it is trading at 0.8 times the value of its tangible

assets, suggesting it may be undervalued by

the market.

The commodities trader, Noble, had a tough

week with the relatively small research firm,

Iceberg Research, suggesting the company

had used false accounting. Although Noble

denied overstating the value of the commodities

it held, it was forced to halt trading on its stock

on Thursday morning as it consulted its

auditors, Ernst and Young. In addition, the firm

later released its Q3 results, in which it

announced its profits had fallen 60% to $24.7

million dollars. The company attributed this to

extremely low metal prices, which is

unsurprising as the price of copper is at a 6-year

low, while gold is at its lowest since 2010. As

the company is also faced with $3 billion worth

of debt repayments over the next year, we can

expect to see it struggle. This has been

reflected by the market as the share price of the

company has fallen 65% over the past year, as

is shown in the graph below.

Sam Ewing

Share price of Noble over the last year (Source: finance.yahoo.com)

NEFS Market Wrap-Up

18

Oil and Gas

Much of the week was dominated by news from

Saudi Arabia, which intends to keep pumping

oil at the high rates it has maintained this year

in spite of the slump in crude prices, and will tap

international capital markets to cover the

shortfall in its revenues. As a result, Brent crude

(COZ5: ICE EU), the global benchmark, fell to

below $44 a barrel this Friday from above $47

last week.

E.on (EOAN: ETR), Germany’s largest utility by

market value, has been hit especially hard by

the significant decline in commodity and energy

prices this week, which, combined with the

Energiewende (Germany’s radical shift towards

clean energy sources), led to its biggest write-

downs on the value of its power generation

assets. Losses stood at €7.25bn for the three

months to September 30th, and the company

reported impairments of €8.3bn in the third

quarter. The company’s shares closed at $8.72

on Friday, down about 8.2% from $9.5 last

week.

Even at a time when crude prices are low and

oil and gas producers are under severe

financial pressure, it has been difficult for deals

to take place and reach agreements due to the

vast difference between buyers’ and sellers’

expectations. On Wednesday, Anadarko

Petroleum (APC: NYQ) confirmed that it had

rejected a takeover offer by Apache (APA:

NYQ), a fellow US oil exploration and

production company. Apache shares jumped

13% on Monday after the unsolicited takeover

approach, but were down again 6% on

Wednesday following Anadarko’s statement, as

shown on the graph below. But even after this

week’s bump up, over the past five years its

shares have dropped by 54%

Last week, I talked about Exxon Mobil’s

investigation into its allegedly suppressed

climate-change research and findings; the

world’s largest publicly traded international oil

and gas company shares have risen from about

$69 at the end of August to $87 just last week.

Now, Exxon’s shares are trading at around $78.

Investors should take the climate change cover-

up investigation as a wake-up call. Climate

change considerations, and how they will affect

both energy suppliers and users, should now be

central to nearly any investment decision. It

doesn’t seem to be the case at the moment, as

securities of companies most susceptible to

physical and regulatory climate risks are not

seen to trade at a discount on the market.

But this should not merely be a “sell dirty and

buy green” approach. Instead, investors should

look at companies that are addressing the

increasing regulatory risks. These include both

renewable-energy firms and traditional

suppliers that are investing aggressively in

energy efficiency, carbon reduction and cost

competitiveness.

Andrea Di Francia


19

Retail

In much the same vein as recent weeks, retail

equities have failed to show a great deal of

fluctuation, with most sectors being only slightly

down amidst news of consumer sales failing to

grow as much as expected in October,

insinuating a possible slow-down in consumer

spending as the upcoming holiday season

draws nearer. The performance of the Dow

Jones Consumer Goods Index can be seen in

the graph below.

As such, department stores were particularly

blighted by the news, with department store

Macy’s diminished forecasts being

compounded by Nordstrom’s similar woes,

spooking investors who will have already had

existing concerns over the lack of retail sales

growth in the US. This has certainly not been

ameliorated by a relatively small yet

pronounced drop in foreign sales growth for US

retailers. Retail equities have largely been

bright spots in a 2015 backdrop of fears of a

global slowdown, in addition to anticipation of a

US rate hike, hitting most stocks, especially

those of companies in the energy, materials,

and industrial sectors. Given the

aforementioned news, as well as existing fears

regarding a lack of consumer sales growth and

disappointing holiday forecasts, it seems that

retail equities may no longer be as attractive a

proposition in the near future.

Elsewhere in the sector, however, some

promise was shown, particularly thanks to

SABMiller and Anheuser-Busch agreeing a

behemoth of a merger, with talks of a £71 billion

takeover having been finalised recently. The

resultant company will supply nearly a third of

the world’s beer, assuming their share of the

market remains constant, and Lazard analysts

are predicting a £1.4 billion decrease in costs

for the new company, even allowing for the cost

of mitigating competition concerns from US

regulators, another indication of the size,

scope, and significance of the merger. In fact,

SABMiller, a FTSE 100 company, has had to

sell off a share in a joint-venture with

MillerCoors, so as to prevent a monopoly being

formed. It is the hope of the author that other

companies in the retail sector will continue this

impetus, and deliver tangible earnings growth

and cost decreases in the near future.

Jack Blake

NEFS Market Wrap-Up

20

Technology

Two large firms seemingly weakened this week,

with Samsung suffering a short downfall, with

prices dropping to $551 – a 4.6% fall from this

week’s high of $577.50 (Monday’s price).

Meanwhile, Microsoft shares are also down this

week, with a drop of 4.3% to $52.59, another

minor drop from Monday’s high of $54.93.

News surrounded Apple this week with the

deliberation of the addition of person-to-person

transfers to their Apple Pay – a currently

present system that allows consumers to make

payments for goods using their iPhones. This

addition comes vital to the company

considering that Apple’s service has struggled

to progress since last year’s launch, even

despite the addition of new and valuable

merchant partners such as KFC and Starbucks.

Shareholders hold hope that if Apple, who has

yet to comment, does progress with this plan,

then profits will certainly be boosted. Even

though companies do not gain any revenue

from person-to-person transfers since the

service is free, such convenience will certainly

attract a greater deal of users, who in turn will

boost Apple’s share prices.

Such adaption to this feature is essential in an

ever-changing market, particularly with

forecasts set for person-to-person mobile

transfers expanding an incredible 25% annually

– intended to reach $17 billion before 2020.

Regardless of this potential expansion, this

week finished with Apple shares being down

from $121.74 to $112.78 – a 7.4% fall for the

giant tech-firm, as shown on the graph below.

This move proves possibly threatening to

PayPal, whose Venmo app (one of the fastest

growing US payments app) is currently a

market leader. This app’s news feed allows

users to see their friends payments to other

friends – a highly rated feature, where Venmo’s

volume of payments tripled throughout this

year’s third quarter, relative to a year ago –

excelling a phenomenal $2.1 billion. The news

of Apple’s plans, for direct competition with

PayPal, saw PayPal losing a 2% value in their

share price on the NASDAQ exchange, from

$37.02 to $36.05, throughout Wednesday due

to rising fears amongst shareholders.

It’s not just these companies taking action to

this new trend, with Facebook launching a

payments service earlier this year, which allows

users to send money through the FB

messenger app, whilst Google Wallet offers

such a similar feature. However, adoption of

these services is seemingly low; it is clear that

there is need for further adaption and alteration.

Daniel Land

Apple’s weekly share price


21

Pharmaceuticals

Pharmaceutical equities have continued to fall

as the expected slowdowns to the healthcare

sector have started to materialise. Ralph Segall

of financial analysts Segall Bryant & Hamill

suggests that falling sales growth, political

pressures in the US over drug price hikes and

attempts to avoid tax, alongside industry-wide

accounting misdemeanours, are affecting the

whole sector. The FTSE 350 Pharmaceuticals

& Biotechnology Index fell by 4.38% and this

trend resonated in the US as the NYSE

Pharmaceutical index fell by an additional

2.48%.

Additionally, one of the most recent hostile

takeover battles has just come to a seven

month end. A number of hedge funds had been

greatly impacted by the news that generic drug

company Mylan failed to acquire smaller

Dublin-based rival Perrigo. Both companies

had recently moved their headquarters out of

the US, exemplifying a trend that is likely to be

followed by other Pharmaceutical firms

including Pfizer. The bid launched by Teva

Pharmaceuticals to takeover Mylan earlier this

year may have been the driving force behind

Mylan’s attempt to increase market

capitalisation as we are going through an M&A

spike in this industry.

Mylan only offered to buy 40% of Perrigo, a

store-brand, cold and allergy based company,

which would have left it short of control. The

deals collapse caused Perrigo’s shares to fall

by 6.5% to a new 13-month closing low, and

Mylan’s share price rocketed by 12.58% by the

end of the day. Mylan’s price climbed because

investors thought that it was overpaying for

Perrigo and believed that a combined entity

was a less profitable strategy. A large number

of hedge funds, including New York based OZ

Management, who lost $30 million on this

investment last Friday, had a stake in this deal

which highlights the struggles that hedge funds

have experienced this year.

In other news, over in China, 11 applications for

new generic drugs have been rejected in a

move by the China Food and Drug

Administration (CFDA) to crackdown on

inadequate self-testing. Although only a minor

short term set-back, this follows the pattern that

China is in the midst of a major health reform

effort. Reinforced by China’s ageing population,

analysts view the CFDA’s possible reforms,

which may increase insurance coverage and

reimbursement payments, as a key to the

upcoming growth of multinational

Pharmaceutical companies.

Sam Hillman

FTSE 350 Pharmaceuticals & Biotechnology Index

NEFS Market Wrap-Up

22

Industrials & Basic

Materials

Three weeks ago we covered Glencore and the

mined commodities sector. Our focus this week

will be on Glencore and Anglo American PLC,

the world’s fifth-largest miner.

This week, Glencore is again in the red as its

shares dropped to below a pound for the first

time in a month with a continuous 6-day sell off

in the stock as slumping metal prices have

stalled.

Glencore is now the worst performer in the UK's

FTSE 100 Index with its share price dropping

68% after a rout in commodity prices. The

shrinking profits, massive $30billion debt and

worries over its business model going forward

have left investors and funds cutting their

positions in the company.

Glencore and the price of copper have the

tendency to envelope one another and with the

recent plunge in copper prices amidst the

strength of the Dollar as well as the Fed's

intention to raise interest rates in the meeting

next month, has severely affected Glencore.

Anglo American PLC, the world's fifth-largest

mining company by market capitalization, has

had its share price fall 60% this year to a new

low of 478.65 pence each, its lowest since

listing in London in 1999. On Thursday, the

company also announced the departure of its

iron ore chief and a renewed focus on sales and

marketing. The management shuffle is timely

as Anglo American is trying to turn around its

fortunes after underperforming in comparison to

its peers such as BHP Billiton and Rio Tinto.

Although they have all been hit by the slump in

commodity prices, alongside the slowdown in

China, Anglo American is largely invested in the

costly $8.8bn Minas Rios iron-ore project,

which it launched at a time when the prices for

iron ore spiralled towards historic lows.

With the strengthening of the Dollar and

impending interest rate hike as well as the

falling growth expectations for the economic

growth of China – the world’s largest consumer

of raw materials, the outlook for mining firms

seems bleak, with commodity prices forecast to

remain low. The cash pile of companies such

as Glencore and Anglo American are severely

depleting and the need to preserve cash is as

crucial as ever.

Erwin Low


23

COMMODITIES

Energy

Energy prices have collapsed dramatically this

week after OPEC – the cartel responsible for a

third of the world’s output – stated that the “oil

overhang” had grown even bigger than during

the financial crisis. North Sea Brent, the

international benchmark, fell 8.1% during the

week to $43.56 a barrel, the lowest since

August, while US benchmark West Texas

Intermediate (WTI) slumped 8.2% to $40.70 per

barrel in the same period. Apart from Natural

Gas, energy prices on average have fallen a

staggering 7.3%.

Speaking on Thursday, OPEC concluded that

inventories of crude oil in advanced economies

were more than 210m barrels above average

over the past 5 years, outstripping the build-up

following a price crash in 2009. Furthermore,

more than 100m barrels of crude oil and heavy

fuels are being held on ships at sea, as a year-

long supply glut fills up available storage on

land.

One reason given by OPEC for this price crash

and subsequent oil glut has been the markets

reacting to the forces of demand and supply; an

unusual occurrence for the energy commodity.

One of the cartel analysts declared that “the

build in global inventories is mainly the result of

the increase in total supply outpacing growth in

world oil demand over the first nine months of

this year.”

There is significant evidence to back this claim.

Due to the laws of demand and supply, you

would expect a movement down the demand

curve after a shift outwards in supply as there is

excess supply. Indeed, according to the

International Energy Agency (IEA), drivers have

been opting more often for “larger, more fuel-

guzzling vehicles” such as SUVs since last

year, especially in America and China. Overall

the IEA expects demand to grow by 1.9% this

year, well above the average for the past

decade, of 0.9%.

Yet it appears fairly certain that low oil prices

look set to stay for the foreseeable future. Saudi

Arabia, OPEC’s de facto leader, has exhibited

no hint of overturning its policy of keeping the

taps open in an attempt to win back customers

from higher-cost producers. But these prices

are not to last forever. OPEC along with BP has

forecast that the crude price will settle at around

$60 next year as global demand rises ever

higher and output from non-cartel organisations

begins to fall.

Harry Butterworth

NEFS Market Wrap-Up

24

Precious Metals

This week we have seen the precious metals

sector prices continue to dip to historically low

levels. Gold prices dropped to their lowest in 5

years and copper has also dropped to its lowest

price since 2009 as investors around the world

eye the Fed’s next move. Falling prices are

pulling down producer shares, pushing the

Bloomberg World Mining Index to a five-week

low.

Gold prices have been pushed down further

from 1108.24 USD/oz. to 1078.33 USD/oz (see

chart below). A report showing the US jobless

benefit claim is unchanged since last week has

signalled that the US economy is strengthening

as unemployment rates continue to stay low

while boosting the case for the Federal Reserve

to increase interest rates. The percentage

chance of an interest rate hike next month has

increased to 66%, and as mentioned last week,

the higher rates curb the appeal for gold as they

lose their competitiveness against assets that

pay interest or dividends.

Purchases of gold have jumped 8% to 1121

metric tons in the last three months. The lower

prices have spurred demand as the buying of

gold including gold bars, jewellery and coins

have risen to the highest in two years. This can

be attributed to other institutions and central

banks which increased their purchases of gold

as well as countries like China and Russia who

are also looking to boost their reserves. Festive

seasons such as Diwali in India have boosted

the demand for gold as jewellers look to hoard

more gold because of the attractive prices.

Silver has also continued to plunge as it falls to

almost 14 USD/oz., nearing its lowest level

since 2009. Silver is one of the most volatile

metals and its moves and fluctuations tend to

be higher than the other metals. The

strengthening of the dollar is hurting the

precious metal’s prices as both industrial and

investor demand remain weak.

In other news, Platinum and Palladium prices

have continued to fall and this has caused

Lonmin Plc (the third largest platinum

producer)’s share price to drop 29% as it is said

that the company is looking to sell billions of its

shares.

With the strong US economic data, all eyes

would be on the Fed as investors all around the

world closely await the more-than-likely

decision of an interest rate hike in December.

Higher rates would mean a stronger US dollar

which, coupled with a weak global economy,

would be a negative for the Precious Metals

prices.

Samuel Tan

Gold Price Trend


25

Agriculturals

The last couple of weeks concluded an overall

decline in agricultural commodities’ prices and

are justifying global predictions. At the

beginning of October, the World Trade

Organisation (WTO) Public Forum has received

information that increasing production of the

goods will be likely to suspend or depress the

current prices for the next ten years. However,

although the general trend is unfavourable to

producers, individual industries may still

experience more positive shifts in prices due to

unpredictable factors. Consequently, this

week’s focus is on the production of oranges.

Citrus greening disease (also known as HLB),

a serious threat to citrus plants in North

America, seems to retreat and cause a

significant decline in production of citrus fruit,

including oranges. The main concern involves

knowledge that, once the pathogenic bacterium

enters the tree, it stops bearing fruit and,

eventually, is killed.

As reflected in the Diagram A, orange juice

prices remained relatively stable between 22nd

October and 5th November, averaging at

$134.18/lb. However, the current forecast on

the impact of disease isn’t favourable. Diagram

B indicates significance of HLB on the

production of oranges in Florida. Not only is

there a negative relationship between the level

of production and time, but the rate of change

is also increasing; just between October and

November (2015) months there was -6.25% in

production, which was a significant rise relative

to the 2013-2014 (-22.2%) and 2014-2015 (-

7.14%) yearly fluctuations.

As mentioned previously, increased production

due to sharp rise in global population is

desirable - if not essential. According to US

Department of Agriculture, projected future

estimates for Florida’s orange production in

2015-2016 cycle is 74 million boxes (90lb/box).

As a result of the contracting supply, prices are

being pushed upwards, as a result of excess

demand for the good.

Juice prices are peaking up since 6th of this

month and already reached $156.25/lb by 12th

November (Diagram A). As there is no

treatment for infected trees, future values are

believed to continue rising and soon to be

reflected in supermarkets. Although the

variation in orange production and prices

doesn’t follow the predictions of WTO, the

overall trend is unlikely to change as this

commodity is just one of many that influence the

overall outcome.

Goda Paulauskaite

A – Price B -

NEFS Market Wrap-Up

26

CURRENCIES

Major Currencies

EUR/USD continued its decline this week,

dipping below 1.07 and meeting resistance at

1.0680, but neither the bulls nor bears could

gain control and the pair continued to largely

trade sideways, despite continuing to test lower

support levels.

However, Mario Draghi, the head of the

European Central Bank signalled on Thursday

that the bank was ready to extend the

Quantitative easing stimulus programme to

boost Eurozone recovery. Highlighting that

‘signs of a sustained turnaround in core inflation

had weakened’, his comments reinforce similar

warnings released in October. Core inflation

strips out price changes for more volatile items

such as food and energy; it is seen as a more

reliable indicator because of this. It is now

expected that further action could be taken as

soon as December, when the ECB next meets.

Stating that ‘the option of doing nothing would

go against price stability’, it is likely that the ECB

could release a more aggressive quantitative

easing package and even consider further

cutting interest rates.

On the back of this news the euro dropped 0.5%

to $1.0692, before quickly recovering and

settling close to the 1.077 level. It appeared the

market was waiting for the release of EU GDP

figures and further US economic data on Friday

before entering into another full sell off of

EUR/USD.

However, the pair continued to trade within the

week’s range as Eurozone GDP came in on

target, and US retail sales disappointed. French

and German GDP came in at 0.3%, matching

expectations. Eurozone GDP also posted a

gain of 0.3%, just shy of the 0.4% forecast.

Despite these results failing to inspire Eurozone

confidence, the pair only narrowly gave way,

trading down to 1.0755. The Euro was saved

somewhat by soft US data. Retail sales in

October missed expectations, coming in at

0.1%, where consensus lay at 0.3%. The price

came under pressure in anticipation of the US

market opening and these data releases, falling

to 1.0655. Despite the disappointing US data

the pair continued to decline throughout the day

and Friday’s close came only marginally below

the weeks open.

Continuing from last week’s technical analysis,

the price is still well below the 20 SMA, and all

indications point towards a further decline. Next

week holds key US and EU data releases, and

I expect we will see a more decisive price

movement. We will also analyse sterling vs

dollar, as a host of UK releases lie ahead.

Adam Nelson


27

Minor Currencies

Aussie dollar fell sharply against its US

counterpart late in last Friday’s trading after

strong US non-farm payrolls and

unemployment reports were released. The

AUD/USD pair fell over 100pips from a price of

0.715 to 0.704. Consequently, the pair began

this week trading within a lower range than last

week - between a price of 0.702 and 0.706.

The Westpac consumer confidence index was

released late on Tuesday 11th, which is

calculated from a survey of 1,200 people in

which respondents subjectively rate the

economic climate. The index rose from 97.8 the

previous month, up to 101.7, indicating a higher

level of consumer confidence. This caused a

minor uptrend in AUD/USD and meant the pair

traded within a slightly higher range, breaking

through the 0.706 level of resistance. Price

movement slowed down as traders stalled

opening positions in anticipation of the

Australian employment report.

Traders holding back due to any bearish

sentiment about the Australian dollar would

have been very right to do so. The very sharp

up candle early on Thursday was due to

exceptional changes in employment and

unemployment. Unemployment fell from 6.2%

to 5.9% when it was forecast to rise 0.1%.

While, perhaps more dramatically, employment

had previously fallen by 5,100 jobs but there

was a sharp turnaround with 58,600 new jobs

created this month. Investors reacted well to the

newfound strength in the Australian economy

with the pair rising to levels similar to last week.

There was then some correctional down

movement in the pair before it found the clear

uptrend highlighted in the graph below.

The uptrend could continue into next week if the

sentiment about AUD remains strong.

Therefore the AUD/USD pair should trade

within higher range next week with 0.716

becoming the main support price.

Generally it was a fairly quiet week for other

minor currencies. The Canadian dollar was

unable to profit on its own relatively strong

employment data, an additional 44,000 new

jobs. The fact the vast majority of its trading is

done against the US dollar meant the

comparatively better numbers from the US

cancelled out any gains that could have been

made and so CAD fell about 1%.

Will Norcliffe-Brown

AUS/USD 1 hour candlestick (Source: OANDA)

NEFS Market Wrap-Up

28

About the Research Division The Research Division was formed in early 2011 and is a part of the Nottingham Economics and Finance Society (NEFS, formerly known as NFS and UNIS). It consists of teams of analysts closely monitoring particular markets and providing insights into their developments, digested in our NEFS Weekly Market Wrap-Up. The goal of the division is both the development of the analysts’ writing skills and market knowledge, as well as providing NEFS members with quality analysis, keeping them up to date with the most important financial news. We would appreciate any feedback you may have as we strive to grow the quality and usefulness of weekly market wrap-ups.

For any queries, please contact Josh Martin at [email protected]. Sincerely Yours, Josh Martin, Director of the Nottingham Economics & Finance Society Research Division

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About the Research Division The Research Division was formed in early 2011 and is a part of the Nottingham Economics and Finance Society (NEFS, formerly known as NFS and UNIS). It consists of teams of analysts closely monitoring particular markets and providing insights into their developments, digested in our NEFS Weekly Market Wrap-Up. The goal of the division is both the development of the analysts’ writing skills and market knowledge, as well as providing NEFS members with quality analysis, keeping them up to date with the most important financial news. We would appreciate any feedback you may have as we strive to grow the quality and usefulness of weekly market wrap-ups. For any queries, please contact Jack Millar at [email protected] Sincerely Yours, Jack Millar, Director of the Nottingham Economics & Finance Society Research Division

mailto:[email protected]

mailto:[email protected]

Documents

NEFS Market Wrap Up Week 4