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Forex & Binary Daily Fundamental Analysis: 1 Sep 2015

Discussion in 'Fundamental Analysis' started by Sandra S., Sep 1, 2015.

  1. Sandra S.

    Sandra S. Forum Member

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    Greetings,

    Let's start with China where we continue to see more evidence of economic deceleration.

    1. China's overall (composite) output entered contraction mode, dragged down by a sharp slowdown in the manufacturing sector.
    [​IMG]
    Source: Markit
    2. Factory layoffs have been a particularly troublesome and persistent trend. This could further worsen social tensions in China as the number of protests/strikes increases.
    [​IMG]
    Source: Markit
    3. The official manufacturing PMI (chart below) declined to a 3-year low and now shows contraction (PMI < 50). This supports the data above.
    [​IMG]
    Source: @fion_li
    4. The Baidu SME sentiment index shows the nation's smaller firms remain under pressure.
    [​IMG]
    Source: @Callum_Thomas
     
  2. Sandra S.

    Sandra S. Forum Member

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    5. Public firms' earnings are declining again (profits and EBITDA shown).
    [​IMG]
    Source: @vikramreuters
    6. Macau's GDP declined by 26% in a single quarter on the latest slowdown in gambling revenues.
    [​IMG]
    Source: @frostyhk
    7. The government is realizing it botched the latest stock market bailout as the public loses confidence. Instead of buying more shares, the government has supposedly set out to find scapegoats to take the blame for the selloff.
    [​IMG]
    Source: BBC
    8. To make matters worse, there was another chemical facility explosion late Monday. While the direct impact of such events on the overall economy is minimal, it's the diminished confidence in the authorities that could become an issue.
    [​IMG]
    Source: @PDChina
    S&P500 futures are sharply lower in after-hours trading on China concerns.
    [​IMG]
    Source: Investing.com
    At this point the economic headwinds in China have spread throughout Asia. Here are some examples.

    1. South Korea's exports fell almost 15% from last year.
    [​IMG]
    Source:Investing.com
    2. Malaysia's manufacturing is contracting sharply.
    [​IMG]
    Source: Markit
    3. Taiwan's manufacturing sector is struggling as well.
    [​IMG]
    Related to the above as well as from the extreme weakness in the energy markets, here is what happened to the global CPI.
    [​IMG]
    Source: @GaveKalCapital
    While India's exposure to China is relatively minor, its GDP growth came in below expectations. With inflation slowing, this gives Raghuram Rajan room to cut rates in the next couple of quarters.
    [​IMG]
    Source: @vikramreuters
    [​IMG]
    Source: Investing.com
    Turning to the Eurozone, we see a material improvement in Belgium's GDP growth.
    [​IMG]
    Also, the area's inflation rate shows surprising resilience - for now. Here is the core CPI.
    [​IMG]
     
  3. Sandra S.

    Sandra S. Forum Member

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    Elsewhere in Europe we have Denmark's economy picking up momentum. Growth has improved this year and unemployment continues to fall.
    [​IMG]
    [​IMG]
    The Brazilian real continues to fall - reaching lows not seen in over a decade. Fiscal problems have become more apparent as Dilma Rousseff’s economic team submitted their 2016 budget, forecasting a 30.5bn reais deficit. Debt downgrades loom.
    [​IMG]
    Source: Investing.com (chart shows the number of reais a dollar buys)
    In fact the JPMorgan index of emerging market currencies hit new lows on Monday.
    [​IMG]
    Source: @MktOutperform
    Now let's turn to the energy markets where crude oil has undergone a 3-day spike we haven't seen in years.
    [​IMG]
    Source: Investing.com
    What drove this latest spike? Apparently the US government (the EIA) revised its survey methodology, showing it has been overstating US crude oil production for some time now. As I discussed a number of times, current US crude production growth is not sustainable at these prices - even with improved efficiency. Here is the updated chart from the EIA.
    [​IMG]
    This spike in crude oil has stabilized a number of credit markets. BDCs, MLPs, HY bonds are all stronger. In fact on a total return basis HY bonds are now outperforming the S&P500 year-to-date.
    [​IMG]
    Source: Ycharts.com
    On a related note, depressed energy prices this year have been wrecking havoc in the Texas manufacturing sector.
    [​IMG]
    Here are a couple of developments in other commodity markets.

    1. Lumber futures are at the lowest level since 2011 on China, weak Canadian dollar.
    [​IMG]
    Source: barchart
    2. Ready for Thanksgiving? It could be an expensive one this time. Turkey prices have spiked as a result of the avian flu.
    [​IMG]
    Source: USDA
    Turning to Food for Thought, we have 5 items this morning:

    1. Iowa now loves Donald Trump.
    [​IMG]
    Source: @conradhackett, Washington Post
    2. From BBC: "Before and after image shows the extent of Temple of Bel's destruction in Palmyra by IS militants".
    [​IMG]
    Source: @BBCBreaking
    3. US troop numbers in Afghanistan have declined sharply.
    [​IMG]
    Source: ‏ ‏@WSJGraphics
    4. Best-selling auto by state.
    [​IMG]
    Source: ‏@conradhackett, Yahoo
    5. Refugees are flooding into Europe.
    [​IMG]
    Source: ‏‏@FactTank
    [​IMG]
    Source: ‏‏@WSJGraphics
     

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