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Tuesday, 21 October 2014
European Stocks Rise as Actelion, Swedbank Post Earnings
European stocks rose after companies including Actelion Ltd. and Swedbank AB (SWEDA) posted better-than-estimated earnings. U.S. index futures also advanced.
Actelion added 6 percent after increasing its full-year prediction for a second time. Swedbank rose 3.2 percent after announcing job cuts and posting net income that beat estimates. Reckitt Benckiser Group Plc lost 1.9 percent after saying full-year sales growth will be at the lower end of its forecast.
The Stoxx Europe 600 Index climbed 1.5 percent to 321.78 at 11:59 a.m. in London, extending gains after the European Central Bank was said to have bought Italian covered bonds. The index fell for four weeks amid growing concern that a potential recession in Europe will undermine growth as the U.S. Federal Reserve winds down stimulus. Standard & Poor’s 500 Index futures rose 0.8 percent today.
“The focus may go back to the micro, the corporate, as we get into the meat of the reporting season,”James Buckley, who helps oversee about $48 billion as a portfolio manager at Baring Asset Management Ltd. in London, said by telephone. “The quarter reported may be tough because of the global and geopolitical uncertainty, but guidance will be crucial and that’ll have some tailwinds in terms of lower commodity prices and weaker euro.”
The euro has weakened against 14 out of 16 peers this year, amid signs of fragility in Europe’s economy. Crude tumbled into a bear market this month on concern over a global supply glut.
Some 10 Stoxx 600 companies are posting results today. GlaxoSmithKline Plc, Credit Suisse Group AG, Daimler AG and Tesco Plc are among others that will report later this week.
Lowest Level
The benchmark index reached its lowest level of the year on Oct. 16, after its longest losing streak in 11 years, on concern a financial crisis was returning to the region’s peripheral countries. Since then, the index has rebounded 3.8 percent amid optimism the ECB will enact sufficient stimulus measures to rekindle growth.
The ECB bought Italian covered bonds as it returned to the market for a second day under its asset purchase program, according to two people familiar with the matter. The central bank bought short-dated French notes from Societe Generale SA and BNP Paribas SA as well as Spanish securities from other lenders yesterday.
“The ECB was slow to start and it’s still not U.S.-style QE, but they’re doing the best to talk up the market,” Justin Haque, an equity sales trader at Hobart Capital Markets LLP in London, said, referring to quantitative easing. “People’s appetite to short is now sated, so why not run long with the ECB?”
Actelion Advances
Actelion climbed 6 percent to 108.50 Swiss francs. Core earnings will increase in a low-twenties percentage range at constant exchange rates, compared with a previous forecast for growth in the mid-teen percentage range, the drugmaker said. It also said third-quarter core earnings jumped 31 percent to 209 million francs ($222 million). That beat the average analyst estimate of 184.6 million francs.
Swedbank gained 3.2 percent to 182.80 kronor. Sweden’s largest mortgage lender said it will cut as many as 800 jobs to cut costs as it adjusts to a low-rate environment. It also reported third-quarter net income of 4.56 billion kronor ($636 million), topping the 4.23 billion kroner estimated by analysts. Net interest income of 5.83 billion kronor also beat projections.
Akzo Nobel NV rose 4.9 percent to 51.76 euros. Europe’s largest paintmaker said its drive to improve efficiency is yielding results as it kept a 2015 profitability goal even amid challenging European markets. The targets include a 9 percent return on sales and 14 percent return on invested capital.
Havas SA climbed 6.4 percent to 6.16 euros. The advertising agency will report the strongest third-quarter organic growth among its peers, Nomura Holdings Inc. wrote in a note.
Reckitt Benckiser lost 1.9 percent to 5,020 pence. The maker of Nurofen painkillers and Veet hair-removal creams said full-year sales growth will be at the low end of its 4 percent to 5 percent forecast as expansion lags behind in Asia and Latin America.
To contact the reporter on this story: Inyoung Hwang in London at ihwang7@bloomberg.net
To contact the editors responsible for this story: Cecile Vannucci at cvannucci1@bloomberg.netAlan Soughley
Tuesday, 14 October 2014
Technical Trading: Gold Vulnerable To Near Term Backing And Filling
(Kitco News) - Comex Decmeber gold futures are moderately firmer heading into the New York open on Monday, but well off their overnight highs. For now the bulls are pausing ahead of 40-day moving average resistance, but the action is not really a surprise. Gold bulls marked out an important bottom last week, as the market rallied sharply from key support. And it is now vulnerable to a short period of consolidation or “backing and filling” as the market digests last week’s gains.
Last week’s action was impressive and marked out a near term bottom on the daily gold chart for gold. The gold market fell to test major long-term support around the $1,182 per ounce level (the June 2013 low and the January 2014 low).
The quick sell-off on October 6 to an intraday low at $1,183.30 was quickly used as a buying opportunity. Long-term physical buyers were attracted to that level. A bullish reversal day formed on the daily chart, which cements the $1,183.30 as strong near term support. The weekly chart for December gold reveals a bullish outside week last week, which is another positive signal.
The bulls drove the gold market higher last week through initial 20-day moving average resistance, which is a positive signal. That moving average seen in red below in Figure 1 is now support at $1,218.30 an ounce.
However, above the market the 40-day moving average, seen in green in Figure 1, stands as important near term resistance at $1,244 per ounce. December gold has been trading below its 40-day moving average since mid August.
Moving averages are trend following indicators and the recent push above the shorter 10-day and 20-day points are positive for the short-term trend for gold. But, in order to show improvement to the intermediate term trend, gold would need to conquer the 40-day moving average, which could be a tough hurdle.
Daily momentum studies are now bullish. The 14-day relative strength index, shown below the gold prices reveals a “bullish divergence.” When December gold touched the fresh 2014 low on October 6, the RSI had already turned higher. The indicator has pushed above the 30% zone (the oversold line) and is now pointing higher. The bullish turn from oversold levels gives the bulls the edge on a daily basis going forward.
Very short-term, however, hourly momentum studies are falling from overbought levels, which could allow for modest backing and filling and minor retreat. There is strong hourly chart support at the $1,217.60 level for gold. The 20-day moving average is also important near term support. As long as those levels holds firm, any near term retreat should be minor.
Shanghai, Singapore, HK bid to break London grip on gold trading
ASIANS buy most of the world’s gold, but nearly all of it trades in London. Now, with Western investors souring on the metal, the region is making a bid for some of the action.
Three big financial hubs in Asia are separately launching trading in a gold contract, each backed with physical gold.
If they draw enough investors, the contracts could influence the price of gold, which is set by a daily fix in London.
“You now have a market that’s driven by Asia,” says Catherine Raw, who manages BlackRock’s $US7 billion global mining fund.
The Shanghai Gold Exchange was launched in September inside the city’s free-trade zone, offering yuan-denominated contracts backed by gold held in Shanghai.
This week, Singapore will offer its own contract, and later this year, CME Group, which operates exchanges in Chicago and New York, plans to start a US dollar-denominated contract in Hong Kong.
In the US and Europe, gold is often bought as a hedge against higher consumer prices. But with few signs of inflation, the price of gold has fallen 10 per cent since March and is down by a third since the end of 2012.
Holdings by gold-backed exchange-traded funds fell to 53.5 million ounces in October, the lowest level in five years, according to US-based ETF Securities.
In Asia, where the metal remains popular as a store of wealth, demand for gold jewellery, bars and coins is robust. The World Gold Council, an industry body, says demand in China rose to almost 1300 tonnes in 2013, up 160 per cent from five years ago, although it expects demand to be flat this year. In India, buying was 50 per cent higher over the same period at 975 tonnes.
Two-thirds of global gold purchases come from Asia, the World Gold Council says. Still, many observers say Asia is likely to find it a hard task to unseat London as the world’s centre for gold trading. A major reason: China bans the export of gold bullion, arguing its huge domestic production is needed to meet local demand.
That means gold can flow into China when prices there are above those set in London, but cannot move the other way. Beijing’s strict controls also limit movement of capital.
“Any desire by China to establish a price benchmark which is not London-based is impaired by these restrictions,” said Ryan Case, Brisbane-based head of institutional sales for bullioncapital.com, a gold exchange.
London has dominated the trade in physical bullion for more than 300 years. Vaults in the city, including one under the Bank of England, house 7500 tonnes of gold, according to the London Bullion Market Association. Since 1919, prices have been set in the city by a twice-daily conference call among four banks: Barclays, HSBC, Bank of Nova Scotia and Societe Generale.
Trade in gold futures — agreements to buy or sell the metal at a specified price on a predetermined date — is dominated by the Comex division of the New York Mercantile Exchange. The contracts in Shanghai and Singapore are backed by physical trade in gold, while Hong Kong’s plans are for a futures contract.
Efforts in the past by Asia to set local gold prices haven’t been successful. In 2010, the Singapore Exchange offered a gold contract but later withdrew it amid poor investor appetite.
“The greater prominence of prices out of Asia can only enhance the mix, but I doubt within the next couple of years that it will fundamentally change the way spot prices are derived,” said Ross Norman, chief executive of Sharps Pixley, a London-based bullion broker.
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