UK & Europe Archives - Page 53 of 88

August 22, 2012

Germany backs Draghi bond plan against Bundesbank – Telegraph

By Ambrose Evans-Pritchard,
9:39PM BST 20 Aug 2012

“A currency can only be stable if its future existence is not in doubt,” said Jörg Asmussen, the powerful German member of the ECB’s executive board. He signalled full backing for the bond rescue plan of ECB chief Mario Draghi, brushing aside warnings from the German Bundesbank that large-scale purchases would amount to debt monetisation and a back-door fiscal rescue of insolvent states in breach of EU treaty law.

via Germany backs Draghi bond plan against Bundesbank – Telegraph.

Colin Twiggs

Colin Twiggs is a former investment banker with almost 40 years of experience in financial markets. He co-founded Incredible Charts and writes the popular Trading Diary and Patient Investor newsletters.

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

Focusing on interest rates and financial market liquidity as primary drivers of the economic cycle, he warned of the 2008/2009 and 2020 bear markets well ahead of actual events.
He founded PVT Capital (AFSL No. 546090) in May 2023, which offers investment strategy and advice to wholesale clients.

August 21, 2012

European revival

Madrid General Index broke above 720 to complete a double-bottom reversal with a target of 840*. Bullish divergence on 13-week Twiggs Money Flow indicates buying pressure. Penetration of the descending trendline would strengthen the reversal signal.

Madrid General Index

* Target calculation: 720 + ( 720 – 600 ) = 840

Italian FTSE MIB Index also completed a double bottom reversal, offering a target of 16500*. Bullish divergence on 13-week Twiggs Money Flow again indicates buying pressure.

FTSE Italian MIB Index

* Target calculation: 14500 + ( 14500 – 12500 ) = 16500

The FTSE 100 is headed for a test of major resistance at 6000. Expect strong resistance between 6000 and 6100 because of the number of previous peaks at this level. Breakout would offer a long-term target of 6750*. 13-Week Twiggs Money Flow oscillating above zero suggests a primary up-trend.

FTSE 100 Index

* Target calculation: 6000 + ( 6000 – 5250 ) = 6750

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

August 19, 2012

"François Hollande’s Wrong Idea of France" by Brigitte Granville | Project Syndicate

Since the euro’s introduction, unit labor costs have risen dramatically faster in France than they have in Germany. According to Eurostat data published in April 2011, the hourly labor cost in France was €34.2, compared to €30.1 in Germany – and nearly 20% higher than the eurozone average of €27.6. France’s current-account deficit has risen to more than 2% of GDP, even as its economic growth has ground to a halt.

The high cost of employing workers in France is due not so much to wages and benefits as it is to payroll taxes levied on employers. The entire French political class has long delighted in taxing labor to finance the country’s generous welfare provisions, thus avoiding excessively high taxation of individuals’ income and consumption – though that is about to come to an end as Hollande intends to slap a 75% tax on incomes above €1 million. This is a version of the fallacy that taxing companies (“capital”) spares ordinary people (“workers”).

via “François Hollande’s Wrong Idea of France” by Brigitte Granville | Project Syndicate.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

August 18, 2012

French Industrial Policies Are Aiding Rapid Decline of Peugeot – SPIEGEL ONLINE

By Dietmar Hawranek and Isabell Hülsen:

When Helping Is Hurting
Ironically, the victims of these two developments — focusing on production in France and high wage increases — are those whose cause is being championed by governments and labor representatives: the autoworkers themselves. Workers at the [Peugeot] Aulnay plant had to look on as their company went into gradual decline. Aulnay was once one of the most modern plants in the country, annually producing more than 400,000 cars. Today, fewer than 140,000 vehicles roll off its assembly lines each year. An auto plant that produces so few vehicles can hardly be profitable. If President Hollande and the unions compel Peugeot to keep the plant in operation, they will only accelerate the company’s demise.

via French Industrial Policies Are Aiding Rapid Decline of Peugeot – SPIEGEL ONLINE.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

August 16, 2012

Friedman’s Japanese lessons for the ECB « The Market Monetarist

Milton Friedman, December 1997:

Defenders of the Bank of Japan will say, “How? The bank has already cut its discount rate to 0.5 percent. What more can it do to increase the quantity of money?”

The answer is straightforward: The Bank of Japan can buy government bonds on the open market, paying for them with either currency or deposits at the Bank of Japan, what economists call high-powered money. Most of the proceeds will end up in commercial banks, adding to their reserves and enabling them to expand their liabilities by loans and open market purchases. But whether they do so or not, the money supply will increase.

There is no limit to the extent to which the Bank of Japan can increase the money supply if it wishes to do so. Higher monetary growth will have the same effect as always. After a year or so, the economy will expand more rapidly; output will grow, and after another delay, inflation will increase moderately. A return to the conditions of the late 1980s would rejuvenate Japan and help shore up the rest of Asia.

via Friedman’s Japanese lessons for the ECB « The Market Monetarist.

Friedman was suggesting that the BOJ implement QE to boost the money supply and create inflation. Inflation would rescue the banks and real-estate-owners with underwater mortgages.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

August 16, 2012

Forex: Euro, Pound Sterling, Canadian Loonie, Australian Dollar and Japanese Yen

The Euro is testing short-term support at $1.2250 on the daily chart. Recovery above $1.2400 would indicate another rally, while failure of support would test primary support at $1.2050. The primary trend is still downwards, but breach of the descending trendline means the primary down-trend is losing momentum and a bottom is forming. Failure of primary support is unlikely but would warn of another down-swing, with a target of $1.185.

Euro/USD

* Target calculation: 1.215 – ( 1.245 – 1.215 ) = 1.185

Pound Sterling found support at €1.255 against the Euro before rallying to €1.28. Narrow consolidation between €1.27 and €1.28 suggests continuation of the rally. Breach of resistance at €1.29 would signal an advance to €1.315*. Rising 63-day Twiggs Momentum reflects a strong primary up-trend.

Pound Sterling/Euro

* Target calculation: 1.285 + ( 1.285 – 1.255 ) = 1.315

Canada’s Loonie is headed for a test of resistance against the greenback at $1.02. Bullish divergence on 63-day Twiggs Momentum on the weekly chart suggests a primary up-trend; confirmed if resistance at $1.02 is broken.

Canadian Loonie/Aussie Dollar

Shallow retracement of the Aussie Dollar against the greenback suggests trend strength. Recovery above $1.06 would indicate an advance to $1.075. Breakout above $1.075/$1.08 would offer a long-term target of $1.20* but RBA intervention, to protect local industry, could be a factor.

Aussie Dollar/USD

* Target calculation: 1.045 + ( 1.045 – 1.015 ) = 1.075

The greenback found support at ¥78 against the Japanese Yen. Rising Twiggs Momentum and penetration of the descending trendline both warn that a bottom is forming. Recovery above ¥80.50 would complete a double bottom reversal, suggesting an advance to ¥84.

US Dollar/Japanese Yen

* Target calculation: 81 + ( 81 – 78 ) = 84

The Aussie Dollar broke medium-term resistance at ¥82 against the Japanese Yen, headed for a test of the upper range border at ¥88/¥90. Rising 63-Day Twiggs Momentum and recovery above zero suggest a primary up-trend as the Aussie Dollar attracts capital inflows.

Aussie Dollar/Japanese Yen

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

August 14, 2012

BBC News – High-frequency trading and the $440m mistake

By Tim Harford

……There are two rather more predatory strategies. One is called algo-sniffing. Here, a super-fast computer tries to find other computers going about their everyday business of buying or selling shares, and figures out what they’re going to do and when.

The algo-sniffer can then get ahead of the game and exploit the slower computer. And of course you could have algo-sniffer-sniffers and algo-sniffer-sniffer-sniffers in a high-frequency arms race. No wonder speed can be so important.

And finally, a particular sub-category of the algo-sniffer is the spoofer, which deliberately makes fake offers designed to lure other computers to show their hands, then cancels the offers. Spoofing might be illegal, or at least against the rules of stock exchanges, but it’s hard to prove that it’s going on.

Andrew Haldane, executive director for financial stability at the Bank of England:

“What we have out there now is this complex array of multiple mutating interacting machines, algorithms. It’s constantly developing and travelling at ever higher velocities. And it’s just difficult to know what will pop out next. And that’s not an accident waiting to happen, that’s an accident that has been happening with increasing frequency over the last few years.”

via BBC News – High-frequency trading and the $440m mistake.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

August 14, 2012

French High Frequency Trading Tax Enters Into Force

By Ulrika Lomas, Tax-News.com, Brussels
14 August 2012

France has enacted a tax on high frequency trading, at a flat rate of 0.01%. This move coincides with a similar draft law under consideration in Germany……Market makers are expressly exempt.

via French High Frequency Trading Tax Enters Into Force.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

August 13, 2012

Europe: Signs of a revival

Bullish divergence on Madrid General Index (13-week Twiggs Money Flow) indicates buying pressure. Breakout above 720 would complete a double-bottom reversal with a target of 840*. Penetration of the descending trendline would strengthen the signal.

Madrid General Index

* Target calculation: 720 + ( 720 – 600 ) = 840

FTSE 100 broke resistance at 5750 and is headed for a test of 6000 on the weekly chart. The 13-week Twiggs Money Flow trough above zero indicates a healthy primary up-trend. Expect strong resistance at 6000 because of the number of previous peaks at this level. Breakout would offer a long-term target of 6750*.

FTSE 100 Index

* Target calculation: 6000 + ( 6000 – 5250 ) = 6750

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

August 10, 2012

Forex: Euro, Pound Sterling, Canadian Loonie, Australian Dollar, South African Rand and Japanese Yen

The Euro retreated after encountering resistance at $1.2400/1.2450. Respect of the rising trendline, however, would confirm that the primary down-trend is losing momentum and a bottom is forming. Recovery above $1.2450 would strengthen the signal. Reversal below $1.2150 would warn of another down-swing — confirmed if primary support at $1.2050 is broken — with a target of $1.185.

Euro/USD

* Target calculation: 1.215 – ( 1.245 – 1.215 ) = 1.185

Pound Sterling’s up-trend against the Euro continues on the Weekly chart. Respect of support at €1.255 would indicate an advance to €1.315*. Rising 63-day Twiggs Momentum is evidence of a strong primary up-trend.

Pound Sterling/Euro

* Target calculation: 1.285 + ( 1.285 – 1.255 ) = 1.315

Canada’s Loonie broke above parity, headed for a test of resistance against the greenback at $1.02. Long-term bullish divergence on 63-day Twiggs Momentum and recovery above zero suggest a primary up-trend.

Canadian Loonie/Aussie Dollar

The Aussie Dollar is similarly headed for a test of resistance at $1.08 against the greenback. Breakout would offer a long-term target of $1.20* but calls for RBA intervention to prevent further appreciation are growing. Professor Warwick McKibbin told The Australian Financial Review:

When a portfolio shift into Australian currency is observed, the exchange rate change should be completely offset so the shock only affects the money markets rather than the real economy. If the shock cannot be observed precisely then the central bank should “lean against the wind”, that is intervene to slow down the extent of appreciation of the exchange rate.

Aussie Dollar/USD

* Target calculation: 1.08 + ( 1.08 – 0.96 ) = 1.20

The Aussie retreated from resistance at R8.75 against the South African Rand and is testing support at R8.50. Failure of support would signal a primary down-trend with an initial target of $8.25*.

Aussie Dollar/South African Rand

* Target calculation: 8.50 – ( 8.75 – 8.50 ) = 8.25

The Aussie broke medium-term resistance at ¥82.50 against the Japanese Yen, heading for a test of the upper range border at ¥88/¥90. The Australian Dollar/Japanese Yen has been a good reflection of global risk tolerance since 2009, oscillating between ¥72 and ¥90 as risk tolerance rises or falls. Rising 63-Day Twiggs Momentum and recovery above zero suggest a primary up-trend as the Aussie Dollar’s status as a reserve currency grows, attracting capital inflows.

Aussie Dollar/Japanese Yen

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.