German trade hits record high and volatility eases as markets look beyond Macron victory –as it happened

Graeme Wearden (until 2.10) and Nick Fletcher

from on 2017-05-09 17:02 (#2NTQC)

All the day's economic and financial news, as Germany imports and exports more than ever before

6.02pm BST

The belated relief over Emmanuel Macron's victory in the weekend's French presidential election, along with strong German trade figures and a recovery in resource stocks all helped to give European stock markets a boost. Germany's Dax reached a new closing high, while the FTSE 100 ended at its best level since the middle of April. In the US, both the Nasdaq Composite and S&P 500 hit new intra-day highs. The final scores showed:

4.56pm BST

Many analysts believe another US interest rate rise is on the cards when the Federal Reserve gets together for its regular meeting in June.

And in a speech in California, Kansas City Fed president Esther George has added to that impression. Indicating she believed the US economy was strong enough for further hikes, she said:

The economy continues to expand as sustained job growth and solid gains in household spending - the weak first quarter notwithstanding - are mutually reinforcing. The international backdrop poses less downside risks today, further supporting growth at home. In this environment, the role for monetary policy is to support the sustainability of the expansion. Therefore, as labor markets continue to tighten, continuing the gradual removal of monetary accommodation is the appropriate course for the FOMC.

Removing policy accommodation goes beyond increasing the level of the federal funds rate. The Federal Open Markets Committee also must begin to adjust the size and composition of its securities holdings. The Federal Reserve's balance sheet is currently about $4.5 trillion, or almost 25 percent of GDP compared to 6 percent of GDP 10 years ago. ...My own view is that the process should begin sometime this year by reducing reinvestments in mortgage-backed securities (MBS) and long-term Treasury securities.

Once it begins, however, the runoff in the portfolio should be on autopilot and not reconsidered at each subsequent FOMC meeting.

4.26pm BST

Those expecting a market sell-off from the current highs could be disappointed, says Chris Beauchamp, chief market analyst at IG:

Despite a lacklustre open, the S&P 500 and the Nasdaq 100 have already notched up record highs, while European markets have put in healthy gains.

We have a market with no news, and no volatility, and this leaves us wondering what the next move will be. Everyone is looking for the next selloff, or at least the reason for the next selloff, so we will probably go without one throughout the summer.

It is possible to imagine a world where gold prices keep falling right to June and the next Fed rate hike. Dollar strength continues to wreak havoc in commodity prices, but for gold all hope of a bounce appears to have gone. Instead of slowing down, the slump seems to be picking up speed once again.

4.13pm BST

With stock markets moving higher after the French election and the volatility index on the slide, investors are shunning assets traditionally seen as havens in difficult times.

In particular, gold has fallen to an eight week low, down around $8 an ounce to $1217. UBS analyst Joni Teves said:

Gold is currently facing pressure amid diminished political risks out of Europe and market participants anticipating the Fed to hike rates in June...

With one of the largest political risk events [the French election] now cleared, some consolidation is warranted, albeit political uncertainty lingers in Italy and is likely to remain for some time. For now, the focus is likely to shift to monetary policy at the Fed and the ECB, which implies economic data will need to be closely watched.

3.40pm BST

More signs of confidence in the US jobs market.

Job openings were steady at 3.8% in March compared to February, according to the Labor Department, as was the quits rate at 2.1%. The latter is a key measure for Federal Reserve chair Janet Yellen, since it indicates workers are confident enough about the jobs market to move on. The actual numbers showed an increase from 3.03m to 3.1m.

Voluntary quits, a sign of confidence in the job market, rose slightly in March. #JOLTS pic.twitter.com/muP8Dl4bfs

3.17pm BST

And Apple is not the only one:

Sorry for broken record.
All-time hi's:

Amazon
McDonalds
Lowe's
UAL
Marriott
Ulta
Aetna
Humana
ThermoFisher
Boeing
Raytheon
Apple
Alphabet

3.06pm BST

With US markets moving higher, Apple has hit another peak, adding 1% to more than $154 a share and valuing the iPhone company at more than $800bn.

The company has crossed that barrier despite falling iPhone sales, which has been put down to consumers waiting for the next model to be launched later this year. And analysts at US broker Drexel Hamilton believe the company's shares could climb even further, putting a target value on the business of $1trn.

2.42pm BST

A strong US company results season and the outcome of the French election have pushed American markets higher again.

The S&P 500 and the Nasdaq Composite have both edged higher at the open to touch yet new highs, while the Dow Jones Industrial Average is currently up 8 points or 0.04%.

2.21pm BST

And here's the Dax hitting new peaks:

2.11pm BST

After Monday's muted response to Emmanuel Macron's weekend victory in the French elections, European markets have belatedly picked up the pace.

In Germany, the strong trade data and a weaker euro have helped the country's stock market to a fresh intra-day high. The Dax is currently up 0.65% or 82 points at 12,776 having earlier hit a record of 12,783.

1.56pm BST

Here's another chart showing how market volatility has fallen sharply in recent weeks to the lowest level since 1993, and MUCH lower than in the financial crisis.

$VIX lowest close since 1993. The options @market doesn't expect much movement in the weeks ahead. But, what if they're wrong? pic.twitter.com/7KJBaz7u5b

1.27pm BST

Over in Australia, the major banks are reeling after being hit with a new tax.

The banks don't have a secret stash of money ... there's only three places they can get this from - borrowings, deposits or shareholders or a combination of all three and every Australian has an interest in one of more of those parts of a bank's operations.

12.47pm BST

The job vacancies total in Germany has hit a record high, in (yet) another sign that its economy is robust.

12.21pm BST

Global stock markets have "found their mojo" today, says Mike van Dulken, head of research at Accendo Markets.

He cites five reasons:

Optimistic is derived from hopes that OPEC will extend [oil] production cuts at month end; Macron can form a working parliamentary majority; the Fed will hike because the US economy warrants it; the ECB will keep the QE taps open a little longer, and base metals prices have found a bottom after their recent sell-off.

11.39am BST

Britain's blue-chip stock index has risen to its highest level since Theresa May triggered next month's general election.

The FTSE 100 has now gained 42 points today, or 0.6%, to 7343. That's only 100 points away from its all-time high set in March.

In London the embattled mining sector is finally seeing some support, despite little sign of a real turnaround in the ongoing fall in commodity prices.

At the other end of the spectrum, Centrica leads the utility sector lower as the Conservatives bang on about their energy capping policies. Such a move is emblematic of the Conservative party's more interventionist stance. It will start with energy companies, but some will be wondering whether other sectors will come under pressure as well.

10.59am BST

So much for the Macron bounce!

The euro has just dropped below $1.09 against the US dollar for the first time since last Thursday, having hit a six-month high on Sunday night.

10.29am BST

John Wyn-Evans, Head of Investment Strategy at Investec Wealth & Investment, has issued a research note on European politics following the French election.

He flags up that the next potential pitfall comes next month:

There are France's legislative elections to the National Assembly on June 11^th, when we will see whether or not M.Macron can consolidate his position with a parliamentary majority. In truth, this looks like a tall order for his En Marche! Party which now has to find 577 candidates to field. Even so, there is a fighting chance that a working coalition can be formed with other parties to push through a reformist agenda.

Matters can hardly be much worse than under Francois Hollande's lame duck regime.

Looming larger is Italy's forthcoming general election, which has to take place by May 2018. For Marine Le Pen, read Beppe Grillo; for the National Front, read the Five Star Party (5*). Although 5* is not, perhaps, as ideologically extreme as the National Front, it is definitely anti-establishment and not a fan of a more integrated Europe. But the threat is tempered by the fact that it is only polling around 30% of the vote (neck and neck with the Democrats) so would need to form a coalition to pursue its aims. Furthermore, a referendum on membership of the euro would require constitutional change, and former Prime Minister Renzi's attempts to do just that failed last year, suggesting an underlying resistance to big changes within the country.

In any event, you can expect a sharp increase in the volume of commentary on Italian politics once a firm date is set, and markets to enter another period of uncertainty.

10.11am BST

One of France's most senior left-leaning politicians has thrown his support behind Emmanuel Macron.

"I will be a candidate for the presidential majority and I wish to join his (Macron's) movement," Valls, who was prime minister in Francois Hollande's administration between 2014 and 2016, told RTL radio.

"This Socialist party is dead. It is behind us," he said.

9.44am BST

At first glance, the news that Wall Street's fear gauge had hit its lowest level since 1993 sounds reassuring.

The VIX index (officially the "CBOE Volatility Index") measures market volatility by tracking a number of 'option calls' -- contracts to buy or sell securities at a certain price in the future. It goes up when investors are scrambling for protection, and goes down when they're not.

US VIX index closes at lowest level since 1993. Smooth sailing ahead or is it the calm before the storm...? pic.twitter.com/BAzw9i29Xo

While this could be interpreted to mean that good times lie ahead, it also indicates that the party may be over soon. Volatility does not stay at low levels for prolonged periods of time, and we're likely to see the index reverting to its 200-days moving average around 15.

Just don't let the extremely quiet market conditions trap you into taking huge risks.

Super-easy monetary policy is creating artificially low volatility and driving money into trades and investments that are mispriced as a result.

9.18am BST

After dropping yesterday, European stock markets are all rising this morning.

Mining companies are leading the FTSE 100, with Glencore up 3% and Antofagasta gaining 2.5%.

9.01am BST

Today's trade figures show that Europe's largest economy continues to power ahead, says the FT's Mehreen Khan:

Year on year exports were up an impressive 10.8 per cent in March while imports climbed 14.7 per cent - a sign of healthy foreign demand for German wares and buoyant consumer appetite within the country which boasted its best level of growth in six years last year.

Germany's overall trade surplus - which hit a record in 2016 - is now at a25.8bn.

Germany powers ahead with best ever trade figures in March https://t.co/01bCBsa3KI

8.39am BST

Germany's dominant trade position is under the microscope again today, with new figures showing that it is importing and exporting more than ever before.

These are the highest monthly figures ever reported for both exports and imports.....

In March 2017, Germany exported goods to the value of a68bn to the Member States of the European Union (EU), while it imported goods to the value of a61.1bn from those countries. Compared with March 2016, exports to the EU countries increased by 8.7%, and imports from those countries by 13.5%.

The German trade surplus reached an all-time-high in March. pic.twitter.com/c5ZHfXT09x

Germany's export imbalance is widely criticized by other countries, which accuse Europe's biggest economy of not doing enough to spur domestic demand for foreign goods. Berlin counters that products made in Germany are simply better than the competition.

8.14am BST

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

Following the excitement of the French presidential election, the markets are rather subdued this morning.

There are more political risks on Europe's horizon. Legislative elections in France in two months, German elections and perhaps a snap Italian election could yet see the European project derailed.

Italians have already demonstrated a willingness to 'vote with their feet' when they blocked a government referendum late last year.

The reason is that the Macron victory does not mean that we are out of the woods, there are still massive challenges ahead of him and the issue of soft and hard Brexit is still very much in play.

US Earnings for the Q1 were a little soft and the US GDP growth is nowhere close enough to its previous level- let alone what Trump wants.

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