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05 / 06 / 2018 | Market News

G7 finance ministers criticise the US for trade tariffs

The tariffs that the United States (US) imposed on products imported from its closest trade allies and the G7 summit in Quebec, Canada, have monopolized the interest of investors around the globe. On Thursday May 31st 2018, the US Secretary of Commerce Wilbur Ross announced that the US would impose a 25% tariff on steel imports and a 10% tariff on aluminium imports coming from the European Union (EU), Canada and Mexico, effective immediately. 

The imposed trade tariffs marked the end of the two-month exemption that the US had granted to its trade partners. “Talks with Europe have made some progress but not enough for additional exemptions,” said Wilbur Ross adding that “we look forward to continued negotiations, both with Canada and Mexico on the one hand, and with the European Commission (EC) on the other hand, because there are other issues that we also need to get resolved.” When asked by reporters about the ongoing negotiations with Mexico and Canada regarding the North American Free Trade Agreement (NAFTA), the US Secretary of Commerce replied that “they are taking longer than we hoped.”

The G7 finance ministers met in Whistler, British Columbia in Canada ahead of the upcoming G7 leaders’ meeting on June 9th- June 10th 2018 in Quebec. During the G7 finance ministers’ meeting, the US Secretary of the Treasury Steven Mnuchin was cornered by the rest of the ministers who warned that the collaboration and cooperation between the G7 was at risk because of US policies. The official statement published after the summit said that “concerns were expressed that the tariffs imposed by the US on its friends and allies, on the grounds of national security, undermine open trade and confidence in the global economy. Finance minister and central bank governors requested that the US Secretary of the Treasury communicate their unanimous concern and disappointment.” 

G7 or G6+1?

The French finance and economy minister Bruno Le Maire who took part in the summit expressed his opposition to the implemented US policies. Bruno Le Maire said to the press right after the summit that “it has been a tense and tough G7- I would say it’s been far more a G6 plus one than a G7. We regret that our common work together at the level of the G7 has been put at risk by the decisions taken by the American administration on trade and on tariffs.” 

According to a Reuters article published on June 4th 2018, France is getting prepared to hold talks with the US on the sideline of the G7 leaders’ summit. Reuters’ sources in the French presidential palace noted that “the work agenda for the G7 summit in Quebec, Canada this week has been complicated by the US stance on trade, climate change and foreign policy. The US position on certain issues could make negotiations on the final conclusion tricky.”

The US reaction

The US Secretary of the Treasury Steven Mnuchin didn’t seem to be disheartened by the rest of the finance ministers’ public outcry. Answering a question made by Michael McKee, one of the top Bloomberg reporters, Steven Mnuchin said that because of the tax cuts implemented by the President Donald Trump’s administration, the US still leads the global economy, but he acknowledged that the rest of the G7 leaders may disagree. The US Secretary of the Treasury also didn’t agree with the argument that the US was isolated at the G7 finance minister summit.

President Donald Trump seized the opportunity to defend his actions on Twitter writing that “China already charges a tax of 16% on soybeans. Canada has all sorts of trade barriers on our agricultural products. Not acceptable!”. The US President didn’t neglect to speak against the previous administrations’ trade policies noting that “the US has made such bad trade deals over so many years that we can only win.” 

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04 / 06 / 2018 | Market News

Fundamental Analysis 04.06.2018 - Market Outlook

Market Recap

The better-than-expected nonfarm payrolls on Friday June 1st 2018 didn’t help the dollar  – it was down modestly against its G10 peers on the morning of Monday June 4th 2018 as “risk on” trumped higher US bond yields. Most of the US data announced on Friday June 1st 2018 was strong – payrolls, average hourly earnings, the unemployment rate, ISM manufacturing, employment and prices paid indices, and construction spending all beat the consensus forecasts and improved relative to the previous month.

In fact most of the data out for May 2018 has shown improvement:  all five regional Federal Reserve (Fed) surveys rose from April 2018, the National Association of Home Builders (NAHB) housing index rose, and consumer confidence remains strong despite higher gasoline prices. Nonetheless the odds of a rate hike at next week’s Federal Open Market Committee (FOMC) meeting have fallen to 84% from 91% a week ago. Still a near-certainty, but some doubt about Fed policy has crept in due to global market turmoil.

Reflecting the “risk on” mood, JPY and CHF were the big losers of the day. AUD started recovering in the afternoon of Friday June 1st 2018 in Europe but really took off this morning in Asian trading, when Australian retail sales beat estimates (+0.4% mom vs +0.3% expected, 0.0% previous) and ANZ job advertisements rose, and company operating profits and inventories also beat estimates. The currency could possible fall back however if the Reserve Bank of Australia remains dovish at its meeting overnight. GBP rose on Friday June 1st 2018’s better-than-expected manufacturing Purchasing Manager's Index (PMI) which rose to 54.4 (vs fall to 53.5 expected, 53.9 previous. Today’s construction PMI could be neutral for GBP so we may see the currency gain further on momentum. 

Today’s market

The big event of the day is overnight, when the Reserve Bank of Australia (RBA) meets. There’s little chance of a rate hike this time, and the market has steadily been pushing out the time when they’re expected to start raising rates. 

Governor Philip Lowe has said that “further progress in reducing unemployment and having inflation return to target is expected, although this progress is likely to be gradual.” Recent figures bear this out; the unemployment rate is stuck at around 5.5% and wage growth is sluggish. The housing sector is cooling down. And headline inflation at 1.9% yoy remains slightly below their 2%-3% target range. Thus they’re probably in no rush to hike rates at the moment.

The one change to look out for is that the minutes of the RBA meeting in both April and May 2018 have included the comment that “it was more likely that the next move in the cash rate would be up, rather than down.” The market is pricing in zero chance of a cut at any point in the next year. However this assumption hasn’t appeared in the brief statement that Governor Philip Lowe makes after the meeting. We’ll have to see if they do change the rhetoric.

Otherwise, little impact is likely. As you can see, the range in AUD/USD on RBA days is rarely more than average nowadays, indeed is usually less than average as the market waits in vain for some change in stance. 

Today’s indicators

The UK manufacturing purchasing managers’ index (PMI) last week exceeded expectations. This week the market looks forward to the construction and service-sector PMIs. Today’s construction PMI is expected to be lower (although tomorrow’s service-sector PMI is expected to be higher). A small decline might not be that worrisome for the market, given the surprising outperformance of the manufacturing sector and the expectations of a higher service-sector PMI tomorrow. This could be GBP neutral. 

US factory orders are basically a subset or function of the durable goods figures that have already come out, so they rarely offer any major surprise. The 0.5% mom decline that’s expected is well below trend, but coming in the same month as a 1.7% mom fall in durable goods orders, it probably isn’t so bad. This could be USD-neutral. 

Bank of England (BoE) Monetary Policy Committee member Silvana Tenreyro will speak at the University of Surrey. Previously, she was optimistic about UK productivity, which has been one of the main issues facing the Bank – why productivity growth in Britain is so sluggish. If productivity were improving faster, capacity would naturally increase and there would be less need to tighten policy to dampen inflation. 

Overnight, the Caixin/Markit service-sector PMI for China comes out. It’s expected to be unchanged from the previous month. The official service-sector PMI was also expected to be unchanged but rose 0.1 point, not a major achievement. 

The Fundamental Analysis is provided by Marshall Gittler who is an external service provider of Claws and Horns (Cyprus) Limited, an independent analytical company. Any views and opinions expressed are explicitly those of the writer. Any information contained in the article, is believed to be reliable, and has not been verified by STO and is not guaranteed to be accurate. References to specific products, are for illustrative purposes only and are not a form of solicitation, recommendation or investment advice. Past performance is not a guarantee of future performance.

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01 / 06 / 2018 | Market News

Fundamental Analysis 01.06.2018 – Market Outlook

Market Recap

CAD was the best performing currency on Wednesday 30th of May 2018 after the Bank of Canada turned hawkish, but it was the worst performing currency on Thursday 31st of May 2018 after Q1 Gross Domestic Product (GDP) missed (fell to +1.3% qoq SAAR from 1.7%; rise to 1.8% expected). The March 2018 mom figure actually beat expectations (+0.3% mom vs +0.2% expected) but clearly the quarterly data is considered more authoritative. Household spending was the weakest in three years and business investment slowed.

CAD fell on reports that the US administration will today Friday 01st June 2018 impose duties on steel and aluminum from Canada, the EU and Mexico despite their calls for permanent exemptions. All three announced plans for retaliatory tariffs, meaning the "trade war" has begun. The fact that the US would start such a fight with some of the country’s closest allies based on some perceived threat to national security is a big shock not only to the global trading system but to the traditional global political alignment. It’s a strategy that upends the entire post-WWII rules-based international economic system. 

Here’s a graph of what happened to the dollar when President George Bush imposed tariffs on steel back in 2002.

 The trade dispute is apparently the main issue at the G7 Finance Ministers and central bankers’ meeting now under way in  Canada. There have already been comments from (not US) officials about how the tariffs are illegal. 

It was a rare day yesterday Thursday 31st of May 2018 when both EUR and USD gained. EUR was aided by a higher-than-expected May 2018 consumer price index (CPI) (+1.9% yoy vs +1.6% expected, 1.2% previous). Of particular note was that core CPI also accelerated more than expected (+1.1% yoy vs +1.0% expected, 0.7% previous), indicating that higher oil prices aren’t the only thing behind the rise.

Plus, good news out of Italy! It looks as if the country can avoid another election. Law professor Giuseppi Conti, who was appointed Prime Minister (PM) initially but said he couldn’t form a government, will indeed become PM. The heads of the Five Star Movement and the League will be ministers in the new cabinet. Professor Paolo Savona, the euroskeptic who had initially been appointed Finance Minister, will be European Affairs minister. The Finance Minister role will go to economics professor Giovanni Tria. He’s been critical of the EU’s fiscal rules, but hasn’t advocated leaving the euro. Italian markets applauded the move; the 2-year bond yield, which fell 107 bps on Wednesday 30th of May 2018, was down another 63 bps, while the 10-year spread vs Germany came in by 9 bps. 

As for USD, it was up vs six of its nine major counterparts despite the trade problems, the euro’s rebound, and personal consumption expenditure (PCE) deflators stable to lower, as was expected. Personal spending beat estimates but pending home sales missed. One may presume that this is once again the dollar’s role as the “currency of last resort” when things get bad – the fall in stock markets may have sent money into USD. 

Another idea is that perhaps the dollar was boosted by some fairly upbeat comments on the US economy from Fed Gov. Lael Brainard, who confirmed the need for a continued gradual pace of rate hikes. Perhaps the key was when she said her outlook “suggests a policy path that moves gradually from modestly accommodative today to neutral—and, after some time, modestly beyond neutral—against the backdrop of a longer-run neutral rate that is likely to remain low by historical standards.” That suggests she sees rates steadily increasing towards 2.75%-3.00%, at which point the Fed would pause, wait a while, and then perhaps start hiking further. At one hike per quarter, this would imply steady hikes until June next year.

Today’s market

Today is the 20th anniversary of the founding of the European Central Bank (ECB).

Today 01st of June 2018, the US releases the nonfarm payrolls (NFP).

Despite the big build-up ahead of time, the NFP doesn’t seem to have that lasting an impact on the market. Looking at the last year’s worth, EUR/USD was generally higher a couple of days later no matter whether the figure beat estimates or missed estimates.

Although on average it does work – EUR/USD did gain on average when it missed, and fell on average when it beat. But that was largely down to two months (Feb 2018 and May 2017), when the dollar rallied tremendously in the following days. The February one, if you remember, was due largely to the average hourly earnings coming in higher. In May 2017, the unemployment rate unexpectedly fell to 6.5% from 6.6% (revised down from 6.7%). So there were positive surprises in other parts of the data then too.

Admittedly, even if we look just at the months when EUR/USD rose following the NFP, the rises tended to be less following beats than following misses.

Market expectations

Nonfarm payrolls is forecast to be up 190k. This is almost exactly the six-month moving average of the initial figure (193k). It would therefore represent no change in the employment situation either way. In this case however “no change” may mean continued pressure on the Federal Open Market Committee (FOMC) to change their view to four rate hikes this year from three, so it could be positive for the dollar.

The Bloomberg “whisper” number is slightly lower than the official economists’ forecast. We also now have a new market estimate:  Bloomberg provides a “Twitter median forecast” that’s extracted from the Twitter stream. This may also give a good estimate of what traders and market participants are expecting, rather than economists. Note that the Bloomberg whisper is lower than the official “consensus” forecast from economists, and the Twitter estimate is lower still. That suggests some market participants are bracing for a negative surprise, which would also mean a figure in line with consensus could provide a boost for USD. 

The unemployment rate is expected to remain at 3.9%, the lowest level in decades and well below the FOMC’s estimate of the long-run equilibrium unemployment rate, which is 4.5%.

The average hourly earnings figure however is expected to be little changed. The mom change is expected to be +0.2%, which is the most common change (see below), while the yoy rate of increase is expected to hold steady at 2.7%. Note that the “whisper” for the mom change is also lower (+0.1%) than the official economists’ forecast, as it is for the NFP as well.

Since 2013, the average hourly earnings figure has most often been up 0.2% mom. Otherwise, it’s pretty much a toss-up between +0.1% and +0.3%. 

One interesting point: last Friday 25th of May 2018, the market was expecting +0.3%, but as more forecasts were updated it fell to +0.2%. The “whisper” number similarly fell from +0.2 to +0.1. So the market is gradually lowering its expectations for this number. That too gives us the possibility of an asymmetric response to a surprise – a bigger response to a positive surprise than to a negative one. 

Other indicators

The day starts off with the final figures for the major Eurozone manufacturers’ purchasing manufacturers’ indices (PMI) and the PMIs for other countries.

The UK manufacturing PMI is usually the most important of these. It’s expected to decline further. Although it remains at a relatively high level, suggesting continued expansion, the fact that it hasn’t bounced at all after the sluggish growth in Q1 suggests that Q2 isn’t likely to be any better. That may dissuade the Bank of England from tightening anytime soon, which could be negative for GBP.

By contrast, the US Institute of Supply Management (ISM) manufacturing PMI is expected to rise after two months of declines. That’s despite the fact that it’s already quite high. This would show that activity is picking up and be considered a good sign for Q2, which is bullish for the dollar.

On Saturday 2nd of June 2018, the G7 Finance Ministers and Central Bank Governors meeting breaks up and there will be loads of press conferences. Canadian Finance Minister Bill Morneau said “we will need to talk about this first and foremost.”  “We think it’s absurd that Canada is considered in any way a security risk…” he said. Other ministers agreed. “The decision by the US governmetn to unilaterally implement tariffs is wrong and – from my point of view also illegal,” said German Finance Minister Olaf Scholz.

The Fundamental Analysis is provided by Marshall Gittler who is an external service provider of Claws and Horns (Cyprus) Limited, an independent analytical company. Any views and opinions expressed are explicitly those of the writer. Any information contained in the article, is believed to be reliable, and has not been verified by STO and is not guaranteed to be accurate. References to specific products, are for illustrative purposes only and are not a form of solicitation, recommendation or investment advice. Past performance is not a guarantee of future performance.

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31 / 05 / 2018 | Market News

Fundamental Analysis 31.05.2018 – Market Outlook

Market Recap
The market decided that the big fear over Italy was overdone yesterday after the country successfully completed 5- and 10-year bond sales. Both auctions were oversubscribed, with higher bid-to-cover ratios than at the previous auction.

As a result, markets reversed most of the spread widening that had taken place the previous day. That is, for Spain and Portugal, spreads narrowed back to slightly less than they were on Monday 28th of May, before Tuesday’s 29th of May 2018 big panic. Italian and Greek spreads also fell back, but remain wider than on Monday. This shows some less panic, more thinking – these are after all the countries that are having problems, not Spain and Portugal, which are well on their way to economic recovery.

Note how the Italian two-year bond spread had gone from being much narrower than the 10-year spread to suddenly being wider, but is now back to being narrower. (2yr was 157 bps over Germany on Monday vs 234 bps for the 10y year; 353 bps over vs 290 bps on Tuesday; and now back to 235 bps vs 254 bps.) Two-year yields had soared 186 bps on Tuesday but fell back 107 bps yesterday 30th of May 2018. Amazing volatility! This indicates that people see the Italian crisis as a relatively short-term phenomenon – they’re more worried about the next two years than the next ten.

Political developments are the driving force behind the market relief. President Sergio Mattarella and his designated Prime Minister, Carlo Cottarelli, are trying to find some agreement on a new government that would enable the country to avoid another general election. Five Star Movement’s leader, Luigi Di Maio, appears willing to nominate a finance minister who won’t try to take Italy out of the euro, which is a big relief too. Of course, all political developments are subject to change without notice.

USD was the worst-performing currency. It’s noticeable that it did even worse than the supposed safe-haven JPY and CHF, even though one might have imagined that the return of a “risk on” environment would have hurt those currencies even more.

The economic news in the US was mixed. On the one hand, Q1 Gross Domestic Product (GDP) was revised down and the ADP report missed expectations. If Q1 GDP isn’t revised back up, then the US will need to average 3% growth for the rest of the year in order to hit the market and the Federal Reserve System (Fed’s) expectations of 2.8% growth for the year as a whole. That’s likely to be tough. A downward revision to growth expectations  is likely to bring a downward revision to rate expectations too, and that’s likely to weigh on the dollar. On the other hand, the Beige Book was relatively upbeat – it said manufacturing “shifted into higher gear” and “many firms” raised wages to attract workers --  and the US trade deficit narrowed slightly.

Having said that, it was noticable that the dollar lost ground yesterday even though US bond yields rose. This suggests to me that much of the recent strength of the dollar was a reflection of the US’ position as “safe haven of last resort,” not just higher yields. Also, the trade issue is flaring up again, which is likely to pressure USD further. The split between US President Donald Trump’s trade negotiators with China came out in the open after White House trade adviser Peter Navarro criticized Treasury Secretary Steven Mnuchin’s recent comment that  the US-China trade war was “on hold.” It was that comment that calmed down sentiment around the trade issue. Meanwhile, the WSJ reported that the US is likely to implement tariffs on European steel and aluminum, which is sure to worsen relations there too.

CAD was the best performing currency after the Bank of Canada came out with a relatively hawkish statement. Although they left rates unchanged as was uniformly expected, they said that “…developments since April 2018 further reinforce Governing Council’s view that higher interest rates will be warranted to keep inflation near target.” As a result, expectations for a rate hike at the July 2018 meeting have risen to 76% from 53% the day before the meeting. CAD looks likely to undergo a fundamental rethink based on this view, although oil prices have the potential to put downward pressure the currency if they fall further. Watch for Bank of Canada Deputy Governor  Sylvain Leduc’s speech tonight (see below).

Today’s market

We get an update on the targeted inflation rates of both the EU and the US today.

First we get the EU-wide Consumer Price Index (CPI). Following yesterday’s much-higher-than-expected German harmonized CPI (+0.6% mom vs +0.3% expected, +2.2% yoy vs +1.8% expected, 1.4% previous), expectations are that today’s EU-wide CPI may beat expectations too, if that makes sense. The market is looking for EU-wide CPI to rise 1.6% yoy. But given the higher-than-expected German CPI, and assuming France and Italy hit their consensus estimates, all other EU countries could see zero mom rise in prices and the EU-wide inflation rate could accelerate to 1.9% to 2.0%, which would put it right at the European Central Banks (ECB’s) target of “close to, but below, 2%.” 

Of course that’s the headline number, which has been inflated by the recent rise in Brent prices and the resultant rise in gasoline prices in Europe. Core German CPI isn’t released at the same time so we don’t know how that performed. 

It’s not clear though whether higher inflation would be good or bad for the euro. Expectations are shifting towards the ECB delaying the end of its Quantitative easing (QE) program because of the turmoil in Italy. If inflation hits the target, then it may make for a more difficult decision. Probably the market wouldn’t want to see the ECB backing off its purchases, or even its rhetoric, while the Italy crisis is under way – higher Italian yields are a flashing red “sell euro” signal.

Then later in the day we get what should be the most important indicator of the month:  the US personal consumption expenditure (PCE) deflators. These are even more important than the nonfarm payrolls, because the Federal Open Market Committee (FOMC) has already met its employment mandate – the unemployment rate is well below what it believes is the long-term rate of unemployment, 4.5%. However, it’s still waiting to see if it meets its other target, 2% inflation, and the PCE is the inflation gauge that it uses, not the CPI. So whether the PCE comes in “close to 2%,” as they said after their last meeting, or at 2% or even maybe above 2% is the other shoe left to drop.

In this case, the shoe isn’t expected to fit. The headline PCE deflator is expected to remain at 2.0%, which will be another month at that level, but the rate of  growth of the core PCE deflator, which most analysts assume is their real target, is forecast to slow slightly to 1.8% yoy. That still qualifies as “close to” 2%, but given their focus at their last meeting on a “symmetric 2% objective,” meaning allowing overshoots as well as undershoots, close to isn’t good enough. A slowdown in the core PCE deflator could be negative for USD.

The PCE deflators are of course part of the personal income & personal spending data. These are played up in the press as more important, and they may well be for the stock market, but they aren’t particularly big for the FX market. And this month they’re likely to be even less important, as they’re both expected to grow at exactly the same pace as the month before. Income would be at +0.3% mom for the third month in a row – This could be neutral for USD.

Canada Q1 GDP is a bit confusing. Canada does a monthly GDP figure as well as a quarterly one. The monthly series is expected to slow slightly from the previous month, but the quarterly series is forecast to accelerate from the previous quarter. Just to make things even more interesting, the monthly data has a year-on-year change too, and that’s expected to be unchanged at the previous month’s growth rate of 3.0%.

A lot will depend on the composition of growth. If the small slowdown in growth in March 2018 was due to weak external demand, but domestic demand remains strong then the market should overlook the drop and the figure could likely be considered positive for CAD.

Luckily we should be able to get an expert assessment of the GDP data just a few hours later when Bank of Canada Deputy Governor Sylvain Leduc will speak on “Economic Progress Report.” Coming a day after the Bank of Canada’s meeting, her comments will be closely watched for more detailed explanation of their optimistic view on the outlook. An upbeat assessment could be the impetus for a further rise in CAD.
US pending home sales is an erratic series. It’s hard to see any trend here. Nonetheless, if the April 2018 figure comes in slightly higher than the March 2018 figure, as the market expects, it could be taken as another sign that the housing market isn’t being affected by higher interest rates. This could be positive for the dollar.

Atlanta Federal Reserve System (Fed) President Raphael Bostic speaks in a moderated Q&A, but since he just spoke on Tuesday 29th of May 2018 and last week as well, I doubt if he’ll say anything new or market-affecting.

Federal Reserve System (Fed) Governor Lael Brainard’s speech however is much more important. She’s a voting member who hasn’t spoken in a while. When she last talked about monetary policy, a little over a month ago, she said the outlook was consistent with “continued gradual increases” in the Fed funds rate. Several Fed officials have recently reaffirmed their expectations for three hikes. This may be the last opportunity before the June 2018 Federal Open Market Committee (FOMC) meeting for a Fed official to signal a shift to expecting four hikes, if indeed she does.

Overnight, Japan announces its capital spending figures. They’re expected to be slightly softer, which would go along with the recent downturn in growth in Japan. The data could be modestly negative for JPY, unless of course it sends the stock market lower, in which case it could be positive for JPY regardless of what the actual macroeconomic implications are.

Finally, the Caixin China manufacturing Purchasing Managers’ Index (PMI) is expected to rise one tic. This compares with the official manufacturing PMI, released overnight, which was up a surprisingly strong 0.5 point to 51.9 (51.4 expected).

The Fundamental Analysis is provided by Marshall Gittler who is an external service provider of Claws and Horns (Cyprus) Limited, an independent analytical company. Any views and opinions expressed are explicitly those of the writer. Any information contained in the article, is believed to be reliable, and has not been verified by STO and is not guaranteed to be accurate. References to specific products, are for illustrative purposes only and are not a form of solicitation, recommendation or investment advice. Past performance is not a guarantee of future performance.
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30 / 05 / 2018 | Market News

Fundamental Analysis 30.05.2018 – Market Outlook

Market Recap

The Italian crisis is spreading out to be a Eurozone crisis. Italian bond yields soared further yesterday Tuesday 29th of May 2018, but that’s only half the story – note how spreads on Portuguese and Greek bonds are also being affected. This is contagion and it spells trouble for the Eurozone and the euro. While you could argue that Spain is having its own political problems and therefore the spread widening there is justified, there’s nothing new in Portugal or Greece – just worries about the cohesion of the Eurozone if the anti-EU parties turn the repeat election into a referendum on Italy’s membership of the euro.

It is unlikely that Italy is leaving the euro any time soon, nor are any of the other countries who are seen to be in peril. While people may be angry at the EU, they realize that leaving the common currency would be a big deal. The euro is a more concrete to people than Brexit was, because while the average person in Britain may not have a particularly realistic feel for how the EU affects their day-to-day life, everyone can see the euros in their pockets.

Since the euro was established, support for the single currency has remained above 50% in these countries most of the time, except for Greece. Notice in particular how support is rising (and, in the next graph, opposition is falling) in Spain and Portugal, two countries that were crushed by the Global Financial Crisis in 2008. 

Furthermore, the European Central Bank (ECB) can’t announce an end to its bond-buying program while peripheral bond prices are collapsing. And if they can’t end the bond-buying program, they can’t lift interest rates. So the crisis has an impact on expected euro interest rates and hence EUR/USD as well.

Of course, the Federal Reserve System (Fed) would also be reluctant to move while global markets are in turmoil. We’ve seen that before in the Federal Open Market Committee (FOMC) statements; during times of upset like this, they put a lot of emphasis on the global picture, not just the domestic US economy, in making their decision. That’s probably why expectations of four rate hikes in the US this year are collapsing. The market now sees two rate hikes – i.e., only one more rate hike – as just as likely as three, which was previously seen as probably the minimum.

US bond yields are collapsing – 10-year yields are now where five-year yields were last Thursday 24th of May 2018.


But lower US yields aren’t hurting the dollar much, because A) USD is the alternative to EUR, and EUR is hurt much worse, plus B) bond yields everywhere are falling, except of course for peripheral Europe. Bund yields are falling even more than Treasuries as people selling peripheral Europe pile into core Europe.

Meanwhile, stock prices are collapsing around the world too.

It only adds to the risk-off mood that US President Donald Trump said he would go ahead and impose tariffs on $50bn of Chinese imports and curb investment in sensitive technology.

Today’s market – main events

Bank of Canada day! Currently, the market is forecasting a 63% probability of a rate hike in July 2018, and sees two or three more hikes this year as the most likely scenario (that’s the blue and red lines). 

After the recent weak economic data, including slowing inflation, they may be a bit cautious. Some indicators have improved, such as trade and retail sales, but overall it remains disappointing. Q1 Gross Domestic Product (GDP) is expected to show an improvement in growth, but that will come a day too late for the meeting.

Perhaps most importantly though, with the increasing uncertainty of a North American Free Trade Agreement (NAFTA) deal, I think they are likely to repeat the line from the April 2018 meeting about “escalating geopolitical and trade conflicts.” I expect the probability of three rate hikes this year to subside, with negative implications for the CAD.

The other major point today is the ADP employment report. Automated Data Processing Inc. (ADP) is an outsourcing company that handles about one-fifth of the private payrolls in the US, so its client base is a pretty sizeable sample of the US labor market as a whole. One point to note: its figures are adjusted to match the final estimate of the nonfarm payrolls (NFP), not the initial estimate that we get this Friday 1st of June 2018. So while they are one of the best guides to the NFP that we have, they aren’t perfect by any means – in fact, neither is the NFP figure itself, since it’s always revised.

In any event, the market consensus is for a solid 190k rise, which although below the recent trend would still be a healthy number indeed – the 2017 average was 185k, so this would still be an acceleration after all these years of steady growth in employment. The “whisper” number on Bloomberg isn’t far off at 195k, suggesting no major difference between traders and economists.


We also get the German Consumer Price Index (CPI), a closely watched indicator of tomorrow’s EU-wide CPI. Inflation is expected to accelerate notably in Germany as well as in the EU as a whole. Part of the rise though is just an optical illusion arising from the difference in the timing of the Easter and Pentecost holidays this year and last year, so it’s not clear whether the ECB will take it into account at its 14 June 2018 meeting or whether they will want to wait to see the next month’s data. Nonetheless, market participants don’t always take these kinds of technical details into account, so the figure could be positive for the Euro.

Today’s market – other

The German unemployment data comes out fairly early. The unemployment rate is expected to stay at its historically low level – the data only goes back to 1991, but just for comparison, before the Global Financial Crisis the lowest it got down to was 7.3% in 1991, vs today’s 5.3%. The fall number of unemployed persons is expected to fall by much less than is usual nowadays, but with leading indices of employment, such as hiring intentions and vacancies, still pointing to continued growth in employment. This could be neutral for EUR.

The second estimate of US Q1 GDP is forecast to be unchanged from the previous estimate at 2.3% qoq SAAR. However, looking at past several years, we can see that eight out of the last 10 quarters it was revised up. Moreover, this time around upward revisions to core retail sales data for February and March 2018 suggest that consumption may have grown more than was figured into the initial calculation.

However, the record for Q1, which still apparently has some particular problems with seasonal adjustment, isn’t so consistent over the last several years. In fact the two biggest downward revisions occurred in Q1, albeit some time ago. There could well be a surprise in these figures.


The US advance goods trade balance is expected to show a widening in the trade deficit relative to the previous month, but still a narrower-than-trend figure. I expect people will look at the data and figure that March 2018 was a fluke and the deficit is widening out again, which could be negative for the dollar, particularly in today’s political atmosphere.

The Fed releases the “Summary of Commentary on Current Economic Conditions,” aka The Beige Book as always two weeks before the next FOMC meeting. It’s significant for the market because the first paragraph of the statement following each FOMC meeting tends to mirror the tone of the Beige Book's characterization of the economy. 

Overnight, China announces its official purchasing managers indices (as opposed to those calculated by Caixin/Markit). Both the manufacturing and the service-sector indices are expected to be unchanged from the previous month. They are both in expansionary territory, although the manufacturing one is less so than the service-sector index. Continuing that expansion could be modestly positive for risk-sensitive currencies, such as AUD. In any event, no change = no change.

Australian private sector credit is forecast to grow at a slightly slower pace than in the previous month as tighter lending conditions restrict the growth in housing loans. The mom turnout is forecast to be pretty much in line with the recent figures, although down one tic from the previous month. That will lead to a slight decline in the yoy figure, but still above the recent low. AUD-neutral.

The Fundamental Analysis is provided by Marshall Gittler who is an external service provider of Claws and Horns (Cyprus) Limited, an independent analytical company. Any views and opinions expressed are explicitly those of the writer. Any information contained in the article, is believed to be reliable, and has not been verified by STO and is not guaranteed to be accurate. References to specific products, are for illustrative purposes only and are not a form of solicitation, recommendation or investment advice. Past performance is not a guarantee of future performance.

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28 / 05 / 2018 | Market News

Fundamental Analysis 28.05.2018 – Market Outlook

Market Recap
Chaos in Italy as the Prime Minister resigns almost before taking office! The premier-designate Guiseppe Conte on Sunday 28th of May met with President Sergio Mattarella and handed back his mandate for forming a new government. The issue was the finance minister. The coalition wanted to name someone who’s in favor of leaving the euro. President Mattarella has to approve the Prime Minister and all ministers, but he refused to sign off on the finance minister. Now there’s talk that leaders of the Five Star Movement may try to impeach President Matterella. It looks like the President may appoint an interim government while the parties prepare for new elections. A former International Monetary Fund (IMF) official is being mentioned as a possible interim Prime Minister (PM).

Meanwhile in Spain, the no-confidence motion that the largest opposition party filed on Friday 25th of May will be considered by the other parties today. Apparently the other parties all have a variety of demands and might not agree to support the motion. Recent opinion polls show that they have little to gain from new elections, so they may prefer the status quo to the possibility of losing seats in a new election.

It looks like chaos, but from the market’s point of view, the worst-case scenario of a euro-skeptic Italy has been avoided. The euro is actually up as a result, rising from a low of 1.1646 on Friday afternoon to 1.1715 this morning. We could see continued EUR strength today as these events offer the possiblity of a more settled future, rather than just a descent into chaos.

Oil collapsed after Russia and Saudi Arabia said they want the Organization of the Petroleum Exporting Countries (OPEC) meeting next month to discuss suspending its output restrictions. The Saudi energy minister said there were proposals to increase production by some 300 kb/d-800 kb/d, with Saudi Arabia favoring the low end and Russia favoring the high end. Russian President Putin said the country was happy with oil at $60/bbl, substantially below current levels. (Brent was $79.42 on Thursday 24th of May, before this talk began.)

The other OPEC countries however don’t see any upside in this for them. Most are producing at their limit anyway; only Russia and Saudi Arabia have room to increase production. In theory those two countries could just boost production unilaterally, but OPEC rules say the group has to agree. To win the agreement of the others and also to make up for a long period of low prices, it is expected that the group will probably want to keep the supply/demand balance relatively tight, which means leaning more towards the lower increases that the Saudis prefer. Under that scenario, prices would probably fall modestly but still remain well supported above $50/bbl. Raising output by 800 kb/d, as Russia prefers, would probably mean an oversupplied market eventually and send prices materially lower.

Oil prices are expected to continue their slide, particularly WTI, as US production is rising and inventories, which have come down a lot, have started rising again. The Brent/WTI spread, now at its widest level of the year, could widen out even further.
Lower oil prices and continuing fears over North American Free Trade Agreement (NAFTA) sent CAD down sharply. In this uncertain environment, one could expect a dovish Bank of Canada statement on Wednesday 23rd of May that could cause investors to reconsider their interest rate expectations and push the currency lower still.

NZD, AUD and JPY were generally higher as it appears that the meeting between US President Donald Trump and Supreme Leader of North Korea Kim Jong-un may be back on. US stock futures gained in early trading. New Zealand announced plans to eradicate a cattle disease that’s been troubling the country’s important dairy sector, but this was announced well after NZD began shooting up. A surge in Chinese industrial profits – up 21.9% yoy in April vs +3.1% in March 2018 – may have also boosted sentiment for these currencies, although again this news too came out after the surge began.

USD was also higher despite US interest rates being lower across the curve. The US currency seems to have momentum behind it.

The weak GBP is to some degree the counterpart of a stronger EUR, as a lot of EUR positioning recently has been through EUR/GBP. Scottish First Minister Nicola Sturgeon will go to Brussels this week to meet with EU Chief Negotiator Michel Barnier. There’s increasing concern that Scotland could vote to break away from the UK and remain in the EU if and when Britain leaves the EU. Separately, it appears that the UK Electoral Commission has  set aside GBP 829,000 for a European Parliament election that’s scheduled to take place eight weeks after Brexit is supposed to occur.

Commitment of Traders Report

Investors continue to trim their USD shorts and EUR longs. They are modestly long the DXY index and modestly short JPY. Still long GBP suggests that there’s plenty of room for them to sell the beleaguered British currency, though. CHF shorts increased, as did CAD and NZD.

Speculators decreased their long WTI positions a little, but there’s lots of room to cut further there as OPEC considers cutting its output.

Today’s market

The only point of interest during the European and US day is the three Italian note auctions. These are all reopenings of existing issues. It will be a good guide to whether people see the recent rise in Italian yields as an opportunity or a warning.
It’s noticeable that even with all its problems, Italian 10-year yields are still lower than US 10-year yields!

Overnight, the Japanese unemployment rate does seem significant for the yen, but with the rate expected to stay unchanged, the small rise in the job-offers-to-applicants ratio may go unnoticed. This could be neutral for JPY.

The Fundamental Analysis is provided by Marshall Gittler who is an external service provider of Claws and Horns (Cyprus) Limited, an independent analytical company. Any views and opinions expressed are explicitly those of the writer. Any information contained in the article, is believed to be reliable, and has not been verified by STO and is not guaranteed to be accurate. References to specific products, are for illustrative purposes only and are not a form of solicitation, recommendation or investment advice. Past performance is not a guarantee of future performance.
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25 / 05 / 2018 | Market News

Fundamental Analysis 25.05.2018 – Market Outlook

Market Recap

Modest movements in most currencies, especially considering the surprising news that US President Donald Trump is calling off his meeting with North Korean Supreme Leader Kim Jong-un. US stocks closed down slightly but well off the lows, while Tokyo stocks are higher this morning and South Korea down only by a small amount, so the move clearly isn’t disturbing the world that much. 

The only currency showing a notable move was CAD,  which plunged on Trump’s threats to impose tariffs on US auto imports under US national security grounds. A spokesman for Canada’s foreign minister said it was “inconceivable” that Canada would pose “any kind of security threat to the US.” Mexico is actually the #1 exporter of autos to the US, followed by Canada. 

Oil was down after Russia's energy minister Alexander Valentinovich Novak said that at their Tuesday 22nd of June 2018 meeting, Organization of the Petroleum Exporting Countries (OPEC) would discuss reversing the group’s production curbs and increasing output to compensate for falling production in Venezuela and the loss of global supply caused by new US sanctions on Iran. Libya also recently announced that it would curb production by 120k bbl/day because of power shortages. All this is pushing prices up to levels that OPEC fears will dampen long-term demand for oil, so they want to keep prices from rising further.

UK retail sales were much better than expected (+1.6% mom vs +0.9% expected, -1.1% previous). It didn’t help the pound much however, which suggests that sentiment for the British currency remains weak as politics dominate. 

Today’s market

The day starts with the Ifo indices for May 2018. They’re expected to be down just marginally, really nothing major at all, considering that the current assessment hit a record high in February 2018 and the business climate hit a record high last November (the data goes back to 2005). This compares with Wednesday’s 23rd of May 2018 German Purchasing Manager's Index (PMIs), which fell more than expected (albeit also remaining at a fairly high level). I think this indication that activity is stabilizing at a relatively high level would be taken as good news for Germany and the euro.

UK Finance housing loans are forecast to continue their recent decline. There was an upsurge in January 2018, but since then they’ve been coming back down steadily, resuming the decline that started a few months before the Brexit vote. This should be negative for GBP.

The second estimate of Britain’s Q1 Gross Domestic Product (GDP) rarely brings any revision to the main figures, just details about the composition of the figures.


The big indicator of the day is US durable goods. The headline figure, which is the one that the FX market usually focuses on, is expected to fall on a mom basis, but that’s entirely due to the big aircraft orders in the previous month. Excluding transportation, it’s expected to show a decent rise, which should reinforce expectations of +3.0% or so GDP growth in Q2 and therefore could be positive for the dollar.


The Sveriges Riksbank – Sweden’s central bank – is 350 years old this year, the oldest central bank in the world. It’s holding a commemorative conference today. The conference is in two parts:  the morning is for a Swedish audience and the afternoon is aimed at an international audience. The afternoon session will feature a panel discussion with Federal Reserve System (Fed) Chair Jerome Powell, Bank of England Governor John Carney, European Central Bank (ECB) Board member Coeure, plus Bank of International Settlements (BIS) General Manager Agustin Carstens. There’s some disagreement though on what the panel discussion will be about. The Riksbank’s web site says:  Panel discussion: The future of central banking? But the Fed’s web site says Panel Discussion:  Financial Stability and Central Bank Transparency.  

Later in the day, Dallas Fed President Robert Steven Kaplan,  Atlanta Fed President Raphael Bostic and Chicago Fed President Charles Evans speak on a panel discussion on “Technology-Enabled Disruption:  Implications for Business, Labor Markets and Monetary Policy” at the Dallas Fed.

The Fundamental Analysis is provided by Marshall Gittler who is an external service provider of Claws and Horns (Cyprus) Limited, an independent analytical company. Any views and opinions expressed are explicitly those of the writer. Any information contained in the article, is believed to be reliable, and has not been verified by STO and is not guaranteed to be accurate. References to specific products, are for illustrative purposes only and are not a form of solicitation, recommendation or investment advice. Past performance is not a guarantee of future performance.
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24 / 05 / 2018 | Market News

3 questions to ask yourself before making a trade

Trading speculative derivatives such as Contract for Differences (CFDs) is the activity of buying and selling financial instruments with the intent of profiting from price movements in the underlying asset. Trading can be a difficult task for a trader that is just starting out and for those that don’t have the necessary experience to understand the market conditions and make the right decisions. 

However, some people believe that trading is not so difficult and start the process without having an organised plan about how they are going to take advantage of the markets and therefore sometimes they could fail and lose capital because of their lack of preparation and experience. The available trading options are increasing but the difficulties around trading remain, especially when new traders are involved. Traders should prepare a trading strategy before they engage in one of the most volatile financial markets.

Some experienced traders suggest that people who want to trade should ask themselves a series of questions beforehand. The answers to these questions could shed light on what exactly traders want to achieve and form a suitable strategy that would help them achieve their targets. 

How useful is it to analyse a trading idea?

Traders sometimes lose capital because their ideas about trading transactions are coming from sources that are not accurate. Some traders get ideas from trading forums, others from Facebook groups about trading etc. Experienced traders’ piece of advice is to not trust every source such as forums, groups or media and urge beginners to filter data. They also invite people who start to trade now to take their time and analyse each idea and examine which could be the advantages and the disadvantages. 

How much money will be at risk?

Before engaging in trading, traders should decide how much money are they willing to risk for their cause. Sometimes traders tend to make impulsive trades and spend significant amounts of capital. This kind of actions could lead to capital losses as impulse is rarely a good indicator for traders. Experienced traders suggest that determining a conservative position size can be a step towards the right direction. They also urge beginners not to over invest on any trade but they advise them to take marginal positions in different securities. 

Is there a plan for entry or exit?

Before starting to trade, forming a trading plan is essential. Usually, impulse traders don’t think about having a plan for entry or exit. This type of trader is interested only in making a trade and worry about these elements later. People experienced in trading suggest that there should be a defined initial stop point for a trade, which should also be in line with the maximum amount of capital that the traders is willing to risk. Another decision that traders have to take is to define what trading strategy they will follow in order to protect their profits.

STO and Trading 

STO has set as a goal to offer an optimal trading experience to its clients. STO pays special attention to its clients’ education by arranging educational courses such as webinars and providing its clients with the latest market news reports. STO account owners are able to trade on the most active shares in the US, German and Italian stock markets. 

Trading Forex and CFDs (Contracts For Difference), which are leveraged products, are high risk investments and puts your capital at risk. You may sustain a loss of some or all of your invested capital. Only speculate with money you can afford to lose.
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23 / 05 / 2018 | Market News

Fundamental Analysis 23.05.2018 – Market Outlook

Market Recap

A typical “risk off” profile to the FX market:  CHF and JPY were the two best-performing currencies, while the commodity currencies were the biggest losers. The move was due to renewed concerns about US-North Korea relations after US President Donald Trump said that there’s a “very substantial chance” his proposed summit with North Korea’s Supreme Leader Kim Jong Un “won’t work out.” US stocks closed lower as a result.

Odd then that EUR was lower too. Peripheral European bond spreads tightened as doubts emerged that Italy’s President Sergio Mattarella would accept the 5 Star/League’s nomination for the next Prime Minister, Giuseppe Conte, after questions arose about whether he was entirely honest about his stated academic qualifications. It seems that EUR/USD is being driven more by global risk factors than the idiosyncratic European factors, and the conclusion must be that EUR is the “risk on” currency and USD the “risk off” currency. Mattarella is expected to announce his decision today.

Gilt yields rose and GBP gained slightly after Bank of England Governor John Carney told Parliament’s Treasury Committee that “it made sense to take a bit of time” to assess the economic outlook in light of the soft Q1 Gross Domestic Product (GDP), while noting that “it's more likely to have been temporary and idiosyncratic factors that slowed the economy.” His colleague on the Monetary Policy Committee, Gertjan Vlieghe said he sees one or two rate hikes a year for the next three years. Investors see only two hikes in the next four years.

Today’s market

First thing on the agenda is the preliminary purchasing managers’ indices (PMIs) for the Eurozone. The manufacturing PMIs are all expected to be down a little, confirming the loss of some momentum in the EU economy. The scale of the decline is modest though and the PMIs are at historically high levels, so even a small decline leaves them at levels indicating continued expansion.


The Eurozone composite PMI is expected to be unchanged at a relatively high level as the service-sector PMI, the main determinant of the overall PMI, is also expected to be unchanged. That suggests the EU economy is likely to continue to expand. However, the lack of any rebound following the recent decline also suggests that the scope for a material acceleration in growth is limited. This may make the European Central Bank (ECB) more cautious and convince them to delay the end of Quantitative easing (QE) to the end of the year and to wait longer after that before starting to normalize policy. In that respect, the figures could be negative for EUR.

Next up is the UK consumer price index (CPI). This is of course a major indicator for the UK, but there will be another one on the 13th of June 2018 ahead of the 21st of June 2018 Bank of England meeting. In any case while the headline inflation rate is forecast to remain the same, core inflation is expected to moderate slightly, as is producer price inflation, as the pass-through from a weaker sterling fades. The figure is therefore likely to be negative for GBP. 


The US PMIs by contrast are expected to be unchanged (manufacturing) or higher (services), which suggests an acceleration in growth in Q2. This would confirm the upturn in growth that both the Atlanta Federal Reserve System (Fed) and New York Fed are estimating for Q2 (4.1% and 3.1% qoq SAAR, respectively, vs 2.0% in Q1). Given the mounting questions about ECB policy against the background of sluggish growth and policy uncertainty in Italy, It is expected that signs of accelerating growth in the US would tend to reassure investors about the Fed’s intentions and therefore could be positive for the dollar.

US new home sales are expected to be down modestly, as are existing home sales (due out tomorrow). It’s a little worrisome as springtime is the peak period for home buying. The problem is that a) the inventory of homes for sale is relatively low, and b) mortgage rates are now at a five-year high. The big question is whether sales are being held back by low inventory or by high mortgages. The former is a neutral factor but the latter could have some impact on Fed thinking.

The release of the minutes from the May 2018 Federal Open Market Committee (FOMC) meeting is one of the major events of the week. The statement following the meeting was considered rather hawkish, because they changed their wording to show more confidence in inflation. As a result, the likelihood of four rate hikes this year increased following the meeting (see graph). 

In reading the minutes, the focus will be on what they were thinking when they changed their statement from inflation “continued to run below 2%” to “moved close to 2%.”  Any specific discussion of the data is likely to be somewhat stale however after average hourly earnings growth slowed in April 2018 and the rate of increase in the core CPI was unchanged.

We should also look out for discussions about the flattening of the yield curve. This has been a big issue, since of course a flat yield curve is a necessary precursor to an inverted yield curve, and an inverted yield curve normally heralds a recession. Some FOMC members have argued the Fed should be cautious in raising rates further lest the yield curve invert, which in my view confuses cause (recession) with effect (inverted yield curve). 

Later in the evening, the garrulous Minneapolis Fed President Neel Kashkari has yet another moderated Q&A session.

Overnight, New Zealand announces its trade figures. While the balance is forecast to flip from a small deficit to a small surplus, it’s not enough of a surplus to stop the 12-month moving average from declining further. Furthermore, the improvement is expected to come from lower imports, not higher exports, which are forecast to remain unchanged. This could be negative for NZD.

And finally, early in the European day, Germany will announce the second estimate of its Q1 GDP. Usually there’s no revision, but rather we get the detailed breakdown of the data.

The Fundamental Analysis is provided by Marshall Gittler who is an external service provider of Claws and Horns (Cyprus) Limited, an independent analytical company. Any views and opinions expressed are explicitly those of the writer. Any information contained in the article, is believed to be reliable, and has not been verified by STO and is not guaranteed to be accurate. References to specific products, are for illustrative purposes only and are not a form of solicitation, recommendation or investment advice. Past performance is not a guarantee of future performance.
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23 / 05 / 2018 | Market News

Investments and the ROI ratio

Understanding the basic concepts of investing should not be overlooked - saving money from a monthly salary is vastly different to trading with complex financial instruments. The basic idea behind investing is to invest capital into assets and gain from a potential increase in their prices. However, investing can result to capital losses if the market moves against the investor’s interests. 

Investors can find the appropriate solutions by browsing through various types of investments. Some of the most known ones are for example stocks, mutual funds, government and corporate bonds, real-estate as wells as other lower risk investments such as certificates of deposits (CDs) which enable you to earn interest on your money while maintaining some liquidity. Regardless of the type of investment, investors will be always interested to know how much they could gain and what is the timeframe for that. Expressions such as Return On Investment (ROI) are very common in discussions between investors.

Return On Investment (ROI)

Return on investment (ROI) is a financial ratio used to calculate the benefit an investor will receive in relation to their investment cost. The ROI can be measured if you divide the net income by the original cost of the investment. Depending on the figures included in the calculation, the higher the ratio the greater the benefit earned. 

ROI calculations help investors decide whether an investment opportunity is suitable for their plans or it should be skipped. An ROI calculation could also indicate how an investment has performed to date. A positive or negative ROI result could reveal a lot about the course of an investment and could help an investor improve or change drastically his strategy. 

ROI calculations are especially useful for people who choose to have an investment portfolio. The ROI calculations are a vital part of an investment strategy and investors could use the results in order to separate the high-performing investments from the low-performing ones. Thanks to the ROI calculation results, the managers of investment portfolios can compare their investments with the performance of other available investments and make well-informed decisions.  

Why do analysts prefer the ROI metric?

Many market analysts choose to use the ROI metric in their analyses because it’s very easy to be calculated. Analysts can do the calculations having only two figures available-the cost and the benefit. Another reason is that the ROI metric is generally understood by many people and can be used in discussions about investments without the need for further explanations. 

ROI limitations

Investors should know that the ROI metric has some disadvantages that could create problems when thinking about an investment strategy. The first is that the ROI metric disregards the time factor. An investor could calculate the ROI of two different investments and find out that the result is for both 30%. However, calculating the ROI doesn't include how much time do these two investments need to produce the same yield. This means that while the two investments produce the same yield, one of them, for example investment A, could be doing it in 1 year and the second investment B in 3 years. The investment A would be the preferred one as it would be equally profitable but in shorter time. 

The second disadvantage is that the ROI can be easily manipulated by analysts or investors who want to alter data. Some of them tend to hide the additional costs such as sales fees, stamp duties, maintenance costs etc. This could happen in order to achieve their own personal targets by selling or buying an asset in the price they want. Investors should be careful in this situation and take in consideration every factor. 

STO and Investo

Our consolidated experience in portfolio management helped us develop an investment strategy for STO clients called “Investo”. Our “Investo” strategy is suitable for individuals who seek long-term investment goals, and who want to trade Forex and CFDs but lack the advanced knowledge of a professional portfolio manager or the necessary time to trade. Trading CFDs requires the potential investor to have sufficient knowledge and experience to understand the nature and the risks involved in trading CFD and the management of his/her portfolio of   leveraged derivative products. 

Trading Forex and CFDs (Contracts For Difference), which are leveraged products, are high risk investments and puts your capital at risk. You may sustain a loss of some or all of your invested capital. Only speculate with money you can afford to lose.
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Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 66.69% of retail investor accounts lose money when trading CFDs with AFX Capital Markets Ltd. 66.36% of retail investor accounts lose money when trading CFDs with AFX Markets Ltd. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.