Monday, December 30, 2013

What is a Future Contract

A future contracts obligate the seller to deliver a commodity or other financial instrument to the buyer at an agreed upon date in the future.

Every contract must have a buyer and a seller and they must be standardized in order to facilitate trading on a futures exchange. Traders publically set a price for subsequent delivery within a specified time period and place. Exchange specifies major terms and conditions of the contract, except for the price. The buyer and seller of the contract make equal and offsetting commitments.  These commitments are legally binding, but can be offset.  Most futures contracts do not result in delivery and some do not permit delivery. For ICM Brokers, delivery is not permitted.

Futures contracts were traditionally used to trade commodities like sugar and coffee. It’s an obvious fact that futures market has become an important economic tool to determine prices based on today's and tomorrows estimated amount of supply and demand. Futures market prices depend on a continuous flow of information from around the world and thus require a high amount of transparency. Factors such as weather, war, debt default, refugee displacement, land reclamation and deforestation can all have a major effect on supply and demand and, as a result, the present and future price of a commodity. This kind of information and the way people absorb it constantly changes the price of a commodity. This process is known as price discovery. Futures markets are also a place for people to reduce risk when making purchases. Risks are reduced because the price is pre-set, therefore letting participants know how much they will need to buy or sell. 
This helps reduce the ultimate cost to the retail buyer because with less risk there is less of a chance that manufacturers will jack up prices to make up for profit losses in the cash market. 

2013 leaving 30% loss on gold prices

Gold was on the upward trend during the first nine months in 2012, to start retreating on October, on 2013, gold started the year’s high at $1696.6 per ounce on January, due to the major global events gold fluctuated to lose more and more as U.S. dollar gain, the yellow metal fall by more than 30% reaching 12 months low.
During the year, the non-farm payroll increased by 31% (from 155K on the 4th of January to 203K on December 6). Regarding the trade balance, the main economical health measurement, U.S. trade balance recorded 0.4% deficit decline during the year, since it was 42 Millions earlier this year, reaching 40 Millions later on, to push the U.S. dollar upward trend.

During the last 12 months, reaching 7% the unemployment rate declined by 0.9%, the lowest rate since December 2008, this obvious decline in the unemployment rate started to be clear after the 16 days shutdown in the U.S. government, to push the gold upward for less than five weeks before the next long fall in the last of November, on December this year gold fall reaching $1180.57 per ounce to be recorded as the lowest price in 2013.

Monday, December 23, 2013

WTI on two months high amid OPEC’s supply unchanged

WTI rose to two months high at the level of $98.91 per barrel today, amid the decision of OPEC to keep the daily production on the same level during 2014. The Organization of Petroleum Exporting Countries, which provides about 40% of the world’s oil, rejected the possibility of a supply glut next year, ministers from Saudi Arabia, Iraq and Kuwait said after a gathering of Arab crude exporters in Doha. OPEC’s 12 members agreed at a meeting on December 4 to keep their production target unchanged at 30 million barrels a day.

Regarding to the African oil, Libya and Sudan oil will not be at that much to meet global demand, the evacuation in South Sudan is temporary and oil output in the state of Upper Nile is flowing normally. The landlocked nation has sub-Saharan Africa’s third-largest oil reserves after Nigeria and Angola, according to the BP Statistical Review. It has a capacity to export about 220,000 barrels of a day through pipelines across neighboring Sudan. Libya will resort to force if necessary to reopen export terminals that have been closed by protesters. The nation, which holds Africa’s largest crude reserves, is producing 250,000 barrels a day, he said. That’s down from 1.43 million barrels a day in December 2012, data compiled by Bloomberg show. 

Friday, December 20, 2013

FOMC meeting minutes, projections and reflection

Information received since the Federal Open Market Committee met in October indicates that economic activity is expanding at a moderate pace. Labor market conditions have shown further improvement; the unemployment rate has declined but remains higher than targeted. Household spending and business fixed investment advanced, while the recovery in the housing sector slowed somewhat in recent months. Fiscal policy is restraining economic growth, although the extent of restraint may be diminishing. Inflation has been running below the Committee's longer-run objective, but longer-term inflation expectations have remained stable.
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with appropriate policy accommodation, economic growth will pick up from its recent pace and the unemployment rate will gradually decline toward levels the Committee judges consistent with its dual mandate. The Committee sees the risks to the outlook for the economy and the labor market as having become more nearly balanced. The Committee recognizes that inflation persistently below its 2% objective could pose risks to economic performance, and it is monitoring inflation developments carefully for evidence that inflation will move back toward its objective over the medium term.
Taking into account the extent of federal fiscal retrenchment since the inception of its current asset purchase program, the Committee sees the improvement in economic activity and labor market conditions over that period as consistent with growing underlying strength in the broader economy. In light of the cumulative progress toward maximum employment and the improvement in the outlook for labor market conditions, the Committee decided to modestly reduce the pace of its asset purchases. Beginning in January, the Committee will add to its holdings of agency mortgage-backed securities at a pace of $35 billion per month rather than $40 billion per month, and will add to its holdings of longer-term Treasury securities at a pace of $40 billion per month rather than $45 billion per month. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. The Committee's sizable and still-increasing holdings of longer-term securities should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative, which in turn should promote a stronger economic recovery and help to ensure that inflation, over time, is at the rate most consistent with the Committee's dual mandate.

FOMC reaffirmed its expectation that the current exceptionally low target range for the federal funds rate of 0 - 0.25% will be appropriate at least as long as the unemployment rate remains above 6.5%, inflation between one and two years ahead is projected to be no more than 0.5% point above the Committee's 2% longer-run goal, and longer-term inflation expectations continue to be well anchored. In determining how long to maintain a highly accommodative stance of monetary policy, the Committee will also consider other information, including additional measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments. The Committee now anticipates, based on its assessment of these factors that it likely will be appropriate to maintain the current target range for the federal funds rate well past the time that the unemployment rate declines below 6-1/2 percent, especially if projected inflation continues to run below the Committee's 2% longer-run goal. When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2%.

Wednesday, December 18, 2013

Yen retreats as trade balance deficit increased

Japanese balance of trade deficit increased by 23.8% during November over the last release of October data, reaching ¥1.35 Trillion while it was 35.1% larger in the same month of 2012, while the supposed is increasing the exports as a result of raising inflation rates.

This report detailed as, ¥ 5.9 Trillion exports 18% higher than the same month of 2012, but Imports are ¥7.1 Trillion 21.1% higher than the same period of the last year. With 19.4% of total trades recorded with China the biggest trade partner for Japan. Yen weakens by 2% for the first time in four days amid the release of the balance of trade data reaching 103.1.

Monday, December 16, 2013

Eurozone PMI composite indicating growth

The Eurozone PMI Composite Output Index rose to 52.1 in December, according to the flash estimate, up from 51.7 in November. The upturn brings the rate of growth close to the 27-month peak seen in September and marks a reversal of the easing in the rate of growth seen over the prior two months. Growth of new orders also accelerated, showing the biggest jump in demand for goods and services since June 2011. Manufacturing led the upturn, with output rising for the sixth successive month and the rate of increase hitting the highest since April 2011. New orders at goods producers likewise rose for a sixth month, also showing the fastest expansion since April 2011. Order book growth was fueled by rising exports, growth of which continued to run at the fastest clip since early-2011. It was a different story in services. Although activity in the service sector rose for a fifth straight month in December, the rate of growth slowed for the third successive month from the already weak pace seen in November, resulting in the smallest monthly expansion since August. Growth of new business also remained only very modest in the service sector; easing slightly in December as demand from many domestic markets within the single currency area remained lackluster, hindered in the case of consumer services by high unemployment.

Increasingly divergent trends were also evident by country. Of greatest concern was a drop in private sector activity for a second month running in France, where the rate of decline accelerated to the fastest since May. In contrast, Germany continued to record a rate of expansion not seen since the first half of 2011. Output grew for an eighth successive month, at a rate little-changed from November’s 29-month high. Elsewhere across the region, output rose for the fifth month running and at the steepest rate since April 2011. Private sector employment in the eurozone fell for a twenty-fourth consecutive month, but the decline was only marginal and the smallest seen over this period. A fractional decline in service sector employment compared with broadly no change in manufacturing jobs. By country, employment rose for the third time in four months in Germany, with jobs being created at the highest rate since January 2012. Job losses were reported for a second month in a row in France, although the rate of decline eased. Elsewhere in the region, the pace of job losses slowed on average to the lowest since July 2011

Thursday, December 12, 2013

Global indices are pointing lower

Starting with U.S. stock market indices which are taking down ward trend nevertheless the obvious recovery in U.S. economy, Standard and poor the most popular traded index is going down in the longest drop during the last ten weeks, recording 1775.502 as three weeks low, Dow Jones is not doing much better than S&P, recording 1.4% decline in the last 24 hours after the huge deficit in crude oil inventories in U.S.,  yesterday at 10.6 Million barrels which is the main industrial component, when looking at NASDAQ index it is clear that it is the most stable performance with low volatility for today, after yesterday’s drop of 1.6% keeping investors optimism of gain.

European indices are doing almost the same; CAC index is going down for the third day, touching three months low at 4060.5, DAX is on four weeks low after 14 days fall today, recording 8996.5 holding the same bearish trend with no close sign to gin.

British index is going bearish too, scoring nine weeks low after the longest weekly drop in 14 weeks at 6431.5, as so as NIKKIE doing the same with week’s low at 15225 and 1.5% drop in three days.

Wednesday, December 11, 2013

Gold on three weeks high with Chinese demand increase

Gold fluctuated near a three weeks high after advancing the most in seven weeks as the dollar weakened and signs of increased physical demand in China boosted the metal’s outlook.
Gold has rebounded from a five months low on December 6 to touch $1,268 per ounce, the highest price since November 20, as signs of increased demand in China and the dollar’s weakness countered expectations that the Federal Reserve is set to pare stimulus. Volumes for bullion of 99.99% purity on the Shanghai Gold Exchange, the benchmark spot contract, rose for a third day to 15,224 kilograms yesterday, the most since November 28 this year.

Monday, December 9, 2013

China to the top and WTI gains …

As the last month data regarding crude oil imports, China on the top as  the biggest crude oil consumer in the world, 27% and 25% crude oil imports rose in china for September and October reaching 6.45 Million barrels per day, 7.8% the GDP increasing rate during the last three months , which help to increase the consumption during that period.

China reported 6.53 Million barrels exceeding U.S. with 6.23 daily imports of crude oil, to be in total during November 9.61 Million barrels as daily consumption.
Today WTI reached the level of $97.97 per barrel, after the Chinese data in addition of unemployment data drop in U.S., to show the recovery signals and growth data, WTI traded on average price at $97.65 per barrel during Monday combined with investors’ optimism to gain more during this week.

Friday, December 6, 2013

WTI rebound with inventory deficit

WTI rebound due to the global conditions related to U.S. inventories and North Sea Brent production after the wide gap between Brent and WTI during the last weeks.

Although the increased demand in west European countries and U.K., North Sea countries reduced crude oil production to offset the rise in KSA production, the Iranian potential supplies and keep on the upward trend on Brent prices graph. In the other hand crude oil inventories reported on the first deficit in the last 11 weeks and the biggest in 20 weeks at 5.6 Million barrels which may increase the demand during the next week in U.S. especially with the fast growth in the manufacturing industry and PMI levels, adding that production shrinking in the western states by 83K barrels.

WTI supported its five days upward trend after the report of crude oil inventories, to gain around 3% reaching $97.71 per barrel.

Wednesday, November 13, 2013

Sterling rebound after the inflation report

For the first time, you don’t have to be an optimist to see the glass as half full. The recovery has finally taken hold, the economy is growing at its fastest pace in 6 years and Inflation is now as low as it has been since 2009. Jobs are being created at a rate of 60,000 per month. 

The UK economy expanded by 0.8% in 2013 Q3 and business surveys point to continued robust growth in Q4. The gathering pace of expansion during 2013 was supported by an increase in domestic demand. That reflects both an improvement in credit conditions — for example, rates on new loans to households have fallen significantly over the past year — and a reduction in uncertainty. The easing of these headwinds has supported consumer spending and helped to revive the housing market: housing activity and prices increased and housing investment rose robustly in the first half of this year. Leading indicators suggest that housing activity is likely to strengthen further in the near term. 
Talking by numbers, Pound reached the level of 1.5879 as low before the inflation report with uncertain expectations about it. Just after the inflation report of BOE sterling hit the level of 1.6002 as day high, with more than 90 points movement during report releasing time.

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Tuesday, November 12, 2013

Global indices in variance performance

American stocks indices in-bounding today but staying on the same mid-term bullish trend from the past week accompanied with investor’s optimism about U.S. economy which is showing a good performance during the last two weeks.

In briefly, Dow Jones Industrial index scored 15750 as day high, recorded at the early morning just before starting the hourly decline shown on the performance graph scoring 15698 as day’s low and supported at the range of 15700. Mini S&P 500 which showed a big jump on Friday is in-bounding on the Daily base graph reaching 1762.75 with less than 28 points variance from the high to be traded on the average of 1764.00. NASDAQ index pointed till today week’s low at 3344.25 and 3358.00 as day’s high, with a low volatility and trading volume NASDAQ still refusing to break the level 3345 as closing price. 

FTSE 100, is doing well compared with the total U.K. economy rising to 6726.0 on Monday as high, opening at 6683.0 reaching 6700.5 as day’s high. Staying in the same region CAC 40 Index is going down from 4279.5 as day’s high scoring low of 4254.5. 

NIKKEI 225, the Japanese index is going up with strong bullish trend started on Friday to open at 14420 today down 10 points to score the low at 14410 then started to gain reaching the high of 14590 proving the strength of the Japanese economy. 

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