What Is Going Down In Yemen?

What Is Going Down In Yemen

On Tuesday, the United States told its citizens in Yemen to immediately leave the country. The official announcement on the U.S. State Department was: “The Department urges U.S. Citizens to defer travel to Yemen and those U.S. Citizens currently living in Yemen to depart immediately.”

Moreover, it seems that all diplomatic missions of the United States across the Middle East are to be closed these days, following warnings of potential attacks coming from the zone. Important communication between bin Laden’s successors as al Qaeda leader, Ayman al-Zawahri, and the Yemen based wing were intercepted by U.S. Secret Services. It is strongly believed that the terrorist attacks are oriented against the U.S. because of some drone aircraft strikes that took place lately in Yemen.

Even if Yemen is one of the poorest Arab country, the intensity of the threat must not be neglected, and measures already appeared in the whole Western countries. Great Britain also took initiative by advised its citizens in Yemen to “leave now” and by “temporarily evacuating all its embassy staff” (according to Reuters).

Given this context, it is important to analyze how the events can influence, on a short term period, the economic relations between Yemen and the United States. As we mentioned before, Yemen is not a rich country, but it has established diplomatic relations with the U.S. in 1947. It is not competing with other Arabic countries from the economic point of view, nor from the natural resources aspect.

Its oil reserves and natural gas deposits, on which the Yemeni economy is totally dependent, are important in the agreements between the two countries. However, the oil reserves in Yemen are expected to be depleted by 2017, possibly bringing on economic collapse. At this point, we can now argue whether these reserves are enough for the U.S. to keeping wanting the country close in a diplomatic manner.

The rupture announced these days does not seem so big as to have effects on the oil’s price on the international market. However, the announcement made by the U.S. about the closure of all diplomatic relations across the Middle East could raise questions and produce signals in financial markets. It is a situation to be closely followed, because consequences on short periods of time can appear and can also give birth to long term consequences on the financial markets, as the politics are strongly related to economics all over the world.

Depending on the consequences of these threats, which may prove false or true, we will be able to provide the economical consequences, at least in terms of oil prices. Of course, the position of the U.S. to these events is not negligible, but we might take into account that a total and irreversible retreat of them from Yemen is not possible, because of strategic reasons on which the United States are counting.


Why You Should Pay Attention To Yahoo! Inc.?

As I mention a few months ago, in an article about Yahoo! Inc. which you can find here, this company may worth you full attention. Since then, the CEO at Yahoo Marissa Mayer, continued with buying startups and made 9 new brand acquisitions. When will she stop? It looks like the main purpose of Marissa Mayer is to buy people instead of the ideas behind the startups. She is actually pointing towards the engineers of these little organizations which will be kept by 2 to 4 years contracts.

Apparently, the new CEO found the malfunction of the company and now is taking steps in order to fix it. Definitely, there is an urgent need of creative engineers and Marissa Mayer is doing nothing but to provide the company with this medicine in return of billions of dollars. It will take time in order to see whether or not this strategy will work and indeed the company will produce new value and attract and retain new users. Revenue for the full year of 2013 is projected to be in the range of $108.0 million to $112.0 million without dropping far below the last year’s figures.


Reaction To The Bank Of England’s News

Considering the stagnation that characterized United Kingdom last year, this year we cannot expect miracles to happen. Thereby, the recovery is expected to be slow, with the inflation staying around the values of 3% (CPI inflation rose at 2.9% in June).

Even if the outlook for the U.K.’s economy becomes increasingly positive from one quarter to another, the wounds left by the under target productivity which in turn caused a decrease in demand and also the inflation above target, determines the economists to be realistic and to give time to the economy in order to recover. Here comes the BoE, saying that is ready to intervene so as to make the economy get up and run again at the fastness registered before 2005. Maintaining its focus on price stability, BoE engaged to keep the highly stimulative monetary policy at the current pace for the next 3 years and to maintain the forward guidance as well, with a stable interest rate at the value of 0.5% until the unemployment rate drops to 7% (currently at 7.8%). Proving caution and responsability, BOE affirmed that is liable to intervene and change any of the above mentioned measures in case the inflation’s value will remain 0.5% above the 2% target for next 2 years and if the actual monetary policy will prove to seriously affect the financial stability or price stability.

Assuming that this context is being maintained, United Kingdom will get back to growth, perspective that boosted the investors’ confidence to buy the British pound today, as it was the top mover. The fact that Governor Mark Carney decided to clearly express the BoE’s plans for the future recovery has inspired even more confidence that this growth will really happen. In fact, is extremely important not to neglect the overall image of the Euro zone economy since it is really significant how it handles the current situation which affects all the member states.

Is The Euro Overbought Or The Uptrend Is Sustained?

Well, let us see what are the premises? For the Euro Area we had some very good PMIs published this month, lower unemployment rate and Germany surprised with better than forecast industrial production, trade balance, factory orders and unemployment change. Furthermore the ECB maintained the interest rate unchanged and Mario Draghi recovered his optimism in what concerns the economic evolution of Europe.

Adding to this the fact that Federal Reserve is still maintaining the Quantitative Easing program unmodified we can say that there are reasons for the investors to go long Euro and short the US dollar.

In every FOMC statement and speech of Ben Bernanke its is said that Fed will continue the QE as long as it is necessarily for the labor market to get back on its feet. On the other hand the officials that gave statements to the press believe that the tapering of the program will start in September, because the unemployment rate started to drop and there are signs of economic recovery.

Bering this in mind, we believe that this uptrend will continue until the Fed will announce the tapering of the stimulus and the date that will end the QE.

So to answer our question: The Euro is not yet overbought, but the uptrend might not be sustained for a long period of time.

From the technical point of view, the price has breached above Friday’s top and almost hit 1.3400. For today it seems that the rally stopped. If this week will close above 1.3350 it will confirm the break above the higher line of the symmetrical triangle (you can find more details reading EURUSD Dragged Towards 1.34 on QE Continuity) and also signal that the uptrend could continue for the rest of August. A false breakout could bring the price back to 1.33 or even lower.

Chart: EURUSD, H1

Looking at the lower time frame we can see that the price has reached a resistance area at 1.3400/20. Adding the overbought in the RSI evolution we should open the eyes for a pullback. A break above the resistance could open the way for another rally that is targeting 1.3500.


Who Is The Next Leader Of The Oil Industry?

The oil industry, as one of the most important industries, is mainly driven by North America, Russia and the Arabic States (most important countries being Saudi Arabia and Iraq). Why is this industry so important? Considering the fact that is responsible for about 2.5% of the world’s GDP, it’s also pumping life in all other important fields as transportation, agriculture, army and any other branch that supports the human life. If the oil industry would collapse now, it wouldn’t take a few months to see the world’s economy on the ground. Nowadays, the supply of energy tends to increase because of the continuous increase in demand, which results in the development of the economies in question (reflected by their GDPs).

Meanwhile, North America is seriously gaining ground in the oil industry, threatening to become the biggest oil producer by 2030, as last year recorded the world’s biggest increase in oil and gas production (80% of which came from North Dakota and Texas). It is also likely to become self-sufficient around 2020 as the production will increase and the demand will fall, due to the efficient use of resources. The “power shift” will probably happen in the near future and the dominator is likely to be the United States which will for sure cause an energy boom by its drilling technology that can reveal important quantities of oil. This situation is thought to cause the defeat of the OPEC states which will be required to accept new regulations and will have diminished their power of making the market (as a secondary effect it is believed that the Arabic nuclear programs will lose momentum). Obviously, the U.S.’s economy will benefit from this power shift, leaving behind the quantitative easing programs.

In the area of the Arab States, where important oil producers are found, we encounter significant turbulences. The internal conflict between Iraq and Kurdistan, a semi-autonomous zone within Iraq, poses problems to the production of oil, as Kurdistan and Iraq have an interdependent infrastructure. The two countries are also fighting about the rights upon the oil reserves and the benefits resulting from exploiting those resources. As a general view over the Arabic’s oil production, things are likely to go in a negative direction, as conflicts between countries are worsening and the lack of technology may result in an ineffective business (leading to higher costs of production).

Recently, the narrowing between benchmark prices of Brent and WTI crude oil got in the viewfinder. The price of WTI crude oil is thought to have been increased due to several factors as the projects for the oil transportation which came online, making it available in new areas, fact that lead to an increase in demand. On the other hand, the narrowing of prices also derives from the downward pressure on the Brent oil caused by the access to domestic light sweet oil which can easily replace the imported Brent oil.

Chart: WTI and brent crude oil spot prices in 2013

The outlook for the next year concerning the oil market awaits some improvements as economic growth in 2014 is expected to reach 3.5%. Non-OECD countries are projected to continue to lead the oil demand growth, while OECD economies are expected to remain in decline mode.


Fundamental Analysis – An Inside Look

Fundamental analysis is a method of examining the factors that influence and characterize a company or a market. When looking into details of a company, fundamental analysis takes into consideration its financial statements. When applied to futures or forex, it takes into account a broad palette of factors that influences the economy as a whole.

T.S Or F.A ?

This is the first question that arises to the persons interested in this domain. F.A. is known for the analysing of the present situation having a more rapid effect. Meanwhile, T.A. is mainly based on past patterns based on which long term strategies can be built. Some considers that the T.A. is more accurate and some believes that the F.A. offers the real signals of trading. In my opinion the healthier way is the combination of both technical and fundamental analysis if a careful supervision of the market is wanted.

Why Fundamental Analysis?

It offers to the investors an overview of the investment opportunities encountered in the market. An important advantage is offered by the possibility to predict which stocks are valuable and which are not. This way, an investor can remark in advance the overestimated assets (in which case the investor is advise to enter a sell position) and underestimated assets (in which case the investor is advised to enter a buy position). Moreover, fundamental analysis provides the investor with a profound understanding of the instrument and the market that he targets. This way, he is able to take smart investment decisions.

How Can You Apply The Fundamental Analysis?

There are two approaches when using the fundamental analysis. The first one, top-down analysis, requires the investor to take a look at the bigger picture, the general condition of the economy followed by a tightening of the research to the specific domain of interest and a closer look the specific asset. The second approach consists of the bottom-up analysis when the investors pay attention first at the specific asset and after that they can expand its research towards the industry of interest.

Fundamental Analysis Based On The Asset That Interests Me!

Depending on the financial instruments included in your portfolio, there are various factors that need to be considered. Thus:

- When trading FX, you should pay attention to macroeconomic indicators as: interest rate, labor market, consumers’ confidence, inflation;

- When trading on the Equity Market, you should consider financial indicators as: general aspects of the company and assessment indicators (Price to Earnings Ratio, Price to Book Value, Price to Sales, dividend yield);

- When trading on the Commodities market, you should pay attention to: supply, demand and factors of impact (technological developments, new resources);

We can conclude that Fundamental Analysis represents the use of financial and macroeconomic indicators, along with news with impact strength in order to evaluate an asset. In order to compose an investment portfolio, a careful fundamental analysis is required.


Non-Farm Payrolls Delivers Bad News

The most important indicator of the American labour market, the Non-Farm Employment Change, dissapointed big time with only 169k jobs created last month. On the other side, the unemployment rate fell to 7.3%, a minimum close to data last reported in January 2009. As this is an important critaria that Fed considers before deciding on the Quantitative Easing Program, the 18th of September looks like a battle even harder. Currently, the FOMC members are approving Ben Bernanke’s plan to reduce the easing program. Remains to be seen if thee data released today will weight enough to influence the date of the tapering (later this year or next year). Economists incline to believe that the Fed’s decison will stay in place because their assessment is based on a broad range of indicators that offers information over a greater period of time.

In any case, United States’ economy shone yestrday in the light of the ADP results, 176k jobs created in the private sector, a decrease in the unemployment rate at 323k and the Non-Manufacturing Index showing an expansion correlated with 58.6 points.

Canada really delivered an improvement in the labour market with a fell in the unemployment rate at 7.1% and an impressionant number of new jobs created last month, 59.2k, mainly because of the boom in part-time jobs.


Major News On The Most Important Markets

Major News On The Most Important Markets

Now that Lawrence Summers is out of the race for the presidency of Fed, once again the assumptions that Janet Yellen will take over the leadership of Federal Reserve Bank are becoming more realistic. What does that mean? I means that the Bernanke’s style will be kept and the Quantitative Easing Program will know a smooth tapering or even a continuation, under certain circumstances. Investors don’t expect major changes in the way the tapering will evolve (a reduction consisting in $10 billion), keeping an eye on the FOMC press conferences, as the one that will follow on Wednesday.

On the other side of the ocean, things seem to settle. Germany is preparing next Sunday for elections and the whole Euro zone is expecting Chancellor Angela Merkel to win a third term and continue to run Germany’s economy as before (also will continue to say the word regarding European monetary policy, a view which has great importance). Out today, Mario Draghi spoke about the European’s economy which seems to have passed the unstable period and now is trying to consolidate and to follow a path that will lead to economic growth.

As the unemployment rate in Europe stays at a concerning level and the fragility still characterizes the zone, the interest rate is expected to remain at low levels, with an optimistic touch given by the 0.3% GDP growth in the second quarter, after six straight quarters of negative growth. Mario Draghi emphasized the need to strenght the institutional architecture of EMU by building a stronger Europe thru the banking union and a single European supervisor which will make sure that capital is correctly flowing through the Union’s countries. The feeling that Europe is still looking for its balance was submitted, leaving the investors waiting for positive signals.

Tomorrow FOMC Will Decide QE3′s Fate

Tomorrow FOMC Will Decide QE3′s Fate

Tomorrow is the much awaited day, when chairman Ben Bernanke will expose his decision concerning the evolution of the third Quantitative Easing program that has been implemented for one year, so far. Everybody’s eyes will be on Fed’s chairman and for sure the markets will be highly sensitive to each word delivered.

The big question is: will the QE3 be reduced now? Or later this year?

Most of the investors, and also most of the surveys conducted by Reuters and Bloomberg are pointing towards a contraction of $10 billion that will be announced tomorrow, but the amount may vary between $5 and $25 billion. Tomorrow are expected forecasts about the American economy for 2016 and it will be interested to follow the way they will treat the fact that in January 2014 Ben Bernanke will no longer lead the Federal Banks of the United States. Janet Yellen is the favorite so far, but we have to be careful to any possible surprises.

Even if economists believe that Yellen’s approach will be almost the same as the one of Bernanke and another chairman will make radical changes, we cannot expect this scenario to happen. Giving the size and importance of the QE, no matter the chairman, decisions will be taken in the best interest of the American economy. Thus, tapering will happen gradually and further changes will be made according to data coming from the labor and housing sectors, in particular. Anyhow, the difficult part of the process of strengthening the economy just now is coming, and the next chairman will have to be able to control the situation in a proper way.

Both gold an silver’s futures dropped in anticipation of the decision that is coming tomorrow, investors preferring to wait. As it concerns the price of gold, it is expected to further decline until the end of this year. Same for the emerging markets, which are already feeling the effects of the “absence of QE” due to the considerable decrease of inflows of money.


The Quantitative Easing Program Remains In Force

The Quantitative Easing Program Remains In Force

The FOMC decided to wait and hold the QE3 in place at a pace of $85 billion per month. Apparently, the economy of the United States is not ready to quit the stimulus, decided the FOMC members by a 1-to-9 vote. Indeed, the data below expectations coming from the labour market influenced the decision took today and Ben Bernanke gave assurances that the progress of the economy is basically deciding whether or not the QE3 will continue to run or not.

Likewise, the interest rate is going to remain at low levels with no changes on the long-term. The “no tapering” indicated an economy still fragile, then add the fact that the Fed is revising down its economic growth forecasts, seeing growth between 2% and 2.3% this year, down from 2.3% to 2.6%. Even if the program is being maintained, it doesn’t mean that it failed to deliver results, just that a better recovery of the economy is needed. As an example, since September 2012 when the QE3 started, the jobless rate fall from 8.3% to 7.3%, a substantial improvement but still above the targeted percentage. As there are no worries about inflation which this year is expected to vary between 1.2% and 1.3%, the Quantitative Easing program will continue to support the American economy as long as needed.