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How traders need to leverage social signals to stay ahead

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How traders need to leverage social signals to stay ahead

Edward Oliver, Vice President, Finance Sales, Dataminr

The days of reading the morning paper for stock price updates are long gone. In today’s social-first world, where speed is everything and news headlines can instantly impact share prices, traders can’t afford to wait for stories to break via traditional news sources.

The real-time news environment has never been so complex, and events often break first on social media. You can no longer guarantee who will break news first, or who might share critical information, so staying vigilant on social media has become a necessity if you want to stay ahead of the game. Nowadays it could just as easily be a member of the public rather than a journalist, who happens to be on the ground observing an event, that breaks the scoop on social media using their smartphone.

This can have a direct affect on market volatility, with unexpected news and events instantly impacting markets. As a result the need to capture information from the most unlikely of sources, in the moment, is driving traders’ decision making. According to research from Greenwich Associates[1], nearly 70% of investors believe real-time market data provides them with an edge, and 80% want greater access to alternative data sources. 

What’s a signal and what’s just noise?

The use of alternative data is becoming ‘mainstream’ as more companies turn to these new data sets to add a layer of real-world insight, beyond market data. Having this real-time view can help traders and investors know first and act faster; allowing them to make smarter decisions, in the moment. In this way the trading paradigm has shifted with the introduction of new tools that provide real-time awareness and give finance professionals a first mover advantage.

However alternative data is often random, unstructured and can be hard to decipher in a way that is beneficial to making quick decisions. News breaks anywhere at anytime and it’s essential that traders are able to separate the signals that provide the first indication of an event happening, from the wider noise. Traders need the right tools to spot what’s important in the moment, not after the fact.

Seeing the story behind the story

Context is, and always will be, king. Correctly identifying social media signals provides real-time insight on the situation, but also a whole new level of context. Traditional sources such as news outlets can be limited in scope, especially when news is breaking and a story or event is unfolding. Having a real-time view of the social media landscape, including access to sources that traders would never have been able to follow on their own, provides a much fuller and more complete picture. In this way traders can capitalise on social media posts by going straight to the source, then using this information to inform their decisions.

However, just having access to reams of data is not enough for traders to be able to perform well. They are time poor and have a multitude of sources, screens and platforms to contend with, meaning the monitoring of profit & loss and execution management systems will often take priority over reading the headline news. This is where having the right platforms in place can allow traders to integrate all their sources through one system – giving them an instant, single view on everything that really matters. Such integration allows traders to keep focussed on the screen or application that’s most important in the moment, with the addition of real-time alerts, information and insight – helping them to make more powerful decisions even quicker by finding the needles in the big data haystack.

When time literally is money, having all the data to hand is a huge asset. Alternative data is quickly becoming the new normal for traders and is helping them make quicker, and more informed decisions, than ever before.

[1]“Alternative Data for Alpha” Greenwich Associates – Q1 2017

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Dollar mixed after Powell, pound hits three-year high

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Dollar mixed after Powell, pound hits three-year high 1

By Kate Duguid

NEW YORK (Reuters) – The dollar reversed earlier gains on Tuesday morning after a dovish speech from U.S. Federal Reserve chief Jerome Powell failed to quell inflation fears, while the British pound rose to fresh three-year highs.

The growing likelihood that Congress will pass President Joe Biden’s $1.9 trillion stimulus plan has raised concerns about a possible spike in inflation. The recent rise in inflation expectations as investors bet on a post-pandemic economic recovery and the so-called “reflation” trade has hurt the dollar this month.

Powell’s speech on Tuesday did little to allay inflation fears. In remarks prepared for delivery to a Senate Banking Committee, Powell said, “The economy is a long way from our employment and inflation goals, and it is likely to take some time for substantial further progress to be achieved,” the hurdle the Fed has set for discussing when it might be appropriate to pare back support.

“The new fear of inflation – he did try to cap down the worry a little bit,” said John Doyle, vice president of dealing and trading at Tempus Inc.

But, he added, “I think [Powell] is going to continue that line about holding rates low for a long time. I think he’s going to try to continue to be that reassuring voice for markets. Which is why we’ve seen a little bit of recovery in risk as he started to speak and the dollar dip.”

The dollar index was last at 90.115, 0.08% higher on the day, but off session highs after the post-Powell dip.

Sterling hit a new nearly three-year high of $1.412, last up 0.33% on the day, as investors stuck with their bets that a rapid rollout of the COVID-19 vaccine would allow the British economy to reopen over the next few months.

Prime Minister Boris Johnson on Monday laid out a step-by-step plan for ending the current British lockdown.

“The pound made the most noise on a quiet night,” said Doyle. In addition to the plans to end lockdowns, sterling has benefited in recent months from relief over Brexit and better-than-expected economic data, which diminished the chances the Bank of England would push interest rates below zero.

Elsewhere, the euro strengthened 0.07% to $1.216 and the Japanese yen, the worst performing major currency of 2021, remained down on the day despite the weakening in the dollar. The dollar was last up 0.02% at 105.09 yen.

(Reporting by Kate Duguid in New York and Tommy Wilkes in London; Editing by Steve Orlofsky)

 

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Dollar bounces off six-week low as traders prepare for Powell

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Dollar bounces off six-week low as traders prepare for Powell 2

By Tommy Wilkes

LONDON (Reuters) – The dollar rebounded off six-week lows on Tuesday as investors’ focus shifted to how U.S. Federal Reserve chief Jerome Powell might respond to resurgent inflation expectations, while commodity-linked currencies hovered near multi-year highs.

The recent rise in inflation expectations as investors bet on a post-pandemic economic recovery and the so-called “reflation” trade has lifted U.S. government bond yields. That had fed through to a higher dollar until earlier this month when the greenback resumed its decline.

Analysts expect Powell, who testifies before Congress at 1500 GMT, to provide some reassurance that the Fed will tolerate higher inflation without rushing to raise rates. That might calm bond markets and eventually weigh on the dollar, they said.

“Mr. Powell will very likely reiterate that the Fed is a long way from meeting its goals and that it will likely take some time before “sufficient progress” has been made to taper its bond purchase program,” UniCredit analysts said.

The dollar index was last at 90.143, up 0.1% on the day, having earlier fallen to 89.941, its weakest since Jan. 13.

Graphic: U.S. dollar index

Dollar bounces off six-week low as traders prepare for Powell 3

Positioning data shows investors overwhelmingly betting that a U.S. dollar, which has been dropping since last March, will keep falling as the world recovers from the COVID-19 pandemic.

“Only when the spike in U.S. yields becomes more disorderly and spills forcefully into risk assets, would U.S. dollar experience an across-the-board strength,” said ING analysts in a research note.

The euro weakened 0.1% to $1.2151. Euro zone government bond yields have also been rising but the rally took a brief pause after European Central Bank President Christine Lagarde said on Monday the bank was “closely monitoring” rising borrowing costs.

Commodity-linked currencies have been among the best performers in 2021. Surging prices for materials from oil and copper to lumber and milk powder have pushed currencies such as the Canadian, Australian and New Zealand dollars to their highest in roughly three years.

On Tuesday, the Aussie traded down 0.2% at $0.7903 having earlier hit a high of $0.7934. The New Zealand dollar was down marginally while the Canadian dollar was just below its Monday high.

Sterling hit a new nearly three-year high of $1.4098, up 0.3% on the day, as investors stuck with their bets that a rapid rollout of the COVID-19 vaccine would allow the British economy to reopen over the next few months.

Prime Minister Boris Johnson laid out his step-by-step plan for ending the current British lockdown on Monday.

Bitcoin, the world’s biggest cryptocurrency, fell sharply below $45,000 and was last down 15% at $45,953, extending its drop from a record set on Sunday of $58,354 as investors grow nervous about sky-high valuations.

The Japanese yen, the worst performing major currency of 2021 because rising U.S. Treasury yields can lure investment from Japan, fell again. The dollar was last up 0.2% at 105.26 yen per dollar.

(Additional reporting by Tom Westbrook in Singapore; editing by Emelia Sithole-Matarise)

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Stocks struggle as tech slide erases commodities surge

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Stocks struggle as tech slide erases commodities surge 4

By Danilo Masoni

MILAN (Reuters) – World shares struggled on Tuesday as a rally in commodity-related assets gave in to pressure on heavily weighed tech stocks and investors awaited reassurance from U.S. Federal Reserve Chair Jerome Powell on the path for monetary policy in United States.

European tech stocks were on set for their worst day in four months, down 2.7%, and futures on the Nasdaq fell 1.5% after losses in stocks like Apple and Tesla dragged the index down 2.5% on Monday.

“The prospect of a less dovish tone from central banks, sparked by rising inflation, is causing stock traders to reduce their exposure to equities, especially overbought sectors like tech,” said Pierre Veyret, analyst at ActivTrades in London.

The MSCI world equity benchmark fell 0.1% to fresh two-week lows by 1138 GMT, having earlier risen on gains in commodity-heavy equity indexes in Asia. S&P 500 futures also fell, and were last down 0.5%.

Tesla shares were set to plunge into the red for the year, hit by a fall of bitcoin, in which the electric carmaker recently invested $1.5 billion.

The level of angst was also reflected in equity volatility gauges which rose to multi-week highs, while on bond markets German and U.S. yields moved in different directions, even though both remained just below the highs hit on Monday.

After being knocked off from eight-month high by European Central Bank chief Christine Lagarde signalling discomfort with the recent surge in yields, 10-year Bund yields resumed their upward trend and were last at -0.297%.

Ten-year Treasury yields were steady below Monday’s one-year high of 1.394% and were last at 1.370%.

Fed Chair Powell is expected to be equally reassuring on the central bank’s dovish stance when he gives his congressional testimony at 1500 GMT in Washington.

“If there were already any expectations that Powell could try to calm down rates, then (Lagarde’s remarks) have just further cemented them,” said Giuseppe Sersale, strategist and fund manager at Anthilia in Milan.

Commodity prices strengthened again.

Oil prices jumped by more than $1 at one point, underpinned by optimism over COVID-19 vaccine rollouts and lower output as U.S. supplies were slow to return after a deep freeze in Texas shut in crude production last week.

Brent crude was last up 0.7% at $65.7 a barrel after earlier hitting a fresh 13-month high of $66.79, while U.S. crude rose 0.8% to $62.17 a barrel.

“Oil has been caught up in the broader commodities move higher, with a weaker USD proving constructive for the complex,” ING strategists led by Warren Patterson said in a note.

“Meanwhile, there is also a growing view that the oil market is looking increasingly tight over the remainder of the year”.

Copper prices meanwhile hit a 9-1/2-year high as tight supply and solid demand from top consumer China boosted sentiment.

In currency markets, the dollar briefly dropped to its lowest since Jan. 13 ahead of Powell’s testimony, while commodity-linked currencies hovered near multi-year highs.

The dollar index was up 0.1% at 90.137, with the euro flat at $1.215.

Bitcoin fell as much as 17%, sparking a sell-off across cryptocurrency markets as investors grew nervous at sky-high valuations.

(Reporting by Danilo Masoni in Milan; additional reporting by Anshuman Daga in Singapore; Editing by Ana Nicolaci da Costa)

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