• European markets stable on the open – AM Briefing

    Early moves

    Crude holding stock markets steady

    Euro gets boost from the French

    European equities and US stock index futures are all firmer in early trade this morning, helped along by a continued pick-up in crude prices. Oil prices were up first thing, helped by renewed speculation that November’s agreement between OPEC and non-OPEC producers to cut output by close to 1.8 million barrels per day could be extended beyond the current June cut-off.

    Oil steadied yesterday following a sharp sell-off on the open. This unnerved investors who were concerned that oil could be set for another leg down. However, oil now appears to be steadying, albeit at lower levels, following its dramatic plunge two weeks ago. This was triggered by the release of US inventory data which showed a much bigger-than-expected growth in stockpiles. Since then, however, the data has showed that inventories are declining once again and this has helped put a floor under prices for now. We’ll have an update from the American Petroleum Institute after tonight’s close.

    Meanwhile, the euro is firmer this morning following last night’s French Presidential debate. The main takeaway seems to be that Marine Le Pen’s main opponents acquitted themselves well, reducing the possibility of the Euro sceptic candidate ultimately prevailing. The Dollar Index remains below 100, but this is seen as down to euro strength rather than dollar weakness. Consequently, the dollar’s move has failed to offer any support to gold or silver which are both modestly lower.

    Traders in London were eagerly eyeing UK inflation data this morning, which was released at 9:30am. Consensus was that the latest inflation figures would be revised upwards from January’s 1.8%, with 2.1% a highly anticipated, three-year high for CPI. Markets were surprised to see an even higher 2.3% for year-on-year CPI, with the core figure (excluding food and energy) also higher than anticipated at 2%.

    Stock Market Update

    The anti-Google advertising bandwagon grows

    Toyota, Tesco and Volkswagen are the latest in a host of more than 250 global companies who have suspended their advertising deals with Google’s video-sharing platform YouTube. This comes off the back of the California-based internet giant publicly apologizing for their loose measures against offensive posts. Several others have already pulled their advertising from YouTube after an investigation discovered they had been advertising on videos posted by hate preachers and other offensive, extremist videos, potentially tainting the brand names of these companies which include ITV, M&S and Aviva. Google are reportedly taking measures to solve these issues, reviewing their policy and hiring new staff to better personalize their advertising structure.

    Commodities Update

    Gold pulls back from  two-week highs

    Oil prices higher in Europe

    Gold and silver both saw a selloff this morning as investors look to when the next Federal Reserve interest rate hike could be. After the latest 25 basis point hike last week, the markets immediately began predicting if the Fed would stick to their proposed three increases in 2017, or would the strong data out of the US create the right environment for a fourth hike. Despite this debate one thing is for certain; higher rates mean a stronger dollar, and a stronger dollar is bad for dollar-priced commodities. Gold came off its two-week highs this morning, with silver following suit lower. The Fed seems to be pulling the strings for these metals, so every Fed member speech has the potential to create volatility here.

    Oil markets got a lift this morning as investors hope the OPEC-led production cuts could get an extension. This comes as inventories slowly begin to decline again in the US, while at the same time strong demand appears to be chipping away at the stockpiles. Brent crude futures are comfortably above $51 a barrel, while the WTI contract is trading clear of the $48 mark. Should the planned production cuts receive an extension, the move could help remove the global supply glut and find a new equilibrium price for these modern-day levels of supply and demand.

    Forex Update

    Dollar index slips below 100

    The euro’s strength this morning has aided in the dollar index’s move below 100, as competition to the Euroskeptic Le Pen came out of the Presidential debate looking strong. Consensus remains that Le Pen will likely sail through the first leg of the elections but will not win the final vote for the presidency. After the loss of another far-right, anti-euro party in the Dutch general election last week, the euro has strengthened significantly. Against the dollar, the euro is testing resistance near 1.08, a psychological level it has failed to break both in December and again in February.

    The pound has steadied against its counterparts as the markets price in Britain’s triggering of Article 50, striking their official negotiations to leave the EU. The government have stated that this will occur on March 29th, so with just over a week to go sterling is expected to be trading in a tight band, although this morning’s inflation data has begun a short rally against the dollar.

    Upcoming Events

    Amongst today’s significant economic data releases and events we have just had a wave of PPI and CPI inflation data for the UK before Bank of England Governor Mark Carney gives his latest speech. We also have the Economic and Financial Affairs Council of the EU meeting today and minutes from the Bank of Japan’s monetary policy meeting this evening.


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