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Markets drift ahead of weekend - AM Briefing
24 Nov 2017
US closed for Thanksgiving - AM Briefing
23 Nov 2017
Wall Street hits fresh record highs - AM Briefing
22 Nov 2017
The UK100 and sterling - PM Bulletin
21 Nov 2017
Equities drift in featureless trade - AM Briefing
21 Nov 2017
German coalition talks collapse - AM Briefing
20 Nov 2017
Quiet start after Wall Street surge - AM Briefing
17 Nov 2017
Global stock indices steady - AM Briefing
16 Nov 2017
Is this the start of a stock market correction? - Video Update
15 Nov 2017
Crude sell-off rattles investors - AM Briefing
15 Nov 2017
GBPUSD testing support - PM Bulletin
14 Nov 2017
Central bankers meet in Frankfurt - AM Briefing
14 Nov 2017
Sterling under pressure - AM Briefing
13 Nov 2017
Indices in retreat ahead of weekend - AM Briefing
10 Nov 2017
Could low volatility trigger a market correction? - Video Update
09 Nov 2017
All quiet on the Western Front - AM Briefing
09 Nov 2017
WTI crude surges through resistance - Video Update
08 Nov 2017
Investor inertia sees equities drift - AM Briefing
08 Nov 2017
Crude in demand - PM Bulletin
07 Nov 2017
Fresh record close for Wall Street - AM Briefing
07 Nov 2017
EURUSD shows clear “head and shoulders” - PM Bulletin
06 Nov 2017
Cautious start to trading week - AM Briefing
06 Nov 2017
Traders look ahead to Non-Farm Payrolls - AM Bulletin
03 Nov 2017
Traders look ahead Friday’s US Non-Farm Payrolls - Video Update
02 Nov 2017
BoE expected to raise rates - AM Briefing
02 Nov 2017
Equities soar on US corporate tax cut hopes - AM Briefing
01 Nov 2017
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 Thursday 09 November 2017

All quiet on the Western Front - AM Briefing



Early moves

·         European stock indices mixed

·         Gold back above $1,280

European indices were mixed on the open but were soon pushing into positive territory. The dollar was a touch easier in early trade as investors fretted about more hold-ups in the Trump administration’s proposed tax reforms and a flattening US yield curve. The latter weighed on the banking sector yesterday as this is not only an indication of investor concern for the economic outlook, but it also makes it more difficult for the banking sector to make risk-free profits.

Crude oil was steady first thing after pulling back from the two-and-a-half year highs made earlier in the week. Meanwhile, precious metals were firmer as gold reclaimed, and is currently holding above, the $1,280 level. Sterling is a touch higher despite the apparent disarray of the UK government just as another round of Brexit negotiations get underway.

Stock Index Update

·         Wall Street ekes out modest gains

·         Banking stocks fall in US and Europe

US stock indices finished a tad higher last night, but were held back by weakness in the banking sector. There are concerns that the Trump administration is going to struggle to push tax reform through Congress, particularly after the Republicans lost elections in New Jersey and Virginia on Tuesday. There are also concerns that the yield curve continues to flatten. This means that longer term interest rates are slipping even as near-term rates rise. Typically this indicates a lack of confidence in the economy going forward. It also affects bank profitability.

European stock indices drifted lower in early trade yesterday but bounced back off their lows later in the session. But overall there seemed to be little appetite to add to holdings as investors found little in the way of inspiration from US equities. Instead, there were concerns over the state of the European banking sector which is being weighed down by Italian banks. Once more, the issue of non-performing loans is back in the headlights and this saw Banca Monte dei Paschi suspended after the stock fell close to 5%.

Meanwhile, stodgy old Marks & Spencer rose over 3% in early trade after the high street retailer reported a 2.6% rise in revenues for the six months to 30th September. But overall pre-tax profits fell 5.3% over the same period. The company said it was accelerating the planned closure of 100 clothes stores and departments, while slowing down the opening of its premium Simply Food outlets. The group will be hoping that its Christmas “Paddington” advert helps lift sales over the holiday period.

Commodities Update

·         US inventories jump unexpectedly

·         Gold pushes back above $1,280

Crude was on the back foot for most of yesterday’s session. There seemed to be a reluctance to push prices much higher despite WTI surging above a highly area of resistance just over a week ago. But yesterday traders had the perfect excuse to trim their long-side exposure following a reported drop in Chinese crude imports. The selling picked up steam following the latest US inventory update from the Energy Information Administration (EIA). This showed a 2.24 million-barrel build in crude stockpiles when a 2.45 million barrel decline had been anticipated. On top of this the EIA reported that US crude production jumped to a fresh all-time high, which was something of a surprise given last week’s decline in the US rig count. If anything, this would suggest that US shale producers are still capable of responding quickly to price rises and increasing output. If this really is the case then this may prove to keep the oil price capped going forward. However, it’s worth remembering that open interest in WTI is currently at an all-time high, suggesting excessive speculation. This means we should be prepared for volatility going forward, particularly as traders position themselves ahead of the OPEC meeting on 30th November.

Yesterday saw gold push back above $1,280 in a move which suggests that the precious metal is picking up some buy-side momentum. The chart is beginning to look a bit healthier now and the recent price behaviour since the end of October now looks like a period of bullish consolidation. But gold really needs to dig in above $1,280 for confidence to return raising the probability of a retest of $1,300. Meanwhile, silver is also looking constructive with a series of higher lows clearly visible on the daily chart over the last fortnight. If the metal can bed in above $17, then a break through $17.20 and a retest of resistance around $17.40 looks entirely possible. As always, traders will be keeping a close eye on the dollar. Yesterday the greenback drifted lower following speculation that a number of Republican Senators are looking to delay the passage of Trump’s tax reforms. But any positive resolution here should lead to a rally in the dollar which will once again put downside pressure on the two precious metals.

Forex Update

·         USDJPY fails to hold above resistance

·         Sterling slides on political concerns

Trade was mixed in FX yesterday, at least as far as the EURUSD was concerned. There was no overall direction as the pair fluctuated in a relatively narrow range throughout the day. But the dollar came under a period of selling pressure as doubts emerged over the likelihood of Trump’s tax reforms making it through Congress before the year-end. In particular, there was talk that leading Republican Senators were looking to delay by one year the proposal to cut corporation tax. Just last week President Trump had suggested that the tax rate would be cut to 20% from 35% in one go. Previously the dollar had lost ground after it was suggested that Congress was considering a gradual reduction lasting around 5 years.

The Japanese yen rallied sharply yesterday on profit-taking and a general loss of investor risk appetite. This saw the USDJPY pull back further below 114.00. On Monday the pair shot up above 114.70 to hit its highest level since March this year. The area around 114.50 has now held as resistance three times since May.

Sterling also took a tumble as traders expressed concerns over the state of Theresa May’s government. The UK Prime Minister is under pressure having lost her Defence Minister due to “sex pest” allegations and Priti Patel, Secretary of State for International Development, following her trip to Israel when she held a series of unauthorised meetings. The Government looks in disarray and this can’t be good given the current parlous state of Brexit negotiations.

Upcoming events

Today’s significant events and economic data releases include the German Trade Balance, European Central Bank Economic Bulletin and EU Economic Forecasts. From the US we have Weekly Jobless Claims and Wholesale Inventories. Swiss National Bank Chairman Thomas Jordan is set to deliver a speech titled "Independence of Central Banks after the Financial Crisis: The Swiss Perspective" at 16:30 GMT.


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Posted by David Morrison

Tagged: Dollar Gold Brent crudeoil

Category: AM Bulletin

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