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Tory Poll Lead Narrows Sharply - Video Update
31 May 2017
S&P 500 and NASDAQ break winning streak
31 May 2017
Sterling swings on polls - PM Bulletin
30 May 2017
Equities drift after long holiday weekend - AM Briefing
30 May 2017
Crude oil slumps on OPEC disappointment - AM Briefing
26 May 2017
OPEC disappoints while FOMC minutes provide cheer - Video Update
25 May 2017
OPEC expected to agree 9-month extension - AM Briefing
25 May 2017
Look-ahead to OPEC - Video Update
24 May 2017
Markets quiet ahead of FOMC minutes and OPEC - AM Briefing
24 May 2017
Crude oil update - OPEC meeting in focus - PM Bulletin
23 May 2017
Markets shrug off atrocity in Manchester - AM Briefing
23 May 2017
Equities mixed, but supported by oil
22 May 2017
Nerves steady after firmer close on Wall Street - AM Briefing
19 May 2017
Political fall-out continues to weigh on markets - Video Update
18 May 2017
Slide in European indices accelerates - AM Bulletin
18 May 2017
Trump’s woes hit markets - Video Update
17 May 2017
Trump’s woes lead to market wobble - AM Briefing
17 May 2017
EURUSD hits six-month high - PM Bulletin
16 May 2017
Crude oil extends rally - AM Briefing
16 May 2017
US inflation data and retail sales in focus - AM Briefing
12 May 2017
Crude oil recovers after “flash crash”- Video Update
11 May 2017
Crude oil soars while equities drift - AM Briefing
11 May 2017
Are investors too complacent? - Video Update
10 May 2017
Investors rattled after Trump fires FBI head - AM bulletin
10 May 2017
Crude oil’s “flash crash” leads to OPEC desperation - PM Bulletin
09 May 2017
Equities rally as oil steadies - AM Briefing
09 May 2017
Forex: Top Ten Tips for beginners - Trading Guides
08 May 2017
Markets little moved after Macron win - AM Briefing
08 May 2017
Payrolls in focus - AM Briefing
05 May 2017
NFP look-ahead - Video Update
04 May 2017
FOMC hints at rate hike in June - AM Briefing
04 May 2017
FOMC look-ahead - Video Update
03 May 2017
Apple disappoints on sales numbers - AM Briefing
03 May 2017
CFD Trading Tips - Trading Guides
02 May 2017
European traders return after May Day - AM Briefing
02 May 2017
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 Wednesday 31 May 2017

S&P 500 and NASDAQ break winning streak



Early moves

·         European stocks modestly lower

·         Euro zone inflation data ahead

There’s a mixed tone to this morning’s early trade with European stock indices modestly lower. The UK’s FTSE100 was firmer first thing but has since pulled back from its best levels. The main reason for the initial move higher was the pull-back in sterling. This followed the release of a YouGov poll in the Times which suggested that the Tories could lose their parliamentary majority in next week’s vote.

Last night all the US majors closed lower, with the S&P500 and NASDAQ both breaking a seven day winning streak.

In data releases this morning German Retail Sales fell 0.2% in April from the previous month which was well below the 0.4% rise expected. Later today we get an update on Euro zone inflation. Flash CPI (Core) is expected to rise 1.0% year-on-year - still a long was short of the ECB’s target rate of 2%. If so, then this would support Mario Draghi’s statement yesterday that inflation remains subdued and that “substantial” stimulus is still required.

Stock Index Update

·         S&P and NASDAQ break winning streak

·         US inflation data trending lower

All the major US indices ended yesterday’s session lower. This meant that the S&P and NASDAQ finally broke a 7-day winning streak. But the losses were modest and don’t appear to presage a downside correction - not yet anyway.

Data-wise, yesterday brought the release of the Core PCE Price Index (which is the Fed’s preferred inflation measure). This rose 0.2% in April from the previous month, putting the year-on-year inflation rate at +1.5%, down from 1.6% previously. This is somewhere short of the Fed’s 2% target and the trend so far this year has been downward. There are some analysts who have started to wonder if the Fed may hold off from hiking rates in June. However, we’ll probably have a clearer idea of their intentions after this Friday’s Non-Farm Payroll release. Nevertheless, the consensus is that the US central bank will hike rates in a few weeks’ time, but leave their options open in September.

There was a softer bias in European equities yesterday as investors returned from the long holiday weekend. The UK FTSE100, German DAX and French CAC all ended modestly lower although the Italian MIB eked out a small gain. Banking stocks were among the worst performers after a research note from Deutsche Bank said the sector could struggle as economic growth across the Euro zone looked likely to fade. This tied into comments from ECB President Mario Draghi when he repeated his assertion that “substantial” stimulus was still required due to subdued inflation pressures. There are also concerns that Greece may default on its next bailout payment unless her creditors agree to debt relief measures next month.

We had a clutch of economic data releases yesterday and the main takeaway in Europe (as with the US) was the pull-back in inflation. German CPI slipped by 0.2% month-on-month after being flat previously. Spanish CPI rose 1.9% year-on-year but this was well below last month’s reading of +2.6% year-on-year.

Commodities Update

·         WTI slips back below $50

·         Precious metals slip

Crude oil fell yesterday. This saw the front-month WTI contract pull back below $50 per barrel while Brent came close to breaking below $51. All in all, investors remain nervous following last week’s slump. Crude fell sharply on Thursday after it was announced that OPEC and a number of non-OPEC oil producers were prepared to extend last year’s output cuts by another nine months. This means maintaining the 1.8 million barrels per day production cut beyond June to the end of March next year. This was as expected, although there was some disappointment that the producers weren’t prepared to make deeper cuts. The feeling is that even this extension may not be enough to get global supply and demand back into balance. This is particularly the case given the continued pick-up in US oil shale production.

Gold and silver gave back early gains yesterday morning and spent most of the session trading in negative territory. Gold briefly broke above $1,270 first thing to hit its highest level since the beginning of the month. Silver topped $17.40 to trade at its best level since the end of April. Yesterday’s moves followed a strong performance from both precious metals last week. The rally helped silver retrace just over 50% of its sell-off from mid-April to the lows hit earlier this month. Gold managed to push above the 61.8% Fibonacci Retracement of the pull-back over the same period. Consequently, it shouldn’t be too surprising if both metals consolidate for a while. If so, then this should help gold and silver build bases from which they can push higher over the next few months. However, there’s always the danger of a more substantial pull-back if risk appetite returns.

Forex Update

·         Euro weaker after Draghi comments

·         Sterling down again on latest poll result

The euro fell sharply in early trade yesterday morning but recovered later in the session. The single currency came under pressure after European Central Bank (ECB) President Mario Draghi said that there was still a need for “substantial” stimulus due to subdued inflation pressures. This has surprised many analysts who are looking at the growth data which suggests a sharp pick-up is underway across the Euro zone economy.

There are also concerns that Greece may opt out of its next bailout payment (which is effectively a default) unless her creditors agree to debt relief measures next month. Investors were also slightly unnerved after Italian Prime Minister Matteo Renzi said there were good reasons for holding a General election this year, rather than waiting until 2018. Despite the fact that Dutch and French voters effectively rejected far right, anti-European parties, investors remain concerned about the popularity of anti-establishment parties in Italy.

Sterling managed to make back some ground against the US dollar. It sold off sharply at the end of last week after polls showed a dramatic drop-off in support for PM Theresa May and the Conservatives. The thinking goes that a Tory landslide will give Theresa May a stronger negotiating hand in Brexit negotiations. In contrast, if she fails to build on her current majority she could face difficulties from the pro-EU section within her own party.

Upcoming events

Today’s significant events and economic data releases include UK Net Lending, M4 Money Supply and Mortgage Approvals. From the Euro zone we have CPI and Unemployment and from the US we have the Chicago PMI, Pending Home Sales and the Fed’s Beige Book.


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Posted by David Morrison

Category: AM Bulletin

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