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EURUSD hovers around 1.1800 - AM Briefing
29 Sep 2017
Trump tax reform lifts Wall Street - AM Briefing
28 Sep 2017
What is the Fed trying to tell us? - PM Bulletin
27 Sep 2017
Yellen struggles with inflation - AM Briefing
27 Sep 2017
Can cable’s rally continue? - PM Bulletin
26 Sep 2017
Investors jittery after North Korean threat - AM Briefing
26 Sep 2017
EURUSD slips again - PM bulletin
25 Sep 2017
Merkel scrambles to form coalition - AM Briefing
25 Sep 2017
Caution ahead of weekend - AM Briefing
22 Sep 2017
Fed Meeting Post-Mortem - Video Update
21 Sep 2017
Fed signals another rate hike - AM Briefing
21 Sep 2017
Trading subdued ahead of Fed meeting - Video Update
20 Sep 2017
Fed expected to reduce balance sheet - AM Briefing
20 Sep 2017
FOMC and balance sheet reduction - PM Bulletin
19 Sep 2017
Dow hits fresh record high - AM Briefing
19 Sep 2017
EURUSD continues to trend higher - PM Bulletin
18 Sep 2017
Global indices storm higher - AM Briefing
18 Sep 2017
Investors shrug off NK missile test - AM Briefing
15 Sep 2017
Sterling soars after BoE meeting - Video Update
14 Sep 2017
Bank of England meeting in focus - AM Briefing
14 Sep 2017
Look-ahead to the BoE monetary policy meeting - Video Update
13 Sep 2017
Sterling bounces as inflation picks up - PM Bulletin
12 Sep 2017
Wall Street rally lifts sentiment - AM Briefing
12 Sep 2017
Euro storms higher - AM Briefing
08 Sep 2017
ECB meeting in focus - AM Briefing
07 Sep 2017
EURUSD soars during Draghi’s press conference - Video Update
07 Sep 2017
ECB meeting, a look-ahead to Thursday - Video Update
06 Sep 2017
Wall Street wobbles, but closes off lows - AM Briefing
06 Sep 2017
WTI recovering as clean-up continues - PM bulletin
05 Sep 2017
Investors shrug off North Korean threat - AM Briefing
05 Sep 2017
North Korean nuclear test boosts gold - PM Bulletin
04 Sep 2017
North Korea rattles markets - AM Briefing
04 Sep 2017
High hopes for the latest US jobs release - AM Briefing
01 Sep 2017
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 Tuesday 19 September 2017

Dow hits fresh record high - AM Briefing

 

 

Early moves

·         European indices drift in featureless trade

·         Investors on hold ahead of Fed meeting

Trading was subdued first thing this morning. The major European stock indices all opened with modest losses despite the Dow Jones Industrial Average closing out at its fifth consecutive record close last night. The S&P500 also made another fresh record, once again ending above 2,500, while the NASDAQ100 continues to hover just below 6,000. But it seems likely that investors will be unwilling to add much to their exposure to equities ahead of the two-day Fed meeting which starts later this afternoon. This is a significant quarterly meeting which will include the FOMC’s Summary of Economic Projections. But more importantly the Fed is expected to detail how and when it will begin winding down its $4.5 trillion balance sheet.

Stock Index Update

·         Geopolitical tensions subside

·         Investors shrug off talk of stimulus reduction

Global indices flew higher yesterday. There were solid gains posted across Asian Pacific, European and US markets. Investors were solidly in “risk-on” mode, helped in part by a lack of activity across the Korean peninsula. North Korea decided not to follow up on last week’s missile test over Japan and this has emboldened investors desperate for any excuse to increase their exposure to equities. Investors are also shrugging off the negative ramifications of a reduction in central bank monetary stimulus. Last week the Bank of England’s Monetary Policy Committee (MPC) said that it was getting closer to raising interest rates. But Governor Mark Carney attempted to dampen this hawkishness yesterday when he warned there were still “considerable” risks to the UK outlook. Tomorrow we’ll hear from the US Federal Reserve. The central bank is expected to provide details about reducing its $4.5 trillion balance sheet. Then the Bank of Japan will update on Thursday, although it is expected to continue with its programme of Quantitative and Qualitative Easing. But there’s already speculation that the ECB will start to reduce its own bond purchase programme early next year.

Commodities Update

·         Crude hovers near multi-month highs

·         Precious metals under pressure


Crude prices slipped yesterday and at one point WTI broke back below $50 per barrel. However, the losses were modest and both WTI and Brent continued to hover around multi-month highs. Investors are still trying to unscramble the effect on prices of the refining shutdown which came as a result of hurricanes hitting Texas, Louisiana and then Florida. Last week’s inventory data releases showed large drawdowns in gasoline stockpiles and modest builds in crude supplies. This was entirely consistent with the sharp drop-off in refining activity which led to gasoline shortfalls and reduced demand for crude oil as a result of Hurricane Harvey. On Friday the latest data from Baker Hughes recorded a decline in shale rigs. On top of this last week both OPEC and the IEA raised their demand forecasts for both this year and 2018. All this is helping to support prices for now.

Gold and silver fell again yesterday while Bitcoin rallied by around 9%. The two precious metals tend to struggle when the world’s favourite cryptocurrency is in demand. But by the same token both have been in demand when Bitcoin sells off.

Less than two weeks ago gold was trading just a fraction below $1,360 marking its highest level in just over a year. Yesterday it dipped to $1,310 for a loss of around 3.5% since the first week in September. Silver has lost around 4.7% over the same period. The high back then coincided with the US Dollar Index hitting its lowest level since January 2015. But the dollar has bounced back since then and this has also helped to take some of the gloss off precious metals. Investors were also quick to dump gold and silver as they dialled back their concerns over North Korea. Last week Kim Jong-un ordered a missile test which flew once more over the Japanese island of Hokkaido. However, investors seem convinced that there’s little danger of things escalating militarily.

Forex Update

·         Carney comments send sterling lower

·         EURUSD uptrend continues

There was no clear direction in FX yesterday and it appeared that most pairs were happy to consolidate following recent big moves. Last week sterling soared higher after the Bank of England unveiled a hawkish summary after its latest Monetary Policy Committee meeting. However, it lost some ground yesterday afternoon following comments from Bank of England Governor Mark Carney. In his inimitable “unreliable boyfriend” style, Mr Carney told an audience in Washington DC that there are still “considerable” risks to the UK outlook. Meanwhile, the dollar continued to bounce back after a sell-off which less than a fortnight ago saw the Dollar Index hit its lowest level since early 2015. The greenback made its biggest gains versus the Japanese yen. This was tied to investors recovering their risk appetite and unwinding their “safe haven” trades. But the yen also fell on the news that Japan’s Prime Minister Shinzo Abe is to hold a snap general election next month. The Bank of Japan holds a monetary policy meeting on Thursday.

The upward trend in the EURUSD remains in place. However, where we go from here has much to do with what happens at the Fed meeting on Wednesday. The expectation is that the US central bank will lay down a timetable for reducing its $4.5 trillion balance sheet. This in itself is something that’s never been attempted before so the Fed has to get this right. All the indications suggest that this will be carried out at a glacial pace. But if the market feels the Fed is set to remove stimulus too quickly, then the dollar could turn sharply higher.

Upcoming events

Today’s significant events and economic data releases include the German and Euro zone ZEW Economic Sentiment surveys. From the US we have Building Permits, Current Account, Housing Starts and Import Prices.

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Posted by David Morrison

Tagged: AM Bulletin briefing

Category: AM Bulletin


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