Incisive market commentary from David Morrison

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Collapse 2017 <span class='blogcount'>(348)</span>2017 (348)
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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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Early moves

European stocks slip

Draghi says stimulus still required

European stock indices were weaker in early trade this morning as investors returned from the long holiday weekend. 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 was likely to fade. On top of this, ECB President Mario Draghi repeated his assertion that “substantial” stimulus was still required due to subdued inflation pressures. His comments led to a pull-back in the euro.  In addition, there are concerns that Greece may opt out of its next bailout payment unless her creditors agree to debt relief measures next month.

Stock Index Update

US indices steady ahead of weekend

Mixed messages from Fed members

At the end of last week US indices traded at or near their all-time record highs. The S&P and NASDAQ eked out the smallest of gains to hit fresh records while the Dow ended a couple of points lower. All-in-all, this was seen as a positive end to the week, particularly as it came ahead of the long holiday weekend when typically investors are keen to book profits. Investors were encouraged by a better-than-expected update to US first quarter GDP. This rose 1.2% - well above the initial reading of +0.7%.

On Friday St. Louis Federal Reserve President James Bullard said the path of inflation in the US is "not as severe as the 1990s Japanese experience, but it is worrisome." Bullard noted the gap between where US prices stand currently and where they should be if the Fed had delivered on its 2% inflation target in recent years. Bullard reiterated his view that the Fed is seeking to raise rates too quickly and by too much. He also believes that the markets' view of the upcoming rate hike trajectory is out of lockstep with the Fed. However, it’s worth noting that Mr Bullard isn’t currently a voting member of the FOMC. Yet Federal Reserve governor Lael Brainard is an FOMC-voting member. And it’s interesting to see how she has turned hawkish from uber-dovish prior to the US presidential election. On Thursday Ms Brainard told a panel discussion yesterday that the global outlook had perked up and this had shifted the risk balance for the US economy. She expects upward revisions to global growth forecasts to continue.

Commodities Update

Crude oil still under pressure

Gold and silver back in favour

Crude oil continues to come under selling pressure although it managed to recover some of its losses at the end of last week. On Thursday crude prices slumped after it was announced that OPEC and a number of non-OPEC oil producers would extend last November’s output cuts by another nine months. This was the baseline expectation from the meeting. However, it was viewed as a disappointing result as many analysts had hoped that these producers would agree to make deeper cuts than the current 1.8 million barrels per day.

Nevertheless, Saudi Arabia’s oil minister, Khalid Al-Falih, believes that the new deal will help rebalance the oil market by the year-end. He also said that the cartel wasn’t worried about an increase in US shale oil production taking market share. However, US output has picked up sharply over the past year and is now estimated to be in excess of 9.3 million barrels per day. Some OPEC members have convinced themselves that US production can’t increase much more from here. But there’s been no sign of a slowdown so far, and the output cut extension should only encourage US drillers to pump more oil.

Gold and silver shot higher at the end of last week. Both metals got a lift as investors sought out safe havens following Donald Trump’s comments to Japanese Prime Minister Shinzo Abe. The US President was at the G7 summit in Sicily when he told Mr Abe that North Korea was a “big problem” which “will be solved.” Investors are becoming increasingly anxious over Trump’s stance towards North Korea with some concerned about the prospect of military action in the area.

Forex Update

Euro slides on Draghi comments and Greece

Sterling falls as Tory lead slumps

The euro is weaker in early trade this morning as markets restart after the May Bank Holiday. This follows comments from ECB President Mario Draghi who reiterated the need for “substantial” stimulus due to subdued inflation pressures. There are also concerns that Greece may opt out of its next bailout payment unless her creditors agree to debt relief measures next month.

Sterling is having a wobble as the latest polls show that support for Conservatives ahead of the UK General Election has slumped over the past two weeks.  Back in mid-April when Prime Minister Theresa May called the snap election the Tories had a lead of 18 points over Labour, according to a poll-of-polls on voting intentions. By the end of last week that lead had narrowed to 10 points and some polls saw the Tory lead shrink to just 5 points. If this polling was accurate and played out across the country, far from winning by a landslide the Conservative majority in Parliament would shrink to single figures.

In other FX news, the dollar picked up at the end of last week but the Dollar Index continues to trade near six month lows. There is a growing expectation that the US Federal Reserve with raise interest rates by 25 basis points at its June meeting. Meanwhile, the Japanese yen rallied sharply at the end of last week as investors sought out safe havens. This followed reports that President Trump told Japanese Prime Minister Shinzo Abe that North Korea was “a big problem” which at some point “will be solved.”

Upcoming events

Today’s significant events and economic data releases include German Preliminary CPI, French Preliminary GDP and the Swiss KOF Economic Barometer. From the US we have the Core PCE Price Index, Personal Spending, Personal Income, the S&P Case Shiller House Price Index and Consumer Confidence.


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Posted by David Morrison

Category: AM Bulletin

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