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Non-Farm Payroll look-ahead - Video Update
31 Aug 2017
Tech stocks lead market recovery - AM Briefing
31 Aug 2017
Fall-out from Jackson Hole - Video Update
30 Aug 2017
Investors shrug off North Korean missile launch - AM Briefing
30 Aug 2017
Gold breaks through $1,300 - PM Bulletin
29 Aug 2017
Equities slide after North Korean missile launch - AM Briefing
29 Aug 2017
Yellen and Draghi in focus - AM Briefing
25 Aug 2017
Jackson Hole look-ahead to key speeches - Video Update
23 Aug 2017
Wall Street surges on tax reform hopes - AM Briefing
23 Aug 2017
Euro slips, but range-bound ahead of Jackson Hole - PM Bulletin
22 Aug 2017
Equities recover in early trade - AM Briefing
22 Aug 2017
Equities under pressure as Trump struggles - AM Briefing
21 Aug 2017
Equities fall as investors find reasons to sell - AM Briefing
18 Aug 2017
ECB and FOMC minutes lead to FX volatility
17 Aug 2017
FOMC minutes viewed as dovish - AM Briefing
17 Aug 2017
FOMC minutes in focus - Video Update
16 Aug 2017
Fed minutes in focus - AM Briefing
16 Aug 2017
Sterling slips as inflation steadies - PM Bulletin
15 Aug 2017
Equities continue to recover - AM Briefing
15 Aug 2017
Gold: triple top or third time lucky? - PM Bulletin
14 Aug 2017
Stocks bounce as geopolitical risk eases - AM Briefing
14 Aug 2017
Bank of England rate decision in focus - AM Briefing
03 Aug 2017
Crude breaks above resistance - PM Bulletin
02 Aug 2017
Apple rallies 6% on strong report - AM Briefing
02 Aug 2017
Cable breaks above 1.32000 - PM Bulletin
01 Aug 2017
Apple to report after the close - AM Briefing
01 Aug 2017
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Early moves

·         European stock indices firmer in early trade

·         Traders once again “buy-the-dip”

There’s a firmer tone in early trade across European and US stock index futures this morning. Investors were relieved that Wall Street got through the first session of the week with only a modest loss on the NASDAQ100 and small gains for the Dow and S&P500. There had been fears that last week’s selling may accelerate given the ructions and uncertainty apparent within the Trump administration and concerns that this week’s US/South Korean military exercises around the Korean peninsula could trigger hostilities with North Korea. But for now it looks as if traders are taking advantage of the recent sell-off to buy the dips, in tried and tested manner. The question is if it will work as well now as it has in the past.

Crude oil has steadied after plunging yesterday afternoon although it has simply reversed Friday night’s sharp rally which was triggered by a slight fall in the US rig count. But gold and silver are drifting lower while the dollar is a touch firmer. However, FX traders are unlikely to position themselves aggressively ahead of the Jackson Hole Economic Symposium which begins on Thursday. Janet Yellen and Mario Draghi are both scheduled to speak on Friday although both camps have being playing down expectations that they will announce anything dramatic in terms of monetary policy.

Stock Index Update

·         European equities firmer in early trade

·         Wall Street mixed but off lows

There was a mixed close on Wall Street last night with the NASDAQ posting a small loss while the Dow and S&P500 both registered modest gains. Nevertheless, all the majors rallied off lows made earlier in the session and this has helped to lift European equities this morning.

European stock indices swung between positive and negative territory in early trade yesterday, but ultimately succumbed to selling pressure. Investors continue to fret about the possibility of hostilities breaking out across the Korean peninsula as the US and South Korea begin a series of military manoeuvres in the area. This comes after North Korea threatened to test fire a number of missiles towards the US territory of Guam in the Pacific. This threat led President Trump to respond with a couple of inflammatory tweets, although North Korea’s leader Kim Jong-un postponed the test. The danger now is that any miscalculation during this week’s military exercises could trigger a disproportionate response from any party.

Meanwhile, concerns continue to fester over the state of the Trump administration. At the end of last week Trump fired Steve Bannon, his controversial policy strategist. This was seen as a good move initially as observers felt that it would encourage Gary Cohn, a senior economic advisor, to stay in the White House. However, Carl Icahn, Trump’s special advisor on regulation, has also left. Investors can’t shrug off the feeling that Trump just bounces from one disaster to another - the danger being that nothing gets done while he remains president. That could of course end up being a very good thing for the US. Time will tell.

Commodities Update

·         Crude slips after Friday’s sharp rally

·         Precious metals head higher again

Crude prices lost ground yesterday in a move which saw WTI and Brent give back some of Friday’s gains. The pull-back appeared to be little more than opportunistic profit-taking following on from the sharp rally at the end of last week. Oil prices spiked higher after the European close on news of an unexpected decline in the US rig count. Oil services provider Baker Hughes reported a fall in the rig count for the second consecutive week.  This led to a short-covering rally which went on to trigger a deluge of buy-stops. The move saw both front-month contracts bounce off significant technical levels of support around $47 and $49.70/50.00 respectively. These levels mark the 50% retracement of the May-June sell-off which followed the last official OPEC meeting. Yet despite last week’s late rally there are still concerns that there is a global oil supply glut. On Wednesday the US Department of Energy showed that US production rose to hit its highest level in over three years. However, further declines in the rig count should help support prices as will any significant US inventory drawdowns. The Energy Information Administration (EIA) releases its latest weekly update after tonight’s close.

There’s been a modest pull-back this morning, but despite this the rally in gold and silver continued yesterday as investors increased their exposure to these two safe havens. Investors are once again expressing concern about a possible escalation in geopolitical tensions as the US and South Korea undertake extensive military manoeuvres around the Korean peninsula. This is a regular event involving air, sea and land forces. However, given the war of words that took place two weeks ago between president Trump and the North Korean leadership, there’s a danger that any misstep over the next ten days or so could result in an outbreak of real hostilities. Gold and silver spiked higher after Mr Trump responded to threats from Kim Jong-un of missiles being launched in the general direction of Guam, a US territory in the Pacific. 

Last week gold briefly traded above $1,300 for the first time since early November last year when Donald Trump secured an unexpected victory in the US presidential election. Silver briefly popped its head above $17.30 to hit its highest level since mid-June. Both metals got another lift as the Trump administration ran into further controversy after the president disbanded two high profile business councils. Then Steve Bannon, a senior member of Trump’s inner circle, was fired on Friday. Precious metals got further support following the release of dovish minutes from last month’s FOMC meeting.

Forex Update

·         Dollar dips against the majors

·         All eyes on Jackson Hole

It was a relatively quiet session in FX yesterday. But the dollar lost ground against all the majors in a move which saw the EURUSD creep back above 1.1800. At the beginning of this month this currency pair briefly topped 1.1900 to hit its highest level since early 2015. This represented a tremendous turnaround for the euro this year as the EURUSD hit a 14-year low at the beginning of January. But it has since rallied around 15% in an adjustment which warranted some comment from the ECB’s Governing Council (GC). Thursday saw the release of minutes from the July meeting when GC members expressed concern about “the risk of the exchange rate overshooting in the future.” The news saw the euro fall briefly but it remains close to its two-and-a-half-year highs. Just one day previously, minutes from the last Fed meeting suggested that FOMC members were divided over the outlook for inflation. Investors will probably be unwilling to take on much more exposure to FX ahead of this week’s Jackson Hole Economic Symposium. There’s still an expectation that both ECB President Mario Draghi and Fed Chair Janet Yellen may say something market-moving. This is despite a story from Reuters last week which said that Mario Draghi wouldn’t be announcing any policy changes at Jackson Hole.

Upcoming events

Today’s significant events and economic data releases include UK Public Sector Net Borrowing, the German and Euro zone ZEW Economic Sentiment surveys, UK CBI Industrial Order Expectations, Canadian Retail Sales and Richmond Manufacturing Index.

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Posted by David Morrison

Category: AM Bulletin


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