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Collapse 2017 <span class='blogcount'>(348)</span>2017 (348)
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Using the RSI in FX - Trading Guide
31 Jul 2017
HSBC share buy-back helps lift indices - AM Briefing
31 Jul 2017
Amazon triggers tech tumble - AM Briefing
28 Jul 2017
Fed reinforces dovish credentials - Video Update
27 Jul 2017
Facebook results boost NASDAQ - AM Briefing
27 Jul 2017
Crude breaks above resistance - PM Bulletin
26 Jul 2017
Equities rally on positive earnings - AM Briefing
26 Jul 2017
Look-ahead to tomorrow’s rate decision from the Fed
25 Jul 2017
Alphabet/Google falls 3% in after-hours trade
25 Jul 2017
Equities start the week on back-foot - AM Briefing
24 Jul 2017
Euro surges on “hawkish” comments from Draghi - AM Briefing
21 Jul 2017
Equities firmer ahead of ECB meeting - AM Briefing
20 Jul 2017
Europe firmer after late US rally - AM Briefing
19 Jul 2017
US Fed turns dovish - PM Bulletin
18 Jul 2017
Dollar slumps on US healthcare gridlock - AM Briefing
18 Jul 2017
Wall Street leads equity rally - AM Briefing
17 Jul 2017
US bank earnings in focus - AM Briefing
14 Jul 2017
Yellen flip-flops to reassure investors - AM Briefing
13 Jul 2017
Oil rallies, but volatility high - Video Update
12 Jul 2017
Yellen to testify in Washington - AM Briefing
12 Jul 2017
A look-ahead to Janet Yellen’s testimony - PM Bulletin
11 Jul 2017
Second quarter earnings in focus - AM Briefing
11 Jul 2017
Jobs data boost sentiment ahead of earnings - AM Briefing
10 Jul 2017
Investors nervous; Non-Farm Payrolls in focus - AM Briefing
07 Jul 2017
Non-Farm Payroll look-ahead - Video Update
06 Jul 2017
Investors shrug off FOMC minutes - AM Briefing
06 Jul 2017
Investors shrug off FOMC minutes - AM Briefing
06 Jul 2017
Look-ahead to FOMC minutes - Video Update
05 Jul 2017
Markets quiet and waiting for fresh guidance from US - AM Briefing
05 Jul 2017
Crude continues to push higher - PM Bulletin
04 Jul 2017
Dow closes at fresh record high - AM Briefing
04 Jul 2017
Positive start to second half of 2017 - AM Briefing
03 Jul 2017
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Early moves

·         Facebook beats expectations

·         Stock up over 3% in after-hours trade

Facebook reported second quarter earnings after the bell. The share price fell sharply initially after Bloomberg posted an incorrect consensus forecast against the earnings per share. However, it subsequently rallied and was up around 3% in after-hours trade shortly after the European open. Facebook posted Q2 revenues of $9.32 billion against expectations of $9.2 billion. Earnings per share were $1.32 versus the (correct) forecast of $1.13 (not $1.38 first reported). There were 1.32 billion daily active users in the second quarter, in line with forecasts while monthly active users came in at 2.01 billion versus 1.98 billion anticipated.

Investors had been a bit cautious ahead of the report and some had lightened up their holdings over the past couple of days. The trigger for this was the latest set of figures from Alphabet, Google’s parent company. While Alphabet beat expectations on both revenue and earnings, there were some worries that revenue growth is going to be more expensive going forward. “Traffic acquisition costs” were higher for the quarter while “costs per click” (the amount advertisers pay for ad clicks) fell.

Stock Index Update

·         Dow/S&P500 post fresh record close

·         Fed keeps its options open

Last night the US Federal Reserve kept its key interest rate unchanged and also made no immediate move to reduce its $4.5 trillion balance sheet. This was as expected. However, market participants were more interested in any changes to the wording in the Fed’s statement. The key change was that the US central bank stated that balance sheet reduction would be implemented “relatively soon” rather than “this year” as noted in the June statement. The Fed also noted the recent downward trend in inflation but that it expected the economy to continue strengthening. This was considered more dovish than expected and helps to keep the Fed’s options open.

US indices made solid gains yesterday in a move which saw both the Dow and S&P500 close out at fresh record highs. The moves were driven by a slew of positive earnings stories with strong results from Boeing, Coca-Cola and Ford. According to data from The Earnings Scout, 34% of S&P500 companies have reported so far and 78% of these have beaten earnings expectations with 73% beating on revenues. Earlier in the week there were strong numbers from General Motors, Caterpillar and MacDonald’s. These reports helped to offset some disappointment after Alphabet, Google’s parent company, reported a sharp rise in customer acquisition costs and a decline in “costs per click” (the amount advertisers pay for ad clicks). There were concerns that such signs that revenue growth may now be harder to come by may not bode well for other tech giants who depend on advertising sales income.

European stock indices posted modest gains yesterday, building on the strong upside moves made on Tuesday. Investor sentiment continues to be positive, boosted by a clutch of better-than-expected second quarter corporate earnings reports.

Commodities Update

·         Crude holding above resistance

·         Gold and silver boosted by dovish Fed

Yesterday the US Department of Energy released their latest inventory update for the week ending 21st July. This showed a 7.2 million drawdown in crude against an expected reduction of 3 million barrels. There were also larger than forecast drawdowns in gasoline stockpiles and at the Cushing, Oklahoma hub. The data confirmed Tuesday night’s update from the American Petroleum Institute (API). Both WTI and Brent soared after the API recorded a 10.2 million barrel drawdown in crude - far more than the 3 million expected, and the biggest draw since September 2016. Crude made further gains following the release of yesterday’s data. However, both WTI and Brent subsequently pulled back from their best levels.

Earlier this week WTI pushed above key resistance around $47. This level marks the 50% retracement of the of the May-June sell-off which followed the last OPEC meeting in Vienna. WTI made further gains after yesterday’s inventory update to trade above the $48.50 area. This level marks the 50% retracement of the sell-off from the significant high hit back in February this year to the June low. It also coincides with the upper end of a trend line which marks a line of resistance in a downward-sloping channel that began forming in March.

If WTI can break above and then consolidate above $48.20/$48.50 for the rest of this week then it will look as if the bulls are back in control and further gains look possible. Both contracts have had a strong start so far thanks in no small measure to commitments made in St Petersburg on Monday. Oil ministers from six key oil producers met in the Russian city and Saudi Arabia promised to cuts its exports by 1 million barrels per day (bpd) to 6.6 million bpd from August. In addition, the ministers pledged to extend the current 1.8 million bpd production cut for a second time, taking it out beyond March 2018 if necessary. Nigeria also agreed to cap output at 1.8 million bpd. It currently produces around 1.7 million bpd.

Gold and silver began yesterday’s session sharply lower. The initial sell-off came at the start of Asian Pacific trading when liquidity is typically low and volumes light. But as gold broke below $1,250 and silver dipped under $1.6.30 there were concerns that the pull-back could become more severe, particularly as traders positioned themselves ahead of last night’s Federal Reserve rate decision. After all, both precious metals have rallied steadily over the past fortnight with less than a handful of negative sessions between them. There was a feeling that both gold and silver were overdue a more concerted bout of profit-taking. However, both metals made back most of their early losses soon after the US open. They then rallied sharply following the release of the US Federal Reserve’s latest monetary policy statement. This was slightly more dovish than expected as the Fed was quite vague over the timing of balance sheet reduction while it noted the continuing downward trend in inflation.

Forex Update

·         FX quiet ahead of Fed meeting

·         Dollar falls after FOMC reinforces dovish attitude

There was relatively little movement across the major currency pairs ahead of last night’s FOMC statement which followed a two-day meeting of the Federal Reserve. Ahead of last night’s decision traders assigned a token 3% chance of any kind of change taking place. In fact, the market reckons there’s very little probability of a rate hike until the meeting on 13th December. Even then there’s a 50% chance of no change from the current 1.00% - 1.25% band. This market expectation runs contrary to the FOMC’s latest Summary of Economic Projections from June, where twelve out of sixteen members expect the fed funds rate to be 25/50 basis points higher from current levels by year-end. However, Janet Yellen’s testimony in Washington two weeks ago suggested that the Fed is now taking a more dovish stance and could row back on planned monetary tightening.

This view was reinforced last night following the release of the Fed’s latest statement on monetary policy. The US central bank kept its key interest rate unchanged and also made no immediate move to reduce its $4.5 trillion balance sheet. This was as expected. However, there was a subtle change to the wording in the Fed’s statement. The US central bank stated that balance sheet reduction would be implemented “relatively soon” rather than “this year” as noted in the June statement. The Fed also noted the recent downward trend in inflation but that it expected the economy to continue strengthening. This was considered more dovish than expected and helps to keep the Fed’s options open. The dollar fell sharply on the news and the EURUSD hits highest level since January 2015.

Upcoming events

Today’s significant events and economic data releases include Euro zone M3 Money Supply and UK CBI Realised Sales. From the US we have Durable Goods, Weekly Jobless Claims and Wholesale Inventories.


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Posted by David Morrison

Category: AM Bulletin

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