Incisive market commentary from David Morrison

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Markets drift ahead of weekend - AM Briefing
24 Nov 2017
US closed for Thanksgiving - AM Briefing
23 Nov 2017
Wall Street hits fresh record highs - AM Briefing
22 Nov 2017
The UK100 and sterling - PM Bulletin
21 Nov 2017
Equities drift in featureless trade - AM Briefing
21 Nov 2017
German coalition talks collapse - AM Briefing
20 Nov 2017
Quiet start after Wall Street surge - AM Briefing
17 Nov 2017
Global stock indices steady - AM Briefing
16 Nov 2017
Is this the start of a stock market correction? - Video Update
15 Nov 2017
Crude sell-off rattles investors - AM Briefing
15 Nov 2017
GBPUSD testing support - PM Bulletin
14 Nov 2017
Central bankers meet in Frankfurt - AM Briefing
14 Nov 2017
Sterling under pressure - AM Briefing
13 Nov 2017
Indices in retreat ahead of weekend - AM Briefing
10 Nov 2017
Could low volatility trigger a market correction? - Video Update
09 Nov 2017
All quiet on the Western Front - AM Briefing
09 Nov 2017
WTI crude surges through resistance - Video Update
08 Nov 2017
Investor inertia sees equities drift - AM Briefing
08 Nov 2017
Crude in demand - PM Bulletin
07 Nov 2017
Fresh record close for Wall Street - AM Briefing
07 Nov 2017
EURUSD shows clear “head and shoulders” - PM Bulletin
06 Nov 2017
Cautious start to trading week - AM Briefing
06 Nov 2017
Traders look ahead to Non-Farm Payrolls - AM Bulletin
03 Nov 2017
Traders look ahead Friday’s US Non-Farm Payrolls - Video Update
02 Nov 2017
BoE expected to raise rates - AM Briefing
02 Nov 2017
Equities soar on US corporate tax cut hopes - AM Briefing
01 Nov 2017
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 Thursday 16 November 2017

Global stock indices steady - AM Briefing



Early moves

·         Nikkei jumps 1.5%

·         Positive start across European equities

European stock indices were all firmly back in positive territory soon after this morning’s open. This followed on from last night’s price action on Wall Street where the US majors finished down on the session but well above their lows. Adding to the improved sentiment was the Japanese Nikkei which flew higher overnight to end up 1.5%, erasing a large chuck of its losses from earlier in the week. The Shanghai Composite finished effectively unchanged, suggesting that investors are taking Tuesday’s disappointing Chinese data releases in their stride. On top of this, oil prices appear to have steadied and the dollar has recovered. So for now there’s a calmer feel across the markets although traders will be quick to dump their “risk-on” trades at the first sign of trouble.

Stock Index Update

·         Dow hits 3-week low

·         But US indices bounce off lows

All the major US stock indices ended yesterday’s session in negative territory but off their lows. The Dow closed out at its lowest level in three weeks with Caterpillar weighing heavily on the index. However, it got a bit of a lift as General Electric made back some of its losses from earlier in the week.

Most European stock indices ended yesterday’s session in negative territory. However, all managed to bounce off their respective lows for the day. Nevertheless, global equity markets appear to be undergoing a minor correction. But we have seen similar downside moves before, and on every occasion even the mildest of sell-offs has been quickly reversed as buyers swept in to take advantage of cheaper stock prices. This time may be different, especially given concerns over a flattening US yield curve, a probable delay in Trump’s tax reforms and some disappointing Chinese economic data earlier in the week. Traders have also been rattled by an unexpectedly sharp sell-off in crude prices. These may give investors enough of an excuse to book profits and come back later. However, there’s always the fear of missing out, and that could prevent the current sell-off from gathering momentum.

Commodities Update

·         Crude steadies after Tuesday’s fall

·         Precious metals in late sell-off

In early trade yesterday oil continued to pull back from the multi-year highs hit just over a week ago. Both WTI and Brent fell sharply on Tuesday following the release of the International Energy Agency’s (IEA) annual World Energy Outlook. The IEA gave its latest forecast for global oil demand growth. The agency cut its demand growth outlook by 100,000 bpd throughout 2017 and 2018. This was in stark contrast to Monday’s OPEC forecast which expects global demand growth of 74,000 bpd to 1.53 million bpd. On top of this the IEA said that the US is set to become the "undisputed" leader in global oil production. Output growth through to 2025 is predicted to be the strongest seen by any country in the history of crude oil markets and should account for 80% of the increase in global supply between 2015 and 2015. Yesterday afternoon the Energy Information Administration (EIA) reported that US crude production had risen to a fresh record high. It also confirmed Tuesday night’s inventory report from the API showing unexpected builds in crude and gasoline stockpiles. But crude prices steadied later in the session with both Brent and WTI closing out in positive territory.

Yesterday morning gold rallied back above $1,280 in a continuation of a recovery which followed Tuesday’s dramatic sell-off. This sudden price fall was triggered by a significant indiscriminate sell order in the US futures market - that is, a large order that is executed with no consideration to price levels.  Likewise, yesterday’s rally was triggered by a purchase order of similar size. But at least the rally in gold (and silver) was entirely consistent with the ongoing decline in the US dollar. This has seen the greenback lose around 2% against the euro over the past week. On top of this, investors have looked to increase their exposure to precious metals as global equity markets appear to be undergoing a slight correction. But similar downside moves have been quickly reversed as buyers take advantage of cheaper stock prices. When that happens we should expect precious metals to succumb to selling pressure once again.

Forex Update

·         US dollar bounces off lows

·         Sterling consolidates against the dollar

The euro continued to push higher yesterday. The key EURUSD currency pair held above 1.1800 for most of the session and posted its best intra-day levels in over a month. The dollar has now lost around 2% over the last week as investors increasingly discount the possibility of significant US tax reforms taking place anytime soon. There are also concerns about falling US bond yields. Yesterday the 5-year/10-year Treasury spread hit a fresh ten year low, indicating doubts over future US economic growth. The dollar made back a good proportion of its losses later in the session.

Meanwhile, the Japanese yen rose sharply in the first half of yesterday’s trading session as investors cut their exposure to global equities and bought back yen borrowed to finance their stock holdings.

The GBPUSD held on to recent gains. However, sterling lost ground against the euro. The EURGBP briefly nosed above 0.9000 - a level which has acted as resistance on a number of occasions over the last month.

Upcoming events

Today’s significant events and economic data releases include Euro zone Final CPI and a speech from Bank of England Governor Mark Carney. From the US we have Weekly Jobless Claims, Import Prices, the Philly Fed Manufacturing Index, Capacity Utilisation, Industrial Production and Mortgage Delinquencies. We also have speeches from FOMC-voting members Robert Kaplan and Lael Brainard.


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Posted by David Morrison

Tagged: Oil Dollar EURUSD nikkei Crude

Category: AM Bulletin

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