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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

·         Revenue growth worries at Alphabet/Google

·         News weighs on other tech giants

Alphabet, Google’s parent company, reported its second quarter results after last night’s close. The tech giant posted earnings per share of $5.01, well above the $4.45 expected. Likewise, revenues were strong coming in at $26.01 billion against a consensus forecast of $25.64 billion. However, the stock was down around 3% in after-hours trading. Firstly, second-quarter profits were down thanks to a $2.74 billion fine from European anti-trust regulators. But most importantly, investors were rattled that revenue growth is going to be more expensive going forward. Two key performance metrics came in weaker than expected. “Traffic acquisition costs” were $5.09 billion for the quarter - above the estimated $4.75 billion, and “costs per click” (the amount advertisers pay for ad clicks) fell by 23% year-on-year, way more than the 15% drop expected.

Ahead of the results there was some chatter that Google should be viewed as a bellwether for the rest of the technology sector, particularly those companies that derive so much of their revenue from advertising. If so, then last night’s news from Alphabet doesn’t bode well for Facebook, Twitter, Snap and perhaps even Amazon. Facebook will posts results on Wednesday with Amazon and Twitter on Thursday. Investor expectations are already running high following last week’s news of bigger-than-expected subscriber growth from Netflix. But following Alphabet’s report Facebook is down around 0.5% in pre-market trade while Amazon has fallen around 2%.

Stock Index Update

·         NASDAQ hits a fresh record close

·         Tech earnings in focus

It was something of a mixed session for equities yesterday. The Dow and S&P500 drifted lower to end Monday’s session a touch lower. Meanwhile, the tech-heavy NASDAQ shot up to hit a fresh record high ahead of a string of important earnings releases this week. Google/Alphabet reported overnight and Facebook will post results tomorrow.

As far as Europe was concerned, the UK’s FTSE100 ended the session over 1% lower. In contrast the Italian MIB ended up 0.6%. The German DAX was a touch weaker by the close while the French CAC modestly eked out a modest gain. European equities had begun the day down, led by the auto sector. Shares in Daimler, BMW and Volkswagen fell sharply following reports over the weekend that EU antitrust officials had started investigating allegations of collusion. There are accusations that the top three German carmakers were operating in a cartel to agree on costs and emission treatment systems. On top of this traders were disappointed by the latest updates on Flash Services and Manufacturing PMIs. French and German Services, German and Euro zone Manufacturing PMIs all came in below expectations. The latest data release saw the EURUSD pull back from the 23-month high hit at the end of last week.

Commodities Update

·         Crude rallies after St Petersburg meeting

·         Gold and silver consolidate

Crude oil rallied yesterday as oil ministers from six key oil producers met in St Petersburg.  Saudi Arabia promised to cuts its exports by 1 million barrels per day (bpd) to 6.6 million bpd from August. The move was hinted at last week, but it comes on top of an agreement by Nigeria and Libya to cap production. The two OPEC members were granted exemptions from the oil output cuts agreed to in November last year. Back then, both countries were battling to rebuild their respective oil industries following serious bouts of civil unrest. Output has shot higher in both countries and this is undermining the effectiveness of the production cut agreement. There was also a commitment to extend the current 1.8 million bpd production cut for a second time, taking it out beyond March 2018 if necessary. It seems as if oil producers are trying to convince investors that they will “do whatever it takes” to drive prices higher. However, it’s not yet certain that the market is convinced. Both WTI and Brent are still trading short of key resistance around $47 and $49.80 for WTI and Brent respectively. These two levels mark the 50% retracement of the of the May-June sell-off which followed the last OPEC meeting in Vienna. Both contracts have to break through and consolidate above these levels in order to make significant gains.

Gold and silver were both modestly higher in early trade yesterday. The move was a continuation from last week when both precious metals posted solid gains with gold and silver up around 2.0% and 3.4% respectively. Yesterday afternoon silver pulled back from its best levels prior to the European close. However, it was still notable that both precious metals now appear to be consolidating rather than sliding lower on significant profit-taking. Investors are taking heart from the recent sell-off in the US dollar. The greenback has fallen steadily this year and is now trading close to a two-year low against the euro. There’s a growing conviction that the Fed will hold off from raising rates again until the end of the year. Meanwhile, they also expect the European Central Bank to begin winding down its bond purchase programme early in 2018.

Forex Update

·         Euro zone PMIs disappoint

·         IMF downgrades US/UK growth outlook

There was relatively little movement in FX yesterday. The euro drifted lower, pulling back from the 23-month high it hit last week against the US dollar. Partly this was down to some mild profit-taking, triggered by the release of some disappointing updates on Flash Services and Manufacturing PMIs. French, German and Euro zone Services and German and Euro zone Manufacturing PMIs all came in below expectations. In fact, only French Manufacturing showed any improvement from the previous month.

The IMF updated its projections for global growth. In common with many supranational agencies, the IMF doesn’t have the best record when it comes to economic forecasts. Yet despite this, it is widely quoted and held in high esteem by certain NGOs, the BBC and other entities with an axe to grind. In its latest World Economic Outlook, the IMF kept its global growth outlook unchanged for both this year and next at 3.5% and 3.6% respectively. It cut its forecast for US GDP for 2017 to 2.1% from 2.3% previously, and slashed it to 2.1% from 2.5% for 2018. They expect US fiscal policy to be less expansionary than previously anticipated. The IMF also downgraded their outlook for the UK to 1.7% from 2.0% in 2017 while keeping their 2018 forecast unchanged at 1.5%. But they expect these pull-backs in the US and UK to be offset by an improved outlook across much of the Euro zone and Japan. Traders celebrated the report by increasing their exposure to sterling.

Upcoming events

Today’s significant events and economic data releases include German Ifo Business Climate and the UK’s CBI Industrial Order Expectations. From the US we have the S&P/Case Shiller House Price index and Consumer Confidence.

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Spread Co is an execution only service provider. The material on this page is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by Spread Co Ltd or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. This material has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication. As a marketing communication it is not subject to any prohibition on dealing ahead of the dissemination of investment research, although Spread Co operates a conflict of interest policy to prevent the risk of material damage to our clients.”

 

Posted by David Morrison

Tagged: AM Bulletin briefing

Category: AM Bulletin


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