Incisive market commentary from David Morrison

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Collapse 2017 <span class='blogcount'>(348)</span>2017 (348)
Collapse November <span class='blogcount'>(26)</span>November (26)
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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Early moves

·         Stock indices continue to slide lower

·         Nervousness evident ahead of weekend

European stock indices were all trading lower in early trade this morning in a continuation of the weaker tone from yesterday. Investors are certainly exercising some caution ahead of the weekend and many bulls will have been rattled by Wall Street’s sudden sell-off just after the European close last night. No doubt there was some relief as traders quickly rushed in to “buy the dip” thereby pushing the major indices back off their lows. However, the Dow still ended the day 100 points lower leading many investors wondering if it may now be wise to trim back their exposure rather than adding to it, albeit at slightly better levels.

Stock Index Update

·         Dow falls 250 points before recovering

·         US tax reform faces delay

Yesterday saw a significant sell-off across European equity markets. There was a general “risk off” move as investors cut their exposure as it became increasingly likely that the Trump administration’s planned tax reforms will be delayed beyond this year. Meanwhile, the president was in China where he stressed that he would be working to resolve “unfair trade practices” which worked against the US’s interests. Mr Trump has now moved on to Vietnam.

US equities plunged unexpectedly soon after the European close. At one stage the Dow was down over 250 points although it quickly recovered to end the day 100 points, or 0.4%, lower. Again, investors were rattled by the prospect of US tax reforms being delayed. The latest plan from Senate Republicans would mean that the cutting of corporation tax from 35% to 20% wouldn’t come through until 2019. There had been hopes that a deal would be finalised before the end of this year.

Commodities Update

·         Crude rally resumes

·         Gold holding above $1,280

Crude oil rallied yesterday, making back much of its losses from the previous two sessions. Yesterday’s rally took WTI and Brent back within sight of the 28-month highs hit earlier in the week. Both contracts have surged higher this month ever since WTI smashed above the $54.50 level which marked the top end of an area of resistance that had held since the beginning of the year. This followed on from the recovery in the oil price since June as the output cut agreed between OPEC and a number of non-OPEC producers helped to cut global stockpiles. Crude also got a lift after Saudi Arabia’s Crown Prince Mohammed bin Salman instigated an anti-corruption purge aimed at his opponents over the weekend. However, an unexpected rise in US oil inventories together with an uptick in US production and a downturn in Chinese imports all helped to dampen prices during the week. But now investors are looking ahead to the OPEC meeting on 30th November. The expectation is that the output cut agreement will be extended to the end of next year from March 2018, with the possibility of a production cut deeper than the current 1.8 million barrels per day.

Gold spent most of yesterday’s session trading in positive territory and above $1,280. Silver was also in demand for most of the European session although it dropped back below $17 per ounce soon after the US open. Both precious metals got a lift from dollar weakness as investors sold the greenback on concerns that the Trump administration won’t be able to pass tax reform through Congress before the year-end. However, the rally in gold and silver faded as the day went on despite a sell-off across global stock indices which suggested a reduction in investor risk appetite.

Forex Update

·         Dollar continues to slide

·         British pound proving resilient

The dollar came under further selling pressure yesterday as investors continue to doubt the likelihood that Trump’s proposed tax reforms will make it through Congress before the year-end. It now looks as if any corporation tax cut could be delayed by a year, particularly as Republican Senators Ted Cruz and John McCain have said they oppose the proposed legislation. US Treasury yields dipped which also put pressure on the dollar. The greenback lost ground against most of the majors, although the British pound also came under pressure. Yet again, investors were reluctant to increase their exposure to sterling, despite tighter monetary policy from the Bank of England and rising UK inflation. Political commentators are speculating that Theresa May could struggle to hold on as Prime Minister given the recent loss of two Cabinet members and the ongoing “Westminster sex pest” investigations. However, the fact that the GBPUSD spent most of yesterday trading north of 1.3100 suggests that investors are not yet factoring in a change in leadership. Nevertheless, there are concerns that Mrs May’s position is deteriorating and that could adversely affect the UK’s negotiating position in the ongoing Brexit talks.

Upcoming events

Today’s significant events and economic data releases include UK Manufacturing Production, Goods Trade Balance, Construction Output and Industrial Production. From the US we have Consumer Sentiment and Inflation Expectations and banks will be closed in observation of US Veterans’ Day.


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Posted by David Morrison

Tagged: FXTrading equities Brexit DJIA Crude

Category: AM Bulletin

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