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

·         Softer tone across European equities

·         Chinese trade data mixed

European stock indices and US stock index futures were mixed first thing this morning, although with an overall softer bias. Earnings are still in focus although we’ve now seen the bulk come through and there’s a general feeling of inertia. On top of that, results from retailers generally mark the end of the earnings season and few expect there to be much in the way of good news from “bricks and mortar” store groups.

Precious metals are a touch firmer this morning, helped along by a pull-back in the US dollar. Oil is a touch weaker, weighed down by the release of some negative inventory data from the American Petroleum Institute after last night’s close, together with a unexpected decline in Chinese crude imports.

Yesterday morning the Japanese Nikkei surged 1.7% and closed out at its highest level since 1992. However, this still left it over 40% below its all-time record close hit back in December 1989. This morning it ended little-changed as investors absorbed China’s latest trade data. This was mixed with imports coming in above expectations (except crude) but exports lower than anticipated.

Stock Index Update

·         Dow hits fresh record close

·         But broader-based Russell falls 1.26%

US stock indices ended yesterday’s session mixed, with modest losses for the S&P500 and NASDAQ100 and a small gain for the Dow. The latter was enough to propel the industrial average to a fresh all-time record close. However, it’s worth noting that the Russell2000 (an index of 2,000 stocks of smaller US companies) fell over 1%, indicating the narrow breadth of the current rally in US equities.

European stock indices gave back early gains and this saw them end Tuesday in negative territory. Investors had begun the session in a positive frame of mind, following fresh record closes across Wall Street on the back of news of a record-braking takeover deal. On Monday Broadcom announced that it had made a €103 billion offer for rival chip-maker Qualcomm. If the deal goes ahead then it will be the biggest tech sector takeover of all time, and the news helped to lift the semiconductor sector. But sentiment turned negative later in Tuesday’s session. This wasn’t helped by a sharp sell-off in Anglo-German chipmaker Dialog. The company released disappointing forward guidance for the rest of the year.

Commodities Update

·         Crude slips on profit-taking

·         Precious metals slide again

Last night the American Petroleum Institute (API) released its latest US crude inventory update. This showed an unexpected build in gasoline stocks and a lower-than-expected draw in crude. The news has helped keep a lid on prices this morning and traders will be watching out for today’s inventory release from the Energy Information Administration (EIA) to see if this agency confirms last night’s report. Prices were also under pressure first thing this morning following a fall in Chinese imports.

Crude prices have spike sharply higher since WTI broke above resistance last week. We now need to see WTI consolidate before it is in a position to push on and test $60. While there are positive fundamentals out there (including growing tensions between Saudi Arabia and Iran, Saudi’s anti-corruption push, falling global inventories and a decline in US shale production) it does look as if crude has rallied too far too fast. This is particularly the case as much of the move since the summer has been on the back of last year’s OPEC/non-OPEC production cut agreement. More recently, there has been considerable speculation that this output cut will be extended in duration, and possibly size as well, at this month’s OPEC meeting. But much of this expectation is already priced in so there’s scope for disappointment. While some analysts view the tensions between Saudi Arabia and Iran as positive for oil, prices could turn lower if Iran now refuses to cooperate at the next OPEC meeting.

Gold and silver lost ground yesterday as sellers took advantage of Monday’s late price hike to short the two precious metals. The trigger for the sell-off was the bounce-back in the US dollar which rallied sharply against all the major currencies. The Dollar Index came within a few ticks of 95.00 and is now up more than 4% since it hit a two year nine month low at the beginning of September. Gold and silver are both down close to 6% over the same period. Yesterday’s sell-off was relatively mild to begin with but accelerated later in the afternoon. Chart-wise, gold is struggling to break back above $1,280 and this is currently acting as resistance. The area around $1,265 has offered support over the last two weeks. Resistance for silver comes in around $17.20 with $16.60 acting as support.

Forex Update

·         Dollar gives back early gains

·         Aussie dollar and “Loonie” fall sharply

We saw some significant currency moves early yesterday as most of the majors lost ground against the US dollar. However, the greenback lost ground later in the day to end little-changed versus the euro. This came on reports that Trump’s planned corporate tax cut could be delayed. Nevertheless, the sell-off in both the Canadian and Australian dollar was particularly noteworthy with the latter following on from a rate statement from Reserve Bank of Australia (RBA) Governor, Philip Lowe. The RBA left its Cash Rate unchanged at 1.5% as expected, but Mr Lowe warned of uncertainty over household consumption as the housing market slows.

The Canadian dollar fell sharply just one day after a JP Morgan currency analyst recommended it as a “buy.” The timing of the recommendation was unfortunate and yesterday’s move went a long way to reversing the USDCAD’s losses since the beginning of the month. But it looks as if the “Loonie” just got caught up in a general move into the US dollar rather than anything specific.

Upcoming events

Today’s significant events and economic data releases include the French Trade Balance and Canadian Building Permits. From the US we have Crude Oil Inventories.


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Posted by David Morrison

Tagged: Dollar Brent crudeoil equities nikkei

Category: AM Bulletin

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