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EURUSD hovers around 1.1800 - AM Briefing
29 Sep 2017
Trump tax reform lifts Wall Street - AM Briefing
28 Sep 2017
What is the Fed trying to tell us? - PM Bulletin
27 Sep 2017
Yellen struggles with inflation - AM Briefing
27 Sep 2017
Can cable’s rally continue? - PM Bulletin
26 Sep 2017
Investors jittery after North Korean threat - AM Briefing
26 Sep 2017
EURUSD slips again - PM bulletin
25 Sep 2017
Merkel scrambles to form coalition - AM Briefing
25 Sep 2017
Caution ahead of weekend - AM Briefing
22 Sep 2017
Fed Meeting Post-Mortem - Video Update
21 Sep 2017
Fed signals another rate hike - AM Briefing
21 Sep 2017
Trading subdued ahead of Fed meeting - Video Update
20 Sep 2017
Fed expected to reduce balance sheet - AM Briefing
20 Sep 2017
FOMC and balance sheet reduction - PM Bulletin
19 Sep 2017
Dow hits fresh record high - AM Briefing
19 Sep 2017
EURUSD continues to trend higher - PM Bulletin
18 Sep 2017
Global indices storm higher - AM Briefing
18 Sep 2017
Investors shrug off NK missile test - AM Briefing
15 Sep 2017
Sterling soars after BoE meeting - Video Update
14 Sep 2017
Bank of England meeting in focus - AM Briefing
14 Sep 2017
Look-ahead to the BoE monetary policy meeting - Video Update
13 Sep 2017
Sterling bounces as inflation picks up - PM Bulletin
12 Sep 2017
Wall Street rally lifts sentiment - AM Briefing
12 Sep 2017
Euro storms higher - AM Briefing
08 Sep 2017
ECB meeting in focus - AM Briefing
07 Sep 2017
EURUSD soars during Draghi’s press conference - Video Update
07 Sep 2017
ECB meeting, a look-ahead to Thursday - Video Update
06 Sep 2017
Wall Street wobbles, but closes off lows - AM Briefing
06 Sep 2017
WTI recovering as clean-up continues - PM bulletin
05 Sep 2017
Investors shrug off North Korean threat - AM Briefing
05 Sep 2017
North Korean nuclear test boosts gold - PM Bulletin
04 Sep 2017
North Korea rattles markets - AM Briefing
04 Sep 2017
High hopes for the latest US jobs release - AM Briefing
01 Sep 2017
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Early moves

·         European indices turn lower

·         Merkel starts coalition negotiations

European stock indices were mixed on the open but subsequently turned negative. This is despite the US majors ending only modestly lower last night, bouncing off the lows hit before the European close. Investors remain unsettled after North Korea’s foreign minister said a tweet from President Trump was a declaration of war. As such, this meant that the rogue state was within its rights to shoot down US military aircraft even if they were flying outside North Korea’s airspace.

But this is just one more brick in the “wall of worry” which investors continue to scale. Others include the German general election which has left Chancellor Merkel in a worse position than UK Prime Minister Theresa May. Frau Merkel has to negotiate with three other parties in order to achieve a workable majority, while excluding the anti-immigration AfD and her old coalition partners the SPD.

Last week the US Federal Reserve triggered a rally in the dollar as it appeared to signal a more hawkish stance towards monetary policy. This followed the release of the FOMC’s “dot plot” which forecast four 25 basis point rate hikes between now and the end of 2018. However, the Fed’s longer-term rate projections were nudged down a touch and this helped to temper the dollar’s rise.

Stock Index Update

·         North Korea accuses Trump of declaring war

·         Merkel may struggle to form coalition

Global stock indices suddenly plunged yesterday afternoon led by the US majors. The sell-off came after North Korea’s foreign minister claimed that President Trump had effectively declared war on the country. As a result the rogue state now has the right to shoot down US military aircraft, even if they’re not in North Korean airspace. The US majors all closed lower on Monday, but off their lows.

European equities were generally weaker on yesterday’s open following German election results. Support for the three main parties slumped as voters switched their allegiance to smaller groupings. This saw the far right anti-immigration AfD party win a significant number of seats although they’re unlikely to go into coalition with Chancellor Merkel. However, this will just make Mrs Merkel’s job harder as she tries to form a workable coalition. This looks likely to involve around four different parties as previous coalition partners, the SPD, who also had a dismal showing, will now work in opposition to Merkel. The European majors soon reversed early declines only to lose ground again following fresh provocations from North Korea.

Commodities Update

·         Crude hits 5-month high

·         Precious metals bounce on North Korean “war” statement

Yesterday WTI broke above $52 and went on to hit its highest intra-day level since mid-April. Traders rushed to cover shorts and re-establish long positions ahead of the referendum on Kurdish independence. They were spooked by comments from Turkey’s President Tayyip Erdogan after he threatened to cut the pipeline which carries oil from Northern Iraq to the rest of the world. WTI is consolidating above $52.00 which marks the high from 25th May just before OPEC and non-OPEC disappointed investors by failing to agree to deepen output cuts.

On Friday afternoon Baker Hughes released its latest US oil rig count data. This fell by five to 744 and has now declined for the sixth week in a row. This suggests that US shale production may have peaked, suggesting that there may be less downside pressure on prices (WTI in particular) from shale going forward. However, Chevron says it plans to invest around $4 billion in the Permian Basin. The company says it expects output for the whole area to grow to 3.8 million barrels per day (bpd) from 2.4 million bpd currently.

Gold and silver suddenly shot higher yesterday afternoon after North Korea’s foreign minister claimed President Trump had declared war on the regime. Both metals pushed higher again in this morning’s Asian Pacific session but have given back early gains. Gold and silver fell sharply in early trade yesterday. Both metals had rallied on Friday as traders positioned themselves ahead of the weekend. Partly this was down to profit-taking and position squaring by short-sellers. But this in itself was a function of a slew of threats and insults traded by President Trump and North Korea’s leadership. North Korea threatened to detonate a hydrogen bomb in the Pacific after Trump said he would be prepared to “totally destroy” the country if the US or its allies were threatened. So yesterday the safe haven trade unwound and this was exacerbated by a rally in the US dollar. The greenback’s recovery came as German Chancellor Angela Merkel had a disappointing election result and will have to work hard to form a workable coalition.

Forex Update

·         Euro slides as Merkel weakened

·         EURUSD support around 1.1800

The Japanese yen spiked higher yesterday afternoon, and made particularly strong gains versus the euro. The “safe haven” move came after North Korea’s foreign minister claimed that President Trump had declared war on the country.

The US dollar was also firmer yesterday, but that was just a by-product of euro weakness. The single currency fell sharply after the German election results came through. Angela Merkel won a fourth successive term in office, but overall her party lost support, registering its worst result since 1949. Her SPD coalition party also haemorrhaged votes and will now go into opposition. Chancellor Merkel will now have to cobble together some sort of workable coalition and this looks likely to exclude the right wing anti-immigration AfD party which got the third biggest percentage of votes and now has seats in parliament. The euro is also coming under pressure ahead of this weekend’s Catalonian referendum in Spain. The vote has been deemed illegal by the Spanish government, although it looks like it will go ahead. The danger for the euro is if there’s a significant vote in favour of Catalonian independence. As things stand, EURUSD resistance comes in around 1.2000 with support around 1.1800.

Upcoming events

Today’s significant events and economic data releases all come from the US and include the S&P/Case Shiller House Price Index, Consumer Confidence, New Home Sales and the Richmond Manufacturing Index. We also have speeches from Fed Chair Janet Yellen and FOMC-voting member Lael Brainard.  

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Posted by David Morrison

Category: AM Bulletin


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