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Collapse 2017 <span class='blogcount'>(348)</span>2017 (348)
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Investors on edge after Wall Street sell-off
30 Jun 2017
Central bankers keep traders guessing - Video Update
29 Jun 2017
Markets mixed ahead of weekend - AM Briefing
23 Jun 2017
Investors concerned over oil sell-off - AM Briefing
22 Jun 2017
Crude oil hits seven-month low - Video Update
21 Jun 2017
Sell-off in crude weighs on equities - AM Briefing
21 Jun 2017
Crude falls back to November lows - PM Bulletin
20 Jun 2017
Fresh records for US indices - AM Briefing
20 Jun 2017
Equity rally resumes - AM Briefing
19 Jun 2017
Markets steady ahead of weekend - AM Briefing
16 Jun 2017
FOMC surprises with “hawkish rate hike” - Video Update
15 Jun 2017
Fed unveils “hawkish rate hike” - AM Briefing
15 Jun 2017
FOMC rate decision in focus - Video Update
14 Jun 2017
Investors expect another Fed rate hike - AM Briefing
14 Jun 2017
FOMC look-ahead - PM Bulletin
13 Jun 2017
NASDAQ futures recover in early trade - AM Briefing
13 Jun 2017
Equities slide after US tech sell-off - AM Briefing
12 Jun 2017
May-hem! Tories chuck away majority - AM Briefing
09 Jun 2017
Brief notes on gold - PM Bulletin
08 Jun 2017
Markets calm as investors take “Risky Thursday” in their stride
08 Jun 2017
Markets becalmed ahead of “Risky Thursday” - AM Briefing
07 Jun 2017
Sterling, events on Thursday and the UK election
06 Jun 2017
Safe havens in demand - AM Briefing
06 Jun 2017
Trading Guides - How CFD trading works
05 Jun 2017
Sterling steady after terror attack - AM Briefing
05 Jun 2017
Non-Farm Payrolls in focus - AM briefing
02 Jun 2017
Non-Farm Payroll look-ahead - Video Update
01 Jun 2017
Crude bounces after US inventory data - AM Briefing
01 Jun 2017
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Early moves

·         European equities firmer in early trade

·         ECB, Comey testimony and UK election in focus

There’s a steadier tone across financial markets this morning with net gains for European equities and US stock index futures. Crude oil and precious metals have also steadied following yesterday’s sharp sell-off.

It’s a big day as far as market risk is concerned with the UK General Election, ECB meeting and former FBI chief James Comey’s testimony before Congress all taking place.

As far as the election is concerned, the consensus view is that, despite running a truly awful campaign, the Tories will be outright winners and build on their current parliamentary majority.

That’s certainly what investors expect, as do the bookmakers. Sterling has remained strong throughout the campaign, even as the Tory poll lead collapsed. The pound flew higher again yesterday afternoon making back most of the losses which followed Theresa May’s disastrous manifesto U-turn on social care. We now have to wait for the exit polls which will be released once the voting concludes at 22:00 BST. 

Markets seem relatively non-plussed by the prospect of former FBI Director James Comey damaging President Trump in his testimony before the Senate Intelligence Committee later today. Mostly this is because Mr Comey’s opening statement was made public yesterday. It was viewed as less harmful to President Trump than some expected. However, it’s worth noting that Mr Comey now has to answer questions from Senate committee members and how that will go is anyone’s guess.

Finally, markets seem convinced that the ECB will retain its dovish outlook. Yet again, today’s meeting has been pre-empted to some extent following a report yesterday that the ECB is set to downwardly revise its inflation projections for the next three years. We’ll know more in a few hours’ time.

Stock Index Update

·         Major indices trade in narrow ranges

·         US indices firmer after release of Comey statement

There was relatively little movement across European equity markets yesterday, although all the majors turned lower into the close. Investors appeared to be trimming their risk exposure ahead of today’s major events which include an ECB meeting and the UK General Election. However, the US majors eked out modest gains and that has helped to lift European stock indices this morning. This followed the release of former FBI Director James Comey’s opening statement for today’s testimony before the Senate Intelligence Committee. This was viewed as less damaging to President Trump than some expected. However, it’s worth noting that Mr Comey now has to answer questions from Senate committee members and how that will go is anyone’s guess.

Yesterday Santander stepped in and rescued troubled Spanish lender Banco Popular. Santander is paying a symbolic euro for all shares of its troubled peer. The Spanish banking giant is set to launch a €7 billion rights issue to shore up Banco Popular’s balance sheet and support the buy-out. However, Martin Gilbert of Aberdeen Asset Management warned that the deal was reminiscent of the Lloyds takeover of Halifax/Bank of Scotland. This went through after political pressure was put on Lloyds to do the takeover in a move which ended in a government rescue of the merged entity.  

Commodities Update

·         Oil slumps on US inventory data

·         Gold and silver consolidate

Oil slumped yesterday afternoon following the release latest US crude oil inventory update from the Energy Information Administration (EIA). This showed a build of 3.9 million barrels of crude against a forecast 3.25 million barrel drawdown. There were also bigger-than-expected builds in gasoline and distillates. The sell-off saw both Brent and WTI hit their lowest levels in four weeks. Both contracts are closing in on the multi-month lows hit at the beginning of May.

Oil prices have come under relentless selling pressure ever since the OPEC meeting in Vienna on 25th May. This was when OPEC and a number of non-OPEC producers agreed to extend their 1.8 million barrel per day output cut by nine months. Unfortunately, this hasn’t proved enough to persuade investors that all parties had done enough to bring the market back into balance.

US output continues to grow with some analysts predicting that production will hit 10 million barrels per day by year-end. US crude output has jumped more than 10 percent since mid-2016 and is currently estimated to be over 9.3 million barrels per day. At the end of last week oil services provider Baker Hughes reported that the US oil rig count rose for the 20th successive week to hit its highest level since April 2015. The rig count was up by 11 last week to hit 733. This is further evidence that the US is now the world’s swing producer when it comes to oil, and this also weighed on prices.

Gold and silver drifted lower for most of yesterday’s session. Both fell sharply at one stage following a report that the ECB was preparing to downgrade its inflation expectations for the next three years. The news saw the euro slump and the dollar rally. However, these moves were mostly unwound later in the session after fresh reports suggested that any downgrades would be small. Gold and silver recovered somewhat but still remained in negative territory. Nevertheless, both metals continue to consolidate with gold holding close to the seven month high it hit on Tuesday. If it can now break and hold above $1,300 then it could be set to make further gains. However, in the short-term much depends on how events play out today. If there’s little market disruption then we should expect precious metals to give back some of their recent gains. Silver is lagging gold to some extent, although it’s fair to say that silver’s sell-off from 17th April to early May was considerably larger in percentage terms (14%) than gold’s (6%).

Forex Update

·         Euro falls on ECB inflation projection

·         Sterling strong ahead of election

There were some interesting moves in FX yesterday morning, although these were largely unwound later in the session. The euro slumped mid-morning in a move which helped the Dollar Index bounce off the multi-month low it hit on Tuesday. Traders were caught off guard after a report suggested that the ECB was preparing to cut its inflation outlook. The ECB meets later today. There’s no suggestion that the central bank will make any changes to either its headline interest rate or to its monthly bond purchase programme. However, investors are concerned about increasing tensions between hawks and doves on the Governing Council. But if yesterday’s report is correct, it sounds as if the official statement will separate out the recent pick-up in growth and employment across the Euro zone and focus on the weaker outlook for inflation. Last month Euro zone Core CPI (excluding food and energy) came in at +0.9% annualised. Not only was this well below the ECB’s 2% target, but it also represented a decline from the prior month’s reading of +1.2%.

Upcoming events

Today’s significant events and economic data releases include the UK General Election, the ECB rate setting meeting and former FBI Director James Comey’s testimony before Congress. We also have German Industrial Production, French Trade Balance and Swiss CPI. From the US we have Weekly Jobless Claims. 


Posted by David Morrison

Category: AM Bulletin

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