Incisive market commentary from David Morrison

Stay ahead with our market commentary and webinars from our in house market strategist

Open a Live AccountOpen a Demo Account
+ Show blog menu



Collapse 2017 <span class='blogcount'>(348)</span>2017 (348)
Expand November <span class='blogcount'>(26)</span>November (26)
Expand October <span class='blogcount'>(24)</span>October (24)
Collapse September <span class='blogcount'>(33)</span>September (33)
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
Expand August <span class='blogcount'>(26)</span>August (26)
Expand July <span class='blogcount'>(32)</span>July (32)
Expand June <span class='blogcount'>(28)</span>June (28)
Expand May <span class='blogcount'>(35)</span>May (35)
Expand April <span class='blogcount'>(31)</span>April (31)
Expand March <span class='blogcount'>(38)</span>March (38)
Expand February <span class='blogcount'>(36)</span>February (36)
Expand January <span class='blogcount'>(39)</span>January (39)
Expand 2016 <span class='blogcount'>(483)</span>2016 (483)


Early moves

·         Euro slides despite Merkel win

·         Investors concerned as Chancellor loses support

There’s been a cautious start to Monday’s trade, particularly across Europe. Equities began the session on the back foot as did the euro following Germany’s general election results. Angela Merkel looks set to clinch the Chancellorship for the fourth successive time. However, her party (CDU) notched up its worst performance in nearly 70 years. The CDU and its sister party the CSU won 33% of the vote, down from 41.5% four years ago. Merkel’s junior coalition partners (the SPD led by Martin Shultz) also haemorrhaged support and have announced they will now go into opposition. Meanwhile the far-right AfD won 12.6% of the vote, finishing third overall. This fractured result means that Merkel will have to use all of her political nous to form a working coalition. The concern is that this could take a while.

Late on Friday ratings agency Moody’s downgraded the UK’s credit rating. Sterling sold off initially, but overall the news had very little market impact. The same can be said of Theresa May’s Brexit speech in Florence which was widely seen as conciliatory - at least as far as the EU was concerned, if not with some within her own cabinet.

Stock Index Update

·         Merkel clinches Chancellorship for fourth time

·         German election overshadows good Euro zone data

European equities have begun the week on the back foot after Sunday’s German election results. 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 support and will now go into opposition. Chancellor Merkel will now have to cobble together some sort of workable coalition. At the same time, there’s disquiet that the anti-immigration AfD party enjoyed a surge in support and now have seats in parliament.

Last Friday morning brought the release of a clutch of Manufacturing and Services PMIs. There was a pick-up in both sectors right across the board with better-than-expected numbers from France, Germany and the Euro zone as a whole. On top of this there was good news on employment as manufacturing and services job creation was the second-highest achieved over the last ten years. The news helped to put a floor under European stock indices which were weaker early in the session.

Nevertheless, traders seemed unwilling to increase their exposure to European equities ahead of the weekend. US stock index futures traded in the red throughout the morning following a North Korean threat to detonate a hydrogen bomb in the Pacific Ocean. This latest provocation from the rogue state came in response to a fresh round of US-led sanctions.

Commodities Update

·         Crude oil consolidates near highs

·         Gold and silver slide again

There was relatively little movement in crude prices during Friday’s morning session as traders hung back ahead of a meeting of major oil producers in Vienna. There had been some speculation that those OPEC and non-OPEC producers who agreed to output cuts last November may once again extend the duration of the undertaking beyond the March 2018 cut-off. However, Russia’s energy minister said there would be no decision on the matter before January. But other ministers insisted that changes could be announced after OPEC’s next official meeting in November. Nevertheless, it was emphasised that this meeting was convened to concentrate on crude exports rather than production itself. As things stand, the production cut agreement doesn’t prevent countries from exporting crude or its distillates from existing inventories. On the surface this would appear to limit the effectiveness of the overall production cut. However, exports are seasonal while production is far less so, meaning that curbing production is a more effective strategy when attempting to rebalance the market. Overall, crude prices continue to hover near multi-month highs, boosted by recent forecasts of rising demand growth.

Gold and silver were sharply lower in early trade on Monday. The move came as once again there was no follow-through to US/North Korean sabre rattling. The two metals rallied during Friday’s session as traders squared short sales ahead of the weekend. Precious metals bulls have had a fairly torrid time of late. Both gold and silver have fallen sharply over the past fortnight following a sustained rally from early July. Over that time the two metals saw an increase in demand thanks to dollar weakness and growing tensions across the Korean peninsula. However, there has been a reduced appetite for safe havens as South Korea made it clear that they would choose North Korea with nukes over military intervention. This effectively puts the kibosh on any US-led hostilities. On top of this the dollar appeared to bottom out adding to downward pressure on gold and silver. This was exacerbated on Wednesday and Thursday as the greenback bounced sharply following a hawkish Federal Reserve meeting. However, now investors have had time to consider the Fed’s statement, Yellen’s press conference and the FOMC’s Summary of Economic Projections, the outcome is not so clear cut.

Forex Update

·         Dollar gives back recent gains

·         Central banks still providing stimulus

There has been widespread agreement since last week’s Fed meeting that the Federal Open Market Committee (FOMC) was unreservedly hawkish. This followed on chiefly from the committee’s “dot plot” forecast for changes to the fed funds rate. This showed a concentration (when compared to June’s predictions) of members anticipating another 25 basis point rate rise before the year-end. However, it’s worth noting that this was a result of three members reducing their forecast to one additional rate hike in 2017 from two. In addition, the longer term forecasts showed that the consensus FOMC view is for a fed funds rate of 2.8%, down from 3.0% in June. All-in-all, this could be interpreted as dovish, which could help explain why the dollar has given back most of its gains since Wednesday night.

But it’s important to bear in mind that quantitative easing isn’t all about the Fed. The Bank of Japan (BOJ) and European Central Bank (ECB) continue to add about $125 billion of stimulus every month.  So far this year global central banks have bought around €2 trillion of financial assets. While there’s speculation that the ECB will start to wind down its €60 billion per month bond buying programme early next year, it’s likely to be at a slow pace. Meanwhile, at yesterday’s BOJ meeting Governor Haruhiko Kuroda made it clear that monetary stimulus would continue for now.

Upcoming events

Today’s significant events and economic data releases include the German Ifo Business Climate survey and the Bank of England’s Financial Policy Committee statement.


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

Category: AM Bulletin

Add a comment Add comment            


© 2018 Spread Co Limited. All Rights Reserved.

Spread Co Limited is a limited liability company registered in England and Wales with its registered office at 22 Bruton Street, London W1J 6QE. Company No. 05614477. Spread Co Limited is authorised and regulated by the Financial Conduct Authority. Register No. 446677.

Spread betting and CFD trading are leveraged products and can result in losses that exceed your deposits. Ensure you understand the risks.

Losses can exceed deposits. Click here to learn more.