Incisive market commentary from David Morrison

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Collapse 2017 <span class='blogcount'>(348)</span>2017 (348)
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Tory Poll Lead Narrows Sharply - Video Update
31 May 2017
S&P 500 and NASDAQ break winning streak
31 May 2017
Sterling swings on polls - PM Bulletin
30 May 2017
Equities drift after long holiday weekend - AM Briefing
30 May 2017
Crude oil slumps on OPEC disappointment - AM Briefing
26 May 2017
OPEC disappoints while FOMC minutes provide cheer - Video Update
25 May 2017
OPEC expected to agree 9-month extension - AM Briefing
25 May 2017
Look-ahead to OPEC - Video Update
24 May 2017
Markets quiet ahead of FOMC minutes and OPEC - AM Briefing
24 May 2017
Crude oil update - OPEC meeting in focus - PM Bulletin
23 May 2017
Markets shrug off atrocity in Manchester - AM Briefing
23 May 2017
Equities mixed, but supported by oil
22 May 2017
Nerves steady after firmer close on Wall Street - AM Briefing
19 May 2017
Political fall-out continues to weigh on markets - Video Update
18 May 2017
Slide in European indices accelerates - AM Bulletin
18 May 2017
Trump’s woes hit markets - Video Update
17 May 2017
Trump’s woes lead to market wobble - AM Briefing
17 May 2017
EURUSD hits six-month high - PM Bulletin
16 May 2017
Crude oil extends rally - AM Briefing
16 May 2017
US inflation data and retail sales in focus - AM Briefing
12 May 2017
Crude oil recovers after “flash crash”- Video Update
11 May 2017
Crude oil soars while equities drift - AM Briefing
11 May 2017
Are investors too complacent? - Video Update
10 May 2017
Investors rattled after Trump fires FBI head - AM bulletin
10 May 2017
Crude oil’s “flash crash” leads to OPEC desperation - PM Bulletin
09 May 2017
Equities rally as oil steadies - AM Briefing
09 May 2017
Forex: Top Ten Tips for beginners - Trading Guides
08 May 2017
Markets little moved after Macron win - AM Briefing
08 May 2017
Payrolls in focus - AM Briefing
05 May 2017
NFP look-ahead - Video Update
04 May 2017
FOMC hints at rate hike in June - AM Briefing
04 May 2017
FOMC look-ahead - Video Update
03 May 2017
Apple disappoints on sales numbers - AM Briefing
03 May 2017
CFD Trading Tips - Trading Guides
02 May 2017
European traders return after May Day - AM Briefing
02 May 2017
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Early moves

·         Wall Street posts modest gains

·         Nerves steady, but Washington eyed

There’s a general feeling of relief that the US-led sell-off didn’t accelerate last night. Instead, all the major US stock indices managed to post modest gains despite earlier weakness. It may be too soon to sound the all-clear but so far investors are doing exactly what they’ve done for the past eight years: using any significant pull-back in equity markets as a buying opportunity. But what will be of interest is to see if this bounce-back has the strength and conviction to push the indices back up towards or beyond recent record highs. Most of the trading gaps which formed after the first round of the French presidential election have now been filled. So technically there’s every chance of a resumption of a US-led stock market rally. In the near-term much depends on what comes out of Washington. But for now most investors will be happy to go into the weekend with another positive session for the major indices.

Stock Index Update

·         Washington in focus

·         Special Counsel appointed

European and US stock indices see-sawed around in early trade yesterday. There was an initial bounce in US futures but this soon evaporated and all the US majors turned negative mid-morning, taking Europe with them. In the early hours of Thursday it was revealed that Deputy Attorney General Rod Rosenstein had approached ex-FBI head Robert Mueller to act as Special Counsel to investigate the Trump administration’s contacts with Russia ahead of and immediately after the US presidential election. The news saw Democrats cock-a-hoop on the hope that this would lead to Trump’s ultimate impeachment. But there’s also a school of thought that Mr Mueller could be just the person to bring this issue to a rapid conclusion - for better or worse for all sides. It’s certainly apparent that even Trump’s most visible opponents amongst the Republicans (such as John McCain) are rallying to his defence. If this continues, then impeachment isn’t going to happen.

Investors had been concerned that Trump’s woes were bound to hold up all his plans for infrastructure spending, tax cuts and regulatory roll-back. However, it could be that his current difficulties galvanise Republicans in Congress to speed up the legislative process, and actually achieve something before mid-term elections next year. It is thoughts such as these which helped to boost sentiment and led to a modest recovery on Wall Street last night.

Commodities Update

·         Crude oil pulls back

·         Precious metals slip

Crude oil continues to push higher. Brent and WTI are now up around 11 to 12% since hitting multi-month lows at the beginning of May. Yesterday’s pick-up followed on from a rally that began on Wednesday. This got an additional impetus from the release of the latest official inventory update from the Energy Information Administration (EIA). The EIA data showed significant drawdowns for crude and distillates, contradicting data from the American Petroleum Institute the day before. Despite this, US crude stocks are higher than this time last year while surplus supply is being exported to Asian buyers.

Yet the market continues to get support from speculation that Saudi Arabia and Russia are preparing the ground for an extension to the output cut which is currently set to end in June. An announcement could come after OPEC’s meeting in Vienna on Thursday next week.

Gold and silver pulled back from their Wednesday highs yesterday following a succession of positive trading sessions. Prior to yesterday’s sell-off, gold was up over 3% from a week ago and silver tacked on the best part of 4% over the same period. The gains came on a combination of short-covering following a steep and protracted sell-off together with a rush to traditional safe havens after US equity markets suffered their steepest falls in six months in Wednesday’s trading session. Investors were rattled by the escalation in the brouhaha concerning the Trump administration’s dealings with Russia in the lead-up to and immediately following the US presidential election. This hit a new level of seriousness after Ex-FBI Director James Comey alleged that President Trump attempted to intimidate him into calling off an investigation into Michael Ryan. Mr Ryan was Trump’s original pick as National Security advisor but was forced to resign as it became apparent he had failed to disclose details over his contacts with Russian officials. Yesterday the two precious metals pulled back from their best levels as equity markets stabilised. This came as Deputy Attorney General Rod Rosenstein appointed Ex-FBI head Robert Mueller as special counsel to investigate the Trump administration’s Russian dealings.

Forex Update

·         GBPUSD breaks above 1.3000

·         UK Retail Sales surprise to upside

Yesterday saw a calmer session in currency markets. The US dollar steadied after falling in five consecutive sessions, at least when measured against the basket of currencies in the Dollar Index. Nevertheless, the greenback was still trading near six-month lows, around levels seen ahead of November’s US presidential election. Meanwhile, the GBPUSD smashed above 1.3000 to hit its highest level since the end of September last year. This was just days before sterling suffered a “flash crash” in Asian Pacific trading when it lost perhaps as much as 15% in fifteen minutes before recovering most of these losses. Yesterday it was the release of a better-than-expected UK economic data number which was the trigger for the rally. Retail Sales rose 2.3% in April from the prior month - well above the 1.2% increase expected, and a huge improvement on March’s reading which showed a fall of 1.4%.

Sterling’s most recent push higher began in mid-April after UK Prime Minister Theresa May called a snap election. The Tories have a substantial poll lead over Labour and the current view is that Mrs May should secure a big majority. This helps to “legitimise” her position as Prime Minister and should strengthen her hand when it comes to Brexit negotiations.

Upcoming events

Today’s significant events and economic data releases include the Euro zone Current Account, Euro zone Consumer Confidence, UK CBI Industrial Order Expectations, Canadian CPI and Retail Sales. 


Posted by David Morrison

Category: AM Bulletin

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