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)
Expand September <span class='blogcount'>(33)</span>September (33)
Expand August <span class='blogcount'>(26)</span>August (26)
Collapse July <span class='blogcount'>(32)</span>July (32)
Using the RSI in FX - Trading Guide
31 Jul 2017
HSBC share buy-back helps lift indices - AM Briefing
31 Jul 2017
Amazon triggers tech tumble - AM Briefing
28 Jul 2017
Fed reinforces dovish credentials - Video Update
27 Jul 2017
Facebook results boost NASDAQ - AM Briefing
27 Jul 2017
Crude breaks above resistance - PM Bulletin
26 Jul 2017
Equities rally on positive earnings - AM Briefing
26 Jul 2017
Look-ahead to tomorrow’s rate decision from the Fed
25 Jul 2017
Alphabet/Google falls 3% in after-hours trade
25 Jul 2017
Equities start the week on back-foot - AM Briefing
24 Jul 2017
Euro surges on “hawkish” comments from Draghi - AM Briefing
21 Jul 2017
Equities firmer ahead of ECB meeting - AM Briefing
20 Jul 2017
Europe firmer after late US rally - AM Briefing
19 Jul 2017
US Fed turns dovish - PM Bulletin
18 Jul 2017
Dollar slumps on US healthcare gridlock - AM Briefing
18 Jul 2017
Wall Street leads equity rally - AM Briefing
17 Jul 2017
US bank earnings in focus - AM Briefing
14 Jul 2017
Yellen flip-flops to reassure investors - AM Briefing
13 Jul 2017
Oil rallies, but volatility high - Video Update
12 Jul 2017
Yellen to testify in Washington - AM Briefing
12 Jul 2017
A look-ahead to Janet Yellen’s testimony - PM Bulletin
11 Jul 2017
Second quarter earnings in focus - AM Briefing
11 Jul 2017
Jobs data boost sentiment ahead of earnings - AM Briefing
10 Jul 2017
Investors nervous; Non-Farm Payrolls in focus - AM Briefing
07 Jul 2017
Non-Farm Payroll look-ahead - Video Update
06 Jul 2017
Investors shrug off FOMC minutes - AM Briefing
06 Jul 2017
Investors shrug off FOMC minutes - AM Briefing
06 Jul 2017
Look-ahead to FOMC minutes - Video Update
05 Jul 2017
Markets quiet and waiting for fresh guidance from US - AM Briefing
05 Jul 2017
Crude continues to push higher - PM Bulletin
04 Jul 2017
Dow closes at fresh record high - AM Briefing
04 Jul 2017
Positive start to second half of 2017 - AM Briefing
03 Jul 2017
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

·         Investors bullish as second half gets underway

·         Crude recovery continues

The major European stock indices have kicked off the second half of 2017 on a positive note. Soon after the open the French CAC, Italian MIB and Spanish IBEX had all posted gains of over 1%. The UK’s FTSE100 and German DAX also made solid, if less impressive, gains. Investors hoovered up stocks in the energy and banking sectors. The former is back in favour thanks to the recent recovery in the oil price and as Total prepares to sign a $4.8 billion deal with Iran to develop a gas field. Meanwhile, the banking sector remains in favour following the positive outcome from last week’s Federal Reserve stress tests.

Stock Index Update

·         US indices post solid 6-month gains

·         Central banks turn hawkish

US stock indices ended mixed on Friday night with modest gains for the Dow and S&P500 and a small loss for the tech-heavy NASDAQ. Overall, it was a fairly uninspiring end to the quarter although all the US majors posted solid gains for the first six months of 2017. Both the Dow and S&P500 are up 8% while the NASDAQ100 ended 16% higher, despite the recent pull-back.

European equities drifted lower into Friday’s close to round off a rollercoaster week. The major indices gave back gains made earlier in the session as a bounce-back across US stock markets began to fizzle out towards the European close. Technology stocks were initially among the strongest performers on Friday as the NASDAQ bounced back following Thursday’s sharp sell-off. Investors were struggling to get to grips with a string of hawkish comments from central bankers. Earlier in the week ECB President Mario Draghi and Bank of England Governor Mark Carney both suggested that tighter monetary policy could be on the way. This surprised many investors as Mario Draghi gave a very dovish press conference at the beginning of this month while only last week Carney said conditions weren’t right for a rate hike. In this regard the Bank’s governor is once again behaving like an “unreliable boyfriend”, to quote a member of the Treasury Select Committee in 2014.

Commodities Update

·         Oil rally continues

·         Gold and silver slide lower

Crude oil put in a solid performance last week. Both Brent and WTI are now up over 8% from the lows posted on 21st June. Crude has managed to halt the slide which began straight after the last OPEC meeting at the end of May. However, it’s still too early to confirm if the oil price is set to recover or if there’s more selling to come. Friday’s move saw WTI and Brent break above resistance around $46 and $48.50 respectively. These levels mark the 38.2% Fibonacci Retracement of the May/June sell-off. The two contracts now need to hold above these levels to consolidate. So far the buying has been quite steady which suggests that this is little more than a technical short-covering bounce. However, the rally could suddenly take off if stops are hit and shorts start to panic. On the flip side there’s little positive news out on oil, other than the fact that lower prices lead to lower output which ultimately should see crude recover. But so far there’s been little evidence on any slowdown in US production. At the same time, the OPEC/non-OPEC output cut which came into force at the beginning of this year is failing to make a dent in record-high inventories.

Gold and silver sold off sharply half way through Friday’s session but managed to make back most of their losses by the European close. Despite this, both precious metals have had a disappointing month considering both began June in positive fashion. Nevertheless, gold is up around 7% since the start of this year while silver has tacked on close to 5% over the past six months. The question now is whether the two precious metals can build on these gains or if the current pull-back is set to continue. There’s a strong feeling that gold and silver may struggle to make much headway as central banks indicate that they are preparing to tighten monetary policy. Just this week the European Central Bank, Bank of England and Bank of Canada all suggested that rate increases and/or a reduction in their respective balance sheets could all happen before the year-end. This is not a positive environment for precious metals when inflationary pressures are so low. However, if the prospect of higher rates saw investors slash their exposure to global equities, then gold and silver should benefit on safe-haven demand.

Forex Update

·         Dollar steadies

·         Central bank comments boost euro and sterling

The dollar managed a modest recovery on Friday. This followed a week which saw the greenback lose ground against all the majors. On Thursday the Dollar Index fell below 95.40 to hit its lowest level since beginning of Oct 2016. At the same time the EURUSD broke above 1.1400 to make a 14 month high. Sterling also shot higher, at least against the dollar, as it retested resistance just above the 1.3000 level. Meanwhile at the end of last week the Canadian dollar hit its highest level against the greenback since last September. Bear in mind the US dollar was trading at a fourteen year high against the euro at the beginning of this year.

These big currency moves were all the result of comments from a number of senior central bankers. The heads of the European Central Bank (ECB), Bank of Canada (BOC) and Bank of England (BoE) - together with a number of members of the Federal Reserve - appeared to be making a concerted effort to convince investors that they are all preparing to tighten monetary policy. This caught some investors off guard, particularly as ECB President Mario Draghi and BoE Governor Mark Carney have maintained a solidly dovish attitude for so long, and were talking down the prospect for reducing monetary stimulus only weeks ago. Yet as things stand, these central banks may talk about tightening, but the Fed is the only central bank actually doing something about it. It’s also worth bearing in mind that much of the dollar’s rally between November and January was on the back of Trump’s election win. The current sell-off comes on disappointment that the new president has so far failed to deliver on his campaign promises.

Upcoming events

Today’s significant events and economic data releases include Japanese, Chinese, Swiss, Spanish, Italian, French, German, Euro zone and UK Manufacturing PMIs. From the US we have the ISM Manufacturing PMI, Construction Spending and Total Vehicle Sales.


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.


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.