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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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 Tuesday 06 June 2017

Safe havens in demand - AM Briefing



Early moves

·         Precious metals and yen in demand

·         Sterling points to Tory majority

There’s definitely an overall “risk-off” move across financial markets this morning. The old, reliable safe-haven trades are back in play with precious metals, the Japanese yen and, to a lesser extent, the Swiss franc all well bid. On the other side of the risk ledger European equities and US stock index futures were all under selling pressure first thing. Meanwhile, the yield on the US 10-year Treasury was back down to 2.16% indicating that demand for US government debt remains strong. Crude prices are also slipping again as investors continue to mull the ramifications of the Saudi-led alliance cutting diplomatic ties with Qatar.

Of course there are a number of significant events coming up this week, on top of escalating tensions in the Middle East. On Thursday we have an important ECB meeting and former FBI Director James Comey is set to testify before Congress. We also have the UK General Election which is playing out against a backdrop of the terror attacks in London and Manchester. Recent opinion poll results have proved erratic with the Tory lead over Labour being anything from 1 to 11 points. However, betting markets still have Theresa May’s party picking up an additional 30 seats or so which would be a decent result for the Conservatives given the recent wobble. Investors appear to agree with the punters with sterling holding up well and trading above 1.2900 against the US dollar.

Stock Index Update

·         Apple downgrade weighs on US indices

·         Services data mixed

Yesterday brought a relatively quiet session for US equities. The majors all ended the day modestly lower but close to record highs. US investors paid little attention to the news of the Saudi-led alliance to cut ties with Qatar. Instead it felt as if investors were prepared to push equities higher, but held back following a rare downgrade for Apple. An analyst at Pacific Crest warned that investors have not priced in the potential risk of a supply issue with the new iPhone8. Apple ended the day 1.5% lower.

Yesterday saw the release of a weaker-than-expected ISM Non-Manufacturing PMI for May. This slipped to 56.9 from 57.5 in the previous month. Factory Orders also slipped, coming in at -0.2% from 1.0% previously.

It was a very quiet day across global equity markets on Monday. This was particularly the case in Europe where a number of European stock exchanges were closed for the Whit Monday holiday. But overall there was a softer tone and this was reflected in the UK’s FTSE100 which ended 0.3% lower. The UK equity market came under pressure from some weak data releases and a modest pick-up in the value of sterling. The British pound shrugged off the weekend terror attack and instead rallied on a poll which showed the Tories extending their lead over Labour. This followed a 10-day run where the Conservative poll lead dropped from 18 points to as low as 1. On the data front the UK Services PMI dropped to 53.8 in May, down from 55.8 in the prior month. This was also worse than the 55.1 expected.

Commodities Update

·         Crude turns lower after Saudi action

·         Gold and silver push higher

Crude oil rallied in early trade yesterday morning in a move that took Brent back above $50 per barrel. This followed the news that a Saudi-led coalition had broken diplomatic ties with Qatar. Saudi Arabia, Bahrain, Egypt and the United Arab Emirates suspended all air and sea travel to and from Qatar blaming the latter’s support for terrorist groups for the decision. Yemen and the Maldives have also cut ties. But it didn’t take long for traders to come in and take advantage of the bounce. Qatar has production capacity of around 600,000 barrels per day so is one of OPEC’s smaller members. There are also concerns that the fall-out could jeopardise the recent output cut agreement.

As far as US output is concerned, 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 continue to build on gains from last week. Yesterday both metals hit their highest levels since the third week of April. The two precious metals continue to benefit from a move into safe havens as investors look to diversify their investments. This comes on the back of recent terrorist activity and the upcoming UK election. The ongoing weakness in the US dollar is also helping to lift the two precious metals as has the recent surge in cryptocurrencies such as Bitcoin. Gold and silver flew higher on Friday afternoon following the latest update on US Non-Farm Payrolls (NFP). The headline number came in well below expectations with just 138,000 jobs added in May, against a consensus forecast of 186,000. The feeling is that the US Federal Reserve will still go ahead with a 25 basis point rate hike next week but could well hold off from moving again in September as many expected.  This could put further downside pressure on the dollar which will help to support precious metals.

Forex Update

·         Euro slips on weak data

·         Sterling rallies on polling news

Yesterday saw a relatively quiet session as far as FX trade was concerned. Most currency pairs were little-changed although there was a slight negative bias as far as the euro was concerned. This came on the back of a clutch of weaker-than-expected Services PMIs from Spain, Italy and France. However, this was offset to a degree by a slight improvement in the German data which helped to lift the Euro zone overall.

Sterling managed to rally yesterday despite the terror attack over the weekend and a disappointing Services PMI. Traders reacted to a pick-up in the polls which suggest that the Tory lead over Labour has widened again. The latest poll from ICM shows the Conservative lead at 11 points - well above the polls as we went into the weekend.

Meanwhile the dollar picked up a touch yesterday although it continues to hover around multi-month lows. Friday’s dismal Non-Farm Payroll data has persuaded many people that the US Federal Reserve may be less aggressive than expected when it comes to tightening monetary policy this year. While most analysts expect the Fed to hike next week, the feeling is that the US central bank will hold off from moving again in September.

Upcoming events

Today’s significant events and economic data releases include Euro zone Sentix Investor Confidence and Retail Sales. From the US we have JOLTS Job Openings and IDB/TIPP Economic Optimism.


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Posted by David Morrison

Category: AM Bulletin

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