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Non-Farm Payroll look-ahead - Video Update
31 Aug 2017
Tech stocks lead market recovery - AM Briefing
31 Aug 2017
Fall-out from Jackson Hole - Video Update
30 Aug 2017
Investors shrug off North Korean missile launch - AM Briefing
30 Aug 2017
Gold breaks through $1,300 - PM Bulletin
29 Aug 2017
Equities slide after North Korean missile launch - AM Briefing
29 Aug 2017
Yellen and Draghi in focus - AM Briefing
25 Aug 2017
Jackson Hole look-ahead to key speeches - Video Update
23 Aug 2017
Wall Street surges on tax reform hopes - AM Briefing
23 Aug 2017
Euro slips, but range-bound ahead of Jackson Hole - PM Bulletin
22 Aug 2017
Equities recover in early trade - AM Briefing
22 Aug 2017
Equities under pressure as Trump struggles - AM Briefing
21 Aug 2017
Equities fall as investors find reasons to sell - AM Briefing
18 Aug 2017
ECB and FOMC minutes lead to FX volatility
17 Aug 2017
FOMC minutes viewed as dovish - AM Briefing
17 Aug 2017
FOMC minutes in focus - Video Update
16 Aug 2017
Fed minutes in focus - AM Briefing
16 Aug 2017
Sterling slips as inflation steadies - PM Bulletin
15 Aug 2017
Equities continue to recover - AM Briefing
15 Aug 2017
Gold: triple top or third time lucky? - PM Bulletin
14 Aug 2017
Stocks bounce as geopolitical risk eases - AM Briefing
14 Aug 2017
Bank of England rate decision in focus - AM Briefing
03 Aug 2017
Crude breaks above resistance - PM Bulletin
02 Aug 2017
Apple rallies 6% on strong report - AM Briefing
02 Aug 2017
Cable breaks above 1.32000 - PM Bulletin
01 Aug 2017
Apple to report after the close - AM Briefing
01 Aug 2017
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Early moves

·         Equities firmer after uneventful weekend

·         CPI slip reduces chance of rate hike

There’s a firmer tone across European equity markets this morning as US stock index futures pushed higher in overnight trade. Investors are once again taking the opportunity to “buy the dip” and so repeat the strategy that has worked so well for them since March 2009 at the nadir of the financial crisis. Last week’s sell-off came on the back of bellicose words from President Trump directed at North Korea. However, there’s been widespread relief that there was no escalation in Trump’s “tweet war” over the weekend, nor any retaliation in kind from North Korea itself.

Equities also got a lift following Friday’s lower-than-expected US CPI release. Inflation continues to undershoot the Fed’s 2% target and as a consequence investors believe the US central bank will reduce the pace of monetary tightening for the rest of this year.

Stock Index Update

·         Equities bounce back

·         Investors back in “risk-on” mode

Monday’s early trade has seen investors back in “risk-on” mode following last week’s sharp sell-off. There has been widespread relief that the threats and war of words between the US and North Korea didn’t escalate over the weekend. This has led to a sharp bounce across the major European indices and US stock index futures.

Traders had already started to put in some tentative bids on Friday. This followed on from the release of tepid CPI inflation data from the US. Once again, inflation came in lower than anticipated and this saw investors dial down their expectations for further monetary tightening from the Fed for the rest of the year. This gave investors an excuse to pile back in on the long-side and take advantage of Thursday’s sharp sell-off. This saw the major US indices steady and finish Friday with modest gains. Last week’s pull-back took many by surprise and led to concerns that equities could be set for a steeper and more protracted summer sell-off. Certainly, it’s been a long time since equities saw any sizable downside correction. However, a quick look at the charts shows that there’s been no technical damage done, so far. That’s not to imply that the corrective sell-off is over. But at the same time there’s little reason for long-term bulls to panic - for now anyway.

Commodities Update

·         Crude oil’s gains appear capped for now

·         Gold and silver pull back from highs

Crude prices were a touch lower first thing on Monday following the release of some weaker-than-expected Chinese economic data overnight. Industrial Production rose 6.4% annualised in July, well below last month’s 7.6% and the consensus expectation of 7.1%. Retail Sales and Fixed Asset Investment also disappointed. On top of this, there was a slowdown in Chinese refining activity which suggests that there could be a reduction in demand for crude oil from the world’s second largest economy by GDP. Despite this both WTI and Brent continue to trade in relatively tight ranges and within sight of the highs hit at the end of May. But it’s worth noting that WTI has been unable to break and hold above $50 per barrel while Brent has failed to retake the $53 level.

Gold and silver both made strong gains last week on rising tensions between the US and North Korea. The two precious metals shot higher as investors rushed in to get exposure to safe havens. This followed a stream of bellicose tweets from Donald Trump warning North Korea that there would be serious consequences should the rogue nation proceed with firing missiles near Guam. Last week gold closed in on the $1,300 level and hit its highest level since early June. Meanwhile, silver burst above $17 per ounce to tack on over 6% in the course of one week. But earlier today both metals pulled back from their best levels. Investors unwound some of their long-side exposure following an uneventful weekend. There was widespread relief that the geopolitical situation didn’t escalate after Trump’s tweet on Friday when he warned that military solutions were “fully in place, locked and loaded should North Korea act unwisely.”

Forex Update

·         Dollar recovers after modest sell-off

·         Investors take profits on yen

The dollar was a touch firmer in early trade on Monday, following an uneventful weekend. Last week investors sought safety by purchasing Japanese yen and Swiss francs. This followed a sharp escalation in tensions between the US and North Korea. President Trump unleashed a number of bellicose tweets in response to North Korea’s threat to aim its test missiles towards the US territory of Guam. However, there’s been a move to unwind some of these trades this morning as the war of words failed to escalate over the weekend. On top of this yesterday The Wall Street Journal published an opinion piece co-authored by two senior members of the Trump administration. US Secretary of State Rex Tillerson and Secretary of Defence James Mattis made it clear that the US was looking to denuclearise the Korean peninsula by negotiation and was not looking at regime change.

Upcoming events

Today’s significant events and economic data releases include UK CPI, RPI, HPI and the Conference Board Leading Index. From the US we have Retail Sales, the Empire State Manufacturing Index, Import Prices and Business Inventories.

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Posted by David Morrison

Category: AM Bulletin


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