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EURUSD breaks above resistance - PM Bulletin
31 Jan 2017
Equities recover after Monday’s sell-off - AM Briefing
31 Jan 2017
Trending markets and Andrews’ Pitchfork -Trading Guide
30 Jan 2017
Investors rattled by Trump’s curbs - AM Briefing
30 Jan 2017
Dow holds above 20,000 as dollar firms - AM Briefing
27 Jan 2017
Dow breaks above 20,000 - Video Update
26 Jan 2017
Dow at 20,000 boosts risk appetite - AM Briefing
26 Jan 2017
Dow finally breaks 20,000 - PM Bulletin
25 Jan 2017
Wall Street leads stocks higher - AM Briefing
25 Jan 2017
Consolidation continues - Video Update
24 Jan 2017
Dollar recovery helps lift sentiment - AM Briefing
24 Jan 2017
Money management and stop-losses -Trading Guide
23 Jan 2017
Stocks fall on US protectionism fears - AM Briefing
23 Jan 2017
Trump inauguration in focus - AM Briefing
20 Jan 2017
A look-ahead to Trump’s inauguration - Video Update
19 Jan 2017
ECB President Draghi’s press conference in focus - AM Briefing
19 Jan 2017
Dollar steadies after sell-off - Video Update
18 Jan 2017
Equities drift in featureless trade - AM Briefing
18 Jan 2017
Dollar pull-back lifts precious metals- PM Bulletin
17 Jan 2017
Dollar slumps in early trade - AM Briefing
17 Jan 2017
Charting analysis for beginners - Trading Guide
16 Jan 2017
Sterling slumps on “Hard Brexit” concerns - AM Briefing
16 Jan 2017
Earnings in focus - AM Briefing
13 Jan 2017
Fourth quarter earnings in focus - Video Update
12 Jan 2017
Market Info Update: Martin Luther King Day Monday 16th January 2017
12 Jan 2017
Dollar lower as Trump skips stimulus talk - AM Briefing
12 Jan 2017
Trump news conference - Video Update
11 Jan 2017
Trump press conference in focus - AM Briefing
11 Jan 2017
Has gold turned a corner? - PM Bulletin
10 Jan 2017
Another mixed start for Europe - AM Briefing
10 Jan 2017
Trading Psychology - Trading Guides
09 Jan 2017
Sterling slips on "Hard Brexit" fears - AM Briefing
09 Jan 2017
Non-Farm Payrolls in focus - AM Briefing
06 Jan 2017
Non-Farm Payroll look-ahead - Video Update
05 Jan 2017
FOMC minutes viewed as hawkish - AM Briefing
05 Jan 2017
Look-ahead to release of FOMC minutes - Video Update
04 Jan 2017
FOMC minutes in focus - AM Briefing
04 Jan 2017
Strong start to 2017 - PM Bulletin
03 Jan 2017
Equities push higher in first session of 2017 - AM Briefing
03 Jan 2017
Expand 2016 <span class='blogcount'>(483)</span>2016 (483)
 
 
 

 

Early moves

Strong start for European indices

Sentiment lifted by Chinese data

European stock indices were firmer in early trade this morning, as were US stock index futures. Investors appear to be in a bullish mood as the first full trading session of 2017 gets underway and sentiment was boosted by the releases of Chinese data overnight. China's Caixin Manufacturing PMI came in at 51.9 for December. This was a decent improvement on the prior reading of 50.9 and well above the consensus forecast of 50.7. Overall this represented solid expansion in the sector and helps to bolster the view that the Chinese economy may no longer be slowing down. The Shanghai Composite ended today’s session over 1% higher.

Elsewhere, the dollar is a touch firmer and the Dollar Index continues to trade close to multi-year highs. The EURUSD remains below 1.0500 and this level could now turn into resistance. Investors now have to consider the outlook for the currency pair given last month’s rate hike from the US Federal Reserve, together with its apparent hawkish attitude. Meanwhile, Europe continues to struggle with its unstable banking sector and political uncertainty as elections take place across the European Union in 2017.

Stock Index Update

US indices pull back from record highs

Trump’s market honeymoon continues

Most global equity markets were closed yesterday for the New Year bank holiday. As 2016 drew to a close the major indices pulled back from their best levels. This was probably as much an issue of light trading volumes along with some year-end profit-taking as anything else. It’s worth remembering that the major US indices continue to trade close to their all-time record highs, and the rally since early November is all down to Trump’s surprise election win. Trump’s commitments to cut taxes, boost infrastructure spending and slash regulation are all pro-growth and pro-inflation examples of fiscal stimulus.

There has been some speculation that the stock market rally has been overdone. After all, Mr Trump is still a few weeks away from his inauguration and there are some big question marks over how successful he’ll be at driving his plans through Congress. But by the same token there are many analysts who believe that we’re on the cusp of a new dawn for the US which could bring about unprecedented economic growth and the most positive environment for corporations for a generation. However, Donald Trump’s plans for tax cuts and spending suggest that US national debt levels are set to soar.  With unemployment at a seven year low of 4.6% and inflation picking up there are fears that unleashing these measures now could cause the US economy to overheat. If inflation expectations pick up sharply and bond yields rally in response then this could destabilise equity markets.

Commodities Update

Crude approaches 18-month highs

Gold and silver steadier

Crude oil managed to inch higher throughout the Christmas and New Year period, holding onto the gains made in early December. Back then, WTI and Brent managed to break above resistance around $52 and $54 respectively to hit their highest levels since July 2015. They subsequently fell back on profit-taking but have crept higher over the last three weeks.

Both contracts pushed higher ahead of and after the agreement of OPEC and non-OPEC producers to cut output. Overall, these major producers agreed to cut production by 1.8 million barrels over 2017 with the deal coming into force on 1st January. This was seen as a significant achievement as there had been considerable difficulties ahead of November’s OPEC meeting. However, reaching an agreement and then adhering to it are totally different things. It’s also worth considering that US shale oil drillers (who are not involved in the production cut deal) look set to ramp up production to capitalise on higher prices. Oil analysts believe that this alone could cap the oil price around $60.

2016 was a difficult year for buyers of gold and silver. The two precious metals rallied strongly throughout the first half of the year but subsequently slumped as the US dollar rallied to hit multi-year highs. The real damage (technically) came after Donald Trump clinched victory in the US Presidential Election. Gold and silver soared initially while the dollar slumped. But all three quickly reversed their respective directions as investors priced in what the Trump win (and Republican clean-sweep of Congress) could mean for the US going forward. Trump’s campaign promises of infrastructure spending, tax cuts and slashed regulations are all seen as pro-growth and inflationary. Then the US Federal Reserve finally came through with its first and only rate hike in 2016 with three more forecast for this year. This was all dollar-positive and bad news for precious metals, although both gold and silver managed to steady over the holiday period.

Forex Update

Dollar holds near multi-year highs

EURUSD hovers below 1.0500

The US dollar continues to trade near multi-year highs. The Dollar Index is hovering around 103.00 and is still within a few ticks of the high last seen in January 2003. Meanwhile the EURUSD remains below 1.0500 and this level could now turn into resistance. Two weeks ago the EURUSD broke below 1.0400 to trade at its lowest level in fourteen years. Investors now have to consider the outlook for the currency pair given last month’s rate hike from the US Federal Reserve, together with its apparent hawkish attitude. According to the FOMC’s Summary of Economic Projections, the majority of committee members expect to raise rates by 75 basis points throughout 2017. The consensus expectation had been for 50 basis points.  Meanwhile, Europe continues to struggle with its unstable banking sector and political uncertainty as elections take place across the European Union in 2017. This would suggest that the European Central Bank is likely to remain dovish over the coming year. For these reasons, many analysts expect the dollar to make further gains in 2017.However, some warn that investors are getting overly confident about the rise in the greenback and that a downside correction can’t be ruled out.

Upcoming events

Today’s significant economic data releases and events include German CPI, French CPI, Swiss Manufacturing, German Unemployment Change and the UK’s Manufacturing PMI. From the US we have Construction Spending and the ISM Manufacturing PMI.


Disclaimer: 
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

Tagged: AM Bulletin

Category: AM Bulletin


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