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AM Bulletin: Equities and oil slip in early trade
31 Mar 2016
PM Bulletin: Non-Farm Payroll look-ahead
31 Mar 2016
AM Bulletin: Yellen comments boost risk appetite
30 Mar 2016
PM Bulletin: Is a dovish Janet really that bullish?
30 Mar 2016
AM Bulletin: Yellen to speak
29 Mar 2016
PM Bulletin: US indices running into resistance
29 Mar 2016
AM Bulletin: Profit-taking ahead of holiday weekend
24 Mar 2016
PM Bulletin: Dollar correlations
24 Mar 2016
AM Bulletin: Equities head higher
23 Mar 2016
PM Bulletin: Melt-down in precious metals
23 Mar 2016
AM Bulletin: Markets looking for guidance
22 Mar 2016
Weekly Bulletin: US dollar on the back foot
21 Mar 2016
AM Bulletin: USD sell-off boosts oil
18 Mar 2016
PM Bulletin: A look at the S&P500 and FTSE100
18 Mar 2016
AM Bulletin: USD down on dovish Fed
17 Mar 2016
PM Bulletin: USDJPY
17 Mar 2016
AM Bulletin: All ears and eyes on FOMC
16 Mar 2016
PM Bulletin: Reaction to the “Sugar Tax”
16 Mar 2016
AM Bulletin: BOJ unchanged
15 Mar 2016
PM Bulletin: FOMC look-ahead and the USD
15 Mar 2016
Weekly Bulletin: Central banks still in focus
14 Mar 2016
PM Bulletin: Gold
14 Mar 2016
AM Bulletin: Confusion reins
11 Mar 2016
PM Bulletin: EURUSD revisited
11 Mar 2016
AM Bulletin: ECB meeting in focus
10 Mar 2016
PM Bulletin: Mr Draghi fires his bazooka
10 Mar 2016
AM Bulletin: Markets consolidate
09 Mar 2016
PM Bulletin: ECB look-ahead
09 Mar 2016
AM Bulletin: Chinese data weighs on equities
08 Mar 2016
PM Bulletin: Nasdaq 100
08 Mar 2016
Weekly Bulletin: ECB expected to boost stimulus
07 Mar 2016
PM Bulletin: FTSE making steady gains
07 Mar 2016
March: Non Farm Payrolls Out Today
04 Mar 2016
AM Bulletin: Markets quiet ahead of Non-Farms
04 Mar 2016
PM Bulletin: Meanwhile, over in silver...
04 Mar 2016
AM Bulletin: Equities consolidate
03 Mar 2016
PM Bulletin: Non-Farm Payroll look-ahead
03 Mar 2016
AM Bulletin: Equities soar
02 Mar 2016
PM Bulletin: AUDUSD chart
02 Mar 2016
AM Bulletin: See-saw day ends in losses for US equities
01 Mar 2016
PM Bulletin: Glencore
01 Mar 2016
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Indices Update

European equity markets were under pressure in early trade this morning. Investors were rattled by the release of China’s latest trade surplus which showed a sharp decline in February from the previous month. The fall in both exports and imports was far bigger than expected.

We’ve got used to weak Chinese data boosting risk appetite as investors look forward to further stimulus of one form or another. However, the current stock market rally looks due a pull-back, even if it’s just to book profits and trim exposure ahead of this and next week’s central bank meetings. Last night Federal Reserve vice-chair Stanley Fischer took some of the wind out of the market’s sails when he suggested that the “first stirrings of higher inflation” were evident. This was interpreted as leaving open the possibility for a Fed rate hike next Thursday.

European and US stock indices began the week on the back foot yesterday but ended mixed. They gave back gains made in the aftermath of Friday’s US Non-Farm Payroll release. The better-than-expected data had helped equities tack on gains for the third consecutive week. It supported the view that the US economy is improving, despite the ongoing contraction in US manufacturing. The trouble is that the US Federal Reserve pays a lot of attention to payroll data and Friday’s numbers can only increase the possibility of another rate hike next week. However, the Fed funds futures market still sees no chance of this happening. This being the case, a rate hike next week would completely wrong-foot investors and would most likely result in a significant stock market sell-off.

The conundrum for investors is that the equity market rally since 11th February makes it easier for the Fed to raise rates. If stocks were still struggling, there’s no way in the world that the Fed would risk another rate hike. But an improvement in financial conditions, stronger payroll data and positive investor sentiment make a March hike a possibility.

Nevertheless, investors appear unwilling to take on much more exposure ahead of this week’s European Central Bank (ECB) meeting and rate decision. There are high expectations of further monetary stimulus being announced by the ECB. This should help to boost risk appetite and lift equities. However, there is always a chance that the ECB disappoints, just as it did in December. This would seem unlikely given the unfavourable market reaction back then. But ECB President Mario Draghi may end up being long on promises and short on deeds if other members of the Governing Council object to further stimulus at this stage.

The FTSE 100 index closed at 6,182.4 down 17 points on the day, or -0.3%

The German DAX rose 27 points or 0.3% to finish at 9,778.9

The US30 closed up 67.2 points to finish at 16,125.8. The S&P 500 rose 1.8% to close at 2,001.8 while the Nasdaq 100 fell 0.6% to close at 4,303.3

Equities Update

There is speculation of a break-up after Anglo-South African financial services company Old Mutual (OML) worked on its strategic review. Over the weekend Sky and The Sunday Times reported that the group was looking to divide itself into four standalone companies comprising its stake in South African lender Nedbank Group, its prized UK-focused wealth unit, Old Mutual Wealth, its South Africa-based emerging markets operation, and its international asset management business. The stock ended the day 6.9% higher at 192.1 pence.

Commodities Update

Brent and WTI pushed higher yesterday. The gains were modest throughout the European session but then the two contracts shot higher soon after the US open. Oil got a boost following a report from Genscape which showed a smaller-than-expected build in crude at the US‘s Cushing hub. Genscape’s data on Cushing inventories is highly regarded by the oil market. This is because the company uses actual tank volumes in its storage measurements rather than voluntary reporting or accounting flows. The news saw the front-month Brent contract top $40 for the first time since early December. Back then oil was still declining steadily, whereas it has now been rallying for three weeks. WTI is closing in on $38. The area around here acted as resistance throughout December last year.

Meanwhile, the US oil rig count is back down to levels last seen in December 2009. Saudi Arabia may be determined to keep its production at record levels in a bid to hold on to market share, but US producers prefer to mothball rigs until better prices are available. According to last week’s report from the Energy Information administration (EIA), US output has dropped by around 25,000 barrels per day (bpd) to 9 million bpd. Last April the US was pumping out around 9.6 million bpd. However, if WTI manages to push back up to $40 again (not a million miles from current levels) then US production could come back on stream very quickly.

Usually dollar-denominated commodities (particularly precious metals) struggle when the greenback rises, but that wasn’t the case on Monday. Gold and silver were both firmer in early trade and managed to hang on to these gains throughout the European session. Gold continues to build a base above $1,240, and the 20, 50 and 100-day moving averages are all comfortably above the 200. This should continue to be supportive for prices.

For silver, the 20-day moving average is above the 200, while the 50 and 100 are closing in. Silver put in a strong rally last week but has so far struggled to break and hold above resistance in the $15.70/75 area. This is the 76.4% Fibonacci Retracement of the October-December 2015 sell-off. It also acted as both support and resistance on a number of occasions last year. If it continues to fail to take out this level then there is always the risk of another sharp sell-off. While both gold and silver have gained plenty of upside momentum over the past couple of months, investors will be keeping a very close eye on the upcoming central bank decisions and the US dollar. If the dollar resumes its rally then we could see a pull-back in the two precious metals.

Forex Update

The US dollar spent yesterday’s European session in positive territory and made gains against all the majors. To some extent this was a response to the sell-off at the end of last week. Investors were busy taking profits on their long-dollar positions ahead of Friday’s Non-Farm Payroll release. There was also talk of the euro getting a lift from several big orders which possibly spooked traders leading to an exaggerated move in FX.

Now investors are looking ahead to Thursday’s ECB rate decision and Mario Draghi’s subsequent press conference. The consensus expectation is for yet another cut in the discount rate and an increase in the ECB’s monthly bond purchase programme. There is always the danger that the ECB will come up short of market expectations, leading to a sharp rally in the EURUSD. However, Mr Draghi will be wary of disappointing investors as he did back in December. If he manages to over-deliver, then the euro should weaken somewhat, although any moves are likely to be limited ahead of the Fed’s FOMC rate decision the following week.

Upcoming events

Today’s key economic events include the release of Swiss CPI, ECOFIN meetings, a speech from Bank of England Governor Mark Carney, Euro zone revised GDP and Canadian Housing Starts and Building Permits.

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

Category: AM Bulletin


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