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Dark clouds ahead?
29 Jul 2016
BOJ underwhelms – JPY soars
29 Jul 2016
PM Bulletin: BOJ look-ahead
28 Jul 2016
AM Bulletin: FOMC leaves rates unchanged
28 Jul 2016
PM Bulletin: Yen swinging wildly on stimulus talk
27 Jul 2016
AM Bulletin: Fed rate decision and FOMC statement in focus
27 Jul 2016
PM Bulletin: FOMC look-ahead (and Japanese stimulus talk)
26 Jul 2016
AM Bulletin: FOMC meeting begins today
26 Jul 2016
Platform Tours: CFD Trading - Check Open P & L
25 Jul 2016
PM Bulletin: EURUSD breaks below 1.1000
25 Jul 2016
Weekly Bulletin: Fed and BOJ in focus
25 Jul 2016
PM Bulletin: Sterling looking vulnerable again
22 Jul 2016
AM Bulletin: Stocks lower as oil weighs
22 Jul 2016
PM Bulletin: The EURUSD and the ECB
21 Jul 2016
AM Bulletin: ECB rate decision ahead
21 Jul 2016
PM Bulletin: ECB look-ahead
20 Jul 2016
AM Bulletin: Q2 earnings keep markets buoyant
20 Jul 2016
PM Bulletin: A look at the yen
19 Jul 2016
AM Bulletin: More records for US equities
19 Jul 2016
PM Bulletin: Precious metals pull back
18 Jul 2016
Weekly Bulletin: It’s all about stimulus
18 Jul 2016
PM Bulletin: European banks in trouble
15 Jul 2016
AM Bulletin: Sombre mood following Nice atrocity
15 Jul 2016
PM Bulletin: The BoE rate decision
14 Jul 2016
AM Bulletin: All eyes on Bank of England
14 Jul 2016
PM Bulletin: BoE Rate Decision in focus
13 Jul 2016
AM Bulletin: Equities drift lower after record US close
13 Jul 2016
PM Bulletin: Global indices pushing higher
12 Jul 2016
AM Bulletin: Equity rally powers on
12 Jul 2016
PM Bulletin: Fresh record high for S&P500
11 Jul 2016
Weekly Bulletin: The markets called, NFPs answered
11 Jul 2016
AM Bulletin: The calm before the storm; Markets await today’s NFPs
08 Jul 2016
PM Bulletin: Non-Farm Payroll look-ahead
07 Jul 2016
AM Bulletin: As the Fed turns dovish, the markets turn bullish
07 Jul 2016
AM Bulletin: Concerns continue as Sterling touches $1.27
06 Jul 2016
AM Bulletin: Markets open higher, weak UK Construction PMI data removes confidence
05 Jul 2016
Weekly Bulletin: Central Banks react to Brexit vote
04 Jul 2016
AM Bulletin: When Carney speaks, the markets listen
01 Jul 2016
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Indices update

Once again Europe’s eyes were focused on the UK throughout Tuesday. The session began with June’s service-sector PMI for the UK coming out slightly below expected at 52.3, off 0.4 of the predicted 52.7 and well below May’s figure of 53.5. Although this did not have a huge effect on the blue-chip focused FTSE100 index, it does not tell a healthy story for a modern, service-driven economy such as Britain’s. This figure was, however, overshadowed by Carney’s speech a couple hours later. The Bank of England chair stated that the focus of the latest Financial Stability Report was stimulus for the UK economy, starting with lower capital requirements for banks which should allow them to lend more to both businesses and households, to an apparent sum of £150 billion. In order to achieve this, the bank has now reduced the counter-cyclical capital buffer to 0%, down from 0.5%, and will stay as such until at least June 2017.
All of this paints a sour picture for the country’s foreseeable future, as fears of an ever-approaching recession increase. Rarely is there a situation where an eye for detail provides a completely opposing story than observing the behaviour of the UK’s top stock index, as despite all the negative sentiment, the FTSE100 closed for the day up 0.4% at 6,545.37. Only on closer inspection can you understand why. It was a battle of sell-offs and buy-ins, as the pound tanked against most of its counterparties. London can be thankful there are so many companies focused on exports, with huge revenue exposure outside of the UK, as the weak pound gave their share prices a nice bump in the right direction.
The banking sector was one of the worst hit, despite signs of improvement initially after Carney’s speech. RBS closed down 5.4%, Lloyds fell 3.9%, Barclays dropped 0.5% and Standard Chartered settled down 2.1%, with HSBC one of the few to hold ground, scraping a 0.2% gain.  To make matters worse for the broader financial sector, the selling began to target home builders, real-estate investment trusts and asset managers as the outlook for UK property looked bleak after Carney announced a 50% fall in foreign investment for UK commercial property for Q1. This was coupled with lower than expected figures for construction activity in June. The selloff was so intense that Standard Life Investments, Aviva Investors and M&G Investments all decided to temporarily suspend trading in their commercial property funds.
A truer reflection of the state of the UK economy can come from the performance on the FTSE250. This midcap index is comprised of more UK-focused companies, and it definitely showed as by the end of the session it was trading down 2.4%. The same performance was seen throughout Europe, as the continent awaits a new Conservative leader to take over at 10 Downing Street and begin negotiating Britain’s EU exit. The German Dax finished 1.8% lower at 9,532.61.
With many traders undoubtedly nursing their post-Independence day wounds, trading volumes were fairly light during Tuesday’s US session. Lower volumes can often create much larger price movements, which may have kept smaller investors at bay. With the pessimism from Europe clearly spilling over the Atlantic, American markets saw their healthy four-session rally come to an end with the move mainly attributed to low crude prices dragging down energy shares. The Dow lost 0.6% by the end to close at 17,840.62 after reaching a session low of 17,785. The S&P and the Nasdaq Comp followed suit to settle down 0.7% and 0.8%, respectively. One positive for US markets came as Federal Reserve member Dudley gave his speech. He mentioned the decreasing likelihood of a further rate hike due to low inflation and widespread uncertainty for much of the developed world.
The Asian session saw money being poured into the safe havens, increasing Japanese woes as their yen strengthened once more. This of course had a negative effect on their export-driven stock market, pulling the Nikkei down 1.8%. Elsewhere in the region, Hong Kong’s Hang Seng fell 1.7% and China’s Shanghai Composite lost 0.1%.
Equities update
Oil giants Chevron and Exxon Mobil announced they have committed to a $36.7 billion oil expansion project in Kazakhstan. This deal goes down as the greatest investment in oil extraction since prices fell below $100 a barrel two years ago, hoping to bring production levels in the Tengiz oil field up by 200,000 barrels a day to 1 million, with a completion date of 2022.
ITV were in the news this morning as they look to seek royalties from pay-TV operator Virgin Media. Public sector broadcasters, including ITV, Channel 5 and the BBC, have been campaigning for years to get compensations from the likes of Virgin Media and Sky, as they claim subscribers to these services still spend the majority of their viewing time on the terrestrial channels.
Commodities update
During the US session, Gold and silver both extended their recent gains to reach heights not seen since 2014. The Asian session alone saw Gold tack on another percentage gain to reach $1,371.40 as investors seek out some stability in their portfolios amidst the uncertainty surrounding the UK. This latest increase takes Gold to a 29% gain for 2016, logging the strongest rally in six years. Silver is still holding strong ground, despite losing 2% for a brief period overnight. The precious metal was last seen up a further 1.7% at $20.26.
Oil prices did not seem to know which way they were heading overnight as investors attempted to decide what the situation in the UK would mean for crude. Earlier this morning the US contract was seen up 4 cents at $46.64 while Brent was trading 5 cents higher for the day so far at $48.01. Despite oil’s recent gains from their $26-$27 lows seen earlier on in the year, there are still fears over supply vastly outweighing demand.
Forex update

The pound experienced more turmoil during the European session; falling as low as $1.3000 against the US dollar and hitting its lowest level against the euro for over two years at €1.1765.During Asian trade the pound slid as far as $1.2798, breaking through the previous low. As mentioned above, a weaker pound is beneficial for the likes of the huge multinationals with great incomes from abroad, but spells disaster for a great number of businesses who are by and large net importers. The worrying reality is that more expensive imports could trigger a negative multiplier effect, as wages could stagnate to compensate the additional costs, reducing consumption and resulting in an economic slowdown the UK does not seem prepared for. During Asian trade, Cable continued to fall, hitting a low of 1.28357 as investors opted for safer havens like the Japanese yen. USD/JPY had a turbulent day, the low for the day was 100.591 but shortly after it rebounded to 101.071. The Euro Jumped to 86.26 pence, this level has been unseen since August 2013 as investors challenge the 0.86 figure. 
Upcoming events

ECB President Mario Draghi will surely have plenty to say when he speaks this morning. Later on in the day, the US trade balance and non-manufacturing ISM will be published. The non-manufacturing ISM is forecast to rebound slightly to 53.3 after May’s reading of 52.9. This will be followed shortly after by minutes from the previous FOMC meeting, in which investors will dissect for any signs of when the Fed will raise rates next.

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Posted by Michael Campbell

Category: AM Bulletin

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