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PM Bulletin: Gold
29 Jan 2016
AM Bulletin: BOJ takes rate negative
29 Jan 2016
PM Bulletin: BOJ in focus
28 Jan 2016
AM Bulletin: FOMC disappoints, but earnings offer support
28 Jan 2016
PM Bulletin: Facebook reports after the close
27 Jan 2016
AM Bulletin: Crude still driving equities
27 Jan 2016
PM Bulletin: Tomorrow’s FOMC meeting
26 Jan 2016
AM Bulletin: Equities slide on crude sell-off
26 Jan 2016
PM Bulletin: Silver chart
25 Jan 2016
Weekly Bulletin: Promise of further stimulus halts equity slide
25 Jan 2016
PM Bulletin: EURUSD chart
22 Jan 2016
AM Bulletin: Equities rally on ECB and oil
22 Jan 2016
PM Bulletin: Dovish Draghi triggers euro sell-off
21 Jan 2016
AM Bulletin: ECB meeting in focus
21 Jan 2016
PM Bulletin: Crude makes fresh multi-year lows
20 Jan 2016
AM Bulletin: Stocks slide as oil slumps
20 Jan 2016
PM Bulletin: Bank of Canada rate decision
19 Jan 2016
AM Bulletin: Equities surge on relief rally
19 Jan 2016
PM Bulletin: Crude oil - long-term charts
18 Jan 2016
Weekly Bulletin: China and oil weigh on equities
18 Jan 2016
PM Bulletin: Long-term gold bullion chart
15 Jan 2016
AM Bulletin: More woe from China
15 Jan 2016
Holiday Schedule: Martin Luther King Day Monday 18th January 2016
14 Jan 2016
PM Bulletin: Equities: bull or bear?
14 Jan 2016
AM Bulletin: Investors remain jittery
14 Jan 2016
PM Bulletin: The Bank’s rate decision
13 Jan 2016
AM Bulletin: Oil rebound lifts stocks
13 Jan 2016
PM Bulletin: Saudi Aramco’s IPO
12 Jan 2016
AM Bulletin: Crude closes in on $30
12 Jan 2016
PM Bulletin: US Fourth Quarter Earnings Season
11 Jan 2016
Weekly Bulletin: 2016: Trouble ahead?
11 Jan 2016
January: Non Farm Payrolls Out Today
08 Jan 2016
PM Bulletin: Another blow-out payroll number
08 Jan 2016
AM Bulletin: China effect calms markets
08 Jan 2016
PM Bulletin: Non-Farm Payroll look-ahead
07 Jan 2016
AM Bulletin: Equities slump after 2nd China trading halt
07 Jan 2016
AM Bulletin: Investors remain jittery
06 Jan 2016
AM Bulletin: China steadies and Europe rallies
05 Jan 2016
AM Bulletin: Chinese equities plunge
04 Jan 2016
 
 
 Tuesday 12 January 2016

AM Bulletin: Crude closes in on $30

 

 

Indices Update

European and US stock index futures are weaker this morning as crude oil heads ever-closer towards $30 per barrel. Negative sentiment continues to weigh on risk assets despite the Shanghai Composite ending Tuesday’s session unchanged.

It has been an intriguing start to the week.  The Shanghai Composite ended over 5% lower on Monday, despite the People’s Bank of China (PBOC) guiding the yuan higher in a bid to boost confidence. Yet the continuation of last week’s sell-off in Chinese equities was initially brushed off by investors elsewhere. The major European and US stock index futures began modestly lower but then soon rallied.

This followed a dire start to the New Year for US equities. At the end of last week the S&P 500 and Dow Jones Industrial Average closed out at their lowest levels in over three months. This was despite the release of a stellar Non-Farm Payroll release which appeared to demonstrate underlying strength in the US economy; at least as far as the employment situation is concerned. However, it’s quite possible that we’re back in the “good news is bad” mind-set as stronger US data serves to increase the likelihood of further monetary tightening from the Federal Reserve. The trouble is that with the European Central Bank (ECB), Bank of Japan (BoJ) and PBOC all prepared to provide more stimuli, the prospect of a widening spread for US rates over the rest is helping to strengthen the dollar. This in turn is keeping the downside pressure on dollar-denominated commodity prices which is hurting oil-producing countries and the over-indebted energy and mining sectors.

The FTSE 100 index closed at 5,871.8 down 40.6 points on the day or 0.7%

The German DAX fell 24.3 points or 0.3% to finish at 9,825.1

The US30 closed up 52.1 points to finish at 16,398.6 The S&P 500 ended at 1,923.7 up 1.6 points or 0.1% while the Nasdaq 100 rose 0.3% to close at 4,283.6


Equities update

Pharmaceuticals giant Shire (SHP) finally agreed a deal with US drug maker Baxalta worth $32 billion (£22 billion). Baxalta makes treatments for cancers, immune system disorders and blood conditions and had been in talks with Shire since the summer. If it goes ahead, the acquisition will mean the combined group will become the leading producer of specialist therapies for rare diseases. Nevertheless, Shire fell sharply yesterday ending at 3,925 pence down 8.2%


Commodities Update

Crude oil slipped again yesterday morning and continues to close in on $30 per barrel. The stronger US dollar kept prices under pressure and pinned around the multi-year lows hit last week. Goldman Sachs’ prediction of $20 per barrel oil isn’t looking quite as outrageous as when they made the call in September last year when Brent was trading around $50.

The usual factors continue to weigh on the oil price. Firstly, demand growth is appreciating relatively slowly as global economic activity remains subdued.  At the same time, there are some concerns that China may experience a hard landing as policymakers attempt to rebalance the economy away from reliance on manufacturing/exports and attempt to boost domestic consumption. On Friday research consultancy Fathom calculated that Chinese GDP could be as low as 2.4% per annum – well below the official 2015 estimate of 6.9%. China is world’s second-biggest oil consumer after the US.

On the supply side, over the last six months US production has fallen from 9.6 million barrels per day to around 9.1 million. Most of the decline has been in shale oil while there has been no let-up in supply from conventional sources such as the Gulf of Mexico. Nevertheless, US supply isn’t expected to fall much further in first half of this year. But OPEC production is expected to continue to exceed the old ceiling of 30 million barrels per day by a significant margin. In addition, so far geopolitical tensions have been shrugged off, and Iran is expected to be in a position to export around 500,000 barrels per day once sanctions are lifted. This could happen later this month as long as Iran fulfils its commitments under July’s nuclear agreement.

Precious metals were mixed for most of yesterday’s trading session. Gold hovered around $1,100 and spent most of the day in negative territory. This was primarily due to the dollar which was stronger against most of the majors. In contrast, silver was a touch firmer for most of the session, trading each side of $14 per ounce.

Both gold and silver have had a solid start to the New Year. This is due to safe-haven buying triggered by the ongoing turmoil in China’s stock market. Many traders expect gold to make further gains this month ahead of the Chinese New Year which is typically a busy time for bullion dealers. Gold bulls will be hoping that any bounce will trigger a bout of short-covering which should boost the price further. This is because short interest on the Comex futures market was larger in December than at any time since 2001.


Forex Update

FX markets were mixed yesterday with no one currency dominating proceedings. Overall, the euro was a touch weaker against the majors and the dollar generally stronger. But the moves were fairly modest. Investors are still keeping a close eye on the overnight fixing of the US dollar/yuan by the People’s Bank of China (PBOC). Until the end of last year the yuan was officially linked to the US dollar. This proved to be a problem for China as it meant the yuan strengthened along with the US dollar. That made Chinese exports more expensive and the country became less competitive than other Asian Pacific manufacturers. The Chinese authorities are now valuing the yuan against a basket of currencies. But despite this, the daily USD/Yuan fix remains important. The PBOC are trying to engineer a measured devaluation of the yuan against the dollar. But they are painfully aware that this has to be done carefully to avoid spooking investors. Consequently, the PBOC fixed the yuan higher against the dollar at the end of last week and again on Monday. This followed nine successive downward moves.

Upcoming events

Today’s significant economic releases include UK Manufacturing and Industrial Production. We also have speeches from Bank of Japan Governor Haruhiko Kuroda, US Federal Reserve Vice Chairman Stanley Fischer and Bank of England Governor Mark Carney. 

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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