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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
 Wednesday 27 January 2016

AM Bulletin: Crude still driving equities



Indices Update

European equities and US stock index futures fell again in early trade yesterday as crude oil began the session under $30 per barrel. But it was a see-saw day as stocks oscillated between positive and negative territory while crude traded either side of $30. But sentiment turned positive during the US session as both WTI and Brent oil briefly topped $32 per barrel. They slipped back later but both the Dow and S&P managed gains of 1.8% and 1.4% respectively.

Apple (AAPL) released earnings after the bell. While these came in better-than-expected, revenues and iPhone sales were disappointing. The company reported the slowest growth in iPhone sales since the product's 2007 launch and warned that sales will fall for the first time later this year. At the time of writing Apple’s share price is down over 2.5% in after-hours trading.

Yesterday’s price action demonstrated just how fixated the stock market is by oil. There are good reasons for this of course. The oil price is currently seen as a barometer for global economic activity. This was brought into sharp relief on news that China's annual rail freight volume fell 11.9% in 2015 compared to a 3.9% decline in 2014. This increased concerns over the pace of economic growth in the world’s second-largest oil consumer. Of course the ongoing supply glut also must be considered. Nevertheless, fears of corporate defaults within the energy sector increase every time oil falls in price. This in itself is good reason to worry about crude falling closer to $20 per barrel.

It is also interesting to note that investors effectively shrugged off a 6.4% slump in the Shanghai Composite. The sell-off came despite news that yesterday morning the People's Bank of China (PBOC) conducted its biggest daily open markets operation in three years, injecting 360 billion yuan into money markets to boost liquidity ahead of the Lunar New Year holiday.

Attention now turns to the Fed’s FOMC statement later this evening. Investors will be hoping that the FOMC will dial back its rate hike projections for this year. If that isn’t forthcoming, then we can expect another leg down for equities.

The FTSE 100 index closed at 5,911.5 up 34.5 points (or 0.6%) on the day

The German DAX rose 86.6 points or 0.9% to finish at 9,822.8

The US30 closed up 282.1 points to finish at 16,167.2 The S&P 500 ended at 1,903.6 up 26.6 points while the Nasdaq 100 rose 0.9% to close at 4,233.9

Equities Update

There was a stunning reversal of fortune for holders of Anglo American (AAL) yesterday. Or maybe it would be truer to say there was a well-overdue bout of short-covering in the stock of the well-diversified miner. The share price fell to 215.5 within the first half-hour of this morning’s trade – a level which by my reckoning marked a fresh all-time low for the stock. Yet minutes later it was flying higher and by the US open it was trading above 250 pence per share. The catalyst seems to have been the wide-ranging bounce in precious and base metals. It is tempting to look for value in the mining sector now. As with oil we must be closer to the bottom than the top. Nevertheless, it is dangerous to attempt to catch a falling knife. It is generally better to miss the first part of a rally and wait for further signs of a turnaround than to be caught up in a short-lived sucker rally.

Commodities Update

After falling sharply on Monday, crude managed to steady yesterday. Both WTI and Brent oscillated around $30 per barrel. This level appears to be the “line in the sand” for investors in terms of their “risk on/risk off” attitude to other financial markets.

Crude steadied on hopes that there may be talks (or even a deal) between OPEC and non-OPEC producers to curb output. As the major non-OPEC producer, Russia is seen as the lynchpin for any future agreement. However, there is very little trust amongst oil producers, whether they are members of OPEC or not. Even if there was a general agreement to cut back on production, the chances of everyone sticking to a deal must be miniscule.

At the end of last week crude its biggest two-day rally since 2008. However, Monday saw prices collapse back down below $30 after Iraq reported record production last month.

Gold built on recent gains yesterday, despite little change in the US dollar. Gold scythed through resistance around $1,105 and is now closing in on its 200-day moving average around $1,120. Of course, this is a very unusual state of affairs as it has been quite a while since we’ve seen gold put in a decent rally. It managed one last year back between August and October on the back of the turmoil in the Chinese stock market. But that soon faded and just became a mild blip amid the long-term sell-off since 2011. So this could be a similar “safe haven” move. But this time round it’s from a lower base and a double bottom off long-term support around $1,050. If we do get a pull-back then it will be interesting to see if either $1,100 or $1,080 holds as support.

Silver also had a good day and is looking very constructive chart-wise. It wasn’t too long ago that I felt a move to $12 per ounce was on the cards. Now it looks as if there’s a decent base around $13.60/13.80.

Forex Update

The US dollar was little-changed yesterday against its main counterpart, the euro. Investors seemed unwilling to take on additional exposure ahead of tonight’s Federal Reserve rate decision and FOMC statement. Nevertheless, the EURUSD remains closer to the bottom of its current 1.0800/1.1000 range. Once again it was currencies linked to oil (Canadian dollar/Norwegian krone) which were the biggest movers with both making impressive gains on the back of the oil rally.

Otherwise, it was carry-trade currencies such as the Japanese yen and Swiss franc which were modestly lower. Once again, these were sold (borrowed) and the proceeds funnelled into higher-yielding and higher risk financial instruments such as equities and stock index futures.

The British pound also made solid gains. The rally began as Bank of England Governor Mark Carney and his team testified on the Financial Stability Report before the UK’s Treasury Select Committee.

Upcoming events

Today’s most significant economic events come from the US again. Foremost is the Federal Reserve’s rate decision and FOMC statement, but we also have Crude Oil Inventories and New Home Sales. Later on, the Reserve Bank of New Zealand will deliver its own rate decision and statement. Neither central bank is expected to make any changes to their headline interest rates.


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Posted by David Morrison

Tagged: AM Bulletin

Category: AM Bulletin

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