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Video Update: Yellen’s speech sparks USD rally
31 Aug 2016
AM Bulletin: US dollar holds recent gains
31 Aug 2016
PM Bulletin: What next for the dollar?
30 Aug 2016
AM Bulletin: Investors revel in Fed’s “Goldilocks” worldview
30 Aug 2016
PM Bulletin: Yellen has spoken
26 Aug 2016
AM Bulletin: All eyes on Yellen
26 Aug 2016
PM Bulletin: BREXIT - THE NEXT CHAPTER The referendum and market reaction
25 Aug 2016
Holiday Schedule: Summer Bank Holiday
25 Aug 2016
AM Bulletin: Quiet start ahead of US Durable Goods/Jackson Hole
25 Aug 2016
Video Update: Look–ahead to Janet Yellen’s speech at Jackson Hole
24 Aug 2016
AM Bulletin: Investors edgy ahead of Yellen’s Jackson Hole speech
24 Aug 2016
PM Bulletin: Crude continues to slide
23 Aug 2016
Platform Tour: CFD Trading - How to Place a Trade
23 Aug 2016
AM Bulletin: Crude slide shrugged off by equities
23 Aug 2016
Trading Guides: How fast can you buy and sell with spread betting?
22 Aug 2016
Weekly Bulletin: Jackson Hole Symposium in focus
22 Aug 2016
PM Bulletin: Retailers bring earnings season towards a close
19 Aug 2016
AM Bulletin: Equities driven by oil and the Fed
19 Aug 2016
Video Update: The next Fed rate hike, the dollar and oil
18 Aug 2016
AM Bulletin: FOMC minutes read as dovish
18 Aug 2016
Trading Guide: How to choose a spread bet provider
17 Aug 2016
AM Bulletin: UK employment data and FOMC minutes in focus
17 Aug 2016
PM Bulletin: Dollar sell-off sends USDJPY below 100
16 Aug 2016
AM Bulletin: Yen stronger as investors de-risk
16 Aug 2016
Platform Tours: CFD Trading - How to Place Orders
15 Aug 2016
Trading Guides: What is spread betting?
15 Aug 2016
Weekly Bulletin: Summer “melt-up” continues
15 Aug 2016
PM Bulletin: Dow, S&P and NASDAQ hit all-time highs
12 Aug 2016
AM Bulletin: US indices hit fresh all-time highs
12 Aug 2016
PM Bulletin: Yen still strong, despite Japan’s stimulus
11 Aug 2016
AM Bulletin: Equities following oil
11 Aug 2016
PM Bulletin: Gold back within sight of multi-year highs
10 Aug 2016
AM Bulletin: US Crude Oil inventories eyed
10 Aug 2016
PM Bulletin: Sterling under pressure
09 Aug 2016
AM Bulletin: Stock markets calmer following last week’s rally
09 Aug 2016
Platform Tours: Spread Betting - How to Place a Trade
08 Aug 2016
Platform Tours: Spread Betting - Closure and Partial Closure
08 Aug 2016
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08 Aug 2016
PM Bulletin: FTSE 100 chart
08 Aug 2016
Weekly Bulletin: US Fed: the last hawk standing
08 Aug 2016
PM Bulletin: Non-Farm Payrolls soar
05 Aug 2016
July: Non Farm Payrolls Out Today
05 Aug 2016
AM Bulletin: BoE adds stimulus; Payroll numbers in focus
05 Aug 2016
PM Bulletin: Non-Farm Payroll look-ahead
04 Aug 2016
AM Bulletin: BoE rate decision in focus
04 Aug 2016
PM Bulletin: BoE look-ahead
03 Aug 2016
AM Bulletin: Earnings and Services PMIs in focus
03 Aug 2016
PM Bulletin: JPY rallies on stimulus disappointment
02 Aug 2016
AM Bulletin: JPY strengthens as Abe disappoints
02 Aug 2016
CFD Trading - Closure and Partial Closure
01 Aug 2016
Doubts over European stress tests
01 Aug 2016
Monetary policy driving investor behaviour
01 Aug 2016
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Indices Update

It was a muted start to today’s trade with European equities opening little-changed. However, the major indices then began to drift lower as investors expressed disappointment over corporate earnings and looked ahead to the release of a pile of Services PMIs from Europe, the UK and US. Overnight China’s Caixin Services PMI slipped back from a month previously coming in at 51.7 on expectations of a 52.9 print.

Global equities were in retreat yesterday as disappointment over Japan’s fiscal stimulus and concerns over the second quarter earnings season weighed on risk assets. Investors also continued to bail out of European banking stocks following the publication of the European Banking Authority’s stress test results. The test scenarios were viewed as insignificantly robust to dispel fears that the sector will require a hefty bailout to offset heavy debt levels and the estimated €360 billion of non-performing loans in Italian banks. Banca Monte dei Paschi di Siena, the world’s oldest bank and Italy's most troubled lender, ended the day over 16% lower.

The Reserve Bank of Australia (RBA) cut its benchmark interest rate by 25 basis points to a fresh record low of 1.50%. RBA Governor Glenn Stevens warned that the global economy was growing at a lower-than-average pace.

Meanwhile, the Japanese yen screamed higher against all the majors. This followed general disappointment after Japanese Prime Minister Shinzo Abe gave further details of his much-vaunted 28 trillion yen fiscal stimulus package. It soon became apparent that of that 28 trillion yen there is just 7.5 trillion ($74 billion) of new spending, and only 4.6 trillion earmarked for this year. Also, the apparent lack of coordination between the government’s stimulus and that from the central bank last Friday suggests that the “Helicopter Money” experiment is still unlikely to take place anytime soon. Consequently, the yen has shot higher again with the USDJPY fast closing in on 100 – a level which may trigger unilateral intervention from Japanese policymakers.

The FTSE 100 index closed down 48.6 points, or 0.7%, to end the day at 6,645.4

The German DAX fell 186.2 points or 1.8% to end the day at 10,144.3

The US30 closed down 90.7 points to finish at 18,313.8. The S&P 500 fell 0.6% to close at 2,157 while the Nasdaq 100 fell 0.8% to close at 4,719.2

Equities

The European banking sector remained in focus yesterday. Investors decided that the European Banking Authority’s stress test scenarios weren’t sufficiently robust to boost confidence in the sector. In addition, Germany's Commerzbank (CBK) cut its full-year net profit target for 2016, as its customers were borrowing less and as margins suffered in the continued low-interest rate environment. Commerzbank came out near the bottom of the 51 banks tested by the EBA. The stock closed 9.2% lower.

Commodities Update

Oil managed a decent short-covering bounce in early trade yesterday. The rally came just after WTI and Brent broke briefly below $40 and $42 per barrel respectively. However, oil pulled back sharply just ahead of the European close. Prices then moved higher following a mixed report on inventories from the American Petroleum Institute. The Energy Information Administration provides its own update later this afternoon. Both agencies were expected to report a drawdown in stockpiles following recent bigger-than-expected builds in crude distillates. But crude pulled back sharply

Some analysts have expressed surprise that gasoline stocks have risen so much given that July and August are the peak months in the US driving season. This has weighed on crude prices as has evidence of record high inventories elsewhere in the world. The problem is that the glut means that refiners are unable to shift high margin products such as gasoline, diesel and kerosene as quickly as they would like. This leads to a back-up in these distillate stocks which in turn means less demand for crude from the refiners themselves. Meanwhile, there is evidence of near-record production levels from OPEC and a modest rise in output from US producers. Fortunately global demand growth has held up relatively well so far this year, despite a moderation in economic activity around the world.

Precious metals shot higher yesterday, spurred in no small measure by a sharp sell-off in the US dollar. The greenback fell against all the majors. The euro, yen, British pound, Swiss franc, Canadian and Australian dollars all made strong gains as investors mulled over the recent deterioration in US economic data. One of the biggest surprises came at the end of last week when US Advance second quarter GDP showed a year-on-year increase of just 1.2%. The consensus expectation had been for a rise of 2.6%. On Monday the latest update for the US Manufacturing PMI also disappointed, coming in at 52.6 against an anticipated reading of 53.1. Yesterday the Core PCE Price Index (the Fed’s preferred inflation measure) came in at +0.1% month-on-month, down from +0.2% previously. This was another reminder of how difficult it will be for the US central bank to raise rates this year.

Forex Update

The US dollar fell sharply yesterday against all the majors. The EURUSD broke back above 1.1200 to hit its highest level since its dramatic sell-off in the immediate aftermath of the UK’s vote to leave the EU. A pick-up in oil prices saw the Canadian dollar bounce back, while sterling also made gains even though the UK’s Construction PMI for July slipped to 45.9 from 46 in June, marking the lowest level since 2009. The consensus expectation is that the Bank of England’s MPC will loosen monetary policy when it meets tomorrow to counter fears of a post-Brexit slowdown. But this was of little interest to investors who were rushing to cover their long dollar positions. The dollar sell-off appears linked to last week’s disappointing GDP release. US Advance second quarter GDP showed a year-on-year increase of just 1.2%. The consensus expectation had been for a rise of 2.6%.

Meanwhile, the Japanese yen screamed higher against all the majors. This followed general disappointment after Japanese Prime Minister Shinzo Abe gave further details of his much-vaunted 28 trillion yen fiscal stimulus package. It soon became apparent that of that 28 trillion yen  there is just 7.5 trillion ($74 billion) of new spending, and only 4.6 trillion earmarked for this year. Also, the apparent lack of coordination between the government’s stimulus and that from the central bank last Friday suggests that the “Helicopter Money” experiment is still unlikely to take place anytime soon. Consequently, the yen has shot higher again with the USDJPY fast closing in on 100 – a level which may trigger unilateral intervention from Japanese policymakers.

Meanwhile the Reserve Bank of Australia (RBA) cut its headline Cash Rate by 25 basis points to a record low of 1.50%. The move was widely anticipated, so although the Aussie dollar slipped initially it soon made back its losses. The Aussie dollar went on to make significant gains against the US dollar despite RBA governor Glenn Stevens warning that the global economy was growing at a lower-than-average pace.

On Monday William Dudley, President of the New York Federal Reserve, said investors shouldn't be ruling out the possibility the Fed will hike interest rates this year. He told a conference of central bankers and regulators that the federal funds futures which are pricing in no more than one 25 basis-point rate hike through the end of 2017 have got it wrong. He also said he expected the US economy to grow at an annualised rate of around 2% over the next 18 months. Meanwhile, Federal Reserve Bank of Dallas President Robert Kaplan said the central bank could still raise rates at the September meeting. Unfortunately, investors have been here before where Fed members jump up to say they’re ready to tighten monetary policy just days after failing to take any action.

Upcoming events

Today’s significant economic data releases include Services PMIs from China, Spain, Italy, France, Germany, the Euro zone and the UK. We also have Euro zone Retail Sales. From the US we have ADP Non-Farm Employment Change, Services PMI, ISM Non-Manufacturing PMI and crude Oil Inventories. 

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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