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PM Bulletin: Gold
29 Jan 2016
AM Bulletin: BOJ takes rate negative
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PM Bulletin: BOJ in focus
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AM Bulletin: FOMC disappoints, but earnings offer support
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PM Bulletin: Facebook reports after the close
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AM Bulletin: Crude still driving equities
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PM Bulletin: Tomorrow’s FOMC meeting
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AM Bulletin: Equities slide on crude sell-off
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PM Bulletin: Silver chart
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Weekly Bulletin: Promise of further stimulus halts equity slide
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PM Bulletin: EURUSD chart
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AM Bulletin: Equities rally on ECB and oil
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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
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Weekly Bulletin: China and oil weigh on equities
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PM Bulletin: Long-term gold bullion chart
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AM Bulletin: More woe from China
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Holiday Schedule: Martin Luther King Day Monday 18th January 2016
14 Jan 2016
PM Bulletin: Equities: bull or bear?
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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
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 Thursday 21 January 2016

AM Bulletin: ECB meeting in focus

 

 

Indices Update

Asian Pacific stock indices slumped again overnight. The Shanghai Composite fell over 3%, the Nikkei lost 2.4% while the Hang Seng ended close to 2% lower. However, the reaction from European equity markets and US stock index futures has been surprisingly muted. At the time of writing, all the major indices are in positive territory.

European equities and US stock index futures fell sharply yesterday. But there was a late rally on Wall Street which lifted the major indices off their lows. Despite this, both the Dow and S&P500 closed over 1% lower. Oil made a fresh twelve-year low while the IMF’s latest outlook predicted that world growth would be weaker-than-previously forecast.

Why can’t equities get a break? Well there can be little doubt that there have been signs of stress in the US stock market for a while now. In the latter half of last year the FANG stocks (Facebook, Amazon, Netflix and Google (Alphabet)) were responsible for holding up the major indices as the broader market declined. Technically, the major indices formed a topping pattern as they failed to make fresh highs after the summer sell-off. Stress in the high yield bond market was becoming apparent even before the Fed hiked rates. The latter looks as if it will go down as one of the worst-timed rate rises in history, even crowning the ECB’s classic effort. To top it all, China suffered a second melt-down just as we began the New Year.

The ECB meets today. The central bank isn’t expected to announce additional monetary stimulus, despite recent ructions in financial markets. But analysts will be parsing Mario Draghi’s accompanying statement and press conference and listening out for further dovishness, or (following the BoE’s Mark Carney) any reference to China.

The FTSE 100 index closed at 5,673.6 down 203.2 points (or 3.5%) on the day.

The German DAX fell 272.6 points or 2.8% to finish at 9,391.6

The US30 closed down 249.3 points to finish at 15,766.7 The S&P 500 ended at 1,859.3 down 22 points while the Nasdaq 100 fell 0.3% to close at 4,136.3

Equities Update

Yet again mining stocks sold off hard yesterday. Anglo American (AAL) fell 7.7% to close at 220.4 pence while BHP Billiton (BLT) lost 7.4% and ended at 580.9 pence. Mining and commodity companies continued to come under pressure as oil and base metals slid lower.

Commodities Update

As with equities, crude oil seems incapable of holding a rally. Oil fell again yesterday and made a fresh twelve-year low. The IMF’s gloomy prognosis for world growth was partly to blame, while the latest outlook from the International Energy Agency (IEA) was particularly unhelpful. The IEA said that global oil supply could exceed demand by 1.5 million barrels per day (bpd) in the first half of 2016. Meanwhile Iran is back in play and is set to add around 500,000 bpd to this. In addition, non-OPEC supply has also held up well, although the IEA predicts that this is set to decline in the second half of this year. The IEA left its estimate of growth in global demand for 2016 unchanged from its previous monthly report at around 1.2 million bpd. But investors were really rattled as the agency warned that “the oil market could drown in over-supply. So the answer to our question is an emphatic yes. It could go lower.” Finally, there is talk that Saudi Arabia is preparing to remove the riyal-USD peg. This should keep a lid on crude until the situation is clarified – one way or another.

Gold stormed higher yesterday and was happily trading above $1,100 by the European close. The move came from safe-haven demand as equity markets and other risk assets sold off sharply. It was interesting to note that gold miners were one of the few bright spots amongst the stock market carnage. Some investors now believe that this sector is due a rebound after a sell-off that has lasted for years – in stark contrast to the broader market. It’s certainly possible that gold stocks (like oil) are nearer to the bottom than the top. However, the precious metal will have to make solid gains for the gold mining sector to flourish if the equity sell-off continues.

Forex Update

Commodity currencies were big movers for a second day. The Norwegian krone fell sharply as crude resumed its decline while the Australian dollar was another big loser, reversing all of Tuesday’s gains and more. This came as Asian Pacific equities sold off with the Japanese Nikkei and Hong Kong’s Hang Seng down close to 4% each. The AUDUSD is trading back down at levels last seen in the spring of 2009 as the Aussie began to claw back losses from the financial crisis. The Canadian dollar was also weaker initially, but bounced later in the day after the Bank of Canada wrong-footed traders by keeping its Overnight Rate unchanged at 0.5%. Most analysts had expected a 25 basis-point cut.

There was also a big reversal in risk appetite. On Tuesday investors sold (borrowed) the ultra-low yielding Japanese yen and bought higher-yielding equities with the proceeds. Yesterday this process was reversed. The yen soared against all the majors rising over 1% against the US dollar, euro, British pound and Australian dollar. The USDJPY fell within a few ticks of the low hit back in August of 116.21 at the height of the panic inspired by the Chinese stock market melt-down and subsequent yuan devaluation. The yen hit a three and a half-year high against the Aussie dollar and a two-year high against sterling.

Upcoming events

Today’s significant economic events include the ECB rate decision and press conference, US weekly jobless claims and the ongoing World Economic Forum in Davos.

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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