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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
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15 Aug 2016
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15 Aug 2016
Weekly Bulletin: Summer “melt-up” continues
15 Aug 2016
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12 Aug 2016
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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
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08 Aug 2016
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08 Aug 2016
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08 Aug 2016
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08 Aug 2016
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08 Aug 2016
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05 Aug 2016
July: Non Farm Payrolls Out Today
05 Aug 2016
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05 Aug 2016
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04 Aug 2016
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04 Aug 2016
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03 Aug 2016
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03 Aug 2016
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02 Aug 2016
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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

European and US stock indices were mixed on the open, but had all turned lower at the time of writing. Partly this is down to crude oil giving back early gains, and partly it’s due to members of the Federal Reserve giving out mixed messages. In fact, it’s worse than that. Now we have individual Fed members appearing to contradict themselves in successive statements. Earlier in the week San Francisco Fed President John Williams wrote about raising inflation targets which suggested lower interest rates for longer. Yesterday he suggested there should be US rate hikes before the year-end.

Yesterday, all the major European and US stock indices pushed higher. Investors were heartened by a dovish set of FOMC minutes and a strong rally in crude oil. The weaker dollar also helped as this increases the competitiveness of US multinationals.

Investors spent most of Thursday mulling over the minutes from the Fed’s FOMC July meeting. The main point of interest was that while a number of FOMC members were anxious to raise rates as soon as possible, those members who actually have a vote on the matter wanted to wait. We already knew that out of the 10 voting members only Esther George was in favour of a hike in July. But her colleagues expressed concerns about the possible fall-out of the Brexit vote together with worries over the Italian banking sector as two reasons for holding off. They also cited benign inflationary pressures and volatility in the Non-Farm Payroll data. Taken together, it looks as if the Fed will hold off from tightening monetary policy until after the US Presidential Election in November. If so, this should encourage investors to continue to buy equities and other risk assets, despite valuations which look excessive given the ongoing recession in US corporate earnings and revenues.

Meanwhile, Wal-Mart (WMT) reported earnings and revenues which topped analysts’ forecasts. The world’s biggest retailer reported earnings per share of $1.07 on revenues of $120.85 billion against analysts’ estimates of $1.02 and $120.16 billion respectively. The company also raised its full-year outlook even as it expects to take a $0.05 per share hit from its pending acquisition of Jet.com.

In other news, Moody’s reported that the global situation had stabilised since the UK referendum on 23rd June. The ratings agency said UK GDP should grow by 1.5% this year and 1.7% in 2017. This is considerably more upbeat than the Bank of England’s forecast earlier this month. In its last Quarterly Inflation Report the Bank downgraded its 2017 outlook for UK growth to +0.8% due to a predicted cut-back in economic activity following Brexit. Back in May it predicted growth of 2.3% for 2017, although it also kept its 2016 growth forecast unchanged at +2.0%.

The FTSE 100 index closed at 6,869 up 9.8 points on the day, or 0.1%

The German DAX rose 65.4 points or 0.6% to end the day at 10,603

The US30 closed up 23.8 points to finish at 18,597.7. The S&P 500 rose 0.2% to close at 2,187 while the Nasdaq 100 gained 0.07% to close at 4,808.7

Equities

Shares in Tullow Oil (TLW) jumped over 3.5% on yesterday’s open. The move followed the announcement that the first oil had flowed from the fields offshore of Ghana. The Africa-focused oil company said the first oil had flowed on time and within budget three years after it had obtained approval for the development from the government of Ghana in May 2013. Tullow expects to produce an average of 23,000 barrels per day for the rest of 2016, although production should hit 80,000 barrels per day later in the year. Shares ended the day 2.4% higher at 239.6 pence.

Commodities Update

Crude oil shot higher yesterday afternoon as the US dollar continued to come under selling pressure. WTI and Brent traded up to levels last seen in early July and both seem on course to retest the highs seen at the beginning of June. WTI and Brent are now up 20% and 25% from the lows hit in early August. There’s some mild resistance around $50 for WTI and $51 for Brent. But other than these there doesn’t appear to be much in the way of technical obstacles between their current levels and their respective June highs of $51.66 and $52.85.

Oil continues to get a lift on speculation that OPEC members will agree to freeze output at a meeting in Algeria next month. Most analysts really don’t believe there’s any prospect of a production freeze being agreed. However, traders are mindful of the rally ahead of the freeze meeting in Doha back in April. Indeed, crude continued to rally even after the meeting broke down in acrimony. Looking at current market action it feels as if both Brent and WTI want to retest their highs from the beginning of June, and will use any excuse to keep a bid under the oil price. It’s worth remembering that an OPEC meeting in June also failed to reach an agreement to limit production, and the group's output has since reached new record highs.

Gold and silver made modest gains in early trade yesterday thanks mostly to the pull-back in the US dollar. The greenback lost ground against all of the majors as investors studied the minutes of the US Federal Reserve’s July FOMC meeting. These revealed that 9 out of the 10 voting members of the FOMC wanted to hold off from tightening monetary policy at the July meeting. The members favoured waiting until they had further evidence that the US economy was recovering strongly enough to withstand another rate hike. They also expressed their concerns over the possibility of a slowdown in economic growth across Europe due to the UK’s Brexit vote together with worries about the Italian banking sector. It now seems likely that the Fed will hold off from hiking rates until after the US Presidential Election in November. If so, this should support both gold and silver, particularly if the US dollar continues to weaken.

Both metals were lower in early trade on Friday. This follows the news that San Francisco Fed President John Williams joined a chorus of other Fed members in saying that monetary policy should be tightened this year.

Forex Update

The US dollar fell yesterday against all the majors as investors mulled over the implications of the minutes from the last month’s FOMC meeting. The minutes showed that there were a number of FOMC members who were anxious to raise the key fed funds rate. They cited the fact that the headline unemployment rate is at a level consistent with full employment while inflation is picking up. Perhaps most crucially, some were concerned that leaving rates at historically low levels could threaten the stability of financial markets. Around $11 trillion worth of global government debt now trades with a negative yield. This is forcing investors into riskier assets as they desperately seek out a return on their funds.

However of the ten FOMC members who actually vote on monetary policy, only one (Esther George) wanted to hike rates last month. The others wanted to wait for further evidence that the US economy is robust enough to take a rate rise in its stride. They also expressed concern about the possible negative effects of the Brexit vote and an Italian banking sector which is burdened by €360 billion of non-performing loans. Taken all together, it looks as if the Fed will hold back from raising rates until after the US Presidential Election in November.

Meanwhile, the British pound continues to recover from its post-Brexit lows. Yesterday it got another boost after a strong Retail Sales number. July Retail Sales shot up by 1.4%. This was well above the +0.1% expected while wiping out the dismal -0.9% reading in June. Cable is now over 2% higher from its Monday low.

Upcoming events

Today’s significant economic events include the release of UK Public Sector Net Borrowing, Canadian CPI and Retail Sales
  

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: buletin

Category: AM Bulletin


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