Incisive market commentary from David Morrison

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AM Bulletin: Troubles at Deutsche rile investors
30 Sep 2016
AM Bulletin: OPEC “deal” sends oil soaring
29 Sep 2016
Video Update: Trouble at Deutsche Bank
28 Sep 2016
AM Bulletin: Banks lead equity rally
28 Sep 2016
PM Bulletin: USDJPY – set to break below 100?
27 Sep 2016
AM Bulletin: Equities rally after “Clinton win” in presidential debate
27 Sep 2016
Trading Guides: How margin works with spread betting
26 Sep 2016
Weekly Bulletin:Fed rate hike: postponed or cancelled?
26 Sep 2016
AM Bulletin: Equities dip after central bank-driven rally
23 Sep 2016
Video Update: FOMC keeps rates on hold
22 Sep 2016
AM Bulletin: Fed loses the (dot) plot
22 Sep 2016
PM Bulletin: FOMC in focus
21 Sep 2016
AM Bulletin: Mixed messages from BOJ
21 Sep 2016
PM Bulletin: BOJ look-ahead
20 Sep 2016
AM Bulletin: Stock indices swing on oil price
20 Sep 2016
Trading Guide:Fundamentals - Developing trading ideas
19 Sep 2016
Weekly Bulletin: All eyes on the Fed and BOJ
19 Sep 2016
PM Bulletin: Developed World Top Trumps
16 Sep 2016
AM Bulletin: Weak US data boosts equities
16 Sep 2016
Video Update: What to expect from the Fed
15 Sep 2016
AM Bulletin: US Retail Sales and BoE rate decision ahead
15 Sep 2016
PM Bulletin: The BoE and Beyond
14 Sep 2016
AM Bulletin: Investors nervous ahead of Fed meeting
14 Sep 2016
PM Bulletin: US stock indices coming under pressure
13 Sep 2016
AM Bulletin: Fed keeps us guessing
13 Sep 2016
Weekly Bulletin: Central banks remain in focus
12 Sep 2016
Trading Guides: How to make money spread betting
12 Sep 2016
Comparing major Central Banks
09 Sep 2016
AM Bulletin: ECB disappoints
09 Sep 2016
Video Update: Is the Fed really data-dependent
08 Sep 2016
AM Bulletin: ECB rate decision in focus
08 Sep 2016
Video Update: ECB Look- ahead
07 Sep 2016
AM Bulletin: Weak US data reduces likelihood of September hike
07 Sep 2016
PM Bulletin: EURUSD – still range bound
06 Sep 2016
AM Bulletin: Traders back after long US weekend
06 Sep 2016
Weekly Bulletin: Poor NFP suggests no September rate hike
05 Sep 2016
PM Bulletin: Non-Farm Payrolls disappoint
02 Sep 2016
Holiday Schedule: Labour Day, 5th September 2016
02 Sep 2016
AM Bulletin: All eyes on US Non-Farm Payrolls
02 Sep 2016
Video Update: Look-ahead to Friday's Non-Farm Payrolls
01 Sep 2016
AM Bulletin: Stock indices bounce back
01 Sep 2016
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Indices Update

European equities and US stock index futures have bounced this morning in the aftermath of the first (of three) US presidential election debates. Ahead of last night’s clash Donald Trump’s campaign had been gaining momentum with polls showing him neck-and-neck with Hillary Clinton. However, pundits generally felt that Mrs Clinton fared better in the debate, landing a couple of half-decent jabs on “The Donald” and overall keeping her cool. However, it is worth noting that there was quite a high expectation that Mr Trump would say something to seriously damage his campaign and this didn’t happen. Although it’s too early for a meaningful post-debate poll, the market reaction says Hillary won. Bear in mind, Clinton is the establishment candidate who means business as usual while Trump is an unknown quantity. Investors hate uncertainty, so breathed a sigh of relief and voted with their wallets when it seemed that Clinton managed to trump Trump, for now anyway.

Equities lost ground right from the start of trading yesterday, despite a sharp rally in the oil price. The sell-off was led by the banking sector which came under pressure due to a steep fall in Deutsche Bank (see below). Fears over the stability of Germany’s largest bank, when measured by total assets, saw Deutsche’s share price hit its lowest level since 1992. Later yesterday afternoon during his testimony before the Committee on Economic and Monetary Affairs of European Parliament, ECB President Mario Draghi said: “Many European banks have general problem of profitability. There are several reasons why they are less profitable and one is over capacity.”

The FTSE 100 ended the day 91.4 points lower at 6,818

The German DAX fell 233.3 points or 2.2% to end the day at 10,393.7

The US30 closed down 166.6 points to finish at 18,094.8 The S&P 500 ended down 0.9% at 2,146.1 while the Nasdaq 100 fell 0.9% to close at 4,817.2


Deutsche Bank was back in the news again yesterday for all the wrong reasons.  Shares in Germany’s biggest bank (when measured by total assets) slumped in early trade. They were down over 6% at one stage, falling below €10.70 to hit their lowest level in 24 years. Investors dumped the stock following a report that German Chancellor Angela Merkel had ruled out state aid for the troubled bank.

Earlier this month the US Department of Justice slapped Deutsche with a $14bn fine. The charge relates to civil claims connected with the bank's issuance and underwriting of residential mortgage-backed securities between 2005 and 2007. Deutsche has said that it will appeal the fine and has no intention of settling for anything like this amount. However, this bad news followed on from a poor performance by the bank in stress tests held by both the US Federal Reserve and European Banking Authority. The shares ended the day 7.5% lower at €10.55

Commodities Update

Oil shot higher yesterday as the world’s largest producers gathered for the International Energy Forum in Algeria. On the face of it this seemed to indicate that investors were expecting producers to come up with some plan to support oil prices. However, yesterday’s rally looked technical rather than fundamental, and the gains simply made back Friday’s losses.

Crude prices have bounced sharply since early August after stories emerged that certain countries were prepared to meet and discuss freezing output yet again. It does seem faintly ridiculous that investors should pay any attention to talk of a freeze. After all, the first attempt back in April ended without agreement but with plenty of mud-slinging between Saudi Arabia and Iran (bear in mind that Iran didn’t even take part in those talks). Once again, the two OPEC members appear to be at loggerheads with reports that they had been unable to reach even a preliminary agreement to freeze production. Despite this, Algerian Energy Minister Noureddine Bouterfa has said that "all options" are on the table. But it’s worth remembering that most analysts agree that a production freeze will do very little to change the current supply/demand dynamics of the oil market and feel that producers would need to agree to outright cuts to make a significant difference.

Gold and silver began on the back foot in early trade yesterday. However, both recovered as the session progressed, thanks to some extent to a pull-back in the US dollar. Investors hoovered up precious metals last week following the US Federal Reserve’s decision to keep its headline fed funds rate unchanged after Wednesday’s key FOMC meeting. The prices of both precious metals are highly sensitive to moves in US interest rates. Higher rates increase the lost opportunity costs of holding non-yielding assets such as gold and silver. Higher US rates also tend to lift the dollar which means that dollar-denominated commodities become more expensive to non-dollar holders.

Investors were also nervous ahead of last night’s first presidential election debate between Hillary Clinton and Donald Trump. Mr Trump has been doing well recently with polls suggesting the two candidates are neck-and-neck. There was a feeling that he could pull ahead after the debate. This worries many investors as Hillary Clinton is viewed as the “establishment” candidate who will ensure continuity and allow Wall Street to carry on as usual. In contrast, Donald Trump is an unknown quantity, although he has made numerous criticisms about the way the Federal Reserve operates.

Forex Update

The euro gained steadily for most of yesterday’s European session. It got an early boost after there was evidence of a pick-up in German business confidence. The Ifo Business Climate index for September came in at 109.5 - its highest level since May 2014. This was well above both the consensus expectation and last month’s reading of 106.3. The data suggests that Germany’s businesses are coping fine following the UK’s decision to quit the EU.

Yesterday afternoon European Central Bank President Mario Draghi testified before the Committee on Economic and Monetary Affairs of European Parliament. He said that the “recovery in the euro area is expected to continue at a moderate and steady pace, but with slightly less momentum than envisaged in June.” He highlighted the resilience of the euro area to global and political uncertainty, “notably following the UK referendum outcome.” But he also forecast that export growth would come under pressure due to “the substantial weakening of the foreign demand outlook since June” which would contribute to downside risks for the euro area’s growth prospects.

Meanwhile, the Japanese yen strengthened in a move that saw the USDJPY drop back below 100.50. Earlier in the session Bank of Japan (BOJ) Governor Haruhiko Kuroda reaffirmed his commitment to do whatever was necessary to lift inflation and boost growth. This could include taking interest rates deeper into negative territory while keeping a target for long-term interest rates. At last week’s BOJ meeting the Monetary Policy Board said it would anchor the 10-year Japanese government bond at zero, so ensuring a positive yield curve. The BOJ also said that it was now aiming to drive inflation above 2% and dropped its previous target of increasing its monetary base at an annual pace of 80 trillion yen (around $800 billion). Some analysts saw this as a sign that the BOJ’s programme of Quantitative and Qualitative Easing (QQE) had reached its limit. However, in his first speech since last week’s meeting, Mr Kuroda said that the pace at which the BOJ would buy bonds would depend on what was needed for the central bank to hit its yield curve target. Consequently, it appears that the BOJ wouldn’t be tapering after all.

Upcoming events

Today’s significant economic events include the release of Euro zone M3 Money Supply and UK Realised Sales. From the US we have the S&P/Case Shiller Composite House Price Index, Flash Services PMI, Consumer Confidence and the Richmond Manufacturing Index. Fed Vice-Chair Stanley Fischer will also speak. 


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Posted by David Morrison

Category: AM Bulletin

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