Incisive market commentary from David Morrison

Stay ahead with our market commentary and webinars from our in house market strategist

Open a Live AccountOpen a Demo Account
+ Show blog menu



Expand 2017 <span class='blogcount'>(348)</span>2017 (348)
Collapse 2016 <span class='blogcount'>(483)</span>2016 (483)
Expand December <span class='blogcount'>(23)</span>December (23)
Expand November <span class='blogcount'>(41)</span>November (41)
Collapse October <span class='blogcount'>(37)</span>October (37)
Central banks and US payrolls in focus - Weekly Bulletin
31 Oct 2016
Revised Trading Hours - UK British Summer Time (BST) ends, 30th October 2016
28 Oct 2016
US GDP in focus - AM Bulletin
28 Oct 2016
US stock indices still range-bound
27 Oct 2016
Equities drift on mixed earnings
27 Oct 2016
Earnings season, oil and the US dollar - Video Update
26 Oct 2016
Apple disappoints - AM Bulletin
26 Oct 2016
Silver range-bound - PM Bulletin
25 Oct 2016
Equities up on deals and earnings - AM Bulletin
25 Oct 2016
Spread betting charges – overnight financing - Trading Guide
24 Oct 2016
USD rally continues - Weekly Bulletin
24 Oct 2016
Deutsche Bank trades at pre-DOJ fine levels : AM Bulletin
21 Oct 2016
ECB Decision in less than 400 words - PM Bulletin
20 Oct 2016
Oil’s move to a 15-month high supports global markets - AM Bulletin
20 Oct 2016
Intel buck earnings trend as the Fed takes centre stage again - PM Bulletin
19 Oct 2016
WTI eyes resistance around June highs - PM Bulletin
18 Oct 2016
US/UK inflation data in focus - AM Bulletin
18 Oct 2016
How to know what to spread bet on : Trading Guides
17 Oct 2016
Dollar up on December rate hike speculation - Weekly Bulletin
16 Oct 2016
Oil sparks recovery on Wall Street - AM Bulletin
14 Oct 2016
FOMC minutes - hawkish or dovish? - PM Bulletin
13 Oct 2016
Weak Chinese trade number hits miners - AM Bulletin
13 Oct 2016
US indices range-bound ahead of election - Video Update
12 Oct 2016
FOMC minutes in focus - AM Bulletin
12 Oct 2016
Sterling at fresh multi-year lows : PM Bulletin
11 Oct 2016
Brent crude hits 12-month high - AM Buleltin
11 Oct 2016
How Spread Betting Works : Trading Guides
10 Oct 2016
Another disappointing US payroll report - Weekly Bulletin
09 Oct 2016
Sterling “flash crash” and US Non-Farm Payrolls - AM Bulletin
07 Oct 2016
Non-Farm Payroll look-ahead - PM Bulletin
06 Oct 2016
AM Bulletin: Equities up on data releases and oil
06 Oct 2016
Video Update: OPEC’s production cut promise poses some questions
05 Oct 2016
AM Bulletin: Precious metals slump on USD rally
05 Oct 2016
PM Bulletin: Sterling lurches lower
04 Oct 2016
AM Bulletin: Firmer start for global equities
04 Oct 2016
Trading Guide: How to use Stop Losses in spread betting
03 Oct 2016
Weekly Bulletin: Important week for data releases
03 Oct 2016
Expand September <span class='blogcount'>(41)</span>September (41)
Expand August <span class='blogcount'>(52)</span>August (52)
Expand July <span class='blogcount'>(38)</span>July (38)
Expand June <span class='blogcount'>(42)</span>June (42)
Expand May <span class='blogcount'>(42)</span>May (42)
Expand April <span class='blogcount'>(45)</span>April (45)
Expand March <span class='blogcount'>(41)</span>March (41)
Expand February <span class='blogcount'>(42)</span>February (42)
Expand January <span class='blogcount'>(39)</span>January (39)


Indices Update

There’s a slightly firmer tone for European equities this morning following a positive session on Wall Street last night. Investors seem to be back in a “good news is good news” frame of mind. A number of better-than-expected US data releases have given equity markets a boost, even though improving data increases the likelihood of the Fed tightening monetary policy.

Yesterday saw the release of the US ADP Non-Farm Employment Change. This showed an increase of 154,000 for September which was lower than the 166,000 expected, and considerably below the 175,000 recorded in August. The ADP comes ahead of Friday’s Non-Farm Payroll (NFP) number. While it’s generally accepted that the ADP is a poor predictor for the full-blown NFP, any big discrepancies from the expected number are taken seriously. This is because the privately-collated ADP data tends to be considerably less volatile than the government’s NFP survey. Consequently, yesterday’s disappointment was viewed as a precursor to a poor number on Friday. The dollar sold off on the release while equities rallied as investors decided it reduced the chances of a Federal Reserve rate hike this year. Bear in mind that some analysts have recently suggested that the Fed could tighten monetary policy at next month’s meeting. This seems extremely unlikely as the meeting takes place just one week ahead of the US Presidential Election.

Later in the day the ISM Non-Manufacturing PMI came in way above both market expectations and last month’s reading. This led to US equities rallying further which was a perverse outcome if one considers that the strong data raises the likelihood of a Fed rate hike.

On Tuesday afternoon there was a story doing the rounds that the European Central Bank (ECB) may wind down its asset purchase programme before the current end-date of March 2017. The suggestion was that the ECB was planning to reduce its monthly bond buying programme in €10 billion steps from its current €80 billion per month. In this it would echo the actions of the US Federal Reserve which signalled its own tapering of bond purchases back in May 2013. This led to the infamous “taper tantrum.”

But the story doesn’t really add up. At its last meeting at the beginning of September the ECB’s Governing Council kept monetary policy on hold. However, it did say that its asset purchase programme could run beyond March 2017 “if necessary, and in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim.” In his prepared statement at the beginning of his press conference, ECB President Mario Draghi said the Governing Council’s “baseline scenario (for its macroeconomic projections) remains subject to downside risks.” It’s hard to see what has improved so much since then that the ECB would now consider tapering.

Nevertheless, the ECB is currently finding it tough buying bonds at its full capacity and needs to widen its parameters. On top of this the central bank has faced a barrage of criticism for its loose monetary policy and is getting the blame for the parlous state of the European banking sector. Analysts have said that banks like Deutsche just can’t make money with negative interest rates. The next ECB Governing Council meeting is on October 20.

The FTSE 100 ended the day 41.1 points lower at 7,033.3

The German DAX fell 33.8 points or 0.3% to end the day at 10,585.8

The US30 closed 112.6 points higher to finish at 18,281 The S&P 500 ended up 0.4% at 2,159.7 while the Nasdaq 100 rose 0.4% to close at 4,877.8


Shares in Tesco (TSCO) shot higher yesterday following the release of first half results. Like-for-like UK sales rose 0.6% when compared with the same period last year, while Group sales were up 1%. Sales volumes for the UK and internationally were up 2.1% and 3.3% respectively and the operating profit for the group was up 34.4% to £515 million from a year ago. The supermarket giant pledged to hit an operating margin of 3.5-4.0% by 2019/20 helped by cost cutting and restructuring. Tesco has had a difficult time of late. In recent years it has come under pressure from discounters Aldi and Lidl. It also owned up to a £263 million shortfall on its balance sheet which has led to charges against three former executives. The stock ended the day 9.8% higher at 207.1 pence.

Commodities Update

Crude continued to rally yesterday and built on its gains from last week. After the close on Tuesday the American Petroleum Institute (API) reported a 7.6 million decline in US crude inventories. This was the fifth consecutive week of bigger-than-expected drawdowns and came on expectations of a 1.5 million barrel build. The drawdown was partly offset by a build in gasoline stocks. However, this wasn’t enough to derail the latest leg in this rally. The news of the drawdown helped to keep a bid under oil prices through Wednesday’s session as traders waited for the latest inventory data from the Energy Information Administration (EIA). This confirmed the API data to some extent with a drawdown of 3 million barrels for the week ending 30th September on expectations of a 1.1 million build.

WTI and Brent are now up around 11% and 12% respectively since OPEC announced its commitment to a production cut last week. Details over the proposed cut won’t be known until after the next OPEC meeting at the end of November. However, it looks as if the promise of a reduction in supply may be enough for Brent and WTI to retest their August highs of $51.50 and $52.80 respectively.

Yesterday gold and silver steadied to some extent but failed to recover from Tuesday’s vicious sell-off. The two precious metals had slumped on the “double whammy” fear of a US rate hike and the European Central Bank (ECB) tapering its bond purchase programme. This brought about the possibility of tighter monetary policy coming simultaneously from the US Federal Reserve and the ECB – a prospect which undermined the argument for holding non-yielding precious metals.

Analysts raised the probability of a Fed rate hike before the year-end. This followed hawkish comments from a number of regional Federal Reserve presidents and some better-than-expected economic data releases. Both the Manufacturing and Non-Manufacturing ISM surveys picked up sharply from the prior month’s disappointing readings. Meanwhile, Bloomberg reported that officials at the ECB said the €80 billion per month asset purchase programme could be tapered in €10 billion steps ahead of the current end-date of March 2017.

On Tuesday gold crashed below the $1,300 support level and a flurry of sell stops took it down to its lowest level since before the UK referendum in June. Silver also fell sharply and went on to break below significant support around $18 per ounce. If gold and silver fail to break back above $1,300 and $18 respectively by the end of this week, then further losses look inevitable.

Forex Update

The probability of a Fed rate hike before the year-end increased sharply this week. This followed hawkish comments from a number of regional Federal Reserve presidents and some better-than-expected economic data releases. On Tuesday Richmond Federal Reserve Jeffrey Lacker said that there was a “strong case” for raising interest rates as the Fed's inflation and employment goals were close to being met. Later on Chicago Federal Reserve Bank President Charles Evans said he would be "fine" with raising rates by year-end if the US economic data continued to improve. He went on to say that any move was most likely at the December meeting, although November shouldn’t be ruled out.

Both the Manufacturing and Non-Manufacturing ISM surveys picked up sharply from the prior month’s disappointing readings. Investors jumped on these as evidence of US economic strength while largely ignoring a disappointing ADP payroll report.  Meanwhile, late on Tuesday afternoon Bloomberg reported that officials at the ECB said the €80 billion per month asset purchase programme could be tapered in €10 billion steps ahead of the current end-date of March 2017. If so, the central bank would follow in the footsteps of the US Federal Reserve which signalled its own tapering of bond purchases back in May 2013. This led to the infamous “taper tantrum.”

But the story doesn’t really add up as the ECB is still nowhere near its 2% inflation target while Euro zone growth remains tepid. Yesterday the ECB released a statement which insisted that the Governing Council had not discussed tapering its bond purchase programme. Nevertheless, some analysts believe the taper story was a “trial balloon” sent up by the ECB to see what the market reaction would be to the prospect of tighter monetary policy.

Upcoming events

Today’s significant economic events include the release of German Factory Orders, Swiss CPI, Euro zone Retail PMI and UK Housing Equity Withdrawal. From the US we have Challenger Job Cuts and Weekly Jobless Claims.


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

Add a comment Add comment            


© 2018 Spread Co Limited. All Rights Reserved.

Spread Co Limited is a limited liability company registered in England and Wales with its registered office at 22 Bruton Street, London W1J 6QE. Company No. 05614477. Spread Co Limited is authorised and regulated by the Financial Conduct Authority. Register No. 446677.

Spread betting and CFD trading are leveraged products and can result in losses that exceed your deposits. Ensure you understand the risks.

Losses can exceed deposits. Click here to learn more.