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PM Bulletin: Exxon Mobil - a proxy for crude?
29 Apr 2016
AM Bulletin: Equity sell-off continues
29 Apr 2016
PM Bulletin: JPY update
28 Apr 2016
AM Bulletin: BOJ disappoints
28 Apr 2016
Holiday Schedule: Early May Bank Holiday
27 Apr 2016
PM Bulletin: BOJ meeting
27 Apr 2016
AM Bulletin: FOMC in focus
27 Apr 2016
PM Bulletin: GBPUSD
26 Apr 2016
AM Bulletin: Markets directionless
26 Apr 2016
PM Bulletin: Apple
25 Apr 2016
Weekly Bulletin: Party like it’s 1999?
25 Apr 2016
PM Bulletin: Big move in USDJPY
22 Apr 2016
AM Bulletin: Weaker earnings weigh on US indices
22 Apr 2016
PM Bulletin: Silver’s pump and dump
21 Apr 2016
AM Bulletin: US indices edge closer to all-time highs
21 Apr 2016
PM Bulletin: ECB meeting look-ahead
20 Apr 2016
AM Bulletin: Silver surge drags gold higher
20 Apr 2016
PM Bulletin: Silver update
19 Apr 2016
AM Bulletin: Dow tops 18,000
19 Apr 2016
PM Bulletin: US indices continue to push higher
18 Apr 2016
Weekly Bulletin: The Fed, China, oil and the yen
18 Apr 2016
PM Bulletin: Brent crude
15 Apr 2016
AM Bulletin: Quiet start to Friday’s trade
15 Apr 2016
PM Bulletin: EURUSD chart
14 Apr 2016
AM Bulletin: Equity rally continues
14 Apr 2016
AM Bulletin: Equities push higher
14 Apr 2016
PM Bulletin: JP Morgan Chase
13 Apr 2016
PM Bulletin: Silver chart
12 Apr 2016
AM Bulletin: Equity rally runs out of steam
12 Apr 2016
PM Bulletin: Schlumberger
11 Apr 2016
Weekly Bulletin: Yen strength remains a concern
11 Apr 2016
PM Bulletin: Stock indices ending the week on a high
08 Apr 2016
AM Bulletin: “Risk-on” again as yen retreats
08 Apr 2016
PM Bulletin: JPY update
07 Apr 2016
AM Bulletin: Oil surge boosts equities
07 Apr 2016
PM Bulletin: Gold struggling to build on Q1 gains
06 Apr 2016
AM Bulletin: Firmer start for global indices
06 Apr 2016
PM Bulletin: USDJPY heading towards 110.00
05 Apr 2016
AM Bulletin: Crude weighs on equities
05 Apr 2016
Weekly Bulletin: Yellen or the data – what to believe?
04 Apr 2016
PM Bulletin: Holiday spending money
04 Apr 2016
April: Non Farm Payrolls Out Today
01 Apr 2016
AM Bulletin: Waiting for Non-Farms
01 Apr 2016
PM Bulletin: Non-Farm Payroll post mortem
01 Apr 2016
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Indices Update

Global indices were weaker in early trade yesterday as oil prices slipped overnight and the yen strengthened. However, equities turned sharply higher as the European session got underway as crude pushed off its lows and the yen pulled back from its highs. But it was a recovery in Italian banking stocks which provided the biggest lift. These surged ahead of a meeting to discuss the rescue of various insolvent Italian banks. Italy's largest lenders were set to meet the Treasury and central bank to form a plan to set up a state-backed fund which will buy the bad loans held by these banks.

Earlier on Chinese CPI for March came in at 2.3% year-on-year, a touch below the consensus forecast of 2.4%. Any disappointment at this modest slip in inflation was later countered by the usual speculation that further stimulus measures may be needed in the world's second largest economy.

The stock market rally picked up as the trading session progressed. US indices also shot higher as both WTI and Brent crude reversed earlier losses and pushed further above $40 per barrel. However, they gave back some of their gains as the yen began to strengthen again and as the USDJPY dropped back below 108.00.

US indices ended the session lower. This was a big turnaround given that the Dow had been up 150 points earlier in the day.

The FTSE 100 index closed at 6,200.1 down 4.3 points on the day, or 0.1%

The German DAX rose 60.7 points or 0.6% to finish at 9,683

The US30 closed down 20.6 points to finish at 17,556.4 The S&P 500 fell 0.3% to close at 2,042 while the Nasdaq 100 lost 0.4% to close at 4,458.7

Equities Update

Alcoa (AA) released earnings after yesterday’s close, unofficially marking the start of the US earnings seasonThe metals and materials company managed to beat estimates on earnings, posting 7 cents per share for the first quarter – well above the 2 cents per share expected. However, this was still well down on the 28 cents-per-share recorded for the same period a year ago. Meanwhile revenues were $4.95 billion for the quarter just ended. This was lower than the $5.14 billion expected, and again, well down from the $5.82 billion posted twelve months ago. In after-hours trade Alcoa initially fell 5% but subsequently recovered. It was unchanged as of Tuesday at 08:30 BST

Commodities Update

Crude drifted lower in early trade yesterday. Investors began Monday by trimming back their long positions following a sharp recovery last week. On Friday Federal Reserve Bank of New York President William Dudley delivered a dovish speech which helped to give oil a lift. This followed a sharp short-covering rally earlier in the week on news of a surprisingly large drawdown in US crude inventories. This countered the nervousness apparent in risk markets which followed the surge in the Japanese yen.

Investors are now preparing themselves for this Sunday’s meeting in Qatar. OPEC and non-OPEC producers will gather in the capital Doha with the aim of agreeing to a production freeze in an attempt to lift prices. However, there is plenty of scepticism ahead of the meeting as analysts doubt that anything meaningful will be agreed, let alone followed through on. The producers involved are supposed to be holding output at January levels. Yet Saudi Arabia, Russia and Iraq have all recently announced record crude output levels, while Kuwait has said it intends to raise production capacity over the next few years.  It could prove difficult to get these countries to dial back production from here. On top of this Iran and Libya have made it clear that they have no interest in cutting back production. Despite these concerns both WTI and Brent managed to push back above $40 per barrel soon after the US open yesterday. Whether they can hold above here and build on these gains for the rest of the week is another matter.

Gold and silver rose sharply in early trade yesterday.  Gold broke back above $1,240 – a level which has acted as resistance on a number of occasions in the past. It then managed to capitalise on these gains and is now hovering around $1,260 – its highest level in around three weeks. But it was silver which saw the biggest gains yesterday. At one stage the metal was up over 3%, poking its head above $15.80 and appearing to have $16 as a target. The area around $15.70 has acted as resistance previously and corresponds to the 76.4% Fibonacci Retracement of the October-December 2015 sell-off.

It was difficult to pin-point a precise catalyst for yesterday’s rally in either metal. The US dollar was a touch lower in early trade, and drifted further as the session progressed. This helped to support the two precious metals, but couldn’t account on its own for such a powerful move.  The yen continues to be strong and this could be causing some investor nervousness. If so, then it could help explain the safe-haven demand of the two precious metals. 

Forex Update

After a quiet start the US dollar weakened further yesterday. This followed on from last week’s move when the greenback continued its decline after the release of minutes from the Fed’s FOMC March meeting. The minutes were viewed as dovish as the committee repeatedly referred to global risks. The overall takeaway was that investors don’t expect the US central bank to be in any rush to raise rates this year.

Sterling was a big mover yesterday. The British pound flew higher against the US dollar, euro and Japanese yen. The rumour was that a large GBPJPY buy order triggered the move after the pair rallied from 15204 to 15400 in less than 45 mins.

Yet it is the yen’s general strength which continues to worry many investors. Overnight the USDJPY hit its lowest level since October 2014 surpassing last week’s low by a few ticks. A stronger yen is very bad news for the Japanese economy which is struggling with tepid growth and low inflation. It is particularly worrying as Japan’s policymakers have taken unprecedented fiscal and monetary measures to weaken the currency. Bank of Japan (BOJ) Governor Haruhiko Kuroda said on Monday that the bank would closely watch how global market moves could affect the country's economy and prices. But it was interesting that the Governor’s remarks had little effect on the yen. The worry is that Japanese policymakers have run out effective tools to provide further monetary stimulus.

Over the weekend Japan's government spokesman Chief Cabinet Secretary Suga said that the G20 agreement to avoid competitive currency devaluation "does not mean Japan cannot intervene in response to one-sided currency moves."  Suga added that Japanese Prime Minister Shinzo Abe's comment to the Wall Street Journal last week that countries should avoid "arbitrary intervention," was misunderstood and does not rule out intervention for Japan. "What the G20 is talking about is arbitrary intervention, which is different from responding to a one-sided move," Suga told Reuters in an interview on Saturday.

Japan has a history of currency intervention. However, this activism has waned over the years. In fact the last unilateral intervention was back in October 2011. Not only was the impact short-lived, but the USDJPY was below 80 prior to the intervention. This time round the consensus view from analysts is that no intervention will take place above 100. 

Upcoming events

Today’s significant economic events include the release of UK inflation data and US Import Prices. There are speeches from Philadelphia Fed President Patrick Harker, San Francisco Fed President John Williams and Richmond Fed President Jeffrey Lacker. These are all non-voting FOMC members. 

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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