NEWS AND ANALYSIS

Incisive market commentary and expert opinion

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

Open a Live AccountOpen a Demo Account
 
+ Show blog menu

Categories

Menu

Expand 2017 <span class='blogcount'>(286)</span>2017 (286)
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)
Expand October <span class='blogcount'>(37)</span>October (37)
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)
Collapse April <span class='blogcount'>(45)</span>April (45)
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
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

European and US stock indices look in better shape this morning when compared to yesterday’s close. Crude oil rallied sharply soon after the US close last night with both WTI and Brent pushing back above the significant support/resistance levels of $36 and $38 respectively. The Japanese yen has also pulled back with the USDJPY bouncing off the 110.00 level while China’s Caixin Services PMI came in better-than-expected.

Global stock indices fell sharply yesterday. Investors were rattled by a sell-off in the Japanese Nikkei overnight which was in turn triggered by concerns over the recent strength of the yen. The Bank of Japan (BOJ) has been taking desperate measures to drive the currency lower but to no avail. The yen did dip briefly on a Reuters’ story that the BOJ was preparing to ease monetary policy further at its meeting later this month. However, the yen soon began to strengthen again and the USDJPY fell back to hit its lowest level since October 2014 to break briefly below the technically and psychologically important 110.00 level. Global stock indices were also hurt by the continued sell-off in crude. Yesterday WTI and Brent both broke below significant support at $36 and $38 per barrel respectively.

Investors appeared ready to cut back their exposure to equities following a strong rally since mid-February. Many seem happy to book some profits now ahead of the first quarter earnings season which begins next week. This is despite US Federal Reserve Chairman Janet Yellen’s insistence that there is no danger of an imminent rate hike. Some investors are concerned that despite Mrs Yellen’s assurances, we’re now going to hear from a bunch of Fed members calling for another rise between now and the end of June. We should get a clearer idea of divisions within the Fed when the minutes of the last FOMC meeting are released this evening.

The FTSE 100 index closed at 6,091.2 down 73.5 points on the day, or 1.2%

The German DAX lost 258.7 points or 2.6% to finish at 9,563.4

The US30 closed down 133.7 points to finish at 17,603.3 The S&P 500 fell 1.0% to close at 2,045.2 while the Nasdaq 100 lost 0.9% to close at 4,470.8

Equities Update

Shares in the Dublin-based pharmaceuticals conglomerate Allergan (AGN) slumped yesterday. This followed news late on Monday that the US Treasury has proposed a new raft of tax regulations designed to put an end to tax-avoiding corporate inversions. This would effectively scupper Allergan's agreed $160 billion merger with US rival Pfizer (PFE) – a deal which would have created the world’s largest drug maker. The idea was that after the merger Pfizer would move its headquarters to the Irish Republic and so benefit from a lower tax rate. But President Obama has said that such tax inversion deals are “unpatriotic.” Allergan and Pfizer said they were reviewing the situation, but judging from investor reaction the thinking is that the deal won’t now go ahead. 

Commodities Update

Crude oil fell sharply in early trade yesterday. WTI and Brent traded down to their lowest levels seen in a calendar month and both contracts broke below support around $36 and $38 respectively.

Crude has continued to slide after hitting a fourteen-week high on 18th March. Investors have lost confidence in oil producers to curb output and support prices. There had been hopes that OPEC and non-OPEC producers would agree to freeze output at January levels at a meeting scheduled for 17th April in Qatar. When the freeze was first proposed by Saudi Arabia, Russia, Venezuela and Qatar there seemed to be an understanding that Iran would be exempted from taking part. This was because the country was busy ramping up production to make up for the years of exports lost due to sanctions. But on Friday Saudi Deputy Crown Prince Mohammed bin Salman told Bloomberg that Saudi Arabia will freeze its oil output only if Iran and other major producers do so too. Then Iranian Oil Minister Bijan Zanganeh said Iran would continue to increase production and exports until it reaches the market position it enjoyed before the imposition of sanctions. Unfortunately relations between the two countries took a turn for the worse yesterday. The FT reported that Saudi Arabia was banning vessels that transport Iranian crude from entering their waters. Ironically it could be this event, rather than an output freeze, which pushes oil prices back up.

Gold and silver rallied sharply in early trade yesterday despite a stronger dollar. The move was linked to a general risk-off move and a rush to the relative safety of precious metals. Investors were rattled by the sharp sell-off in global equities. This in turn was triggered by a rally in the Japanese yen. The yen’s move didn’t look like a typical unwind of the carry-trade when investors sell risk assets and buy back the yen they borrowed to finance the trade. Instead it may prove to be more significant than a brief “risk-on/risk-off” period of repositioning. This is because a strengthening yen is such a disaster for Japan’s policymakers as they struggle to spark inflation and boost exports and growth. The whole Japanese economy is based on a powder keg of debt which just keeps on growing relative to GDP. The only thing that can help Japan in the short-term (and bear in mind they’ve been trying to dig themselves out of this hole for over a quarter of a century now) is a cheaper currency. But the markets are of the opinion that the central bank is out of bullets. If that’s the case, then it could have serious implications for the global economy as so much depends on maintaining confidence in central bank monetary policy. Despite yesterday’s gains gold still appears restricted by resistance around $1,240

Forex Update

The big news yesterday was the ongoing rally in the Japanese yen. The USDJPY fell back to hit its lowest level since October 2014 and briefly broke below the technically and psychologically important 110.00 level. The strength of the yen is a disaster for Japanese policymakers and the Bank of Japan (BOJ). The BOJ has already taken unprecedented measures to drive the currency lower, including the adoption of negative interest rates back at the end of January this year. The yen fell sharply on that particular announcement, pushing the USDJPY briefly above 121.00. But the yen subsequently strengthened and the USDJPY is down around 9% since then.

There was some disappointment that the BOJ held off from easing monetary policy further at its meeting last month. Yet many analysts felt that additional stimulus at that time would have smacked of desperation. Nevertheless, Reuters reported yesterday that the BOJ was preparing to ease further at its meeting later this month rather than waiting until July as many expected. This helped to push the yen lower for a bit, although it wasn’t long before the currency began to strengthen again. The trouble is that the BOJ has lost a lot of credibility and analysts have expressed concern that the bank has reached the limits of effective looser monetary policy.

Meanwhile, the Australian dollar continued to retreat yesterday even though the Reserve Bank of Australia (RBA) kept its headline Cash Rate unchanged at 2.0%. This is the perfect outcome for the RBA as its currency is falling making exports cheaper, and it still has room to cut further if required. 

Upcoming events

Today’s main economic event is the release of minutes from the US Federal Reserve’s FOMC meeting on 15th/16th March. We also have speeches from Federal Reserve Bank of Cleveland President Loretta Mester and Federal Reserve Bank of St. Louis President James Bullard. Aside from this we have the latest update on US Crude Oil Inventories.

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


Add a comment Add comment            

 

 
© 2017 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.