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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
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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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 Wednesday 27 April 2016

AM Bulletin: FOMC in focus

 

 

Indices Update

Initially there was a softer tone to the major indices this morning following earnings disappointments from Apple and Twitter. However, most are now back in positive territory thanks mainly to continued strength in crude oil. The Aussie dollar has taken a tumble following the release of a much lower-than-expected CPI number.

European equities and US stock index futures pushed higher in early trade yesterday. A smaller-than-expected loss from BP helped to lift energy stocks but overall gains were modest. Equities were unable to take any guidance from other markets: the dollar was a touch weaker and crude a tad higher but were stuck in narrow trading ranges early on, along with everything else. The major indices slipped into negative territory as the European close approached. Sentiment took a dent after oil giant ExxonMobil lost its AAA credit rating from S&P due to the persistently low oil price.

Investors were in no mood to either add to or cut their existing exposure ahead of this week’s central bank meetings. The US Federal Reserve meeting continues today, culminating in a rate decision and statement release at 19:00 BST. The central bank is expected to keep rates unchanged. However, analysts will scrutinise the accompanying FOMC statement to see if it gives any clues to the possibility of a rate hike in June. If recent comments from Fed Chair Janet Yellen are any guide (and they probably are) we should expect some positive comments concerning the US economy (dovish) to be offset by concerns over the global outlook (hawkish).

Overnight, the Bank of Japan (BOJ) will release its own monetary policy statement and BOJ Governor Haruhiko Kuroda will hold his usual press conference. There is considerably more riding on this event than the Fed meeting and the outcome has the potential to shake up risk assets, positively or negatively. Analysts are fairly evenly split over the prospect of additional stimulus measures being announced. However, the majority of traders expect further easing. Consequently there is plenty of scope for disappointment. If the BOJ fails to deliver on stimulus then we can expect a sell-off in the Nikkei and a rally in the yen. However, there are dangers attached to further stimulus as well. After all, the yen rallied sharply after the BOJ adopted negative interest rates at the end of January.

The FTSE 100 index closed at 6,284.5 up 23.6 points on the day, or 0.4%

The German DAX fell 34.8 points or 0.3% to finish at 10,259.6

The US30 closed up 13.1 points to finish at 17,990.3 The S&P 500 ended 0.2% higher at 2,091.7 while the Nasdaq 100 ended down 0.5% at 4,453.

Equities Update

Apple (AAPL) fell around 8% in after-hours trading following the release of earnings and revenue that missed analysts' estimates thanks to a decrease in iPhone sales. The company’s second quarter earnings came in at $1.90 per share on $50.56 billion in revenue. The consensus expectation was for $2.00 per share on $51.97 billion.

Meanwhile Twitter (TWTR) reported earnings of $0.15 per share on sales of $594.5 million. The consensus expectations were for $0.10 on $608 million. So the company was solid on earnings but light on revenues. However, the real damage was done by disappointing forward guidance. The company expects revenue next quarter of around $600 million – well below analysts’ estimates of $678 million. 

Commodities Update

Precious metals fell in early trade yesterday. The pull-back in both gold and silver occurred even as the US dollar fell. Typically, the two metals (along with other dollar-denominated currencies) tend to rise when the greenback declines. But both gold and silver pushed back into positive territory as the dollar ceded more ground following a string of disappointing data releases. US Durable Goods was the most notable miss on the data front, although Consumer Confidence and the S&P/Case Shiller House Price Index also came in below expectations. Gold poked its head back above $1,240 while silver managed to crawl above $17 per ounce. Traders will keep a close eye on the greenback once the FOMC statement is released tonight. If the statement is hawkish by hinting at a June rate hike, then expect the dollar to rise and precious metals to fall. But a dovish statement is likely to have the opposite effect. Precious metals are benefiting from the current low/negative rate environment. Investors are more likely to buy gold and silver when they are unable to get a decent return on interest-bearing instruments.

Crude rallied yesterday. The weaker US dollar helped to lift prices initially, but buyers continue to dominate the market as fears subside over the extent of the future supply glut. These concerns were allayed further yesterday after BP’s CEO Bob Dudley said that “robust demand and weak supply growth” meant that oil markets would be more balanced by the end of 2016.

Investors shrugged aside concerns of a face-off between Saudi Arabia and Iran. It has become abundantly clear since the failed OPEC/non-OPEC producers’ meeting in Doha earlier this month that both countries are fighting for market share. While Iran’s potential output is far below Saudi Arabia’s (the latter produces over 10 million barrels per day while Iran is still struggling to achieve its pre-sanction production of 4 million barrels per day), any increase from either OPEC member should weigh on prices. This is particularly the case as supply is estimated to exceed demand by around 1 million barrels per day. 


Forex Update

It was another quiet start for FX markets yesterday. But, as on Monday, there was a slightly softer tone to the US dollar in early trade. The selling picked up following the release of US Durable Goods Orders.  Both headline and core numbers came in below market expectations. Core Durables (excluding transportation) fell 0.2% on expectations of a 0.6% increase and last month’s number was revised down to -1.3% from -1.0%. The headline figure rose 0.8% but this was well below the 1.9% increase expected. The prior reading was also revised down to -3.0% from -2.8%.

The dollar rallied off its worst levels as the day progressed. This was despite some other disappointing data releases including the Case Shiller House Price Index, services PMI and Consumer Confidence. The Richmond Manufacturing Index came in better-than-expected, but was down on the prior month.

Once again the British pound was one of the day’s best performers, particularly against the US dollar. President Obama got much credit for this week’s gains after he came out strongly in support of the campaign for the UK to stay in the EU. But the GBPUSD is now butting up against resistance around 1.4640. This marks a couple of significant Fibonacci Retracements and also acted as support back in March and April last year.

Investors will be paying close attention to the US Federal Reserve meeting which concludes this evening. The consensus expectation is that the Fed will keep rates unchanged. However, analysts will parse the accompanying FOMC statement closely for any clues that the Fed is prepared to tighten monetary policy again in June.

Overnight, the Bank of Japan (BOJ) will conclude its own rate meeting. There is a high expectation amongst traders that the central bank will announce additional stimulus measures. Consequently there is plenty of scope for disappointment. However, there are dangers attached to further stimulus as well. If the BOJ acts now but the markets react as they did at the end of January, then the central bank will appear to be out of ammunition and ineffective. A loss of confidence like that could devastate financial markets. 


Upcoming events

Today’s significant economic events include German Import Prices and GfK Consumer Climate, Euro zone Money Supply and Private Loans. From the UK we have Preliminary GDP, Index of Services and Realised Sales. From the US we have Pending Home Sales, Crude Oil Inventories and the US Federal Reserve rate decision and FOMC statement. 

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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