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AM Bulletin: Troubles at Deutsche rile investors
30 Sep 2016
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29 Sep 2016
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28 Sep 2016
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28 Sep 2016
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27 Sep 2016
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27 Sep 2016
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26 Sep 2016
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26 Sep 2016
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23 Sep 2016
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22 Sep 2016
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22 Sep 2016
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21 Sep 2016
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21 Sep 2016
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20 Sep 2016
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20 Sep 2016
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19 Sep 2016
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19 Sep 2016
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16 Sep 2016
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16 Sep 2016
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15 Sep 2016
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15 Sep 2016
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14 Sep 2016
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14 Sep 2016
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13 Sep 2016
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13 Sep 2016
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12 Sep 2016
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12 Sep 2016
Comparing major Central Banks
09 Sep 2016
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09 Sep 2016
Video Update: Is the Fed really data-dependent
08 Sep 2016
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08 Sep 2016
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07 Sep 2016
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07 Sep 2016
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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
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01 Sep 2016
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01 Sep 2016
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Indices Update

There’s a mixed tone to European equities this morning. For the most part Europe managed to shrug off the weaker US close and took heart as crude oil steadied following yesterday’s sell-off.

Global stock indices pulled back yesterday with the major US indices giving back all their gains from the beginning of the week. This was despite the soothing words from Federal Reserve Governor Lael Brainard on Monday night when she said she wanted to see a stronger trend in US consumer spending and evidence of rising inflation before the Fed raises rates. Dr Brainard is well known for her dovishness. However, there was concern amongst some investors that she would follow her colleague Eric Rosengren and indicate a preference for a September rate hike. It was Dr Rosengren’s speech on Friday which triggered the stock market sell-off as investors recalculated the odds of a Fed rate hike next week. Dr Rosengren is a voting member of the FOMC and so his comments carry some weight. He expressed his personal view that “a failure to continue on a path of gradual removal of accommodation could shorten, rather than lengthen, the duration of this recovery.”

The FTSE 100 ended the day 35 points lower at 6,665.6

The German DAX fell 45.2 points or 0.4% to end the day at 10,386.6

The US30 closed down 258.3 points to finish at 18,066.8 The S&P 500 fell 1.5% to close at 2,127 while the Nasdaq 100 lost 0.9% to close at 4,722.9

Equities

Ocado (OCDO) fell sharply in early trade yesterday. The sell-off came despite the company reporting retail sales growth of 13.6% and an increase of 18.9% in the average number of orders per week when compared to the same period last year. Investors dumped the stock following comments made by the delivery service’s chief executive who said the company is facing ongoing margin pressure due to the competition in the supermarket sector. This has become even more of an issue now that Amazon (AMZN) is making inroads into online food retailing. The stock ended the day down 13.7% at 278 pence.

Commodities Update

The latest US inventory update from the American Petroleum Institute (API) showed a smaller-than-expected build in crude stockpiles. Crude stocks rose by 1.4 million barrels for the week ending 9th September which was less than the 3.8 million expected. The news helped to lift crude following Tuesday’s sell-off.

Oil fell sharply yesterday following the release of a market update from the International Energy Agency (IEA). The agency reported that, contrary to earlier forecasts, there was evidence of a sharp slowdown in global oil demand growth. The IEA downgraded its prediction for demand growth for this year by 100,000 barrels to 1.3 million barrels per day (bpd). At the same time, supply is rising as the world’s major producers continue to ramp up output. As a consequence, inventories continue to increase and come in at record levels meaning that it will take somewhat longer than previously expected for markets to rebalance. Last month the IEA forecast that supply and demand was set to be back in balance in the fourth quarter of the year.

This report followed on from other bearish news. OPEC has just revised up estimated oil output from competitors outside the group. In addition, US producers added drilling rigs for a tenth week running.

Gold and silver drifted lower yesterday. However, losses were limited as investors reassessed the odds on the US Federal Reserve raising interest rates at next week’s FOMC meeting. Both precious metals sold off heavily last week as investors began to price in the increased possibility of monetary tightening from the Fed. The probability of a September rate hike had diminished recently following the release of some disappointing US economic data. The latest Non-Farm Payroll number fell short of expectations while August’s ISM Manufacturing and Non-Manufacturing PMIs dropped sharply from the month before. The weaker numbers persuaded investors that the US central bank would wait until December to tighten monetary policy. However, on Friday Boston Fed President Eric Rosengren delivered a speech which appeared to open the door for a September hike. The US dollar rallied and this helped to push precious metals lower. Some of the damage was reversed yesterday following a speech on Monday from FOMC-voting member Lael Brainard. Dr Brainard delivered the last public comment from any Fed member ahead of next week’s meeting and she said it would be wise for the Fed to hold off from tightening monetary policy at this time.

Forex Update

The US dollar rallied yesterday as investors dumped higher-yielding currencies in a general risk-off move. Equity markets fell sharply as investors prepared themselves for next week’s crucial Federal Reserve rate decision. The move brought heavy losses for the Aussie dollar, British pound and Canadian dollar. The latter came under additional selling pressure as crude oil fell sharply.

The risk-off move came despite a dovish speech on Monday from FOMC-voting member Lael Brainard. Dr Brainard delivered the last public pronouncement from the Fed before it went into purdah ahead of next week’s rate meeting. Dr Brainard said it would be wise for the Fed to hold off from tightening monetary policy at this time. The dollar fell initially, and some of yesterday’s rally could be explained by an over-reaction to Dr Brainard’s speech.

The British pound fell sharply yesterday. The sell-off followed the release of some disappointing economic data. Core CPI (excluding food and energy) came in at an annualised rate of +1.3% on expectations of a +1.4% reading. House price and PPI numbers also added to the downside pressure. Nevertheless, cable continues to trade in a narrow trading range which wasn’t breached during yesterday’s sell-off.

Upcoming events

Today’s significant economic events include the UK’s Claimant Count Change, Average Earnings Index and Unemployment Rate. We also have Swiss ZEW Economic Expectations and Euro zone Industrial Production. From the US we have Import Prices and 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


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