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PM Bulletin: Gold
29 Jan 2016
AM Bulletin: BOJ takes rate negative
29 Jan 2016
PM Bulletin: BOJ in focus
28 Jan 2016
AM Bulletin: FOMC disappoints, but earnings offer support
28 Jan 2016
PM Bulletin: Facebook reports after the close
27 Jan 2016
AM Bulletin: Crude still driving equities
27 Jan 2016
PM Bulletin: Tomorrow’s FOMC meeting
26 Jan 2016
AM Bulletin: Equities slide on crude sell-off
26 Jan 2016
PM Bulletin: Silver chart
25 Jan 2016
Weekly Bulletin: Promise of further stimulus halts equity slide
25 Jan 2016
PM Bulletin: EURUSD chart
22 Jan 2016
AM Bulletin: Equities rally on ECB and oil
22 Jan 2016
PM Bulletin: Dovish Draghi triggers euro sell-off
21 Jan 2016
AM Bulletin: ECB meeting in focus
21 Jan 2016
PM Bulletin: Crude makes fresh multi-year lows
20 Jan 2016
AM Bulletin: Stocks slide as oil slumps
20 Jan 2016
PM Bulletin: Bank of Canada rate decision
19 Jan 2016
AM Bulletin: Equities surge on relief rally
19 Jan 2016
PM Bulletin: Crude oil - long-term charts
18 Jan 2016
Weekly Bulletin: China and oil weigh on equities
18 Jan 2016
PM Bulletin: Long-term gold bullion chart
15 Jan 2016
AM Bulletin: More woe from China
15 Jan 2016
Holiday Schedule: Martin Luther King Day Monday 18th January 2016
14 Jan 2016
PM Bulletin: Equities: bull or bear?
14 Jan 2016
AM Bulletin: Investors remain jittery
14 Jan 2016
PM Bulletin: The Bank’s rate decision
13 Jan 2016
AM Bulletin: Oil rebound lifts stocks
13 Jan 2016
PM Bulletin: Saudi Aramco’s IPO
12 Jan 2016
AM Bulletin: Crude closes in on $30
12 Jan 2016
PM Bulletin: US Fourth Quarter Earnings Season
11 Jan 2016
Weekly Bulletin: 2016: Trouble ahead?
11 Jan 2016
January: Non Farm Payrolls Out Today
08 Jan 2016
PM Bulletin: Another blow-out payroll number
08 Jan 2016
AM Bulletin: China effect calms markets
08 Jan 2016
PM Bulletin: Non-Farm Payroll look-ahead
07 Jan 2016
AM Bulletin: Equities slump after 2nd China trading halt
07 Jan 2016
AM Bulletin: Investors remain jittery
06 Jan 2016
AM Bulletin: China steadies and Europe rallies
05 Jan 2016
AM Bulletin: Chinese equities plunge
04 Jan 2016
 
 
 Thursday 14 January 2016

AM Bulletin: Investors remain jittery

 

 

Indices Update

European and US equities began this week looking set for a tentative recovery. They certainly seemed in better shape than they were last Friday. In early trade yesterday the major indices built on Tuesday’s gains. The catalyst for a broad-based rally was a rebound in oil prices. This came after the front-month WTI contract briefly broke below $30 per barrel on Tuesday evening but recovered to end the session in positive territory.

However, last night US equities sold off sharply. Once again the catalyst for the move lower was a fall in oil prices. Yet this time round it was Brent’s turn to break below $30.

European equities were sharply lower this morning as they reacted to last night’s sell-off on Wall Street. However, there was a slightly firmer tone to US stock index futures in early trade thanks to a bounce in oil and a firmer close for the Shanghai Composite. We could be set for another rally attempt, but if yesterday’s price action is any guide, any half-decent gains look likely to meet with further selling.

It was interesting that yesterday’s sharp sell-off in China’s Shanghai Composite was effectively ignored by traders. The sell-off came despite a bigger-than-expected Chinese Trade Surplus, thanks mostly to a surprise increase in exports. Yesterday morning the Shanghai Comp closed out below 3,000 for the first time since last August. This was when the index finally hit a low point after falling 40% from its highs in the space of three months. This morning the index has rallied again and has closed back above 3,000.

The FTSE 100 index closed just under 5,961 up 31.7 points on the day or around 0.5%

The US30 closed down 364.8 points to finish at 16,151.4 The S&P 500 ended at 1,890.3 down 48.4 points or 2.5% while the Nasdaq 100 fell 3.5% to close at 4,183.1

Equities Update

Sainsbury’s (SBRY) reported a modest drop in like-for-like sales for the fifteen weeks through to 9th January. These fell 0.4% (excluding fuel) which was better than the general market expectation of a decline of between 0.7% and 1.1%. General merchandising sales were up 5% over the same period, and within this clothing rose close to 6%. Compare this to M&S where like-for-like general merchandise sales fell 5.8% in the thirteen weeks to 26th December. Nevertheless, investors were underwhelmed and sold the shares. Despite consensus expectations, some analysts expect Sainsbury’s to be the best performing out of the Big Four – including Asda, Tesco and Morrison’s. But the retail environment is particularly tough at present, and this is why a modest decline in overall sales is viewed as an achievement. Sainsbury’s ended the day effectively unchanged at 251 pence.

Commodities Update

After the front month WTI contract briefly dipped below $30, crude oil rallied on Tuesday and ended up on the day. The recovery continued yesterday with both WTI and Brent up over 2% ahead of the US open. The rally looks technical rather than anything else with sellers closing out positions and booking profits following the sharp decline since the beginning of the New Year. Over the last ten days Brent has fallen over 15% while WTI is down around 18%. Oil remains in a downtrend, but nothing goes down (or up) in a straight line, or forever. No doubt there was some relief that a raft of sell-stops weren’t triggered once WTI broke $30.

Overnight it was Brent that broke below $30 while WTI went to a premium. It was fortunate that both contracts haven’t broken below the magic barrier simultaneously as that could trigger a slew of selling.

This is turning out to be a bad week for our two key precious metals. So far gold has given back around two thirds of the safe-haven gains it made earlier this year. Meanwhile, silver is now lower than where it ended in 2015. My own feeling is that at some stage (and probably this year) both precious metals will catch a proper bid and move significantly higher. But that’s because I think that we’re facing a future of financial instability and rising geopolitical tensions. If you disagree with this view, then there’s really no need to consider buying either metal.

Of course, my problem is that gold and silver could have further to fall. Obviously, that would be good news in one respect in that it would offer some bargain basement buying prices. But it won’t do my current portfolio much good. Technically, gold really needs to close above $1,080 or thereabouts to keep hopes alive for another leg higher. If it breaks below then a retest of December’s $1,050 intra-day lows looks likely. The outlook for silver looks grimmer. Despite some sharp rallies, it has struggled to hold above $14. While it is trading close to multi-year lows, the Relative Strength index suggests that it is far from being oversold. In the current environment it looks as if it will continue to struggle along with industrial metals such as copper and aluminium.

Forex Update

The US dollar rose against most of the majors yesterday, making decent gains against the euro, Japanese yen, British pound and Swiss franc. However, it fared less well against commodity currencies such as the Canadian and Australian dollars. The latter got a boost following the release of China’s Trade Balance for December. This showed a surplus of 382 billion yuan – well above the 339 billion expected. The reason for the surprise increase was the export number which was up 2.3% year-on-year – well above the 4.1% decline anticipated and the first increase since February last year. Imports also fell less than expected which helped lift the Aussie dollar as it takes some of the pressure off the Reserve Bank of Australia to cut its Cash Rate. The Canadian dollar got a lift on the back of the rally in oil.

Upcoming events

Today’s significant economic events include Eurogroup meetings, the Bank of England’s rate decision and Monetary Policy Summary, the ECB’s Monetary Policy Meeting accounts, US Weekly Jobless Claims, US Import Prices and a speech from Federal Reserve Bank of St. Louis President James Bullard. We also have earnings from Intel (INTC) JP Morgan (JPM).

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

Category: AM Bulletin


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