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AM Bulletin: Equities and oil slip in early trade
31 Mar 2016
PM Bulletin: Non-Farm Payroll look-ahead
31 Mar 2016
AM Bulletin: Yellen comments boost risk appetite
30 Mar 2016
PM Bulletin: Is a dovish Janet really that bullish?
30 Mar 2016
AM Bulletin: Yellen to speak
29 Mar 2016
PM Bulletin: US indices running into resistance
29 Mar 2016
AM Bulletin: Profit-taking ahead of holiday weekend
24 Mar 2016
PM Bulletin: Dollar correlations
24 Mar 2016
AM Bulletin: Equities head higher
23 Mar 2016
PM Bulletin: Melt-down in precious metals
23 Mar 2016
AM Bulletin: Markets looking for guidance
22 Mar 2016
Weekly Bulletin: US dollar on the back foot
21 Mar 2016
AM Bulletin: USD sell-off boosts oil
18 Mar 2016
PM Bulletin: A look at the S&P500 and FTSE100
18 Mar 2016
AM Bulletin: USD down on dovish Fed
17 Mar 2016
PM Bulletin: USDJPY
17 Mar 2016
AM Bulletin: All ears and eyes on FOMC
16 Mar 2016
PM Bulletin: Reaction to the “Sugar Tax”
16 Mar 2016
AM Bulletin: BOJ unchanged
15 Mar 2016
PM Bulletin: FOMC look-ahead and the USD
15 Mar 2016
Weekly Bulletin: Central banks still in focus
14 Mar 2016
PM Bulletin: Gold
14 Mar 2016
AM Bulletin: Confusion reins
11 Mar 2016
PM Bulletin: EURUSD revisited
11 Mar 2016
AM Bulletin: ECB meeting in focus
10 Mar 2016
PM Bulletin: Mr Draghi fires his bazooka
10 Mar 2016
AM Bulletin: Markets consolidate
09 Mar 2016
PM Bulletin: ECB look-ahead
09 Mar 2016
AM Bulletin: Chinese data weighs on equities
08 Mar 2016
PM Bulletin: Nasdaq 100
08 Mar 2016
Weekly Bulletin: ECB expected to boost stimulus
07 Mar 2016
PM Bulletin: FTSE making steady gains
07 Mar 2016
March: Non Farm Payrolls Out Today
04 Mar 2016
AM Bulletin: Markets quiet ahead of Non-Farms
04 Mar 2016
PM Bulletin: Meanwhile, over in silver...
04 Mar 2016
AM Bulletin: Equities consolidate
03 Mar 2016
PM Bulletin: Non-Farm Payroll look-ahead
03 Mar 2016
AM Bulletin: Equities soar
02 Mar 2016
PM Bulletin: AUDUSD chart
02 Mar 2016
AM Bulletin: See-saw day ends in losses for US equities
01 Mar 2016
PM Bulletin: Glencore
01 Mar 2016
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 Wednesday 09 March 2016

AM Bulletin: Markets consolidate

 

 

Indices Update

It has been a very quiet start to trade this morning. Perhaps the only vaguely interesting observation is that European indices began a touch firmer despite a sell-off in Asian Pacific indices. However, they drifted lower soon after the UK open. Oil is effectively flat and the dollar moderately higher.

European and US stock indices were weaker in early trade yesterday. This followed the release of China’s latest trade surplus which showed a sharp decline in February from the previous month. The fall in both exports and imports was far bigger than expected. Exports fell 25.4% from a year earlier, the biggest drop since May 2009, while imports slumped 13.8%, leaving a trade surplus of $32.6 billion.

The major indices had made back some of their losses by lunchtime in Europe. Perhaps this was on the back of hopes that the Chinese authorities would announce another round of stimulus to stem the obvious slowdown in economic growth. However, it felt as if investors were unwilling to take on additional exposure ahead of the European Central Bank’s rate decision and Mario Draghi’s subsequent press conference tomorrow.

On Monday night Federal Reserve vice-chair Stanley Fischer took some of the wind out of the market’s sails when he suggested that the “first stirrings of an increase in the inflation rate” were evident. He also said that that the US was “in the vicinity of full employment.” This was interpreted as leaving open the possibility for a Fed rate hike next week. But countering this, fellow FOMC member Lael Brainard warned about taking US Labour market strength for granted. So, as the FOMC goes into purdah ahead of next week’s meetings, we are left with contrarian messages from two of the FOMC’s rate setters.

The FTSE 100 index closed at 6,125.4 down 57 points on the day, or -0.9%

The German DAX fell 86.1 points or 0.9% to finish at 9,692.8

The US30 closed down 109.9 points to finish at 16,964.1. The S&P 500 fell 1.1% to close at 1,979.3 while the Nasdaq 100 fell 0.9% to close at 4,265.5

Equities Update

Yesterday morning the FT reported that a potential bidder could be stalking Burberry (BRBY). A mystery investor has built up a stake of more than 5% in the luxury fashion brand leading the company to take action to fend off a possible takeover bid. At the time of writing Burberry had been unable to find out who the stakeholder was despite asking HSBC, the custodian for the position. Along with other fashion brands, shares in the company have lost ground over the last year thanks to global uncertainty and a drop in sales in high-margin Asian Pacific markets. Burberry closed 6.6% higher at 1,462 pence.

Commodities Update

Brent and WTI were both little-moved in early trade yesterday. The near-month Brent contract held above $40 per barrel for most of the European session while WTI briefly topped $38. However, both contracts fell back once the US trading session got underway. Oil traders didn’t take much notice of the poor Chinese trade data. Perhaps this is because the country continues to import crude at a decent clip – no doubt happy to build inventory at attractive prices. However, crude sold off after Kuwait said it would only agree to freeze production if all other major producers did as well – including Iran. Iran had previously been granted an exemption from the Saudi, Russian, Venezuelan, Qatari oil production ceiling proposal on the grounds that it was gradually returning to the market following years of sanctions. However Kuwaiti oil minister Anas al-Saleh insisted that Iran had to be a party to any proposed production freeze, saying on Tuesday: "I'll go full power if there's no agreement. Every barrel I produce I'll sell."

This was a timely reminder that oil cartels aren’t what they used to be. The days when OPEC members fell meekly in line with Saudi Arabia are long over. It just goes to show that if you really want to hold the world to ransom through the oil price then you’d better make sure you control 51% of production, not 40%.

Gold marked time yesterday while silver retreated in a rather featureless trading session. The US dollar was lower in terms of the Dollar Index, and that should have been supportive of precious metals’ prices. However, similarly to Monday (when gold and silver rallied along with the greenback) it appears that dollar moves are currently of secondary importance.

Technically, gold looks as if it is trading in “no man’s land.” It’s next upside target is around $1,300 the high hit back in January last year. Meanwhile, there’s some decent support around $1,240 – the 76.4% Fibonacci Retracement of the Jan-Dec 2015 sell-off.

Silver lost ground yesterday as traders took profits after China’s poor trade numbers. Silver is an important industrial metal and generally gets a bashing on any data which points to a slowdown in the global economy, particularly where manufacturing is concerned. In technical terms there is resistance around $15.70 (the 76.4% Fib retracement of the Oct-Dec 2015 sell-off) and support around $15.30 – the 61.8% retracement of the same move.

Forex Update

The Japanese yen rose sharply yesterday as investors tamped down their risk appetite. Crude oil and equities gave back a proportion of recent gains as market participants repositioned themselves ahead of tomorrow’s ECB meeting. It seems unlikely that any currency will make a significant move ahead of the meeting and the USDJPY should find support around the 112.00 level. However, what is concerning investors is the lack of clarity ahead of both the ECB and next week’s Fed decision, not to mention meetings from the Bank of Canada, Reserve Bank of New Zealand, Bank of Japan and Bank of England. The expectation is that the ECB will cut its discount rate and increase its monthly bond purchase programme. There is always the danger that the ECB will come up short of market expectations, leading to a general “risk off” move. However, Mr Draghi will be wary of disappointing investors as he did back in December. In fact, there has been rising speculation that he may surprise markets the other way and come up with something truly spectacular. However, this seems less likely given a number of influential Governing Council members know to be more hawkish in outlook.

The Canadian dollar fell alongside oil although its losses were relatively minor when put into the context of the rally it has enjoyed since mid-January. The euro and the US dollar were little-changed, despite strong industrial production numbers from Germany – not what the Euro zone doves wanted to see.

Upcoming events

Today’s key economic events include the release of UK Manufacturing and Industrial Production. From the US we have Wholesale and Crude oil inventories. We also have rate decisions from the Bank of Canada and Reserve Bank of New Zealand.

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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