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PM Bulletin: Exxon Mobil - a proxy for crude?
29 Apr 2016
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29 Apr 2016
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28 Apr 2016
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26 Apr 2016
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26 Apr 2016
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25 Apr 2016
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22 Apr 2016
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21 Apr 2016
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18 Apr 2016
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15 Apr 2016
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15 Apr 2016
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14 Apr 2016
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14 Apr 2016
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14 Apr 2016
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12 Apr 2016
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11 Apr 2016
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08 Apr 2016
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08 Apr 2016
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07 Apr 2016
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07 Apr 2016
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06 Apr 2016
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05 Apr 2016
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04 Apr 2016
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04 Apr 2016
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01 Apr 2016
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 Tuesday 26 April 2016

AM Bulletin: Markets directionless

 

 

Indices Update

There was a softer tone to equity markets yesterday, beginning with a selloff in the major Asian Pacific indices. Despite this, losses were limited initially and investors seemed unwilling to ditch long positions, let alone establish new shorts.

However, the selling picked up later in the day and by mid-afternoon the Dow was down by over a hundred points. Investors are no doubt looking ahead to this week’s key central bank meetings. The US Federal reserve begins a two-day meeting this afternoon and the Bank of Japan (BOJ) meets on Thursday. The consensus seems to be that the Fed will leave rates unchanged, but may signal that a second rate hike is a possibility after its June meeting. In contrast, a small majority of analysts expects the BOJ to provide further monetary stimulus the week, by pushing rates further into negative territory and/or announcing their intention to extend their purchases of ETFs. It is worth noting that while analysts are fairly evenly split over the likelihood of further stimulus most traders expect it from the BOJ. Consequently, there is scope for disappointment. If the BOJ fails to deliver, we can expect a sell-off in the Nikkei and a sharp rally in the Japanese yen.

The FTSE 100 index closed at 6,260.9 down 49.5 points on the day, or 0.8%

The German DAX fell 79.1 points or 0.8% to finish at 10,294.4

The US30 closed down 26.5 points to finish at 17,977.2 The S&P 500 ended 0.2% lower at 2,087.8 while the Nasdaq 100 ended unchanged.

Equities Update

BP is up over 2% in early trade this morning. The rally comes despite the oil giant reporting a pre-tax loss for the second successive quarter. BP’s headline “replacement cost” loss was $485 million. This compares with a profit of $2.1 billion for the same period last year. Nevertheless, once one-off items were stripped out, BP’s earnings came in at $532 million – well above the consensus expectation of a $140 million loss. The company said that it had reduced cash costs by $4.6 billion over 2014 levels and cut organic capital expenditure by $500 million from the first quarter of last year.

Commodities Update

Gold and silver were little-changed in early trade yesterday. This was something of a relief to buyers of the two precious metals following a sharp sell-off on Friday evening. At the end of last week investors rushed to dump both as the US dollar staged a late rally. The pull-back took gold down through support around $1,240 and it looked as if further losses were likely. While there’s some mild support around $1,220 which corresponds to a gently upward-sloping trend line, $1,200 or even $1,180 looked like possible downside targets. Silver also lost ground and ended Friday’s session in negative territory. However its losses were less severe than gold’s in percentage terms.

Yesterday both precious metals pushed higher in late afternoon trade. Once again, it was the US dollar which was the catalyst for their moves. The greenback lost ground against all the majors as it gave back some of its gains from last week. Investors are looking ahead to this Wednesday’s Federal Reserve meeting. While few anticipate any change in the headline Fed Funds rate, there is a feeling that the accompanying FOMC statement may once again prove to be quite dovish in tone. If so, this should put further downside pressure on the dollar.

Crude had another mixed session for most of yesterday. It began the European session a touch weaker but picked up later in the day. However, both WTI and Brent turned sharply lower ahead of the European close. The sell-off coincided with the release of US inventory data from Genscape. The latter is a private company which provides early data on weekly storage levels at the key US hub in Cushing, Oklahoma. Genscape’s latest release showed an inventory build of 1.5 million barrels. Not only was this above the 1.2 million expected, but it was also the largest build since mid-December.

As I wrote last week I really don’t know what to make of the recent price action in crude. I had expected a bigger sell-off on the back of the Doha failure and the ending of the strike by Kuwaiti oil workers. Both WTI and Brent front month contracts (June) are still well north of $40, although prices have softened a touch since Thursday last week.  


Forex Update

FX markets were quiet in early trade yesterday. There was a slightly softer tone to the US dollar in early trade. However, traders seemed unwilling to push the greenback lower during the first half of the European session. This was as much to do with the euro as the greenback. The single currency slipped following the release of the German Ifo Business Climate survey. The index slipped to 106.6 in April from 106.7 in March – lower than the consensus expectation of 107.1.

But the dollar turned sharply lower later in the session. This makes some sense as much of the greenback’s gains on Friday came later in the day, so no doubt a lot of those same traders decided to book profits today. After all, both the US Federal Reserve and Bank of Japan make rate decisions this week.

Yesterday’s biggest gainer amongst the majors was the British pound. A number of observers were anxious to give Mr Obama of the United States credit for sterling’s rally. This followed his numerous interventions over the weekend where he explained how stupid we’d all be if we voted to leave the European Union in this summer’s referendum. He pointed out that we will be at the back of the “queue” when it came to negotiating any trade agreement, as the US were currently already in negations  with the EU so rather busy at the moment. Of course the EU has been in existence for many years and countries within it already trade with the US. Political trade agreements may be helpful, but they’re not a requirement. People trade with each other when it’s mutually beneficial, as we’ve known for thousands of years. 


Upcoming events

Today’s significant economic events all come from the US and include Durable Goods, the S&P/Case Shiller HPI, Flash Services PMI, Consumer Confidence and the Richmond Manufacturing Index.

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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