Incisive market commentary from David Morrison

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AM Bulletin: Markets rise for the second day ; back to pre-referendum levels, sterling still weak
30 Jun 2016
AM Bulletin: Confidence returns – but for how long?
29 Jun 2016
AM Bulletin: The onslaught continues – and we’re not just talking the football
28 Jun 2016
Weekly Bulletin: Investors rattled by Brexit vote
27 Jun 2016
PM Bulletin: Brexit - Referendum fallout
24 Jun 2016
AM Bulletin: We’re out! And so is Cameron
24 Jun 2016
Video Update: #AskSpreadCo - EU referendum
23 Jun 2016
AM Bulletin: Markets on tenterhooks ahead of UK vote
23 Jun 2016
Spread Betting Tips
22 Jun 2016
AM Bulletin: Risk assets waft higher
22 Jun 2016
PM Bulletin:Referendum and Market Reaction
21 Jun 2016
PM Bulletin: Gold and the referendum
21 Jun 2016
AM Bulletin: Yellen testimony in focus
21 Jun 2016
PM Bulletin: Janet Yellen’s testimony
20 Jun 2016
Weekly Bulletin: It’s all about the referendum
20 Jun 2016
Market Info Update: EU Referendum Margin Changes - CFDs
17 Jun 2016
Market Info Update: EU Referendum Margin Changes - Spread Betting
17 Jun 2016
PM Bulletin: Forecasting the referendum result
17 Jun 2016
AM Bulletin: Central banks leave rates unchanged
17 Jun 2016
PM Bulletin: FOMC post-mortem
16 Jun 2016
AM Bulletin: Yen, precious metals soar post FOMC/BOJ
16 Jun 2016
PM Bulletin: FOMC look-ahead
15 Jun 2016
AM Bulletin: FOMC meeting ahead
15 Jun 2016
PM Bulletin: European equities slide
14 Jun 2016
AM Bulletin: Stocks down on oil, growth fears and UK referendum
14 Jun 2016
Weekly Bulletin: FOMC and BOJ meetings in focus
13 Jun 2016
PM Bulletin: Markets rattled by slide in bond yields
10 Jun 2016
AM Bulletin: European stock indices drift lower
10 Jun 2016
PM Bulletin: WTI at $50 – thoughts on US production
09 Jun 2016
AM Bulletin: Precious metals soar
09 Jun 2016
PM Bulletin: S&P closes in on all-time high
08 Jun 2016
AM Bulletin: Investors in limbo ahead of Fed and UK vote
08 Jun 2016
PM Bulletin: Yellen and the jobs data
07 Jun 2016
PM Bulletin: Fresh polls send sterling lower
06 Jun 2016
Weekly Bulletin: Rate hike? What rate hike?
06 Jun 2016
PM Bulletin: A dismal Non-Farm Payroll number
03 Jun 2016
AM Bulletin: Non-Farm Payroll Friday
03 Jun 2016
PM Bulletin: Non-Farm Payrolls look-ahead
02 Jun 2016
AM Bulletin: OPEC, ECB, key data releases and central bank speakers
02 Jun 2016
PM Bulletin: OPEC and the oil price
01 Jun 2016
AM Bulletin: Manufacturing PMIs in focus
01 Jun 2016
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Indices Update

The winning streak continues for European stocks into a second day as investors looked to continue taking advantage of beat down stocks. The FTSE 100 index has jumped by 110 points, or 1.8%, to 6251 on the open. Investors were eagerly buying equities as there is no expectation of Article 50 being triggered in the near term.

The EU held their first meeting without the bloc’s second-largest economy for the first time. The meeting included setting the factors of Britain’s new relationship with the EU, making David Cameron aware that further negotiations will not be held until Article 50 in invoked. Cameron has said he will leave this to his successor, candidates will be announced today after lunch. The main concern for Britain will be access to the bloc’s single market with huge companies like Vodafone and Siemens warning Britain of their need for easy access to the EU’s single market. The EU has made it clear that access will not be given unless the UK abides by the rights of EU citizens to migrate to other EU countries. 

Markets were also weighed upon by terror attacks in Turkey, which left 41 dead and inevitably dragged travel service companies down. Markets were also supported by positive data; mortgage approvals for house purchases in May, up from 66,205 in April, to 67,042 and consumer credit rose 9.9 percent compared with a year ago, the biggest annual increase since November 2005 and up from 9.6 percent in April.

Wall Street opened sharply higher and closed up more than 1.5 percent, helped by gains in oil prices and improved sentiment after initial fears of significant negative spill-over from Brexit. It was the best percentage gain since March 1 led by Boeing and Goldman Sachs.

The FTSE 100 has closed up 3.58% and has regained all its losses and more since the referendum and is, in fact, the highest closing level for the index since 21 April this year. European indices closed higher across the board – the question remains if this a ‘dead cat bounce’ or a recovery.

Equities Update

Housebuilders and banking stock were up, providing huge support to the FTSE 100, however still sharply lower than last week. Notably, travel service companies, as mentioned, were dragged down after news of a terrorist attack in Istanbul Ataturk Airport reached the mainstream media. The biggest decline was TUI AG who fell 3.8% with no signs of a reversal throughout the day. In contrast Thomas Cook PLC swung 4.4% and International Consolidated Airlines PLC, parent company of British Airways, swung to move higher by 2% after starting the day down.

The biggest gainer in the FTSE 100 was Fresnillo PLC who saw their shares rise 9.52% to trade at 1587.00. The holding company has benefitted from the rise in precious metals with gold and silver prices on the rise.

Commodities Update

Oil prices took another leap higher for the second trading day, boosted by a massive drop in US crude inventories. The US Energy Information Administration announced their stockpiles of crude had decreased by 4.1 million barrels last week, as opposed to the 2.365 million barrel drop analysts were expecting. This sharp decline must have been somewhat expected, however, as a day earlier API figures suggested a 4 million barrel drop. Nevertheless, oil prices jumped as there is clear confirmation of a solid effort to bring supply down, with inventories decreasing in consistent weeks for a while now. Brent was seen trading 2.7% higher at $49.86 by the end of the European hours, breaking the $50-mark in the overnight session. Crude prices rose 2.6% to $49.10 by lunchtime in New York, extending those gains further by very briefly touching the half-century mark later on.

The markets seem to be catching their breath after the manic weekend, as Gold seems to be consolidating around the $1,320 area – for now. Asian trade overnight saw the precious metal rise up to 1% before coming back down to settle down 0.3% at $1,314.30 an ounce. This type of reaction to gold tends to indicate that, although there is still a lot of money tied up in the safe haven, people have slowly been tempted to dip their toe in stocks once more. It seems as though the mindset of the markets is that the US will hold back on a rate hike as the world awaits what the UK does next.

Forex Update

Sterling, as with indices, rose for the second day due to improved risk appetite – the delay in invoking Article 50 provided support to the currency. Around lunchtime the pound gained ground, up 1.5 cents at $1.35 - 4 cents higher than Monday’s 31-year low, but still 10 cents below pre-referendum levels.

Sterling also drew support from changing views on US interest rates, with a 5% chance the Fed will cut rates by July and 11% that they will cut in September. In the UK, money markets had fully priced in a rate cut with a 50% chance there will be one in August.

The dollar index moved up marginally, retaining its 3 ½ month high, benefitting from the UK’s Brexit decision and views that the US’s interest rates may be cut, as mentioned. The euro remained under pressure, down 0.2%, but remained well above its 3 1/2-month low of $1.0912 hit on Friday last week - down 0.3 percent for the month.

Upcoming events

9:00 Consumer Price Index – 0.8% Expected

11:30 ECB Monetary Policy Meeting Accounts

15:00 BOE’s Governor Carney speech

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Posted by Michael Campbell

Category: AM Bulletin

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