NEWS AND ANALYSIS

Incisive market commentary and expert opinion

Stay ahead with our market commentary and webinars from our in house market strategist

Open a Live AccountOpen a Demo Account
 
+ Show blog menu

Categories

Menu

Expand 2017 <span class='blogcount'>(254)</span>2017 (254)
Collapse 2016 <span class='blogcount'>(483)</span>2016 (483)
Expand December <span class='blogcount'>(23)</span>December (23)
Expand November <span class='blogcount'>(41)</span>November (41)
Expand October <span class='blogcount'>(37)</span>October (37)
Expand September <span class='blogcount'>(41)</span>September (41)
Expand August <span class='blogcount'>(52)</span>August (52)
Expand July <span class='blogcount'>(38)</span>July (38)
Expand June <span class='blogcount'>(42)</span>June (42)
Collapse May <span class='blogcount'>(42)</span>May (42)
PM Bulletin: BOJ and the yen
31 May 2016
AM Bulletin: Quiet start following holiday weekend
31 May 2016
PM Bulletin: Meanwhile in China
27 May 2016
AM Bulletin: Yellen in focus ahead of holiday weekend
27 May 2016
PM Bulletin: FTSE breaks above 6,200 again
26 May 2016
Holiday Schedule: Memorial Day 30th May 2016
26 May 2016
AM Bulletin: Brent crude tops $50
26 May 2016
PM Bulletin : Crude Chart
25 May 2016
AM Bulletin: “Risk-on” trade continues
25 May 2016
PM Bulletin: Another poll boost for sterling
24 May 2016
AM Bulletin: Equities slip as rate hike worries persist
24 May 2016
PM Bulletin: Changing expectations
23 May 2016
Weekly Bulletin: I’ll see your hike and raise you two
23 May 2016
PM Bulletin : Significant events ahead of June FOMC
20 May 2016
AM Bulletin: Preparing for a summer rate hike
20 May 2016
PM Bulletin : Gold struggles as dollar strengthens
19 May 2016
AM Bulletin: FOMC more hawkish than anticipated
19 May 2016
PM Bulletin : FOMC minutes and the S&P
18 May 2016
AM Bulletin: FOMC minutes in focus
18 May 2016
PM Bulletin: Cable rallies on latest poll
17 May 2016
AM Bulletin: US equities lead bounce-back
17 May 2016
Weekly Bulletin : Waiting on Central Banks
13 May 2016
PM Bulletin : Apple
13 May 2016
Holiday Schedule Whit Monday Market Holiday
13 May 2016
AM Bulletin : US Retail Sales in focus
13 May 2016
PM Bulletin : Silver and Gold
12 May 2016
AM Bulletin: Investors wary after Wall Street sell-off
12 May 2016
PM Bulletin: Two headaches for Elon Musk
11 May 2016
AM Bulletin: Stock indices pull back after rally
11 May 2016
PM Bulletin: Yen pulls back on jawboning
10 May 2016
AM Bulletin: Markets steady on commodity bounce
10 May 2016
PM Bulletin: Precious metals give back recent gains
09 May 2016
Weekly Bulletin: Poor Non-Farm Payroll causes concern
09 May 2016
May: Non Farm Payrolls Out Today
06 May 2016
PM Bulletin: A dismal Non-Farm Payroll number
06 May 2016
AM Bulletin: Non-Farm Payrolls in focus
06 May 2016
PM Bulletin: Non-Farm Payroll look-ahead
05 May 2016
AM Bulletin: Crude bounce lifts equities
05 May 2016
PM Bulletin: Apple update
04 May 2016
AM Bulletin: Equities under pressure
04 May 2016
PM Bulletin: Aussie dollar slumps
03 May 2016
AM Bulletin: RBA cuts by 25 basis points
03 May 2016
Expand April <span class='blogcount'>(45)</span>April (45)
Expand March <span class='blogcount'>(41)</span>March (41)
Expand February <span class='blogcount'>(42)</span>February (42)
Expand January <span class='blogcount'>(39)</span>January (39)
 
 
 

 

Indices Update

There’s a firmer tone across European equities and US stock indices this morning. There appears to be something of a relief rally going on as China’s Shanghai Composite steadied overnight along with commodities such as iron ore and copper.

Yesterday the Shanghai Composite fell sharply ending its first session of the week down 2.8%. Investors rushed to dump stocks after China’s main newspaper The People’s Daily reported on an interview with an “authoritative” person. The unnamed source said that China’s economic performance would be L-shaped, rather than V or even U-shaped. The person also said that China should not seek to boost growth through loosening monetary conditions. Any evidence of a further slowdown in China could dissuade the U.S. Fed from tightening policy as expected in June. Industrial and agricultural commodities were also sharply lower as Chinese regulators took measures to curb recent speculative activity.

Despite the sell-off in China European equity markets began yesterday in a positive fashion. Investors took their cue from Friday’s trade which saw US indices rally into the close. This was despite an early sell-off at the end of last week which followed the release of US Non-Farm Payrolls. This key jobs number came in well below the consensus expectation which caused market participants to question the strength of the US recovery. The weak data followed on from disappointing readings for US GDP, Manufacturing and Durable Goods. There are some investors who still feel that “bad news is good” as it reduces the likelihood of the Fed hiking rates at next month’s meeting. However, the market doesn’t expect further tightening in June, no matter how hard Federal Reserve members insist that it’s still an option. Instead, equities got more of a lift from a rally in the oil price as WTI traded back above $45 per barrel. When oil turned lower later in the day, stocks did too.

The FTSE 100 index closed at 6,114.8 down 10.9 points on the day or 0.2%

The German DAX rose 110.5 points or 1.1% to finish at 9,980.5

The US30 closed down 34.7 points to finish at 17,705.9 The S&P 500 ended up 0.1% at 2058.7 while the Nasdaq 100 finished up 0.3% at 4,341.2

Equities Update

Anglo American (AAL) slumped yesterday, closing out at 89.9 pence, down 13.8%. The mining giant was hit by the sharp sell-off in commodities which began overnight in China. Chinese traders have driven the prices of a number of key commodities, including iron ore, higher since the beginning of the year. Anglo generates a third of all its earnings from iron ore, the main component of steel. The price of iron ore fell sharply again yesterday following data which showed an increase in stockpiles at Chinese ports. On top of this, analysts at Citigroup estimate that real demand for steel in China dropped at least 7% in April from the year before.

Commodities Update

Oil rallied in the early part of yesterday’s trading session.  Both WTI and Brent traded above $45 per barrel for much of the morning. Investors reacted to news that the wildfire around Fort McMurray, the capital of Canada’s oil sand fields, had spread. This effectively shut down production in the area and knocked out over a million barrels in daily capacity. The lost output is equivalent to over a third of the country's typical daily production. But as the day progressed news came through that bad weather in the shape of heavy rain and favourable winds was helping to get the fires under control. Once this happens it will still be a few weeks before production returns to normal.

Another big piece of oil-related news came over the weekend. Ali al-Naimi, Saudi Arabia’s oil minister for over 20 years was replaced by Khalid al-Falih, chairman of the country’s state oil company, Saudi Aramco. There was a mixed reaction to the news as analysts struggled to work out whether it was bullish or bearish for the oil price. Some felt the change in leadership could drive prices up in the short term. But analysts also noted that the removal of Mr al-Naimi could be a precursor to Saudi Arabia flooding the market with fresh supply. Ahead of the failed Doha meeting, Prince Mohammed (who made the change) said the Kingdom could boost daily production by as much as 11.5 million barrels without any further investment.

Crude oil fell as the session progressed. Partly this was due to hopes that the Canadian fire would soon be under control. But also it was on news of a bigger-than-expected US inventory build at Cushing, Oklahoma.

Gold and silver fell sharply in early trade yesterday. There has been some downside pressure on precious metals’ prices since the dollar began to rally last week. However, yesterday’s big sell-off was linked to an overnight rout in commodities on China’s exchanges. Chinese investors have been taking on highly leveraged trades on industrial and agricultural commodities. Trading volumes have soared since January’s melt-down in Chinese equities. Regulators have stepped in to dampen speculative trading by raised transaction fees and margins. This contributed to a sell-off of industrial and agricultural commodities which spread through to precious metals. 

Forex Update

Yesterday’s biggest FX move came in the Japanese yen. It fell sharply against all the majors after Japanese Finance Minister Taro Aso said that Tokyo was ready to intervene in an effort to reverse recent gains. Mr Aso addressed parliament saying, “…excessive volatility in yen moves that affect Japan's trade, economic and fiscal policies - be it yen rises or yen falls - is undesirable. If such moves occur, Japan is ready to intervene in the market." Mr Aso’s statement helped push the USDJPY back above 108.50 – its best level in over a week. However, it will probably take outright action rather than a standard threat to push the yen substantially lower. Last week Japan’s Prime Minister Shinzo Abe also suggested that measures could soon be taken to weaken the currency.

Intervention could prove difficult as Japan won’t want to act unilaterally, or without the blessing of the G20, in taking measures to weaken its currency. Another problem is that Japanese policymakers aren’t being taken seriously at the moment.

There must be significant frustration amongst government ministers and the Bank of Japan (BOJ). They have had to sit back and watch the yen rally sharply since the end of January. This was when the BOJ took markets by surprise and adopted negative interest rates. The move should have made the yen less attractive. But instead it was driven higher as investors speculated that the BOJ was acting out of desperation and was close to reaching the limits of monetary easing.

Upcoming events

Today’s significant economic events include Italian Industrial Production and the UK’s Goods Trade Balance. From the US we have JOLTS Job Openings, Mortgage Delinquencies and Wholesale Inventories. Federal Reserve Bank of New York President (and FOMC-voting member) William Dudley speaks in Zurich. 

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


Add a comment Add comment            

 

 
© 2017 Spread Co Limited. All Rights Reserved.

Spread Co Limited is a limited liability company registered in England and Wales with its registered office at 22 Bruton Street, London W1J 6QE. Company No. 05614477. Spread Co Limited is authorised and regulated by the Financial Conduct Authority. Register No. 446677.

Spread betting and CFD trading are leveraged products and can result in losses that exceed your deposits. Ensure you understand the risks.

Losses can exceed deposits. Click here to learn more.