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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
 
 
 Friday 15 January 2016

AM Bulletin: More woe from China

 

 

Indices Update

This morning European stock indices found themselves unable to react to last night’s 1.5% rally across Wall Street. Nearly all of the US gains have been ceded this morning thanks to a 3.5% slump in China’s Shanghai Composite and renewed selling in crude oil. It looks as if investors will be heading into the weekend in pessimistic mood once again.

It was a shaky start for European equity markets yesterday. This followed the sharp Wall Street sell-off on Wednesday which left the major indices 2-3.5% lower. Once again, lower oil prices were fingered as the main catalyst for the slump.

But as is typically the case, the market tone was established once the US opened for business. Equities surged higher as Federal Reserve Bank of St. Louis President James Bullard delivered a speech. He said that he didn’t expect much appreciation in the US dollar in the coming year. Given the stark divergence in monetary policy between the Federal Reserve and other major central banks, either he means the ECB, BOJ and PBOC will hold back from further stimulus, or the Fed won’t be as hawkish as it indicated back in December. Seeing as Bullard is a member of the Fed, it’s probably the latter. In addition, he intimated that the bottom in oil may not be too far away. This led to a surge in crude. So overall his jawboning did the trick.

The FTSE 100 index closed at 5,918.2 down 42.7 points on the day or 0.7% lower.

The German DAX fell 166.8 points or 1.7% to finish a touch below 9,794.2

The US30 closed up 227.6 points to finish at 16,379.1 The S&P 500 ended at 1,921.8 up 31.6 points or 1.7% while the Nasdaq 100 rose 2.2% to close at 4,273

Equities Update

Tesco’s (TSCO) like-for-like group sales were up 2.1% over the six weeks to 9th January compared to the same period last year. UK sales were up 1.3% over the same period. All-in-all, Tesco joined Morrison’s (MRW) and Sainsbury’s (SBRY) in posting better-than-expected Christmas numbers. However, Tesco’s total group sales for the full quarter were down 0.5%. Despite this stock in the supermarket giant closed up 6.1% at 168 pence per share. Just last month the shares hit an eighteen month low.

Commodities Update

Crude rallied yesterday and this helped lift global equities. Traders piled in on the long side after Federal Reserve Bank of St. Louis President James Bullard commented that oil prices have to hit a bottom “sometime.” Traders took this as a sign that further downside is limited – something that is of course obvious to anyone who is familiar with the term “zero.” Nevertheless, human psychology being what it is, memories of $100-plus oil are relatively fresh. Consequently, a drop of $5, $10 or even $20 from current levels is nothing when set against gains of maybe $80 per barrel. Unfortunately, what people overlook at such times is that prices can go up, down or even sideways for extended periods. Also, holding out for $100 when the price is $60 is very different from buying at $30 and holding though to $40. What I mean by this is that traders rarely manage to capitalise on big moves. They either get out too early or hold on too long. I’m talking from experience here as someone who bought silver a $6 and failed to get out as it shot up to $50, still convinced $100 was a reasonable target.

Brent and WTI are sharply lower this morning and within a gnat’s whisker of $30. Both have broken below this level before, but so far not simultaneously. Consequently, it will be interesting to see what happens if both break $30 in a main US/European trading session. It may be that a simultaneous break will trigger a slew of sell-stops below the $30 level. Alternatively, this level could prove to be where we see a wave of short-covering and fresh buying. We’ll know soon enough.

As far as gold and silver are concerned, there’s a big struggle going on between the bulls and bears which the bears are currently winning, hands down. Yesterday both dropped sharply ahead of the open of the US futures market, surrendering all the gains made on Wednesday. They remained under pressure throughout the day as risk appetite returned to the market. Equities and the US dollar screamed higher as the Fed’s James Bullard talked down rate hikes and talked up the price of oil. As a consequence “safe-haven” demand for gold and silver evaporated.

Forex Update

The FX markets were generally mixed in early trade yesterday although the euro soon firmed up against the majors. The single currency rallied following a report from Reuters which said that policymakers at the European Central Bank (ECB) saw less need for further stimulus over the near term. This would be the case even if the ECB predicts lower estimates for growth and inflation in 2018 when in releases its forecast in March.

Later on, it was the US dollar’s turn to rally. The greenback took off as Federal Reserve Bank of St. Louis President James Bullard began to speak. This was surprising given the dovishness of his comments. Mr Bullard is generally to be relatively hawkish in his outlook for monetary policy. Anyway, his comments led to sharp rallies in oil and equities, and this carried on over into the US dollar. This makes sense inasmuch as investors will buy dollars and sell (borrow) lower-yielding currencies such as the yen and euro in order to purchase riskier assets.

Upcoming events

Today’s significant economic events include UK construction Output, Bank of England Credit Conditions survey and ECOFIN meetings. From the US we have Retail Sales, PPI, the Empire State Manufacturing Index, Capacity Utilisation, Industrial Production, Consumer Sentiment, Inflation Expectations and Business Inventories.

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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