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Weekly Bulletin: Equity rally continues
29 Feb 2016
PM Bulletin: Chart for the EURUSD
29 Feb 2016
AM Bulletin: Auction postponement linked to risk rally
26 Feb 2016
PM Bulletin: FOMC members add to confusion over monetary policy
26 Feb 2016
AM Bulletin: US stock indices rebound
25 Feb 2016
PM Bulletin: Lloyds Banking Group
25 Feb 2016
AM Bulletin: Stocks slip on lower crude
24 Feb 2016
PM Bulletin: Gold
24 Feb 2016
PM Bulletin: Crude oil, yen and equities
23 Feb 2016
AM Bulletin: Equities slip after strong start to week
23 Feb 2016
Sterling dumps on Brexit fears
22 Feb 2016
AM Bulletin: Stronger start for global equities
22 Feb 2016
AM Bulletin: Netflix leads Nasdaq lower
19 Feb 2016
PM Bulletin: FTSE revisited
18 Feb 2016
AM Bulletin: Oil still leading equities
18 Feb 2016
PM Bulletin: The yen, Nikkei and negative interest rates
17 Feb 2016
AM Bulletin: Oil and FOMC minutes in focus
17 Feb 2016
PM Bulletin: WTI and Brent
16 Feb 2016
AM Bulletin: Equities, USD, oil rally while precious metals slide
16 Feb 2016
Weekly Bulletin: Yellen keeps us guessing
15 Feb 2016
PM Bulletin: A multi-year look at the FTSE100
15 Feb 2016
PM Bulletin: Andrews’ Pitchfork on S&P500
12 Feb 2016
AM Bulletin: Equities remain vulnerable to further selling
12 Feb 2016
PM Bulletin: EURUSD – what now?
11 Feb 2016
AM Bulletin: Yellen fails to calm nerves
11 Feb 2016
PM Bulletin: Yellen steers through Clashing Rocks
10 Feb 2016
AM Bulletin: Yellen testimony in focus
10 Feb 2016
PM Bulletin: Japanese sell-off spooks investors
09 Feb 2016
AM Bulletin: Investors nervous as crude flirts with $30
09 Feb 2016
PM Bulletin: Big “risk-off” moves to start the week
08 Feb 2016
Weekly Bulletin: Investor jitters raises volatility
08 Feb 2016
February: Non Farm Payrolls Out Today
05 Feb 2016
PM Bulletin: Big miss for Non-Farm Payrolls
05 Feb 2016
AM Bulletin: Non-Farm Friday
05 Feb 2016
PM Bulletin: Non-Farm Payroll look-ahead
04 Feb 2016
AM Bulletin: Dollar slumps; oil spikes
04 Feb 2016
PM Bulletin: Tomorrow’s MPC press conference in focus
03 Feb 2016
AM Bulletin: Weaker crude weighs on equities
03 Feb 2016
PM Bulletin: A look at the EURUSD
02 Feb 2016
AM Bulletin: Google can’t lift indices
02 Feb 2016
PM Bulletin: Charts for USDJPY
01 Feb 2016
Weekly Bulletin: Central banks respond to sell-off
01 Feb 2016
Expand January <span class='blogcount'>(39)</span>January (39)
 
 
 Friday 05 February 2016

AM Bulletin: Non-Farm Friday

 

 

Indices Update

European equities and US stock index futures were little-changed in early trade this morning. Investors are holding back from taking on additional market exposure ahead of this afternoon’s US Non-Farm Payroll release.

Yesterday US markets continued the rally which began in earnest late on Wednesday. But it was another see-saw session, just part of a volatile week for equities with the major indices first selling off sharply and then making back their losses by Thursday afternoon.

Investors are struggling to work out how to respond to weak economic US data. On one hand disappointing numbers add to the negative sentiment which has overhung financial markets since the start of the year. On the other, poor data makes it less likely that the US Federal Reserve will raise rates aggressively in 2016. Ultimately, it has been the latter view which has dominated since Wednesday’s US session. This was confirmed yesterday when investors rushed to buy equities after a poor Jobless Claims number and weaker-than-expected Factory Orders.

Now all eyes are on this afternoon’s Non-Farm Payroll numbers. The consensus expectation is for a modest increase of 189,000 jobs in January – well down on December’s knock-out 292,000 but fine when taking a three month average. The Unemployment Rate is expected to come in unchanged at 5.0%.

The FTSE 100 index closed at 5,898.8 up 61.6 points on the day or 1.1%

The German DAX fell 41.5 points or 0.4% to finish at 9,393.4

The US30 closed up 79.9 points to finish at 16,416.6 The S&P 500 ended at 1,915.5 up 2.9 while the Nasdaq 100 fell 0.1% to close at 4,167.8


Equities update

Yesterday Credit Suisse (CS) posted a full-year pre-tax loss of CHF 2.4 billion ($2.38 billion) in the fourth quarter. This marked the bank’s first full-year loss since 2008. There was a CHF 3.8 billion goodwill impairment related to the acquisition of Donaldson, Lufkin & Jenrette (DLJ) in 2000. Credit Suisse is scaling back its investment banking business to focus on wealth management and warned of future market volatility for the rest of the year. The stock closed down 10.1% at CHF 14.73

Commodities Update

Both the Brent and WTI contracts continue to hold above $30 per barrel. This does seem to be the crucial level for crude prices in terms of their influence in investor risk appetite.

Crude oil remains the key driver for global equity prices. Wednesday’s rally (despite record US inventories) helped a number of major stock indices recover all their losses from earlier in the week. Much of the rebound in oil was attributed to the sharp sell-off in the US dollar. This came about as investors speculated that the US Federal Reserve would dial down its projected interest rate rises for the rest of this year. But there was also renewed speculation that OPEC and non-OPEC producers were preparing to meet to discuss output cuts.

Yesterday ConocoPhillips (COP) became the first oil “Supermajor” to cut its dividend. The move came after the company reported a larger-than-expected loss of $3.5 billion ($2.78 per share) for the fourth quarter from $39 million ($0.03 per share) for the same time last year. The consensus expectation was of $0.65 per share. The cut took the dividend to $0.25 per share from $0.74. The dividend cut contrasts with BP (BP) and Royal Dutch Shell (RDS) who both chose to slash their respective workforces rather than cut their (attractive but expensive) dividends. The decision to cut jobs like this is hardly consistent with the prevailing oil industry view that crude will soon rebound to $60 per barrel.

Gold and silver had another good session yesterday. Once again the two precious metals were supported by a weaker US dollar, although they have managed to garner some upside momentum of their own. It does feel as if investors are rediscovering the two as “safe havens” after years of being out of favour. Gold spent all of the European session trading above $1,140 per ounce, and occasionally pushed its head above $1,150 – a level which marks the 76.4% Fibonacci Retracement of the October-December sell-off.

On Wednesday silver bounced strongly off support around $14.30 (the 23.6% Fib Retracement of its Oct-Dec sell-off) and didn’t stop until it tested resistance around $14.70, the 38.2% retracement of the same move. Yesterday it spent most of the session above $14.70 giving bulls hope that this level could act as fresh support.  

Forex Update

The US dollar sell-off continued yesterday. The dollar has come under pressure as weak U.S. economic data suggested a March interest rate hike from the data-dependent Fed was unlikely. On top of this week’s disappointing ISM Manufacturing and Non-Manufacturing PMIs, yesterday saw the release of poor numbers for Jobless Claims and Factory Orders.

The sell-off in the US dollar was exacerbated after New York Fed President William Dudley warned that additional strength of the greenback could have "significant consequences" for the US economy. He also said that: “Financial conditions are considerably tighter and a weakening outlook for the global economy would have to be taken into account." 

The yen continued to strengthen against the US dollar. This will be something of a disaster for the Bank of Japan (BOJ) as the yen’s rally has followed hard on the heels of the BOJ launching their Negative Interest Rate Policy (NIRP). The BOJ have a very long history of intervening when they feel that their currency is appreciating too far. I would expect Governor Haruhiko Kuroda to step in should the USDJPY approach 116.00 again.

The British pound rallied further against the US dollar yesterday. Overall this was more a function of dollar weakness rather than sterling strength. However, cable was supported to some extent by comments made by Bank of England governor Mark Carney during a scheduled press conference which followed the BoE’s rate decision. Crucially he said that he and the whole MPC stands by the forecast that their first rate move will be higher rather than lower. This is somewhat surprising as MPC member Ian McCafferty dropped his vote for a rate hike, meaning that the MPC just became more dovish. But that’s Carney for you, “inconsistent boyfriend” and all that.


Upcoming events

Today’s main event is the release of US Non-Farm Payrolls, Average Hourly Earnings and the Unemployment Rate. We also have Canadian Unemployment and Trade Balance.

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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