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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
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AM Bulletin: Netflix leads Nasdaq lower
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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
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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
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 Wednesday 17 February 2016

AM Bulletin: Oil and FOMC minutes in focus

 

 

Indices Update

It was a mixed start for the major stock indices this morning. The Europeans were busy playing catch-up following last night’s gains on Wall Street. However, US futures were lower in early trade as front month WTI crude dipped below $30. Traders will continue to keep a close eye on oil, particularly in relation to today’s meeting to discuss an output freeze with OPEC producers Iran and Iraq.

Later we have the release of minutes from the January FOMC meeting. Market participants will be keen to see if these offer up any clues as to the possibility of a rate hike in March, and if so, under what conditions.

European stocks were firmer on the open yesterday, carrying on the rally which began at the end of last week. Equities were boosted by oil which bounced sharply on hopes of talks to curb output from major producers. Investors also expected US markets to push higher as they got back to business after the Presidents’ Day break.

But European equities had turned lower by mid-morning and US stock index futures pulled back from their best levels. Suddenly sentiment once again became negative. Crude oil gave up early gains, the dollar slipped while precious metals rallied once again.

Ultimately, it was a mixed close for European stock indices although US indices all ended in positive territory.

The FTSE 100 index closed at 5,862.2, up 37.9 points on the day, or 0.7%

The German DAX fell 71.7 points or 0.8% to finish at 9,135.1

The US30 closed up 222 points to finish at 16,196. The S&P 500 ended at 1,896 up 31 points while the Nasdaq 100 rose 2.1% to close at 4,104

Equities Update

Standard Chartered (STAN) was one of yesterday’s biggest stock market casualties. Its shares fell sharply after two brokers cut their ratings on the bank, saying that there were better opportunities elsewhere in the sector. Standard Chartered continues to have a dismal time having fallen close to 80% over the last three years. As a comparison, HSBC is down 40% over the same period. Both banks have exposure to Asia, although unlike HSBC, Standard has no consumer presence in the UK. Consequently, it would make a lot of sense for Standard to relocate and avoid the UK banking levy. But for now the bank has to deal with its customers in emerging markets who continue to suffer from the ongoing rout in commodities. The stock ended 5.3% lower on the day at 428.85 pence.

Commodities Update

Crude oil continued to rally in early trade yesterday. WTI shot back above $30 per barrel and this helped to lift equities and other risk assets. Traders bought and covered shorts ahead of a supposedly “secret” meeting between Russia and Saudi Arabia on the expectation that the two would agree to production cuts. However, all that transpired was that the world’s top two oil producers said they would “freeze” output, as long as other producers followed. Venezuela and Qatar (both OPEC) were also present and voted to freeze, and it is understood that Iran and Iraq are being approached today. As there is no way that Iran (OPEC member) would agree to this, the deal between Russia and Saudi is meaningless, especially as the plan was to freeze production at January levels – a new record for output. That was certainly the opinion of traders as they rushed to sell and crude promptly gave back early gains. It is possible that Iran will be offered a tailored deal as it has just been released from sanctions and is only now beginning to export again. But it seems unlikely that this would help to lift oil prices by anything significant as any such side deal will be viewed as a thread with which to unravel anything more substantive.

Gold and silver fell sharply on Monday and the sell-off continued in early trade yesterday. However, things turned round mid-morning as risk appetite waned. This followed news that Russia and Saudi Arabia could only agree to “freeze” oil production at last month’s record levels rather than settling on a full-blown output cut. Both precious metals headed higher on the news despite a stronger US dollar. Gold bulls should take comfort that support at $1,200 is holding so far on a closing basis. The ideal situation would be for some consolidation here which would provide a launch pad for another leap higher. However, even a pull-back to $1,170/80 would be perfectly healthy given the speed and size of the rally since the beginning of the year.

Silver oscillated around $15.30 for most of the session. Like gold, further profit-taking and consolidation cannot be ruled out. But the technical picture would remain constructive as long as the metal can consolidate above $15 per ounce.

Forex Update

The Japanese yen was yesterday’s stand-out performer in currency markets. It posted gains against all the majors as investors went back into “risk-off” mode. The yen had weakened initially overnight continuing a pull-back which began in earnest on Friday. This came as oil pushed higher on hopes of an agreement being reached between Russia and Saudi Arabia for production cuts. However, the agreement turned out to be a disappointment and oil retreated. Investors rushed to buy back yen they initially borrowed at low rates to finance riskier trades with higher yields. As investors bail out of oil and equities (particularly leveraged positions) they end up buying back borrowed yen.

At the end of last week investors were busy piling back into equities as crude oil bounced and market sentiment turned positive. There was a general feeling that the European Central Bank (ECB) would continue to take action supportive for risk assets. This followed a speech by ECB President Mario Draghi when he said that the central bank would “not hesitate to act” should the Governing Council be concerned about the outlook for inflation or a lack of bank lending now that the deposit rate has been shifted further into negative territory.

Mr Draghi managed to calm markets where Fed Chairman Janet Yellen had failed just the day before. Mrs Yellen was cautious in her outlook for the global economy, yet understandably failed to assure investors that further rate hikes were off the agenda for the time being. Attention will be focused on the release of minutes from the last FOMC meeting at 19:00 GMT.

Upcoming events

Today’s significant data releases include UK Unemployment, Claimant Count Change and Average Earnings. From the US we have Building Permits, PPI, Housing Starts, Capacity Utilisation, Industrial Production and FOMC minutes. We also have speeches from FOMC members Eric Rosengren and James Bullard.

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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