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PM Bulletin: FOMC members add to confusion over monetary policy
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AM Bulletin: Stocks slip on lower crude
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PM Bulletin: Gold
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PM Bulletin: Crude oil, yen and equities
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Sterling dumps on Brexit fears
22 Feb 2016
AM Bulletin: Stronger start for global equities
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AM Bulletin: Oil still leading equities
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PM Bulletin: The yen, Nikkei and negative interest rates
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AM Bulletin: Oil and FOMC minutes in focus
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AM Bulletin: Equities, USD, oil rally while precious metals slide
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PM Bulletin: EURUSD – what now?
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AM Bulletin: Yellen fails to calm nerves
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PM Bulletin: Yellen steers through Clashing Rocks
10 Feb 2016
AM Bulletin: Yellen testimony in focus
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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
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AM Bulletin: Non-Farm Friday
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PM Bulletin: Non-Farm Payroll look-ahead
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AM Bulletin: Dollar slumps; oil spikes
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PM Bulletin: Tomorrow’s MPC press conference in focus
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AM Bulletin: Weaker crude weighs on equities
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Weekly Bulletin: Central banks respond to sell-off
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 Thursday 18 February 2016

AM Bulletin: Oil still leading equities

 

 

Indices Update

European equities were mixed in early trade this morning. They are getting some support from yesterday’s rally in crude, although some fear this could prove to be short-lived. Last night’s release of minutes from the Fed’s January meeting were a touch more dovish than expected. Nevertheless, there are still plenty of investors who expect the US central bank to hike in June. A few die-hards are still holding out for an increase next month.

European and US stock indices ended sharply higher yesterday. Equities were once again boosted by oil. This time it was after Iran backed the Saudi/Russian proposal to impose a “ceiling” on oil production. Iran had previously described the plan as “illogical.” Meanwhile, many within the oil industry felt the plan would do nothing significant in terms of lifting the oil price, saying output cuts were needed. They also pointed out that the ceiling was set at January levels – a record month for production.

The FTSE 100 index closed at 6,030.3, up 168.2 points on the day, or 2.9%

The German DAX rose 242.1points or 2.7% to finish at 9,377.2

The US30 closed up 257.4 points to finish at 16,453.8 The S&P 500 ended at 1,926.8 up 31.2 while the Nasdaq 100 rose 2.3% to close at 4,199.1

Equities Update

Mining giant Anglo American (AAL) was downgraded for the second time in three days after Fitch cut it to junk status. This followed Moody’s decision to cut the miner following doubts over its restructuring plan and what it may recoup from the sell-off of its mining assets. On Tuesday Anglo reported a pre-tax annual loss of $5.6 billion (£3.9 billion) and a 26% slump in revenue to $23 billion. Yet investors shrugged off this latest downgrade and piled back into the stock, no doubt hoping that the worst is over. The shares surged 17.6% to close at 468.05 pence.

Commodities Update

Crude oil prices flew higher yesterday. At one stage WTI was up 6% while Brent piled on 7% from Tuesday’s close. The rally came after a meeting between Iranian Oil Minister Bijan Zanganeh and his counterparts from Venezuela, Iraq and Qatar in Tehran. As expected, there was no suggestion of any OPEC/non-OPEC production cuts. However, the Iranian minister said that the production "ceiling" suggested on Tuesday and agreed on by Russia, Saudi Arabia, Venezuela and Qatar should be the first step toward stabilizing the market. This contrasted with earlier reports of Iran saying a freeze was “illogical.”

Nevertheless, the news was enough to put a rocket under the price as short-covering once again kicked in. We’ll see over the rest of the week if this is enough to reinvigorate oil prices and put clear water between WTI, Brent and $30 per barrel. Later today we have US crude inventory data.

Gold and silver have continued to hold around significant support levels. This is despite a decline in positive sentiment following Monday’s sell-off and the slight upside bias to the US dollar. Once again gold is managing to hang on to support at $1,200 on a closing basis. Meanwhile, silver continues to oscillate around $15.30. As this commentary has warned previously, further profit-taking and consolidation cannot be ruled out for either metal. This would certainly be the case if the current equity market rally proves to have legs.

Forex Update

Yesterday the majority of currency pairs traded in narrow ranges ahead of the FOMC minutes. The obvious exceptions were those currencies linked to oil such as the Canadian dollar and Norwegian krone. These rose sharply thanks to the rally in crude which saw the front month WTI contract fly back above $30 per barrel.

The greenback slipped in the immediate aftermath of the release of the minutes. These were viewed as being a tad more dovish than expected and underlined the Fed’s worries concerning the global outlook. Few analysts now expect the central bank to raise rates at its meeting next month. Yet perhaps it is surprising that anyone does considering the bond markets and fed fund futures suggest no hikes for the next year and a half. Despite this, many observers still feel that the Fed could hike in June. They tend to be the same people who feel that the current market ructions are a mere blip and a bullish tone will soon be re-established.

Upcoming events

Today’s significant data releases include the Euro zone Current Account and the accounts of January’s ECB Monetary Policy Meeting. From the US we have the Philly Fed Manufacturing Index, Weekly Jobless Claims and Crude Oil 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

Category: AM Bulletin


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