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Video Update: Yellen’s speech sparks USD rally
31 Aug 2016
AM Bulletin: US dollar holds recent gains
31 Aug 2016
PM Bulletin: What next for the dollar?
30 Aug 2016
AM Bulletin: Investors revel in Fed’s “Goldilocks” worldview
30 Aug 2016
PM Bulletin: Yellen has spoken
26 Aug 2016
AM Bulletin: All eyes on Yellen
26 Aug 2016
PM Bulletin: BREXIT - THE NEXT CHAPTER The referendum and market reaction
25 Aug 2016
Holiday Schedule: Summer Bank Holiday
25 Aug 2016
AM Bulletin: Quiet start ahead of US Durable Goods/Jackson Hole
25 Aug 2016
Video Update: Look–ahead to Janet Yellen’s speech at Jackson Hole
24 Aug 2016
AM Bulletin: Investors edgy ahead of Yellen’s Jackson Hole speech
24 Aug 2016
PM Bulletin: Crude continues to slide
23 Aug 2016
Platform Tour: CFD Trading - How to Place a Trade
23 Aug 2016
AM Bulletin: Crude slide shrugged off by equities
23 Aug 2016
Trading Guides: How fast can you buy and sell with spread betting?
22 Aug 2016
Weekly Bulletin: Jackson Hole Symposium in focus
22 Aug 2016
PM Bulletin: Retailers bring earnings season towards a close
19 Aug 2016
AM Bulletin: Equities driven by oil and the Fed
19 Aug 2016
Video Update: The next Fed rate hike, the dollar and oil
18 Aug 2016
AM Bulletin: FOMC minutes read as dovish
18 Aug 2016
Trading Guide: How to choose a spread bet provider
17 Aug 2016
AM Bulletin: UK employment data and FOMC minutes in focus
17 Aug 2016
PM Bulletin: Dollar sell-off sends USDJPY below 100
16 Aug 2016
AM Bulletin: Yen stronger as investors de-risk
16 Aug 2016
Platform Tours: CFD Trading - How to Place Orders
15 Aug 2016
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15 Aug 2016
Weekly Bulletin: Summer “melt-up” continues
15 Aug 2016
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12 Aug 2016
AM Bulletin: US indices hit fresh all-time highs
12 Aug 2016
PM Bulletin: Yen still strong, despite Japan’s stimulus
11 Aug 2016
AM Bulletin: Equities following oil
11 Aug 2016
PM Bulletin: Gold back within sight of multi-year highs
10 Aug 2016
AM Bulletin: US Crude Oil inventories eyed
10 Aug 2016
PM Bulletin: Sterling under pressure
09 Aug 2016
AM Bulletin: Stock markets calmer following last week’s rally
09 Aug 2016
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08 Aug 2016
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08 Aug 2016
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08 Aug 2016
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08 Aug 2016
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08 Aug 2016
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05 Aug 2016
July: Non Farm Payrolls Out Today
05 Aug 2016
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05 Aug 2016
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04 Aug 2016
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04 Aug 2016
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03 Aug 2016
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03 Aug 2016
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02 Aug 2016
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02 Aug 2016
CFD Trading - Closure and Partial Closure
01 Aug 2016
Doubts over European stress tests
01 Aug 2016
Monetary policy driving investor behaviour
01 Aug 2016
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Indices Update

This morning’s trade has been subdued in thin volumes and with a slight negative bias. Investors appear to be holding back ahead of Janet Yellen’s speech in Jackson Hole tomorrow. However, later today we have US Durable Goods and Weekly Jobless Claims which have the potential to provide a modicum of excitement.

European equities and US stock index futures opened sharply lower yesterday morning. But they quickly recovered and were soon trading in positive territory. There was no particular reason for the bounce-back which came despite weakness in oil prices. However, media stocks got a boost following strong earnings from advertising giant WPP while the European banking sector also fared well. This helped the Italian MIB and Spanish IBEX outperform the German DAX, French CAC and FTSE100. In fact, the FTSE struggled for most of the afternoon session, weighed down by oil and mining stocks which suffered from a sell-off in crude and metals.

We’re in the dog-days of summer when trading desks are running with depleted staff levels. Despite this, the major global stock indices are showing resilience with the Dow, S&P and NASDAQ all hovering around their all-time highs. Investors must be relieved that we’ve got through August without major incident (so far), in stark contrast to this time last year. Back then there was panic in global markets, triggered by the collapse of China’s overheated stock market. Last August the Shanghai Composite fell around 36% in a fortnight. Overall the index halved in value from the highs hit earlier in June that year.

Chinese policymakers’ undertook desperate and cack-handed (yet ultimately successful) measures to stem the sell-off. These included suspending trading in many stocks (some which are still untradeable), threatening any journalists who made negative comments about the markets and arresting short-sellers. We also saw two yuan devaluations in the space of a week.

Now traders are positioning themselves for tomorrow’s keynote speech from Janet Yellen at the Jackson Hole Economic Symposium. Few expect the Fed Chairman to say anything explicit about the likelihood or timing of what would be the Fed’s first rate hike since December last year. Nevertheless, there are hopes that she may give some clues as to her thoughts over the state of the US economy, and indeed any risks facing the global economy as well. On Sunday Fed Vice Chairman Stanley Fischer was upbeat in his outlook for the US economy saying that he expected growth to pick up following a particularly weak second quarter. If Dr Yellen is similarly upbeat, then investors will price in an increased possibility of a September hike.

The FTSE 100 index closed at 6,835.8 down 32.7 points on the day, or 0.5%

The German DAX rose 30.1 points or 0.3% to end the day at 10,623

The US30 closed down 65.8 points to finish at 18,481.5. The S&P 500 fell 0.5% to close at 2,175.4 while the Nasdaq 100 fell 0.7% to close at 4,783.5

Equities

WPP (WPP) topped the FTSE100 leader board yesterday after posting better-than-expected first half results. Revenues rose 11.9% for the first six months of the year to £6.5 billion. However the advertising giant’s pre-tax profit fell to £425 million after £122 million-worth of write-downs. The company raised its forecast for full-year revenue growth to “well over” three per cent, from "over three per cent" previously. There was a dividend increase of 22.9% to 19.55 pence per share. WPP ended the day 1.9% at 1,780 pence.

Commodities Update

Oil fell sharply in early trade yesterday following the news of an unexpectedly large build in US crude inventories. Data released late on Tuesday from the American Petroleum Institute (API) showed that crude stockpiles rose by 4.46 million barrels against an expected draw of 850,000. There was also a bigger-than-expected build (417,000 versus 200,000) at the Cushing, Oklahoma hub. The news overshadowed the 2.2 million drawdown in gasoline stocks (larger than the 1.7 million draw expected) while distillates came in in line.

Oil managed to make back some of its losses as the session wore on. But then it took another lurch lower following the latest US inventory data from the Energy Information Administration (EIA). Once again, there was a bigger-than-expected build in crude stocks. The EIA reported a 2.5 million barrel build against expectations of a 500,000 drawdown. The Administration also said there were builds in gasoline and distillate stocks. WTI and Brent slumped on the report which was consistent with last night’s API release.

Crude oil has been amongst the most volatile markets this week as investors prepare themselves for Janet Yellen’s speech tomorrow at the Jackson Hole Economic Symposium. On Tuesday crude whipsawed from negative to positive territory on a story that Iran was prepared to 'support joint action to prop up the oil market'. However, this headline missed out on another crucial quote from the (anonymous) source which said that even if an agreement was reached to freeze output, there was very little chance that anyone would stick to it. This latter point is entirely consistent with previous attempts by OPEC members to manipulate the oil market. Even in the days when the group operated as a cartel (rather than the fractured and dysfunctional organisation it is now) and brought in quotas for members, nobody stuck to them. In another twist to the story it was reported later that an Iranian oil ministry official wasn’t prepared to confirm that Iran would even attend the meeting in Algeria next month. This is reminiscent of April’s disastrous price freeze talks in Doha when Iran refused to attend.

Gold and silver spent yesterday morning little-changed and treading water as investors kept their powder dry ahead of Janet Yellen’s keynote speech on Friday. However, both suddenly lurched lower as the US exchanges opened for business. The slump was caused by an enormous sell order of over 11,000 lots representing $1.5 billion dollars’ worth of gold. This sent the price down $10 in the space of a few minutes. Quite why anyone would want to trade in this way, rather than working the order gently to get a better average price, is anyone’s guess. But it was fodder for the conspiracy theorists who felt this was yet another attempt to scare leveraged longs out of their positions, trigger stops and generally destabilise the market. Nevertheless, the sell order failed to drive gold down to the $1,320 support level and chart-wise the outlook for gold remains constructive. Unfortunately, silver continues to trade in no-man’s land. Monday’s sharp sell-off opened up a trading gap which has yet to be filled in. At the same time, there’s little in the way of obvious support between current levels and $18. It could be that we see another large sell order in either gold or silver which would see prices test their respective support levels. This is a danger in the thin markets we’re likely to experience between now and Janet Yellen’s speech on Friday. However, it’s more likely that the two metals consolidate now until we hear what Dr Yellen has to say.

Forex Update

The US dollar rallied yesterday in thin trade as investors continued to position themselves ahead of the Jackson Hole Economic Symposium in Wyoming which kicks off today. Fed Chairman Janet Yellen will deliver her keynote speech on Friday. This is a big event as far as investors are concerned as it comes just one month ahead of the Federal Reserve’s next meeting in September. There is little expectation that Dr Yellen will signal the timing of the Fed’s first rate hike since December. For a start, the Fed Chairman is only one of ten voting members on the FOMC. In addition, the US central bank will want to study the major data releases between now and their next FOMC meeting on 20th/21st September. This includes another Non-Farm Payroll report, Manufacturing and Services PMIs, inflation data and Retail Sales. If she repeats Vice Chair Stanley Fischer’s comments on Sunday that the Fed’s inflation and unemployment targets are close to being met, if she downplays the concerns expressed in the minutes of Fed’s July meeting over the uncertainly surrounding Brexit and the Italian banking sector, then this will increase speculation of a rate hike in September. If so then the dollar should rally while equities and precious metals should sell off.

Upcoming events

Today’s significant economic data releases include the German Ifo Business Climate survey and UK CBI Realised Sales. From the US we have Durable Goods, Weekly Jobless Claims and Flash Services PMI. 


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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