NEWS AND ANALYSIS

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AM Bulletin: Equities and oil slip in early trade
31 Mar 2016
PM Bulletin: Non-Farm Payroll look-ahead
31 Mar 2016
AM Bulletin: Yellen comments boost risk appetite
30 Mar 2016
PM Bulletin: Is a dovish Janet really that bullish?
30 Mar 2016
AM Bulletin: Yellen to speak
29 Mar 2016
PM Bulletin: US indices running into resistance
29 Mar 2016
AM Bulletin: Profit-taking ahead of holiday weekend
24 Mar 2016
PM Bulletin: Dollar correlations
24 Mar 2016
AM Bulletin: Equities head higher
23 Mar 2016
PM Bulletin: Melt-down in precious metals
23 Mar 2016
AM Bulletin: Markets looking for guidance
22 Mar 2016
Weekly Bulletin: US dollar on the back foot
21 Mar 2016
AM Bulletin: USD sell-off boosts oil
18 Mar 2016
PM Bulletin: A look at the S&P500 and FTSE100
18 Mar 2016
AM Bulletin: USD down on dovish Fed
17 Mar 2016
PM Bulletin: USDJPY
17 Mar 2016
AM Bulletin: All ears and eyes on FOMC
16 Mar 2016
PM Bulletin: Reaction to the “Sugar Tax”
16 Mar 2016
AM Bulletin: BOJ unchanged
15 Mar 2016
PM Bulletin: FOMC look-ahead and the USD
15 Mar 2016
Weekly Bulletin: Central banks still in focus
14 Mar 2016
PM Bulletin: Gold
14 Mar 2016
AM Bulletin: Confusion reins
11 Mar 2016
PM Bulletin: EURUSD revisited
11 Mar 2016
AM Bulletin: ECB meeting in focus
10 Mar 2016
PM Bulletin: Mr Draghi fires his bazooka
10 Mar 2016
AM Bulletin: Markets consolidate
09 Mar 2016
PM Bulletin: ECB look-ahead
09 Mar 2016
AM Bulletin: Chinese data weighs on equities
08 Mar 2016
PM Bulletin: Nasdaq 100
08 Mar 2016
Weekly Bulletin: ECB expected to boost stimulus
07 Mar 2016
PM Bulletin: FTSE making steady gains
07 Mar 2016
March: Non Farm Payrolls Out Today
04 Mar 2016
AM Bulletin: Markets quiet ahead of Non-Farms
04 Mar 2016
PM Bulletin: Meanwhile, over in silver...
04 Mar 2016
AM Bulletin: Equities consolidate
03 Mar 2016
PM Bulletin: Non-Farm Payroll look-ahead
03 Mar 2016
AM Bulletin: Equities soar
02 Mar 2016
PM Bulletin: AUDUSD chart
02 Mar 2016
AM Bulletin: See-saw day ends in losses for US equities
01 Mar 2016
PM Bulletin: Glencore
01 Mar 2016
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Indices Update

European equities and US stock index futures were sharply lower in early trade yesterday. For once this had nothing to do with the oil price which was pretty much unchanged for most of the morning. Instead, investors had been left disappointed by the outcome of weekend’s G20 meeting in Shanghai. Despite a request from the IMF to consider taking coordinated fiscal measures to address problems within the global economy, once again policymakers left economic stimulus measures to central bankers. As negative interest rates are now the must-have accessory for every sophisticated economy, that’s probably not a good idea. This looks likely to put pressure back on the banking sector.

Things turned around later in the day. News that the People's Bank of China (PBOC) had cut its reserve requirement ratio (RRR) once again gave equities a boost. After the close of Shanghai on Monday the PBOC cut the ratio by 0.5% taking it to 17% for large banks. This is the fifth time since last February that the PBOC has cut the ratio in an effort to boost market liquidity.

While it was a mixed close for Europe, it was a negative one in the US. Traders blamed month-end position squaring for the sell-off which began soon after the European close. Nevertheless, there has been some buying in early trade this morning despite Chinese Manufacturing PMIs once again coming in below expectations and indicating contraction across the sector.

There has been a strong rally across risk assets since 11th February. This was when Janet Yellen testified in Washington and managed to calm investors following a torrid start to the year. She persuaded them that, while there were concerns over the US and global outlook, their fears were overdone. At the same time it was wrong to assume that the central bank’s projections for further tightening over 2016 were set in stone. Since the 11th February lows the Dow has tacked on around 8%, the FTSE100 is up about 10% while Brent and WTI crude are up around 20% and 30% respectively.

We now have a bit of a pause ahead of monetary policy decisions from the ECB, BOJ and Federal Reserve which kick off with the ECB on 10th March. It may be that investors will want to cut back on their exposure, or at least hold back from taking on further risk until these are out of the way. However, we may get some fireworks following this Friday’s non-Farm Payroll release.

The FTSE 100 index closed at 6,097.1 up 1.1 points on the day, or effectively unchanged.

The German DAX fell 17.9 points or 0.2% to finish at 9,495.4

The US30 closed down 123.5 points to finish at 16,516.5. The S&P 500 fell 15.8 to close at 1,932.2 while the Nasdaq 100 lost 0.8% to close at 4,201.1

Equities Update

Morrison Supermarkets (MRW) shot higher yesterday morning. This followed the announcement of a partnership with retailing giant Amazon (AMZN). The idea is that Amazon will now offer fresh and frozen grocery products alongside its packaged foodstuffs. In this way it seems determined to take on our very own supermarket giants Tesco (TSCO), Sainsbury’s (SBRY) and Wal-Mart’s Asda. In addition, the upmarket retailer Waitrose together with the discounters Aldi and Lidl must also be feeling a little uncomfortable. But one of yesterday’s biggest losers was online retailer Ocado (OCDO). This was despite it entering into an agreement with Morrison’s to deliver groceries. The news effectively scuppers any hopes it may have had of linking up with Amazon. Morrison Supermarkets ended the day 5.9% higher at 199 pence. Ocado ended 7.8% lower at 260 pence.

Commodities Update

Crude was little-changed for the early part of yesterday’s European session. However prices picked up as the day progressed with many traders now believing that the lows are now in. There’s a feeling that the major OPEC and non-OPEC producers are prepared to work with each other to put a cap on output, even if they will never agree to any type of cut. While this won’t make any appreciable difference to the supply/demand fundamentals over the short to medium term, it has been enough to give investors just enough of an excuse to start creeping back into the market on the long side.

Oil prices are a long way off their recent lows in percentage terms, but the upside may be capped around $40 per barrel. US shale production begins to be viable around this level, so old rigs come out of mothballs and output rises.

It was another constructive session for gold yesterday. Global equity markets were weaker in early trade in what appeared to be a general loss of investor risk appetite while the US dollar was firmer. Gold rallied in the face of this in a follow-on from Friday’s later price action. At the end of last week gold had weakened in early trade as equities stormed higher. However a late turnaround saw US stock indices give back early gains and close lower while gold recovered in later trade.

Yesterday gold held onto its gains despite equities turning round and heading higher. Chart-wise, gold has begun to make a series of higher lows indicating some upward momentum. However, it continues to struggle every time it approaches $1,240. It will need to break above here to build on its gains since the beginning of the year. However, it may have to consolidate for a bit longer

Forex Update

The US dollar was firmer yesterday but that was much more a story of euro weakness rather than dollar strength. The euro took a battering against all the majors yesterday, and the sell-off has continued this morning.

Yesterday brought the release of the Euro zone’s CPI for February. The headline number (including food and energy) came in at -0.2% annualised. This was well below last month’s reading of +0.3% (revised down from +0.4%). The consensus expectation had been for zero. This was the first negative reading since September last year. Meanwhile, core CPI (excluding food and energy) dipped to +0.7% year-on-year from +1.0% previously. This will also be a concern for the ECB’s Governing Council as it suggests the decline in energy prices is spreading to the prices of other goods and services. The news is a blow for the ECB who have been desperate to counter deflation taking hold within the currency block.

Euro zone inflation has been stuck below the ECB’s 2% target rate for three years now. The weak data raises expectations that the ECB will not only extend its QE programme for a second time (potentially signalling that it is unlimited) but also boost its bond purchases from €60 to perhaps €80 per month. The ECB is set to meet next week. However, there is always the danger that the central bank manages to disappoint investors and come up short on stimulus just as it did back in early December. For now, support comes in around 1.0800 – the 23.6% Fib retracement of the August-December 2015 sell-off.

Upcoming events

Today’s significant data releases include Manufacturing PMIs from Spain, Italy, France, Germany, the Euro zone and the UK. From the US we have the ISM Manufacturing PMI, Construction Spending and Total Vehicle Sales.

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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