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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
Trading Guides: What is spread betting?
15 Aug 2016
Weekly Bulletin: Summer “melt-up” continues
15 Aug 2016
PM Bulletin: Dow, S&P and NASDAQ hit all-time highs
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
Platform Tours: Spread Betting - How to Place a Trade
08 Aug 2016
Platform Tours: Spread Betting - Closure and Partial Closure
08 Aug 2016
Platform Tours: Spread Betting - Check Open P & L
08 Aug 2016
PM Bulletin: FTSE 100 chart
08 Aug 2016
Weekly Bulletin: US Fed: the last hawk standing
08 Aug 2016
PM Bulletin: Non-Farm Payrolls soar
05 Aug 2016
July: Non Farm Payrolls Out Today
05 Aug 2016
AM Bulletin: BoE adds stimulus; Payroll numbers in focus
05 Aug 2016
PM Bulletin: Non-Farm Payroll look-ahead
04 Aug 2016
AM Bulletin: BoE rate decision in focus
04 Aug 2016
PM Bulletin: BoE look-ahead
03 Aug 2016
AM Bulletin: Earnings and Services PMIs in focus
03 Aug 2016
PM Bulletin: JPY rallies on stimulus disappointment
02 Aug 2016
AM Bulletin: JPY strengthens as Abe disappoints
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

Overnight saw the release of Chinese inflation data. Consumer prices rose 1.8% year-on-year which was smack bang in between expectations and last month’s reading. However, this is well below the 3% target set by the People’s Bank of China (PBOC) and the trend in the data remains negative. This suggests that the PBOC may consider additional stimulus measures to try and buck the trend. China’s Shanghai Composite ended this morning’s session modestly higher. Meanwhile producer prices fell by 1.7% which was above both the 2% year-on-year fall expected, and last month’s decline of 2.6%.

On Monday it was reported that China's exports and imports fell more-than-expected in dollar-denominated terms in July, reviving concerns over the economic outlook both domestically and abroad. There are also concerns about a loss of competitiveness in China's state-owned enterprises as well as a sharp rise in debt levels. But the Shanghai Composite shrugged off the news. Instead Asian Pacific markets were up sharply, playing catch-up with Friday’s move higher for European and US equities.

Yesterday brought a mixed session for global stock indices. We saw gains across Europe but these were modest when compared to the moves at the end of last week. The major US indices ended yesterday’s session a touch lower. Friday saw the release of US Non-Farm Payrolls for July. The Bureau of Labor Statistics reported a rise in payrolls of 255,000 while revising up June’s figure by 5,000. For the second consecutive month the headline number blast above the consensus expectation for an increase of around 180,000 which would have been in line with the six month average of 182,000. The dollar soared on the news as did US and European stock indices. 

Ahead of the payroll data US Federal Reserve Governor Jerome Powell gave an interview to the FT in which he warned of the risk that the US economy is now trapped in a prolonged period of subdued growth that will require lower a lower Fed Funds rate than previously anticipated. Mr Powell noted that inflation was still below target, I think we can be patient," and that there should be a "very gradual" path for any rises as the outlook for the US economy remains threatened by global risks. If one puts his comments together with the strong payroll data then one interpretation is that the US economy is storming ahead, yet the Fed is in no rush to tighten monetary policy further.

The FTSE 100 index closed up 15.7 points, or 0.2%, to end the day at 6,809.1

The German DAX rose 65.2 points or 0.6% to end the day at 10,432.4

The US30 closed down 14.2 points to finish at 18,529.3. The S&P 500 fell 0.1% to close at 2,180.9 while the Nasdaq 100 finished 0.1% lower at 4,784.7


Equities

Yesterday it was confirmed that Wal-Mart (WMT) is to buy online retailer Jet.com in a deal valued at $3.3 billion. This will rank as one of the largest ever deals involving an e-commerce company. Wal-Mart and Jet plan to maintain distinct brands. Wal-Mart will continue with its own website which will bang home its "everyday low price” message. Jet.com is aiming to widen the customer base and target millennials. In this way Wal-Mart (the world’s largest retailer) hopes to challenge Amazon (AMZN) on online retailing. But critics reckon this will be difficult to do and point out that Jet’s business is loss-making. Jet co-founder and chief executive Marc Lore will remain at his post and run Wal-Mart’s US e-commerce operations. Wal-Mart ended the day barely changed at $73.40

Commodities Update

Crude oil pushed higher yesterday continuing a corrective bounce which began last Wednesday. This latest move was triggered by a report in the Wall Street Journal late last week about fresh calls by some members of OPEC to freeze production. Well we’ve been here before. Back at the beginning of the year when crude was trading below $30 we had talk of OPEC and non-OPEC producers getting together to freeze production. They even had a meeting in April to discuss the matter seriously. But that ended in acrimony and without agreement. This time round we have OPEC members Venezuela, Ecuador and Kuwait reflating the “freeze” balloon. But fellow members Saudi Arabia, Iran and Iraq are desperate to pump as much oil out as they can. Russia, non-OPEC member and now the world's top oil producer, was quick to dismiss calls for a freeze. So why this plan should end any better than the last one is anyone’s guess.

Yesterday’s gains also came despite an inventory update from Genscape which showed a larger-than-expected build of crude at the Cushing, Oklahoma hub. We can expect more volatility later this evening and tomorrow afternoon as the American Petroleum Institute and Energy Information Administration both release their own updates on US stockpiles.

Oil is also shrugging off the ongoing recovery in the dollar. Usually, dollar-denominated commodities sell off when the greenback rallies as dollar strength makes them less attractive to non-dollar holders. Meanwhile, the latest trade data from China showed that oil imports had dropped to six month lows.

Gold and silver managed to stabilise yesterday after starting in the red. Both metals fell sharply at the end of last week following better-than-expected US payroll data. Non-Farm Payrolls for July showed an increase of 255,000 on an expectation of an 180,000 rise. In addition the data for June was revised higher by 5,000. This was the second consecutive month that the headline number has come in well above the consensus expectation and the news led to a sharp rally in the dollar and a slump in gold and silver.

The two precious metals hit multi-year highs in early July on safe-haven buying following the UK’s referendum vote to leave the EU. Both then pulled back on a combination of profit-taking and a return of risk appetite as the UK’s political situation stabilised as Theresa May was anointed Prime Minister. Gold and silver then bounced back as it became apparent that central bank monetary policy was becoming more accommodative. But Friday’s payroll data has now put the Fed’s September meeting back in the spotlight for a possible rate hike.

Forex Update

Yesterday the US dollar held on to gains made in the latter half of last week. The greenback continues to get a lift thanks to the divergence in central bank behaviour. The US Federal Reserve is thought to be on the verge of raising its key interest rate while every other major central bank is either on hold or actively loosening monetary policy.

Last Thursday sterling fell substantially after the Bank of England (BoE) cut its headline interest rate by 25 basis points and raised its Asset Purchase Facility by £60 billion to £435 billion. It announced its intention to purchase up to £10 billion in corporate bonds and set up a new Term Funding Scheme worth up to £100 billion to protect bank margins.  BoE Governor Mark Carney also said the Bank was prepared to cut rates further towards the zero-bound if required.

Friday brought the release of the latest update on US Non-Farm Payrolls. The consensus expectation was for an increase of around 180,000 which would have been in line with the six month average of 182,000. Instead the Bureau of Labor Statistics reported a rise in payrolls of 255,000 and revised up June’s figure by 5,000. The better-than-expected news sent the dollar sharply higher as it renewed speculation that the Federal Reserve was prepared to raise rates at its next meeting in September.

The dollar’s push higher brought some relief to Japan’s policymakers. The yen had been rallying steadily following disappointment over the Bank of Japan’s monetary stimulus package which was far lighter than expected. However, investors were looking forward to hearing more details about the Japanese government’s 28 trillion yen fiscal stimulus programme. Unfortunately, these also fell short of expectations sending the USDJPY below 101.00 and closer to the point where Japan would look to intervene directly to weaken the currency.


Upcoming events

Today’s significant data releases include UK Manufacturing Production, Industrial Production, Goods Trade Balance, Industrial Production and the NIESR GDP estimate. The numbers take on particular importance as they relate to the post-Brexit economy and come straight after last week’s BoE rate decision and addition to its QE programme. From the US we have Non-Farm Productivity, Labour Costs, Mortgage Delinquencies and Wholesale 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

Tagged: AM Bulletin

Category: AM Bulletin


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