Incisive market commentary from David Morrison

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AM Bulletin: Markets rise for the second day ; back to pre-referendum levels, sterling still weak
30 Jun 2016
AM Bulletin: Confidence returns – but for how long?
29 Jun 2016
AM Bulletin: The onslaught continues – and we’re not just talking the football
28 Jun 2016
Weekly Bulletin: Investors rattled by Brexit vote
27 Jun 2016
PM Bulletin: Brexit - Referendum fallout
24 Jun 2016
AM Bulletin: We’re out! And so is Cameron
24 Jun 2016
Video Update: #AskSpreadCo - EU referendum
23 Jun 2016
AM Bulletin: Markets on tenterhooks ahead of UK vote
23 Jun 2016
Spread Betting Tips
22 Jun 2016
AM Bulletin: Risk assets waft higher
22 Jun 2016
PM Bulletin:Referendum and Market Reaction
21 Jun 2016
PM Bulletin: Gold and the referendum
21 Jun 2016
AM Bulletin: Yellen testimony in focus
21 Jun 2016
PM Bulletin: Janet Yellen’s testimony
20 Jun 2016
Weekly Bulletin: It’s all about the referendum
20 Jun 2016
Market Info Update: EU Referendum Margin Changes - CFDs
17 Jun 2016
Market Info Update: EU Referendum Margin Changes - Spread Betting
17 Jun 2016
PM Bulletin: Forecasting the referendum result
17 Jun 2016
AM Bulletin: Central banks leave rates unchanged
17 Jun 2016
PM Bulletin: FOMC post-mortem
16 Jun 2016
AM Bulletin: Yen, precious metals soar post FOMC/BOJ
16 Jun 2016
PM Bulletin: FOMC look-ahead
15 Jun 2016
AM Bulletin: FOMC meeting ahead
15 Jun 2016
PM Bulletin: European equities slide
14 Jun 2016
AM Bulletin: Stocks down on oil, growth fears and UK referendum
14 Jun 2016
Weekly Bulletin: FOMC and BOJ meetings in focus
13 Jun 2016
PM Bulletin: Markets rattled by slide in bond yields
10 Jun 2016
AM Bulletin: European stock indices drift lower
10 Jun 2016
PM Bulletin: WTI at $50 – thoughts on US production
09 Jun 2016
AM Bulletin: Precious metals soar
09 Jun 2016
PM Bulletin: S&P closes in on all-time high
08 Jun 2016
AM Bulletin: Investors in limbo ahead of Fed and UK vote
08 Jun 2016
PM Bulletin: Yellen and the jobs data
07 Jun 2016
PM Bulletin: Fresh polls send sterling lower
06 Jun 2016
Weekly Bulletin: Rate hike? What rate hike?
06 Jun 2016
PM Bulletin: A dismal Non-Farm Payroll number
03 Jun 2016
AM Bulletin: Non-Farm Payroll Friday
03 Jun 2016
PM Bulletin: Non-Farm Payrolls look-ahead
02 Jun 2016
AM Bulletin: OPEC, ECB, key data releases and central bank speakers
02 Jun 2016
PM Bulletin: OPEC and the oil price
01 Jun 2016
AM Bulletin: Manufacturing PMIs in focus
01 Jun 2016
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Indices Update

All the major European and US indices ended lower yesterday and the selling has continued this morning. Investors appear to be retreating into “risk-off” mode. Yet it was only last Wednesday that the Dow ended back above 18,000 to register its highest close since 27th April. On the same day the S&P500 posted its best close in just under a year and ended 0.6% below its all-time record close from May last year. It looked as if the two indices were ready to take out their highs as investors speculated that there was little chance of the US Federal Reserve hiking rates after this week’s meeting.

However, US equity markets slipped back on Thursday and Friday and the upside momentum appears to be fading. A big cause of this is concerns over falling bond yields with a record amount of global government debt now with a negative yield. There have been more polls showing that the “Leave” campaign is maintaining its upside momentum in the UK’s referendum on EU membership. This is helping to push funds into the perceived safety of government debt.

Crude oil has also pulled back from multi-month highs and WTI and Brent are trading below $50 this morning. At the same time investors are wary about the ongoing strength of the Japanese yen. Last night the USDJPY closed out at its lowest level since October 2014. In early trade this morning it was back below 106.00.

The US Federal Reserve’s FOMC begins a two-day meeting today, and the expectation is that the central bank will hold off from raising rates once again. While a continuation of the Fed’s easy money policy should support stocks, there are concerns that the US economic recovery isn’t as robust as the Fed would like us to believe. Certainly, the latest Non-Farm Payroll release from earlier this month has made many investors question the underlying strength of the US employment situation. This had previously been one of the most positive areas of the economy.

The FTSE 100 index closed down 70.8 points, or 1.2% at 6,044.97

The German DAX fell 177.2 points or 1.8% to end the day at 9,657.4

The US30 closed down 132.9 points to finish at 17,732.5. The S&P 500 fell 0.8% to close at 2,079.1 while the Nasdaq 100 lost 0.9% to close at 4,422.8



Yesterday’s biggest bit of news as far as equities were concerned was the announcement that Microsoft (MSFT) was set to buy LinkedIn for $26.2 billion. The deal came out of the blue and is set to be one of the biggest tech deals ever. However, some analysts have commented that Microsoft is paying a very high price for a loss-making company. Microsoft ended the day 2.6% lower while LinkedIn closed up 46.6% at $192.21


Commodities Update

Crude oil drifted lower throughout yesterday’s trading session and is down again this morning. Last week both WTI and Brent appeared to be bedding in happily above $50 per barrel. Demand growth was considered to be positive for the price while supply disruptions (Nigeria, Canada and North Africa) were also supportive. However, investors are becoming far more cautious as the summer approaches. There are concerns that global economic growth may not be as robust as previously thought. At the same time there is a great deal of uncertainty attached to the UK referendum next week and Chinese oil imports. There are some suggestions that China’s strategic petroleum reserve is close to capacity. Once that is full then daily demand could drop by as much as 800,000 barrels.

Gold and silver continue to build on last week’s gains. Both metals have had a very good run following the poor Non-Farm Payroll earlier this month. The weak data, followed by a hawkish speech from Federal Reserve Chairman Janet Yellen, have effectively ended the likelihood of a summer rate hike from the US central bank. This has led to a sell-off in the US dollar which supports dollar-denominated commodities. At the same time, the prospect of lower rates for longer only boosts the appeal of gold and silver. Finally, investors are buying both thanks to their appeal as safe havens. Not only are there increased concerns over the outlook for global growth, but fresh polls have shown the “Leave” campaign maintain and even strengthen their lead over the “Remainers.” Investors are concerned about the market reaction of a “Brexit” win which could see risk assets sell off aggressively in the first instance. 

Forex Update

The British pound fell sharply yesterday morning. The sell-off followed a clutch of weekend polls which showed the “Leave” vote continuing to gain momentum ahead of next week’s UK referendum on EU membership. However, sterling rallied back later in the session and ended the day well off its lows. But it is lower again today as yet another poll shows “Leave” ahead.

UK polling companies have been widely criticised over the last few years as the vast majority failed miserably to predict the outcome of last year’s general election or the scale of the vote in favour of Scotland remaining part of the Union back in 2014. Prime Minister David Cameron will be desperately hoping that the pollsters have got it wrong again as poll after poll shows a decent lead for those saying they will vote for the UK to leave the EU. Of course, there’s always a chance the polls will be wrong again, but there can be little doubt that the momentum is with the Brexit camp.

Meanwhile the Japanese yen continues to strengthen. In early trade this morning the USDJPY dropped back below 106.00. Investors are increasing their exposure to the yen on a mixture of safe-haven buying and concerns that the Bank of Japan’s (BOJ) efforts at monetary stimulus are offering diminishing returns. The BOJ meets later this week and is expected to hold off again from providing further stimulus. Nevertheless, Japanese policymakers will be very unhappy with the yen’s renewed strength.

Upcoming events

Today’s significant data releases include inflation data from the UK (CPI, RPI and PPI), Euro zone Employment Change and Industrial Production. From the US we have Retail Sales, Import Prices and Business Inventories.


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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