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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
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08 Aug 2016
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08 Aug 2016
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08 Aug 2016
Weekly Bulletin: US Fed: the last hawk standing
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
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

It’s been a relatively quiet start to trading this morning. European and US stock indices have pulled back from their best levels with many now trading in negative territory. Investors seem unwilling to take on more long-side exposure to equities, but also they’re in no hurry to lighten up or go short either. This morning we’ll see the first set of post-Brexit UK employment data. Later on we have minutes of the FOMC’s July meeting.

There was a softer tone to European equities yesterday morning and that was reflected in pre-market US stock index futures. The dollar was sharply lower in early trade following the release of a dovish paper from San Francisco Fed President John Williams. This suggested that global interest rates could stay lower for longer as central banks should consider raising their inflation targets.

The USDJPY broke back below 100.00 to hit its lowest level since the post-referendum sell-off on 24th June. The fall in the USDJPY helped to crimp investor risk appetite. A stronger yen hurts Japan’s export market and is a headwind for economic growth as well as being deflationary. But the dollar recovered some of its losses later in the day after New York Fed President William Dudley said that the market was “complacent about the need to gradually hike rates and the time for a rate hike is edging closer."

All the major European stock indices ended the session lower yesterday although the losses were relatively modest. The exception was the Italian MIB which finished down over 1%.

The FTSE 100 index closed at 6,893.9 down 47.3 points on the day, or 0.7%

The German DAX fell 62.6 points or 0.6% to end the day at 10,676.7

The US30 closed down 84 points to finish at 18,552. The S&P 500 fell 0.6% to close at 2,178.2 while the Nasdaq 100 lost 0.6% to close at 4,797.2

Equities

The mining sector saw some big moves yesterday.  Antofagasta (ANTO) topped the FTSE100 leader board ending the day 8.9% higher at 559.5 pence. The Chilean miner reported weak numbers for the first six months of the year. Lower copper prices and sales volumes pulled Antofagasta's revenue down 18% to $1.4 billion. However, earnings before interest, taxation, depreciation and amortisation were up 2.3% to $571.5 million. The company also forecast an end to copper oversupply by 2018.

Meanwhile BHP Billiton (BLT) reported a record $6.4 billion annual loss, hurt by the dam disaster in Brazil and a slump in commodity prices. Nevertheless, the miner’s underlying profit was better than analysts' expectations and the stock ended the day 0.7% higher at 1,049.50 pence.

Commodities Update

Oil was a touch lower in early trade yesterday as investors reacted to overnight dollar weakness. However, crude prices recovered quickly and it wasn’t long before both Brent and WTI were back in positive territory. WTI hit its highest level in a month while Brent traded back up at levels last seen in the first week of July. However, both contracts turned lower following the latest inventory update from the American Petroleum Institute. This showed bigger-than-expected drawdowns in crude and Cushing inventories. However, there were significant builds in both gasoline and distillates.

Both contracts continue to get support from the ongoing speculation that producers are prepared to discuss freezing output once again. The current proposal is that OPEC and non-OPEC producers will take the opportunity to discuss an output freeze when major producers and consumers get together at the International Energy Forum which meets in Algeria towards the end of next month.  Last week the Saudi Arabian oil minister made some positive comments about the upcoming talks and on Monday it was Russia’s turn. Russian Energy Minister Alexander Novak told a Saudi newspaper that oil producing nations could take action to stabilise prices. Also on Monday market intelligence firm Genscape estimated that there had been a draw of more than 350,000 barrels at the delivery hub at Cushing, Oklahoma.  This was bigger inventory reduction than expected and added to general bullish sentiment.

Gold and silver were both firmer in early trade yesterday but gave back much of their gains ahead of the US open. Gold spent most of the session in positive territory while silver had a tougher time staying in the black. The initial gains came as a reaction to the sell-off in the US dollar. But given the downside pressure on the greenback it was disappointing that the two precious metals couldn’t make greater headway.

The dollar lost ground against all of the majors. The initial sell-off followed the release of a paper from San Francisco Fed President John Williams. Mr Williams argued that central banks may have to raise their inflation targets. This would result in lower interest rates for longer and so implied that the Fed wouldn’t be raising rates for the foreseeable future. This would weigh on the dollar going forward and would therefore be supportive for all dollar-denominated commodities. A cheaper dollar reduces the cost of dollar-denominated commodities for other currency holders and consequently makes them more attractive to buy. In addition, precious metals do well in a low-rate environment as this reduces the lost-opportunity costs of holding non-yielding assets.

Forex Update

The US dollar fell sharply yesterday against all the majors. The Dollar Index hit its lowest level since the UK voted to leave the European Union and this was reflected in big gains for the euro, Japanese yen, Swiss franc and British pound. The greenback took a battering following the release of a paper by San Francisco Fed President John Williams. This was viewed as being particularly dovish and investors interpreted it as suggesting that the central bank would be unwilling to hike rates at next month’s FOMC meeting. In his paper Mr Williams argued that central banks may have to raise their inflation targets. The Fed, BOJ, ECB and Bank of England all have a preferred inflation target of around 2%. Raising this target would suggest that global interest rates could stay lower for longer. In addition, Mr Williams said that central banks should also pay more attention to economic growth and push governments for more fiscal stimulus.

Headline US CPI was flat for the month of July after registering a +0.2% month-on-month rise in June. Core CPI (which excludes food and energy) rose just 0.1%, below the +0.2% month-on-month rate expected. Investors interpreted the data as bearish for the dollar as the Fed is less likely to want to raise rates when inflation is low.

The dollar recovered later in the day after New York Fed President William Dudley claimed that "the market is complacent about the need to gradually hike rates and the time for a rate hike is edging closer." Once again, Federal Reserve members are playing their usual game of knocking out hawkish/dovish comments to keep investors guessing over the possible timing of a Fed rate rise. Overall, they remain keen to convince investors that the September meeting is still “live” as the forum to announce monetary tightening. That really doesn’t seem likely. The US data isn’t really robust enough for financial markets to take a rate hike in their stride. Also, it seems unlikely the Fed would risk a rate rise so close to the Presidential Election. Investors are hoping to garner more clues over the Fed’s thinking when the minutes of the FOMC’s July meeting are released later this evening.

Upcoming events

Today’s significant economic events include the release of UK employment data including the Claimant Count Change and Average Earnings Index. From the US we have Crude Oil Inventories, a speech from FOMC-voting member James Bullard and minutes of the last FOMC meeting in July. 


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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