NEWS AND ANALYSIS

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PM Bulletin: Exxon Mobil - a proxy for crude?
29 Apr 2016
AM Bulletin: Equity sell-off continues
29 Apr 2016
PM Bulletin: JPY update
28 Apr 2016
AM Bulletin: BOJ disappoints
28 Apr 2016
Holiday Schedule: Early May Bank Holiday
27 Apr 2016
PM Bulletin: BOJ meeting
27 Apr 2016
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27 Apr 2016
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26 Apr 2016
AM Bulletin: Markets directionless
26 Apr 2016
PM Bulletin: Apple
25 Apr 2016
Weekly Bulletin: Party like it’s 1999?
25 Apr 2016
PM Bulletin: Big move in USDJPY
22 Apr 2016
AM Bulletin: Weaker earnings weigh on US indices
22 Apr 2016
PM Bulletin: Silver’s pump and dump
21 Apr 2016
AM Bulletin: US indices edge closer to all-time highs
21 Apr 2016
PM Bulletin: ECB meeting look-ahead
20 Apr 2016
AM Bulletin: Silver surge drags gold higher
20 Apr 2016
PM Bulletin: Silver update
19 Apr 2016
AM Bulletin: Dow tops 18,000
19 Apr 2016
PM Bulletin: US indices continue to push higher
18 Apr 2016
Weekly Bulletin: The Fed, China, oil and the yen
18 Apr 2016
PM Bulletin: Brent crude
15 Apr 2016
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15 Apr 2016
PM Bulletin: EURUSD chart
14 Apr 2016
AM Bulletin: Equity rally continues
14 Apr 2016
AM Bulletin: Equities push higher
14 Apr 2016
PM Bulletin: JP Morgan Chase
13 Apr 2016
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12 Apr 2016
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12 Apr 2016
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11 Apr 2016
Weekly Bulletin: Yen strength remains a concern
11 Apr 2016
PM Bulletin: Stock indices ending the week on a high
08 Apr 2016
AM Bulletin: “Risk-on” again as yen retreats
08 Apr 2016
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07 Apr 2016
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07 Apr 2016
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06 Apr 2016
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06 Apr 2016
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05 Apr 2016
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05 Apr 2016
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04 Apr 2016
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04 Apr 2016
April: Non Farm Payrolls Out Today
01 Apr 2016
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01 Apr 2016
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01 Apr 2016
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Indices Update

The Dow and S&P 500 are both hovering around 1% below their all-time nominal highs which were hit in May last year. Investors continue to climb the “wall of worry” and be net buyers of equities despite worries over the state of the global economy and what’s shaping up to be another grim quarter for earnings.

European equities and US stock index futures were a touch weaker on the open yesterday morning. Much of this was due to a pull-back in crude prices as the Kuwaiti oil workers called off their strike, although US indices had closed well below their best levels in the previous session. On top of that, China’s Shanghai Composite fell over 2% to close below 3,000 for the first time since the end of March. However, losses were limited for both oil and equities. This was encouraging for bullish investors as in times gone by a sell-off in oil and China would have guaranteed a sharp “risk-off” move. Stock market investors were no doubt cheered by the ongoing decline of the yen. The USDJPY is up around 1% since its low point on Monday.

Today’s big event is the ECB meeting and Mario Draghi’s subsequent press conference. Analysts don’t expect the ECB will make any adjustment to monetary policy. This seems fair enough when one considers the stimulus boost that the ECB announced in March. The trouble is that the euro has rallied over 7% since early December when Mr Draghi and his colleagues failed to provide the stimulus anticipated by the markets. Even worse, although it fell sharply in the immediate aftermath of the 10th March stimulus, it subsequently flew higher and is now around 4.5% above that day’s low.

While Mario Draghi has previously been happy to give the euro a good kicking, his options are limited this time round. This is especially the case given the recent criticism he’s received from German finance minister Wolfgang Schaeuble. Nevertheless, we shouldn’t be surprised if he attempts to “jawbone” the single currency lower – probably by backing away from his comments last month when he signalled that the ECB wasn’t likely to cut interest rates further.

The FTSE 100 index closed at 6,410.3 up 4.9 points on the day, or 0.1%

The German DAX rose 71.7 points or 0.7% to finish at 10,421.3

The US30 closed up 42.7 points to finish at 18,096.3 The S&P 500 ended 0.1% higher at 2,102.4 while the Nasdaq 100 rose 3.4 or 0.1% to close at 4,540.4

Equities Update

Coca-Cola’s (KO) sales fell for the fourth quarter in a row as demand for carbonated drinks fell in Europe.  The strong dollar also eroded the value of sales in other markets outside the United States. Latin America saw sales slump by 12.2%. Earnings came in at an adjusted $0.45 per share for the first quarter, just one cent above the $0.44 expected. Revenue was slightly above forecasts coming in at $10.33 billion against $10.28 expected. However, this was 4% lower than the same period last year.  Worldwide case volume was up 2%, slightly below analysts' forecasts. The stock ended 4.8% lower at $44.37

Chip-making giant Intel (INTC) beat forecasts by 6 cents with adjusted quarterly profit of 54 cents per share. Revenues were pretty much in line. However, the company gave lower-than-expected forward guidance and cut its full-year profit margin outlook. It also announced it would cut up to 12,000 jobs.

Commodities Update

Crude fell in early trade yesterday on the news that a strike by Kuwaiti oil workers had come to an end. The strike began on Sunday, coinciding with the breakdown of talks between OPEC and non-OPEC producers to freeze output. Kuwait reported that production rose to 1.6 million barrels per day, up from 1.1 million during the strike, but short of the 2.8 million that the country produced in March. There was additional downside pressure on prices due to data released on Tuesday from the American Petroleum Institute which showed that US inventories rose by 3.1 million barrels on expectations of a 2.4 million barrel increase.

But oil bounced off its lows following the latest inventory data release from the Energy Information Administration (EIA). This showed a smaller-than-expected build in stockpiles. These rose 2.1 million barrels for the week ending 15th April lower than the 2.2 million barrel build expected and a sharp decline from the 6.6 million recorded in the previous week. Crude then shot into positive territory following reports that OPEC and non-OPEC producers were preparing to meet again next month. According to the deputy oil minister of Iraq the meeting is to potentially revive an output freeze discussion.

There’s a real tug-of-war going on now between bulls and bears. So far the bulls are winning as a pile of negative news has failed to derail a rally which took hold in mid-February. This has been driven by hopes of an output freeze, dollar weakness and a suggestion that the supplies may come back into line with demand sooner than previously anticipated.

Gold and silver were little-changed in early trade yesterday although there was a slight upside bias to prices. This was a tad surprising given Tuesday’s sharp gains as some consolidation typically follows the kind of big move we saw in silver. But both metals built on their gains from the previous day with silver hitting its highest intra-day level in nearly a year. If it can hold and consolidate above $17 then there’s little in the way of resistance until it tops $18. This level marks the 161.8% Fibonacci extension of the October-December 2015 sell-off.

Gold’s rise was steadier. Yet chart-wise the price action looks constructive with a gently upward-sloping trend line in evidence. However, there is some resistance around $1,250 which gold needs to take out convincingly to make further gains.

Yesterday’s moves were also impressive given that the US dollar managed to modest rally later in the day. Usually any rise in the greenback puts downside pressure on the two precious metals. 

Forex Update

It was a relatively quiet start for the major FX pairs yesterday. The US Dollar Index hovered near support around 94.00 while the EURUSD was effectively becalmed – half way between support at 1.1260 and resistance around 1.1440. The only significant mover was the British pound which fell against both the greenback and the euro following disappointing employment data. While the Unemployment Rate came in unchanged at 5.1%, the Claimant Count rose 6,700 on expectations of a decline of 11,900. On top of this the prior month’s data was revised to show a fall of 9,300 in the claimant count rather than the 18,000 previously calculated. But perhaps most disconcerting was the drop in Average Earnings from +2.1% for three months compared to the same time last year to +1.8%.

Japanese exports fell for a sixth straight month in March as slowing growth in China, soft global demand and a strengthening yen threatened to hold back the country's recovery. Exports dropped 6.8% from a year earlier while imports sank 14.9%. This resulted in the highest trade balance since October 2010. The weak numbers, together with the earthquakes which struck a southern manufacturing hub last week could give the Bank of Japan all the excuses it needs to provide further stimulus at next week’s meeting. However, the yen has weakened considerably since the beginning of last week when the USDJPY hit its lowest level since October 2014. 

Upcoming events

Today’s significant economic events include the release of UK Retail Sales and Public Sector Net Borrowing. From the US we have the Philly Fed Manufacturing Index and Weekly Jobless Claims data. But today’s main event is the ECB’s rate decision followed by Mario Draghi’s press conference.


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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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