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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
AM Bulletin: FOMC in focus
27 Apr 2016
PM Bulletin: GBPUSD
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
AM Bulletin: Quiet start to Friday’s trade
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
PM Bulletin: Silver chart
12 Apr 2016
AM Bulletin: Equity rally runs out of steam
12 Apr 2016
PM Bulletin: Schlumberger
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
PM Bulletin: JPY update
07 Apr 2016
AM Bulletin: Oil surge boosts equities
07 Apr 2016
PM Bulletin: Gold struggling to build on Q1 gains
06 Apr 2016
AM Bulletin: Firmer start for global indices
06 Apr 2016
PM Bulletin: USDJPY heading towards 110.00
05 Apr 2016
AM Bulletin: Crude weighs on equities
05 Apr 2016
Weekly Bulletin: Yellen or the data – what to believe?
04 Apr 2016
PM Bulletin: Holiday spending money
04 Apr 2016
April: Non Farm Payrolls Out Today
01 Apr 2016
AM Bulletin: Waiting for Non-Farms
01 Apr 2016
PM Bulletin: Non-Farm Payroll post mortem
01 Apr 2016
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Indices Update

Yesterday’s big event was the ECB meeting and Mario Draghi’s subsequent press conference. This was widely expected to be a damp squib, with the central bank holding back from further stimulus following the boost that the ECB announced in March.

Neither the ECB nor Mario Draghi did much to rock the boat. The ECB kept rates unchanged. This means its main refinancing rate is still 0%, its marginal lending rate is 0.25% and its deposit rate remains at -0.4%. The central bank also announced that it had started to expand its monthly purchases to €80 billion (as expected) and that it was working to implement the non-standard measures decided at its March meeting.

ECB President Mario Draghi warned that euro zone inflation might turn negative again in coming months, although broad financing conditions had improved since the last meeting. This was the dovish part of his press conference, as it was interpreted as meaning that further stimulus may be required to fend off deflation. However, he also stressed that the central bank hadn't talked about “helicopter money” (injecting cash directly into the real economy, by, for instance, sending cheques to every Euro zone citizen) which was taken as hawkish.

Mr Draghi also hit back at his critics, such as German finance minister Wolfgang Schaeuble, saying: "We have a mandate to pursue price stability for the whole of the euro — not only for Germany. This mandate is established by the treaty by European law. We obey the law, not the politicians, because we are independent as stated by the law."

All-in-all, it was a mixed session for European indices. US stocks fell later in the session with the Dow ending back below 18,000 – coming off its best levels since last summer. There were some notable earnings misses contributing to the pull-back – United Continental, Travelers and Verizon. Today traders will focus on Caterpillar, General Electric and McDonald’s.

The FTSE 100 index closed at 6,381.4 down 28.8 points on the day, or 0.5%

The German DAX rose 14.4 points or 0.1% to finish at 10,435.7

The US30 closed down 113.8 points to finish at 17,982.5 The S&P 500 ended 0.5% lower at 2,091.5 while the Nasdaq 100 ended effectively unchanged.

Equities Update

Alphabet, the parent company of Google, fell sharply in after-hours trade following its latest earnings release. Both earnings and revenue fell short of analysts’ expectations for the first quarter. It reported earnings of $7.50 per share on $20.26 billion in revenue. This compares with the consensus expectations of $7.97 and $20.37 billion respectively. The company attempted to “bull-up” the results and highlighted that adjusted earnings were up close to 16% from this time last year. However, investors were expecting more and the stock was down nearly 6% at $714.20 just after the European open.

Commodities Update

Once again, silver shot out of the starting blocks yesterday to hit a fresh 11-month high early in the morning session. The rally was looking a bit overextended and due some consolidation. However, it could also be argued that the silver price had languished at oversold levels for a long time and an upside readjustment was overdue. However, the market decided that the metal was overbought, and mid-afternoon it got a correction. Out of nowhere there was a vicious sell-off which drove silver 5% lower in less than an hour. Gold fell too while the dollar rallied. The moves followed the ECB meeting and Mario Draghi’s press conference.

Nevertheless, silver has been back in favour this year following a protracted five-year sell-off. The sell-off corresponded to a rally in the US dollar. But more recently, silver suffered the additional problem of its use as an industrial metal. It got caught up in the commodity rout that happened as a consequence of the strengthening dollar and fears of the Chinese slowdown. The dollar stabilised last year and now shows signs of weakening. While concerns over China persist, silver is now benefiting from its status as an investment metal along with gold. Both precious metals should continue to find favour in an environment where many central banks have adopted negative interest rates and when equity and bond markets appear fully (if not over) valued.

Gold also jumped higher yesterday morning. But in contrast to silver the gold price has already undergone consolidation following its December-February rally. There’s some mild support around $1,240 and strong support around $1,200. If gold break back above $1,260 and hold, then its next upside target is the $1,308 high hit in January 2015.

I really don’t know what to make of the recent price action in crude. I was convinced that the catalyst and impetus for this year’s rally was the announcement back in February that OPEC and non-OPEC members (Saudi Arabia, Russia, Venezuela and Qatar) were discussing an output freeze. The weaker dollar has helped, but nevertheless I expected the abject failure of Sunday’s talks to result in a protracted sell-off which would have reversed at least 50% of the rally since Feb. Of course, the Kuwaiti oil workers’ strike helped to counter the negative effects of the Doha failure, but that is over now. So, in the absence of anything else we could be looking at a reappraisal of the global supply-demand situation. At least that would make some sense.

But Wednesday’s price spike on a smaller-than-expected build in US stockpiles followed by a report that OPEC and non-OPEC producers were preparing to meet again next month to discuss an output freeze was ludicrous. The US inventory build missed by 100,000 barrels, which given the volatility in this number, and subsequent revisions, is neither here nor there. At the same time, Russia came out very quickly to say that not only was an additional meeting not taking place, but also, according to Russian energy minister Alexander Novak it was doubtful “…that OPEC countries will reach an agreement among themselves.”

Oil pulled back later in yesterday’s session. But both WTI and Brent front month contracts (June) are still well north of $40. It would probably need a break below here to shake out the latest batch of buyers who came in on Monday following Doha and the Kuwaiti strike. 


Forex Update

It was a quiet start yesterday morning as traders held back ahead of the ECB rate decision and Mario Draghi’s press conference. But the afternoon brought a wild session of sharp swings in all the major currency pairs.

The ECB kept rates unchanged. This means its main refinancing rate is still 0%, its marginal lending rate is 0.25% and its deposit rate remains at -0.4%. The central bank announced that it had started to expand its monthly purchases to €80 billion and that it is working to implement the non-standard measures decided at its March meeting.

ECB President Mario Draghi warned that euro zone inflation might turn negative again in coming months, although broad financing conditions had improved since the last meeting. He stressed that the central bank hadn't talked about helicopter money. The euro rallied initially but then fell back sharply. The swings in the euro and the US dollar led to some big moves across all currency pairs. However, markets calmed down later in the session with the European pairs and EURUSD little-changed as the European close approached. The Canadian dollar slipped along with oil while the Japanese yen strengthened a touch as equities fell back.

UK Retail Sales for March were pretty dire. These fell 1.3% month-on-month, well below the -0.1% expected and February’s decline of 0.5%. The weak data follows on from Wednesday’s poor employment numbers, and no doubt Chancellor Osborne will be quick to blame reluctance on the part of consumers to spend more money on useless tat (sorry, quality goods) on Brexit fears. However, sterling shrugged off the bad news and quickly reversed initial losses. This is probably because the year-on-year comparison was somewhat more encouraging as it showed a 2.7% increase – the 35th consecutive month of year-on-year growth. 


Upcoming events

Today’s significant economic events include the release of Flash Manufacturing and Services PMIs from France, Germany and the Euro zone. We also have Italian Retail Sales, ECOFIN and Eurogroup meetings. From Canada we have CPI and Retail Sales and from the US we have the Flash Manufacturing PMI. 

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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