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AM Bulletin: Equities and oil slip in early trade
31 Mar 2016
PM Bulletin: Non-Farm Payroll look-ahead
31 Mar 2016
AM Bulletin: Yellen comments boost risk appetite
30 Mar 2016
PM Bulletin: Is a dovish Janet really that bullish?
30 Mar 2016
AM Bulletin: Yellen to speak
29 Mar 2016
PM Bulletin: US indices running into resistance
29 Mar 2016
AM Bulletin: Profit-taking ahead of holiday weekend
24 Mar 2016
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24 Mar 2016
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23 Mar 2016
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23 Mar 2016
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22 Mar 2016
Weekly Bulletin: US dollar on the back foot
21 Mar 2016
AM Bulletin: USD sell-off boosts oil
18 Mar 2016
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18 Mar 2016
AM Bulletin: USD down on dovish Fed
17 Mar 2016
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17 Mar 2016
AM Bulletin: All ears and eyes on FOMC
16 Mar 2016
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16 Mar 2016
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15 Mar 2016
PM Bulletin: FOMC look-ahead and the USD
15 Mar 2016
Weekly Bulletin: Central banks still in focus
14 Mar 2016
PM Bulletin: Gold
14 Mar 2016
AM Bulletin: Confusion reins
11 Mar 2016
PM Bulletin: EURUSD revisited
11 Mar 2016
AM Bulletin: ECB meeting in focus
10 Mar 2016
PM Bulletin: Mr Draghi fires his bazooka
10 Mar 2016
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09 Mar 2016
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09 Mar 2016
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08 Mar 2016
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08 Mar 2016
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07 Mar 2016
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07 Mar 2016
March: Non Farm Payrolls Out Today
04 Mar 2016
AM Bulletin: Markets quiet ahead of Non-Farms
04 Mar 2016
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04 Mar 2016
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03 Mar 2016
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03 Mar 2016
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02 Mar 2016
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02 Mar 2016
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01 Mar 2016
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01 Mar 2016
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 Tuesday 29 March 2016

AM Bulletin: Yellen to speak

 

 

Indices Update

There was a firmer tone to today’s early equity trading. European stock indices were all in positive territory soon after the open despite weakness in the oil market. Investors are looking ahead to a speech later this afternoon from Federal Reserve Chairman Janet Yellen. She will be addressing the Economic Club of New York. It will be interesting to hear if she is as hawkish as her colleagues from last week who appeared to open the door for an April rate hike.

Yesterday the main US stock indices trod water after the Easter weekend. This followed a volatile session on Thursday which saw US equities bounce after an early sell-off and resulted in modest gains for the major indices.

European stock indices ended Thursday’s session sharply lower. Investors cut back their equity exposure going into the long holiday weekend. This followed a week which saw a number of regional Federal Reserve presidents suggest that the US central bank should be ready to raise interest rates at April’s meeting. The comments seemed to contradict the dovish tone to the FOMC’s statement and summary of economic projections from the previous week. These showed that members of the Federal Reserve had dialled back their predictions for rate hikes in 2016 to 50 basis points from 100. All in all, the Fed appears to be going out of its way to keep investors guessing about its intentions rather than providing clear guidance.

On Thursday the FTSE 100 index closed at 6,106.5 down 92.6 points on the day, or 1.5% and the German DAX fell 171.6 points or 1.7% to finish at 9,851.4

Yesterday the US30 closed up 19.7 points to finish at 17,535.4 The S&P 500 ended effectively unchanged at 2,037 while the Nasdaq 100 fell 0.2% to close at 4,398.1

Equities Update

European equity markets were closed for the Easter holiday.

Commodities Update

The rally in crude appears to be losing some of its upside momentum. This has coincided with the release of inventory data which for the most part has shown larger-than-expected increases in US crude stocks. Last week the Energy Information Administration (EIA) reported a jump in inventories of 9.4 million barrels for the week ending 18th March. This was well above market expectations of a 2.5 million barrel build.

Investors were emboldened to increase their long side exposure to crude following all the talk of a meeting to agree a production freeze by many OPEC and non-OPEC producers. A meeting had been set for 20th March, although this has now been rescheduled for 17th April in Qatar. Nevertheless, many analysts doubt that even if all attendees manage to agree to some kind of production freeze, the effects on existing inventories will be negligible. As if to confirm this, last week the International Energy Agency (IEA) pointed out that freezing output at January’s levels is “meaningless.” And even that assumes that everyone sticks to their promises – something which is seen as being very low probability.

Gold and silver are struggling at present following dramatic rallies since the end of last year. Both metals came off their best levels ahead of the Federal Reserve’s March meeting and the FOMC’s summary of economic projections. This appeared to be little more than profit-taking and position-squaring by cautious investors who still considered it possible that the Fed would come through with another rate hike at the meeting. The Fed’s surprisingly dovish tone led to a sharp spike in in both metals. However, last week’s torrent of hawkish comments from a clutch of regional Federal Reserve presidents led to a sell-off in in gold and silver. We saw a flash crash in silver on Wednesday when it lost 2% in less than ten minutes. Then yesterday it was gold’s turn to slump on no news in thin holiday volumes.

Nevertheless, both precious metals steadied as the dollar slipped on weak US inflation, spending and consumption data. Support for gold comes in around $1,200 and then $1,180. Below $15.20 there’s support for silver around $14.80.

Forex Update

The US dollar pushed higher last week as investors absorbed the latest statement and economic projections from the Fed’s FOMC. The dollar initially fell after the Federal Reserve dialled back on its prediction of 100-basis points-worth of rate hikes in 2016. But since then some profit-taking crept in and this accelerated as a number of regional Federal Reserve presidents expressed the view that rates could be hiked as early as April. The greenback firmed up again in early trade yesterday in response to additional hawkish comments over the weekend from St Louis Federal Reserve President James Bullard.

However, the dollar pulled back from its best levels and then fell sharply following the release of data covering inflation, consumer spending and saving. The Federal Reserve’s preferred inflation measure is the PCE (Personal Consumption and Expenditure). This rose just 1% in the 12 months ended in February which was down from January’s annualised reading of 1.2%. The Core PCE number (excluding food and energy) rose 0.1% in February giving an unchanged annual increase of 1.7%. The Fed has an inflation target of 2%, so any stagnation or decline in these numbers suggests that no matter what Fed officials may say publicly, another rate hike could be delayed until we’re at or above 2%.

Upcoming events

Today’s significant economic events come from the US and include the S&P/Case Shiller House Price Index and the Conference Board Consumer Confidence Index. Perhaps most importantly, Federal Reserve Chairman Janet Yellen is due to deliver a speech titled "Economic Outlook and Monetary Policy" at the Economic Club of New York luncheon. Overnight Japan releases its Preliminary Industrial Production number. 

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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