Incisive market commentary from David Morrison

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Collapse 2017 <span class='blogcount'>(348)</span>2017 (348)
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Tory Poll Lead Narrows Sharply - Video Update
31 May 2017
S&P 500 and NASDAQ break winning streak
31 May 2017
Sterling swings on polls - PM Bulletin
30 May 2017
Equities drift after long holiday weekend - AM Briefing
30 May 2017
Crude oil slumps on OPEC disappointment - AM Briefing
26 May 2017
OPEC disappoints while FOMC minutes provide cheer - Video Update
25 May 2017
OPEC expected to agree 9-month extension - AM Briefing
25 May 2017
Look-ahead to OPEC - Video Update
24 May 2017
Markets quiet ahead of FOMC minutes and OPEC - AM Briefing
24 May 2017
Crude oil update - OPEC meeting in focus - PM Bulletin
23 May 2017
Markets shrug off atrocity in Manchester - AM Briefing
23 May 2017
Equities mixed, but supported by oil
22 May 2017
Nerves steady after firmer close on Wall Street - AM Briefing
19 May 2017
Political fall-out continues to weigh on markets - Video Update
18 May 2017
Slide in European indices accelerates - AM Bulletin
18 May 2017
Trump’s woes hit markets - Video Update
17 May 2017
Trump’s woes lead to market wobble - AM Briefing
17 May 2017
EURUSD hits six-month high - PM Bulletin
16 May 2017
Crude oil extends rally - AM Briefing
16 May 2017
US inflation data and retail sales in focus - AM Briefing
12 May 2017
Crude oil recovers after “flash crash”- Video Update
11 May 2017
Crude oil soars while equities drift - AM Briefing
11 May 2017
Are investors too complacent? - Video Update
10 May 2017
Investors rattled after Trump fires FBI head - AM bulletin
10 May 2017
Crude oil’s “flash crash” leads to OPEC desperation - PM Bulletin
09 May 2017
Equities rally as oil steadies - AM Briefing
09 May 2017
Forex: Top Ten Tips for beginners - Trading Guides
08 May 2017
Markets little moved after Macron win - AM Briefing
08 May 2017
Payrolls in focus - AM Briefing
05 May 2017
NFP look-ahead - Video Update
04 May 2017
FOMC hints at rate hike in June - AM Briefing
04 May 2017
FOMC look-ahead - Video Update
03 May 2017
Apple disappoints on sales numbers - AM Briefing
03 May 2017
CFD Trading Tips - Trading Guides
02 May 2017
European traders return after May Day - AM Briefing
02 May 2017
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Early moves

·         Corporate results weigh on indices

·         FOMC in focus

We’ve seen early weakness across European stock indices this morning on the back of some negative corporate results. Late last night Apple reported disappointing revenues as iPhone sales were lower than expected. Even though earnings were better than anticipated, the price of the stock fell around 2% in after-hours trading.

Sainsbury’s is also weaker in early trade. This followed the announcement of its third consecutive year-on-year profit decline and the company’s comments of uncertainty over future pricing pressures.

Yesterday both the NASDAQ Composite and NASDAQ 100 indices eked out fresh record intra-day highs, thanks mainly to traders buying Apple ahead of last night’s earnings. But all the US stock index futures were lower first thing this morning.

The US Federal Reserve concludes its two-day monetary policy meeting later this evening. The current probability of a rate hike at this meeting is less than 5%. That’s not to say that there’s been any evidence so far that the US central bank is pulling back on its projection for future rate hikes this year. After all, it could still raise rates in June and September, and then look to reducing its $4.5 trillion balance sheet towards year-end. However, we have seen some weaker US economic data of late and it could be that this id mentioned in tonight’s statement.

Stock Index Update

·         ADP payrolls ahead

·         Then ISM Non-Manufacturing PMI

Ahead of this evening’s FOMC rate decision and statement, investors will be focused on a couple of important US economic data prints. First up is the ADP Payroll number. Historically, this data point has been pretty good in helping to forecast big surprises in the official Non-Farm Payroll (NFP) data which follows on Friday. In other words, a big upside surprise today typically foreshadows a big upside surprise on Friday. Likewise for a downward surprise. However, this “rule of thumb” came badly unstuck last month when the ADP soared above expectations but the came in miles below the anticipated number. Today it looks as if the ADP should drop back a bit with the expectation coming in around 180,000 jobs. Later on we have the ISM Non-Manufacturing PMI. This is expected to come in around 56.1, but don’t be surprised if it misses to the downside considering recent US economic data disappointments.

All the major European stock indices closed higher yesterday following Monday’s Bank holiday break. The oil and gas sector shrugged off continued weakness in the crude price and led the market higher on earnings news. First quarter profits at BP were almost three times higher than this time last year. The stock ended the day over 1.5% higher although it pulled back sharply on Wednesday morning. But European gains were capped by basic resources stocks. Investors looked to book profits in miners following a widespread rally on Tuesday.

Commodities Update

·         US crude inventory update due later today

·         Gold/silver struggle to find support

Crude prices remain under pressure as investors focus on rising US output. This is offsetting agreed production cuts from OPEC and other producers including Russia. On top of that, global inventories remain near record highs and there are doubts that the OPEC/non-OPEC output agreement will be extended beyond June.

Last night the American Petroleum Institute (API) reported a crude inventory draw of 4 million barrels - more than the 3.5 million barrel drawdown expected. There were also larger-than-expected stockpile reductions for gasoline and distillates. Crude oil popped higher on the news but has given back these gains in early trade this morning. We get another inventory update later this afternoon.

Gold and silver continue to come under selling pressure although the former is managing to hold up better than the latter. Gold is hovering around $1,250 and is back to levels seen less than a month ago. However, silver is currently trading around levels last seen at the end of January at a time when the metal was rallying off multi-month lows. Silver has crashed below some significant support areas. It is now flirting with $16.80 which marks the 61.8% Fibonacci Retracement of the rally from December last year to earlier in April. Chart-wise, a break below here opens up the prospect of a pull-back to the December low and a break of $16. But much now depends on whether we’re likely to see a reduction in risk appetite once again and a rush to safe havens. As things stand, investors appear to have little interest in North Korea, China, Syria and Russia.

Forex Update

·         Dollar steadies with FOMC eyed

·         USDJPY trades near six-week high

The US dollar continues to steady although at depressed levels. The Dollar Index is currently hovering near its lowest point since just after Trump’s surprise election victory back in November. The greenback has been sliding ever since it hit a 14-year high against the euro back at the beginning of this year. Partly this is down to a tempering of the excitement that followed Trump’s win as the new administration struggles to follow through on campaign promises. But more recently there are concerns that the US economy may not be robust enough to withstand further monetary tightening from the US Federal Reserve. Traders will be parsing tonight’s FOMC statement for clues over the Fed’s thinking on the subject.

Earlier today the USDJPY was trading near the six-week high it hit yesterday. The yen has weakened recently as investors sell (borrow) the low-yielding Japanese currency when risk appetite is high to invest in higher-yielding assets.

Upcoming events

Today’s significant economic data releases and events include Spanish and German Unemployment, Euro zone Flash GDP and UK Construction PMI. From the US we have the ADP Non-Farm Employment Change, ISM Non-Manufacturing PMI, Crude Oil Inventories and the FOMC Statement. 


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Posted by David Morrison

Category: AM Bulletin

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