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GDP data in focus - AM Briefing
28 Apr 2017
ECB round-up and US GDP look-ahead - Video Update
27 Apr 2017
ECB meeting in focus - AM Briefing
27 Apr 2017
ECB's Rate Meeting, a look ahead - Video Update
26 Apr 2017
High hopes for Trump tax cuts - AM Briefing
26 Apr 2017
Global stock indices storm higher - PM Bulletin
25 Apr 2017
Indices mixed after firmer open - AM Briefing
25 Apr 2017
How to use Stop Losses in FX - Trading Guide
24 Apr 2017
French vote sees risk assets soar - AM Briefing
24 Apr 2017
Mixed European open despite Wall Street rally
21 Apr 2017
French Election in focus - Video Update
20 Apr 2017
French election and oil keep investors cautious - AM Briefing
20 Apr 2017
Equities off highs but still show resilience - Video Update
19 Apr 2017
Equities continue to drift lower - AM Bulletin
19 Apr 2017
Sterling soars on early UK election, but France the biggest concern
18 Apr 2017
Europe shrugs off US rally - AM Bulletin
18 Apr 2017
Trump's mouth sends dollar skidding lower - Video Update
13 Apr 2017
Dollar slumps on Trump comments - AM Bulletin
13 Apr 2017
Uncertain outlook ahead of holiday weekend - Video Update
12 Apr 2017
Equities recover after yesterday’s wobble - AM Briefing
12 Apr 2017
USDJPY approaching support - PM Bulletin
11 Apr 2017
Equities drifting in holiday-shortened week - AM Briefing
11 Apr 2017
Look-ahead to Janet Yellen’s speech this evening - PM Bulletin
10 Apr 2017
All eyes on G7 and Yellen - AM Bulletin
10 Apr 2017
US missile attack sends investors into “risk-off” mode - AM Briefing
07 Apr 2017
FOMC minutes rattle investors - Video Update
06 Apr 2017
Stunning reversal greets Fed minutes - AM Briefing
06 Apr 2017
ADP number points to big payroll beat on Friday - Video Update
05 Apr 2017
FOMC minutes in focus - AM Briefing
05 Apr 2017
US indices flag as first quarter ends - PM Bulletin
04 Apr 2017
Disappointing start to the new quarter - AM Briefing
04 Apr 2017
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Early moves

Softer tone across Europe

US-China summit in focus

There’s a softer tone across European markets this morning, although the FTSE100 managed to post modest gains early on, thanks to sterling weakness. The major US indices closed lower last night although they all managed to bounce off their lows from earlier in the day. Overall it’s been a disappointing start to April which continues the mixed tone from last month.

At the beginning of March global stock indices soared led by the US majors. The move followed Donald Trump’s first address to Congress since becoming president. His speech was considered upbeat and dignified and this went a long way in reassuring investors that here was a president who could get things done. But since then there’s been the controversial wiretap accusation and the Trump administration’s failure to push health care reform through Congress. On top of all this, there are concerns that the US Federal Reserve may be tightening monetary policy just as growth shows signs of slowing. Investors are also preparing themselves for the US-China summit later this week and the start of the first quarter earnings season.

Stock Index Update

Investors cautious as second quarter gets underway

US auto sales fall

Investors appear somewhat jittery this morning and unwilling to increase their exposure to global equities in general. While it’s early days, it’s been a disappointing start to the new month and fresh quarter. Yesterday US investors reacted to some disappointing sales numbers from the auto sector. The total number of cars and trucks sold in the US in March was 16.6 million. This was well below expectations of 17.4 million and the 17.6 million units sold in the previous month. Auto sales have now fallen for three consecutive months. Some analysts have pointed out that this does not bode well for consumer spending. It also suggests that auto loans and finance will come under pressure. This may be no bad thing considering how car finance contributes to over-indebtedness amongst the lower paid. But as far as Wall Street is concerned, falling loans is just bad for banks and associated finance companies.

At the beginning of March global stock indices soared led by the US majors. The move followed Donald Trump’s first address to Congress since becoming president. His speech was considered upbeat and dignified and this went a long way in reassuring investors that here was a president who could get things done. But since then there’s been the controversial wiretap accusation and the Trump administration’s failure to push health care reform through Congress. On top of all this, there are concerns that the US Federal Reserve may be tightening monetary policy just as growth shows signs of slowing. Investors are also preparing themselves for the US-China summit later this week and the start of the first quarter earnings season.

Commodities Update

WTI and Brent slip after last week’s gains

Precious metals rally

Crude prices have pulled back a touch this morning, continuing their move from yesterday. This looks like little more than a bout of profit-taking as investors position themselves ahead of the US inventory updates after the close tonight and again tomorrow. Last week saw WTI and Brent surge higher, albeit from low levels. Both contracts recovered lost ground on what looks like little more than a technical bounce, helped by talk of an extension to the OPEC/non-OPEC output cut agreement.

Crude oil fell sharply last month having failed to break above resistance on a number of occasions. The sell-off happened as traders priced in growing US production as the rig count continues to grow and as inventories continue to hit record highs. This was all seen as symptomatic of the failure of the production cut policy adopted by OPEC and a number of non-OPEC producers at the end of November last year. In fact, March saw WTI and Brent trade down to levels last seen in the immediate aftermath of the November agreement.

Gold and silver continue to creep higher despite a recent pick-up in the US dollar. The move in precious metals seems to be down to investor concerns about the economic outlook. There are worries that the Trump administration may not be able to push through its promised tax cuts, infrastructure spending plans and regulatory reform. This follows Trump’s failure to repeal and replace Obamacare the other week. In addition, while the US Federal Reserve seems to be preparing the markets for tighter monetary policy going forward, there are concerns that the central bank is raising rates just as the US economy appears to be slowing. On top of this, investors appear to be seeking out safe havens ahead of this week’s US-China summit.

Forex Update

Dollar recovery continues

But greenback lower against the yen

The dollar was a touch firmer in early trade on Tuesday, adding to sharp gains made at the end of last week. Investors have piled back into the dollar in an attempt to capitalise on the sell-off which took place for much of last month as they struggled to interpret just how quickly the US Federal Reserve may be prepared to tighten monetary policy. The most recent comments from Fed officials have become increasingly hawkish. Last Friday FOMC vice chair William Dudley even posited that the Fed could look to reduce its $4.5 trillion balance sheet later this year - earlier than previously thought.

But the dollar has fallen against the Japanese yen. Some analysts put this down to a loss of risk appetite which is leading investors to sell equities and buy back the yen which they originally borrowed (sold) to finance the purchase of these higher-yielding assets. But linked to this were comments from an advisor to Japanese Prime minister Shinzo Abe. Former Bank of Japan (BOJ) board member Nobuyuki Nakahara said next year the BOJ should look to reduce the number of JGBs it purchases by at least 50%.

Upcoming events

Today’s significant economic data releases and events are all from the US and include the Trade Balance, Factory Orders, Economic Optimism survey and a speech from Federal Reserve Governor Daniel Tarullo who leaves the Fed this month.

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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