Incisive market commentary from David Morrison

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Collapse 2017 <span class='blogcount'>(348)</span>2017 (348)
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EURUSD breaks above resistance - PM Bulletin
31 Jan 2017
Equities recover after Monday’s sell-off - AM Briefing
31 Jan 2017
Trending markets and Andrews’ Pitchfork -Trading Guide
30 Jan 2017
Investors rattled by Trump’s curbs - AM Briefing
30 Jan 2017
Dow holds above 20,000 as dollar firms - AM Briefing
27 Jan 2017
Dow breaks above 20,000 - Video Update
26 Jan 2017
Dow at 20,000 boosts risk appetite - AM Briefing
26 Jan 2017
Dow finally breaks 20,000 - PM Bulletin
25 Jan 2017
Wall Street leads stocks higher - AM Briefing
25 Jan 2017
Consolidation continues - Video Update
24 Jan 2017
Dollar recovery helps lift sentiment - AM Briefing
24 Jan 2017
Money management and stop-losses -Trading Guide
23 Jan 2017
Stocks fall on US protectionism fears - AM Briefing
23 Jan 2017
Trump inauguration in focus - AM Briefing
20 Jan 2017
A look-ahead to Trump’s inauguration - Video Update
19 Jan 2017
ECB President Draghi’s press conference in focus - AM Briefing
19 Jan 2017
Dollar steadies after sell-off - Video Update
18 Jan 2017
Equities drift in featureless trade - AM Briefing
18 Jan 2017
Dollar pull-back lifts precious metals- PM Bulletin
17 Jan 2017
Dollar slumps in early trade - AM Briefing
17 Jan 2017
Charting analysis for beginners - Trading Guide
16 Jan 2017
Sterling slumps on “Hard Brexit” concerns - AM Briefing
16 Jan 2017
Earnings in focus - AM Briefing
13 Jan 2017
Fourth quarter earnings in focus - Video Update
12 Jan 2017
Market Info Update: Martin Luther King Day Monday 16th January 2017
12 Jan 2017
Dollar lower as Trump skips stimulus talk - AM Briefing
12 Jan 2017
Trump news conference - Video Update
11 Jan 2017
Trump press conference in focus - AM Briefing
11 Jan 2017
Has gold turned a corner? - PM Bulletin
10 Jan 2017
Another mixed start for Europe - AM Briefing
10 Jan 2017
Trading Psychology - Trading Guides
09 Jan 2017
Sterling slips on "Hard Brexit" fears - AM Briefing
09 Jan 2017
Non-Farm Payrolls in focus - AM Briefing
06 Jan 2017
Non-Farm Payroll look-ahead - Video Update
05 Jan 2017
FOMC minutes viewed as hawkish - AM Briefing
05 Jan 2017
Look-ahead to release of FOMC minutes - Video Update
04 Jan 2017
FOMC minutes in focus - AM Briefing
04 Jan 2017
Strong start to 2017 - PM Bulletin
03 Jan 2017
Equities push higher in first session of 2017 - AM Briefing
03 Jan 2017
Expand 2016 <span class='blogcount'>(483)</span>2016 (483)
 Friday 13 January 2017

Earnings in focus - AM Briefing



Early moves

 - Markets steady after Trump wobble

- Press conference disappointment ebbs

Markets are steadier in early trade this morning following yesterday’s wobble. Investors are attempting to put aside their disappointment at president-elect Trump’s unconventional press conference and looking forward to today’s earnings releases.

Many investors were frustrated by Mr Trump’s much-heralded appearance on Wednesday as he failed to mention tax cuts, his plans for infrastructure spending or regulatory roll-back. Instead he took a swipe at the drugs industry, talked about slapping taxes on imported goods made by US manufacturers abroad and dismantling NAFTA. Basically, this was all the business-negative stuff with nothing good to offset it.

However, investors are now looking ahead to the fourth quarter earnings season. There are high hopes that earnings turned a corner last quarter. Previously, there had been five back-to-back quarters of year-on-year earnings declines. This was the longest run since the depth of the financial crisis. Another positive quarter this time round could provide the catalyst for further stock market gains, even from current elevated levels.

Today we have updates from some of the world’s biggest banks: JP Morgan, Bank of America and Wells Fargo. The banking sector is up over 16% since the election on expectations of wider margins now that US rates look like heading higher, and there’s the prospect of a roll-back of regulations.

We also have numbers from Blackrock, First Horizon and PNC Financial.

Stock Index Update

- Mixed session for European equities

- US indices close lower

Yesterday brought mixed fortunes for European and US stock indices. The US majors all ended lower although made back around two thirds of their losses from earlier in the session. US indices fell sharply soon after the open. Less than a day after closing within 50 points of 20,000 the Dow Jones Industrial Average fell sharply and was down over 150 points in early afternoon trade.

The German DAX and Italian FTSE/MIB posted sharp falls with both closing over 1% lower. Meanwhile, Spain’s IBEX closed in positive territory while the FTSE100 squeaked higher to post yet another record close. Concerns continue to build over the health of the Italian banking sector. Italy’s biggest lender, UniCredit, is attempting to raise €13 billion through a rights issue. The money is needed to help execute a recovery plan. However, the bank may have problems finding investors as it’s market capitalisation is a little under €16 billion. Not only that, but last month Banca Monte dei Paschi failed to raise €5 billion soon after Prime Minister Matteo Renzi resigned after losing a referendum on constitutional change.

In other news, German GDP growth rose 1.9% in 2016, after a gain of 1.7% the previous year. This was better than forecast and the fastest pace of growth recorded by the country since 2011. Also, Bank of England governor Mark Carney admitted that Brexit was no longer the biggest single risk to the UK's financial stability. He also gave his opinion that the UK vote to leave the EU was likely to be a bigger issue for Europe than Britain.

Commodities Update

- Crude extends rally

- Weaker dollar lifts precious metals

Oil rallied sharply yesterday following a rollercoaster session on Wednesday. Midweek, crude sold off sharply following the release of US inventory data. The Energy Information Administration (EIA) reported a 4.1 million barrel inventory build for the week ending 6th January. This was way above the 900,000 increase expected. There were also builds in gasoline and distillate inventories. But buyers subsequently rushed in and drove prices back up. Crude then added to these gains during Donald Trump’s news conference as the dollar fell. Oil built on these gains in yesterday’s session, but pulled back from the highs later on.

Investors are struggling to work out whether crude’s rally from early last year has further to run or if it is now topping out. The trouble is that there are many conflicting stories playing into the market concerning supply, demand and the technical outlook. Overall, it can be argued that crude remains in an uptrend, supported by reports that key members of OPEC are starting to cut production and also by forecasts of strong demand growth in China. But prices have been kept in check so far as investors consider the likelihood of an increase in production from US shale oil drillers. However, there is still an expectation that OPEC and non-OPEC producers will abide by the agreements made back in November to cut daily output by around 1.8 million barrels per day. If so, then crude looks likely to be range-bound over the course of the year with any cuts from November’s agreement supporting prices, at say, $45-50 per barrel, while additional US supply capping gains at around $60.

Gold and silver were both up sharply in early trade yesterday, building on their gains from earlier in the week. Yesterday’s move was driven to a great extent by the downward move in the dollar which followed Donald Trump’s first news conference as president-elect. But gold was given additional spur as it broke above resistance around $1,190, going on to trade above $1,200.

Investors viewed Trump’s news conference as something of a disappointment. Mr Trump made no mention of tax cuts, infrastructure spending or regulatory roll-back, all of which have helped to boost risk assets since the presidential election back in November. Instead, Trump lambasted journalists, hit out at drug companies, threatened a tax on imports of goods manufactured abroad by US companies and talked about withdrawing from NAFTA. This saw investors cut their long-side exposure to the US dollar while increasing their positions in safe havens such as gold and silver.

Forex Update

- US dollar falls sharply

- Investors disappointed by Trump press conference

The US dollar fell sharply as Donald Trump held his first news conference since his election victory in November. His early remarks focused on the unsubstantiated stories which appeared in the press this week concerning what he allegedly got up to while visiting Russia some years ago. Then, and in contrast to the positive tone that he struck just after the election, Mr Trump attacked US drug companies over their pricing policies. He also talked of taxing imports of goods manufactured abroad by US companies. In addition, he failed to mention his plans for tax cuts, infrastructure spending or the roll-back of regulations. Overall, investors expressed their disappointment in the conference by selling dollars.

Yesterday Federal Reserve member Patrick Harker said he saw signs that the US economy was gathering in strength. He also said he expects three 25 basis point rate hikes in 2017, which is in line with the FOMC’s Summary of Economic Projections from its December meeting. This helped to trigger some short-side profit-taking to give the dollar a modest lift mid-session.

Upcoming events

Today’s significant economic events and data releases include German Wholesale Prices Index and the Bank of England’s Credit Conditions Survey. From the US we have Retail Sales, PPI, Consumer Sentiment, Business Inventories and Inflation Expectations.


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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