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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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 Thursday 27 April 2017

ECB meeting in focus - AM Briefing



Early moves

Softer start for European equities

ECB meeting in focus

European stock indices have drifted lower this morning as investors react to last night’s turnaround on Wall Street. US indices were pushing higher yesterday afternoon as details of Trump’s tax cuts were unveiled. However, all the majors ended the day lower after the Dow and S&P 500 failed to take out their record highs from early March. In part this was down to “buy the rumour, sell the fact” once investors absorbed news of Trump’s tax cuts. But there was also some concern as the stock prices of Canadian mortgage lenders plunged, possibly signalling the popping of Canada’s housing bubble.

The Bank of Japan left monetary policy unchanged but raised its forecast for economic growth. The Japanese yen weakened overnight. Now attention turns to today’s ECB meeting. There’s no expectation that the ECB will signal that it is preparing to wind down its monthly €60 billion bond purchase programme, but there’s been speculation that there may be a change in tone. This follows a string of better-than-expected economic numbers from across the region. If the central bank raises its growth forecasts for the Euro zone then this will be taken as a hawkish signal and should be positive for the euro.

There have been a number of tailwinds for stocks this week. The positive effects of the still-to-be-decided French presidential election may be fading, but these have been replaced by some strong earnings reports which helped to lift sentiment and an uptick in US Treasury yields. On top of all this, investors were bulled up by prospect of tax cuts from the Trump administration. However, the fact that the Dow and S&P failed to make new highs was disappointing for the bulls. A dovish ECB meeting and some strong US Durable Goods numbers later today could be the catalysts for another push higher. On the other hand any sign that the ECB Governing Council is considering winding down monetary accommodation could lead to further profit-taking.

Stock Index Update

US indices give back early gains

Doubts over Trump tax cuts passing through Congress

Yesterday saw the European majors manage to make back early losses and close with modest gains, in a trading pattern similar to Tuesday’s. Once again, it was the US equities which made all the running to the upside and these were gaining momentum as Europe closed. However, the major US indices lost ground later in the session and ended the day lower. This appears to be the result of a straightforward “buy the rumour, sell the fact” reaction to the Trump administration’s tax cut proposals. While these should be highly simulative, many analysts doubt that they’ll get through Congress.

Commodities Update

Mixed signals from US inventory data

Precious metals mixed after Trump’s tax plans unveiled

Crude oil spiked higher yesterday afternoon following the Energy Information Administration’s (EIA) latest US inventory update. This showed a bigger-than-expected drawdown of 3.6 million barrels for the week ending 21st April - considerably more than the 1.1 million drawdown expected. However, both Brent and WTI pulled back from their respective highs as the trading session progressed.

Crude spent most of yesterday’s session trading in negative territory. Prices were under pressure after the American Petroleum Institute (API) released an update on US inventories on Tuesday night. This showed bigger-than-expected builds in crude and gasoline stocks and this is keeping a lid on prices in early trade.

Sentiment towards oil has soured over the past fortnight. Partly this is due to a loss of upside momentum as a rally from the end of March petered out. But also investors have become less convinced that OPEC and a number of other major producers will agree to extend their output cuts beyond the June end-date. Also the 1.8 million barrel per day cut that began at the beginning of the year has done little to speed up the reduction in global inventories. The pick-up in US production over the past twelve months has contributed to stockpiles.

Precious metals fell in early trade yesterday. Gold picked up later in the session as investors began to question the likelihood of Trump’s tax cut proposals passing through Congress. But overall the recent weakness in the two precious metals is due to increased risk appetite as investors continue to pile into equities and reduce their holdings of so-called safe haven assets. This comes as there’s been an apparent dial-back in tensions between the US, Russia, China and North Korea.  Just over a week ago gold was trading at five month highs and pushing up towards $1,300 per ounce. It has lost over 2% since then and some analysts feel it could have further to fall, especially if the stock market rally continues. The next significant support comes in around $1,250 which marks the 38.2% Fibonacci Retracement of gold’s sell-off between July and December 2016. Yesterday silver fell sharply and is now trading well below its 20, 50 and 100-day Exponential Moving averages. There appears to be some support around $17.20 but a break below here could open up the possibility of a move towards $16.80.

Forex Update

US dollar recovers

ECB meeting in focus

The US dollar was generally stronger yesterday, with most of its gains coming at the expense of the euro and Japanese yen. The move saw the Dollar Index recover from the five and a half month lows hit on Tuesday. The rally was linked to a pick-up in US Treasury yields. However, there was also a degree of profit-taking on the euro. On Monday the euro gapped higher as investors celebrated the result of the first rounds in the French presidential election. This saw the preferred centrist pro-European candidate Emmanuel Macron go through with the highest percentage of the vote, although he was closely followed by the Eurosceptic far-right contender, Marine Le Pen. Nevertheless, the prevailing view is that Macron will clinch the presidency on 7th May, ensuring a degree of political stability and continuity.

The ECB meets today and is expected to keep its statement little-changed from March. However, investors will be paying close attention to ECB President Mario Draghi’s subsequent press conference. There’s been some speculation that the central bank could turn slightly hawkish over the coming months. But if that’s not reflected in Draghi’s Q&A then we could see the euro give back some of this week’s gains.

Upcoming events

Today’s significant economic data releases and events include Spanish CPI, Spanish Unemployment, UK CBI Realised Sales and the European Central Bank rate decision and subsequent press conference. From the US we have Durable Goods, Weekly Jobless Claims, Wholesale Inventories and Pending Home Sales.


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Posted by David Morrison

Category: AM Bulletin

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