Incisive market commentary from David Morrison

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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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Expand February <span class='blogcount'>(36)</span>February (36)
Expand January <span class='blogcount'>(39)</span>January (39)
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Early moves

Europe lower after flat close on Wall Street

Doubts creep in over US economic strength

There’s a weaker tone across European equity markets this morning. This follows on from a disappointing session on Wall Street overnight when the US majors surrendered early gains to close little-changed. There was some caution ahead of a speech from US Federal Reserve Chair Janet Yellen after the close. But this turned out to be breath-taking in its banality and lack of market insight. Instead, in this holiday-shortened week, investors are expressing their concern over increased geopolitical tensions following last week’s US missile attack on a Syrian airbase. On top of that, there are worries that the Federal Reserve is adding balance sheet reduction into the monetary tightening mix at a time of uncertainty over the strength of the US economy. Topping all this off are fears that the Trump administration’s agenda is unravelling with little evidence that tax cuts or infrastructure spending will be agreed by Congress anytime this year. Investors are hoping for better news on the earnings front with reports from Citigroup, JP Morgan and Wells Fargo due on Thursday.

Stock Index Update

Indices drift in directionless trade

French Presidential Election campaign officially kicks off

Yesterday saw a very quiet, low volume day for global stock indices. The major European indices ended yesterday’s session mostly lower. This was a modest turnaround from the start of the day when investors marked up equities into the open. Initially, there was some relief at a lack of negative news over the weekend. This followed a fraught week where we saw a US missile attack on Syria, a meeting between President Trump and his Chinese counterpart Xi Jinping, hawkish minutes from the Federal Reserve’s March meeting and a dismal set of US Non- Farm Payroll numbers. There was a stronger start on Wall Street, but it wasn’t long before equities fell back from their best levels leaving the major US indices effectively unchanged on the day.

Yesterday campaigning in the French presidential election officially began. The first round of voting takes place on 23rd April. Then the two candidates with the highest number of votes go through to the final round on 7th May. There are concerns across the Euro zone about the possibility of a win by far-right candidate Marine Le Pen. She wants France to give up the euro and ultimately leave the EU.

At the end of last week US Non-Farm Payrolls showed an increase of just 98,000 jobs in March. This was well below the 175,000 consensus forecast. Yet so far investors appear relatively unconcerned as they continue to shrug off negative market news.

Commodities Update

Crude builds on last week’s gains

Precious metals recover after sharp sell-off

Crude oil spent most of yesterday’s session building on gains made last week. Crude spiked higher on Thursday following news that the US had launched a missile attack on a Syrian airbase. The decision to attack the airbase has angered Russia and Iran, two main supporters of the Assad regime. It has also led to speculation that the US could become embroiled in yet another Middle Eastern war, only this time where the involvement of Russia in particular means there is a danger that hostilities could escalate dangerously.  Prices pulled back a touch on Friday but overall the worsening geopolitical situation has only helped to keep a rally going which began a fortnight ago. There was further support for crude on the news of a shutdown at Libya’s Sharara oil field. Now attention turns to US inventories. The American Petroleum Institute will publish its latest update after tonight’s close and the Energy Information Administration reports tomorrow.

Gold spent most of yesterday in negative territory.  The sell-off followed on from weakness on Friday night. Early on Friday gold hit a five month high while silver poked back above resistance around $18.40 - a level last tested just over a month ago. Both metals got a lift following news of a US missile strike on a Syrian airbase. But prices fell sharply early Friday evening during a speech from New York Federal Reserve President Bill Dudley who sought to clarify comments he made the previous week. Mr Dudley had suggested that winding down the balance sheet could result in a “little pause” when it came to the central bank raising its fed funds rate. This led the markets to believe that the balance sheet reduction could, after a fashion, replace rate hikes. This suggested a less aggressive pace of monetary tightening. But on Friday the New York Fed President pointed out that this wasn’t what he meant, and that reducing the balance sheet wouldn’t significantly disrupt the Fed’s rate hike programme. This was viewed as a hawkish clarification, and while there was little reaction in equity markets, the dollar soared along with bond yields. Precious metals slumped, with the biggest percentage fall being registered in silver which remains well below $18 per ounce.

Forex Update

Dollar drifts after last week’s rally

Dudley clarifies comments on “slight pause” in rate hikes

The dollar drifted lower yesterday giving back some of the gains made late on Friday. At the end of last week the greenback was mildly firmer during the European session. However, it suddenly spiked higher following a speech from New York Federal Reserve President and vice-chair of the FOMC Bill Dudley. Mr Dudley clarified a phrase that he’d used in a speech the prior week concerning a pause in Fed rate hikes should the US central bank look to reduce its balance sheet. This clarification made it clear that the Fed would not completely halt rate hikes while it wound down its bond holdings. This led to a jump in US Treasury yields and a rally in the dollar as Mr Dudley’s comments were viewed as hawkish.

The dollar has rallied steadily since the end of March. This was when the Dollar Index broke below 99.00 to hit its lowest level since early November, straight after Donald Trump clinched his surprise victory in the US presidential election. It is now testing resistance around the 23.6% Fibonacci Retracement of the May 2017 to Jan 2017 rally. The divergent interest rate policies between the US Federal Reserve (which is looking to continue to tighten monetary policy) and the rest of the developed world central banks (who need to keep conditions loose) would seem to favour the dollar. However, traders will be wary of taking on much more exposure in case we see some profit-taking around current levels. At the same time, the euro could come under pressure should Marine Le Pen - the far-right candidate in the French presidential election - continue to do well in opinion polls.

Upcoming events

Today’s significant economic data releases and events include UK inflation data - CPI and RPI, German ZEW Economic Sentiment, Euro zone ZEW Economic Sentiment and Euro zone Industrial Production. From the US we have JOLTS Job Openings.


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Posted by David Morrison

Category: AM Bulletin

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