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

European indices rally after quiet open

Crude steadies, but below crucial levels

European stock indices were little-changed first thing following on from a quiet session on Wall Street last night. Despite this, both the S&P500 and NASDAQ eked out fresh record closes. This means there’s still some upside momentum, even if it has flagged recently. This became evident soon after the open as investors moved in to buy European equities. Stocks in the energy sector led the advance as crude oil is steadier this morning. Both WTI and Brent are managing to hold on to gains made at the end of last week although both contracts appear vulnerable at current levels. Brent and WTI really need to break back above $50 and $47 respectively. These are support levels that were breached last Thursday which could now act as resistance. While there’s been renewed talk that OPEC and other producers may extend their output cut agreement beyond June, rising US production remains a damper for oil prices. We’ll get an update on US inventories after tonight’s close.

Stock Index Update

European indices pick up after slow start

S&P500 posts fresh record

It was a slow start this morning as far as the major European stock indices were concerned with most opening little-changed. However, it wasn’t long before investors started buying up equities and pushing the indices higher. US indices continue to build on recent gains, even if the upside momentum has flagged somewhat. But it could be that investors are now looking to Europe to provide better value.

Last night saw the US majors edge into positive territory, with the S&P500 and NASDAQ both posting fresh record closes. European stock index futures were all sharply higher first thing yesterday, following confirmation that the pro-European moderate Emmanuel Macron had won the French presidency. However, all the majors gave back early gains to close modestly lower on the day. The only exception was the UK’s FTSE100 which doesn’t really count as a European index. There was a sense of an anti-climax about the result which was widely predicted. But most analysts agreed that a win for Le Pen would have been catastrophic for equities and the euro.

Commodities Update

Crude consolidates at lower levels

Precious metals struggle to find support

Crude oil was steadier for most of yesterday, at least when compared to the volatile sessions seen last week. But despite this, both WTI and Brent repeatedly failed to hold on to any gains, slipping back into negative territory after any rally. In what sounded like desperation, given the plunge in the price of crude over the last three weeks, Saudi Arabia's energy minister Khalid Al-Falih raised hopes that the output cuts agreed by OPEC members and other major producers looked likely to be extended beyond June. He told the 19th Asia O&G Conference that: "The producer coalition is determined to do whatever it takes in bringing stock level to five years average." He went on to say that he was confident that the OPEC/non-OPEC agreement would be extended beyond the June cut-off date, hinting that this could run beyond 2017. But the trouble is that US output continues to be more than a match for cuts from other producers.

Gold and silver were steadier in early trade yesterday morning. Both metals appeared to be on the verge of a recovery following last week’s slump. However, it looks as if it is still too early to expect a bullish fight-back as gold and silver pulled back from early highs mid-afternoon. On Sunday night gold hit its lowest levels in three weeks. Yet technically it looks as if it could have further to fall as the first level of support comes in at $1,220 with a break below here opening up the possibility of a move to $1,200. As far as silver is concerned, yesterday saw the metal trade around $16.35 - the 76.4% Fibonacci Retracement of the December 2016-April 2017 rally. Below here the next level of support comes in around $15.62 - the multi-month low point set at the end of last year. Both metals are out of favour as geopolitical risk has subsided and as investors anticipate tightening in monetary policy from both the Fed and ECB this year.

Forex Update

Euro slips after yesterday’s early rally

EURUSD briefly tops 1.1000

Yesterday brought a mixed reaction in FX to the French election result. The euro popped higher following confirmation of Emmanuel Macron’s French presidential election victory. This saw the EURUSD trade above 1.1000 for the first time since November last year. This was when the dollar first slumped then roared following Trump’s surprise victory in the US Presidential election. However, yesterday the euro was unable to build on these early gains and soon gave back all its early gains.

So France can breathe a sigh of relief that it now has a moderate pro-European in charge who is acceptable to other world leaders. Certainly, a Macron victory was completely priced in. So the real carnage would have occurred on a turnover by Le Pen. But the problem now is that France has parliamentary elections next month and Macron doesn’t have much of a party. He campaigned on pledges to reform France's labour market, sort out the country's pension plans and reduce the budget deficit. But he’ll need to get busy building some coalition partners to have any hope of following through on his promises.

Upcoming events

Today’s significant events and economic data releases include German Industrial Production, German Trade Balance and Italian Retail Sales. From the US we have JOLTS Job Openings, Mortgage Delinquencies, Wholesale Inventories and a speech from FOMC-voting member Robert Kaplan.


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Posted by David Morrison

Category: AM Bulletin

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