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Weekly Bulletin: Equity rally continues
29 Feb 2016
PM Bulletin: Chart for the EURUSD
29 Feb 2016
AM Bulletin: Auction postponement linked to risk rally
26 Feb 2016
PM Bulletin: FOMC members add to confusion over monetary policy
26 Feb 2016
AM Bulletin: US stock indices rebound
25 Feb 2016
PM Bulletin: Lloyds Banking Group
25 Feb 2016
AM Bulletin: Stocks slip on lower crude
24 Feb 2016
PM Bulletin: Gold
24 Feb 2016
PM Bulletin: Crude oil, yen and equities
23 Feb 2016
AM Bulletin: Equities slip after strong start to week
23 Feb 2016
Sterling dumps on Brexit fears
22 Feb 2016
AM Bulletin: Stronger start for global equities
22 Feb 2016
AM Bulletin: Netflix leads Nasdaq lower
19 Feb 2016
PM Bulletin: FTSE revisited
18 Feb 2016
AM Bulletin: Oil still leading equities
18 Feb 2016
PM Bulletin: The yen, Nikkei and negative interest rates
17 Feb 2016
AM Bulletin: Oil and FOMC minutes in focus
17 Feb 2016
PM Bulletin: WTI and Brent
16 Feb 2016
AM Bulletin: Equities, USD, oil rally while precious metals slide
16 Feb 2016
Weekly Bulletin: Yellen keeps us guessing
15 Feb 2016
PM Bulletin: A multi-year look at the FTSE100
15 Feb 2016
PM Bulletin: Andrews’ Pitchfork on S&P500
12 Feb 2016
AM Bulletin: Equities remain vulnerable to further selling
12 Feb 2016
PM Bulletin: EURUSD – what now?
11 Feb 2016
AM Bulletin: Yellen fails to calm nerves
11 Feb 2016
PM Bulletin: Yellen steers through Clashing Rocks
10 Feb 2016
AM Bulletin: Yellen testimony in focus
10 Feb 2016
PM Bulletin: Japanese sell-off spooks investors
09 Feb 2016
AM Bulletin: Investors nervous as crude flirts with $30
09 Feb 2016
PM Bulletin: Big “risk-off” moves to start the week
08 Feb 2016
Weekly Bulletin: Investor jitters raises volatility
08 Feb 2016
February: Non Farm Payrolls Out Today
05 Feb 2016
PM Bulletin: Big miss for Non-Farm Payrolls
05 Feb 2016
AM Bulletin: Non-Farm Friday
05 Feb 2016
PM Bulletin: Non-Farm Payroll look-ahead
04 Feb 2016
AM Bulletin: Dollar slumps; oil spikes
04 Feb 2016
PM Bulletin: Tomorrow’s MPC press conference in focus
03 Feb 2016
AM Bulletin: Weaker crude weighs on equities
03 Feb 2016
PM Bulletin: A look at the EURUSD
02 Feb 2016
AM Bulletin: Google can’t lift indices
02 Feb 2016
PM Bulletin: Charts for USDJPY
01 Feb 2016
Weekly Bulletin: Central banks respond to sell-off
01 Feb 2016
Expand January <span class='blogcount'>(39)</span>January (39)
 
 
 

 

Indices Update

There’s a weaker tone to equity markets this morning. Asian Pacific indices were weaker overnight and oil is lower in early trade.

Global stock indices put in a strong performance yesterday and had a solid start to the week. The gains were broad-based with the rally beginning in Asian Pacific markets and spreading across Europe and into the US.

At the end of last week investors were surprised to hear downbeat comments from Federal Reserve Bank of St. Louis President James Bullard. Previously he had been keen on raising rates. However, on Thursday Mr Bullard said declining inflation expectations and falling asset prices suggested the Fed should hold off from further rate hikes. But his comments were countered the very next day when Cleveland Fed President Loretta Mester was broadly positive over the US outlook. She said that the economy was working through a "rough patch" and there would be gradual hikes this year.

This is the modus operandi of the Fed: keep the markets guessing with conflicting statements from its members. Of course, there’s no reason why individual members shouldn’t express different viewpoints. But it does mean that the next few weeks will be volatile as we digest a succession of views that switch between dovish or hawkish. What is of more interest is how the markets react. While an upbeat outlook for the US economy is all fine and dandy, it does suggest more rate hikes round the corner. And it doesn’t feel to me as if the market is ready yet for further Fed tightening.

The FTSE 100 index closed at 6,037.7 up 87.5 points on the day, or around 1.5%

The German DAX rose 185.5 points or 2.0% to finish at 9,573.6

The US30 closed up 228.7 points to finish at 16,620.1. The S&P 500 rose 27.7 to close at 1,945.5 while the Nasdaq 100 rose 1.6% to close at 4,231.3

Equities Update

It was another of those days when mining stocks dominated the FTSE100 leader board. Base metals such as copper, aluminium, iron ore, nickel and zinc all rallied despite strength in the US dollar. Nevertheless, the mining giants continue to have a fairly torrid time. This comes on the back of a collapse in energy and metals prices as the outlook for global growth (particularly in China) has been repeatedly dialled down. Meanwhile the US Federal Reserve has been gradually tightening monetary policy since the latter half of 2014 – first by winding down its monthly bond purchase programme and then through its December rate hike. Anglo American (AAL) topped the list of FTSE100 gainers closing 10.8% higher at 783.75 pence.

Commodities Update

Crude oil put in a strong performance yesterday and the move helped to boost investor risk appetite generally. The front month WTI contract was closing in on resistance around $34 per barrel, although it has pulled back from here this morning. Nevertheless, if WTI can break and hold above $34 then further gains look likely with $36 and $38 being the two next upside targets. As far as Brent is concerned, $36 is the main level of overhead resistance. If the two contracts fail to crack through their first respective resistance levels then a reversal looks probable. Both contracts have yet to pull away decisively from the $30 per barrel level.

The 35th annual IHS CERAWeek conference got underway in Houston Texas yesterday. The conference attracts all the leading players in and around the energy industry and traders will be keeping an ear out for any comments from the main participants. This is of particular interest given last week’s news that Iran backed the agreement between Saudi Arabia, Russia, Venezuela and Qatar to freeze production at January levels. This will do nothing to reverse the supply glut which overhangs the market. Nevertheless, news of the agreement and Iran’s comments saying that it was a useful first step in normalising the market was enough to lift prices. It just shows how vague statements of intent from a few well-placed sources can influence traders. That is why this week’s meeting is important and it is worth noting that Saudi Arabian Oil Minister Ali al-Naimi will speak later this afternoon.

Gold and silver were both sharply lower in early trade yesterday. The sell-off came as investors recovered their risk appetite and piled back in to oil and equities. Nevertheless, it was encouraging that gold held above $1,200 per ounce throughout the day. Silver took the brunt of the selling and spent much of the early European session below $15 per ounce. However, buyers crept back in later in the day and the two precious metals ended the US session with modest losses. Both have managed to build on that upside momentum this morning.

It is interesting that both precious metals continue to consolidate at these higher levels. It suggests that investors remain guarded over the state of the global economy and ready to diversify their holdings away from equities and into the ultimate safe haven of gold. Of course, this may not last. However, there are still plenty of worrying signs concerning the global economic outlook. In addition, we now have the best part of a month to wait until we’ve had rate meetings from the ECB, BoJ and US Federal Reserve. So we should expect this nervousness to continue.

Forex Update

The British pound was yesterday’s biggest mover. Sterling took a hit after UK Prime Minister David Cameron announced that a referendum on the UK’s membership of the European Union will be held on 23rd June. But it was the news that Brexit campaigners finally have a charismatic figurehead to rally around in the form of London Mayor Boris Johnson that really hit sterling hard. This has led many analysts increasing the likelihood of a referendum victory by the “leave” campaign. But overall, we can expect continued volatility in sterling right up until the result is known.

Sterling’s sell-off since last August is really down to a stream of disappointing UK economic data. No one expects a rate hike from the Bank of England ahead of this summer’s referendum. In fact, it would seem probable that the Bank may have to remain unusually accommodative should the UK vote to leave – just to calm things down.

As far as the GBPUSD is concerned, chart-wise we’re currently retesting the lows hit this time last month. Yesterday’s intra-day low marked the lowest point for cable since March 2009 – just as financial markets were making a tentative recovery thanks to unprecedented fiscal and monetary stimulus measures. Although it bounced off 1.4060 yesterday, cable is weaker again today.

Meanwhile, the Japanese yen continues to strengthen. The USDJPY is sharply lower this morning and looks as if it is back on its way towards 110.00. However, it would be surprising if the Bank of Japan didn’t attempt some verbal intervention to push their currency back down. Whether this will be successful or not is another matter.

Upcoming events

Today’s significant data releases include German Ifo Business Climate survey, the UK Inflation Report Hearings and a speech from Swiss National Bank Chairman Thomas Jordan. From the US we have Consumer Confidence, Existing Home Sales and the Richmond Manufacturing Index. Saudi Arabian Oil Minister Ali al-Naimi is also scheduled to speak later this afternoon.

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

Tagged: AM Bulletin

Category: AM Bulletin


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