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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 Friday 28 April 2017

GDP data in focus - AM Briefing



Early moves

FTSE weighed down by sterling, Barclays

US and UK GDP data in focus

It’s been a mixed start for European stock indices this morning with modest gains for the French CAC and Italian MIB, and small losses for the German DAX and Spanish IBEX. The FTSE100 is the biggest loser so far this morning, with the index weighed down by disappointing results from Barclays and further strength in sterling. Cable is currently trading at its highest level since October last year.

As far as the US is concerned, futures on the NASDAQ 100 are trading at a fresh all-time high this morning. Amazon and Alphabet (formerly Google) reported better-than-expected earnings after last night’s close. The Dow and S&P500 are lagging the NASDAQ, held back by disappointing earnings from Microsoft and Intel, together with ongoing weakness in crude oil.

Traders are now looking ahead to today’s first quarter GDP releases from the UK and US. As far as the US is concerned, analysts are looking for an annualised quarter-on-quarter gain of 1.3%. However, the latest “guesstimate” from the Atlanta Federal Reserve suggests today’s number could be as low as +0.2%.

Stock Index Update

ECB stays dovish

Tech earnings boost NASDAQ

European stock indices ended lower yesterday despite the European Central Bank (ECB) maintaining its accommodative monetary policy. ECB President Mario Draghi said that growth was picking up across the Euro zone and downside risks had diminished. However, he also made it clear that the Governing Council couldn’t be sure that inflation was on a sustainable trajectory to its 2% target. Consequently, the central bank would maintain its €60 billion per month bond purchase programme until the end of this year. Additionally, they stood ready to extend or increase the bond buying should conditions deteriorate. On the earnings front Deutsche Bank ended the day down 3.6% after the troubled lender reported revenue of €7.3 billion on expectations of €8.05 billion.

The NASDAQ 100 and Composite indices both soared to fresh record intra-day highs yesterday, and both are firmer in futures trade this morning. The moves were driven by strong gains in tech companies such as Amazon, Comcast and PayPal. This was due to a number of  strong earnings reports, particularly from Amazon and Alphabet (Google), although Microsoft and Intel disappointed.

Dow and S&P500 both drifted lower for most of yesterday. Investors appeared unwilling to push the indices higher following Wednesday’s failure to take out their record highs from early March. Energy companies weighed on both indices following a sharp fall in crude oil. On top of that Durable Goods were a disappointment. Core Durable Goods (excluding transportation items) fell 0.2% in March on expectations of a 0.4% rise. Headline Durable Goods rose just 0.7% on expectations of a 1.5% increase.

Commodities Update

Crude recovers after sharp sell-off

Precious metals remain weak

Crude fell sharply midway through yesterday’s European session. The move saw WTI  break below $49, a level which has acted as mild support over the past few days and which marks the 23.6% Fibonacci Retracement of the sharp 15% sell-off between February and March this year. Analysts suggested that the market has run out of patience with OPEC and other oil producers as they shilly-shally over the prospect of extending their output cut agreement beyond June. In addition, traders have taken a second look at Wednesday’s US inventory data from the Energy Information Administration’s (EIA). There was a bigger-than-expected drawdown in crude stockpiles which sparked a rally. However, this was offset by a large increase in gasoline and distillate inventories, together with the 10th consecutive week of US production growth. Crude bounced back strongly later in the session as buyers flooded in on rumours that a production cut extension is now close to being agreed.

Precious metals continue to come under selling pressure. Yesterday gold gave back all its gains from Wednesday and tested support around $1,260. This is a level that acted as resistance in February and March this year. A break below here opens up the prospect of a move to $1,250 which marks the 50% retracement of the July-December 2016 sell-off. But silver is having the worst of it currently. The metal has lost over 7% in the last ten days in a seemingly relentless sell-off as traders continue to dump safe-haven assets. This is despite the Dollar Index losing 1% over the same period. Silver is closing in on mild support around $17.20. But a break below here opens up the possibility of a move to $16.80 or so. Both metals are firmer in early trade this morning with silver’s bounce particularly pronounced after coming within two cents of $17.20.

Forex Update

ECB keeps policy accommodative

Dovish press conference sees euro fall

The ECB left interest rates unchanged after its meeting yesterday. This meant that its headline minimum bid rate remains at zero which is where it has been since this time last year. In addition its Discount Rate remains at -0.4%.  This is what the central bank charges financial institutions for leaving deposits with it. The ECB will continue with its €60 billion per month bond purchase programme. This is set to run until the end of this year. However, the Governing Council said it was prepared to extend the programme or increase its scope should there be a downturn in financial conditions. In his press conference ECB President Mario Draghi said that the recovery across the Euro zone was looking increasingly solid and that the downside risks had diminished. However, the Governing Council couldn’t be sure that inflation was on a sustainable trajectory to its 2% target. Mr Draghi said that headline CPI (including food and energy) was set to tick up this month from March’s rate of +1.5% annualised. However, it was likely to stagnate around this level for the rest of the year. This suggested that monetary accommodation should remain in place throughout 2017 and this led to a sell-off in the euro.

Upcoming events

Today’s significant economic data releases and events include a speech from Swiss National Bank Chairman Thomas Jordan, the Swiss KOF Economic Barometer, Spanish Flash GDP, Euro zone Money Supply and Euro zone CPI. From the UK we have Preliminary GDP and Mortgage Approvals. From the US we have Advance GDP, Chicago PMI, Consumer Sentiment, Inflation Expectations and a speech from Federal Reserve Governor and FOMC-voting member Lael Brainard.


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Posted by David Morrison

Category: AM Bulletin

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