Incisive market commentary from David Morrison

Stay ahead with our market commentary and webinars from our in house market strategist

Open a Live AccountOpen a Demo Account
+ Show blog menu



Collapse 2017 <span class='blogcount'>(348)</span>2017 (348)
Expand November <span class='blogcount'>(26)</span>November (26)
Expand October <span class='blogcount'>(24)</span>October (24)
Expand September <span class='blogcount'>(33)</span>September (33)
Expand August <span class='blogcount'>(26)</span>August (26)
Expand July <span class='blogcount'>(32)</span>July (32)
Expand June <span class='blogcount'>(28)</span>June (28)
Expand May <span class='blogcount'>(35)</span>May (35)
Collapse April <span class='blogcount'>(31)</span>April (31)
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
Expand March <span class='blogcount'>(38)</span>March (38)
Expand February <span class='blogcount'>(36)</span>February (36)
Expand January <span class='blogcount'>(39)</span>January (39)
Expand 2016 <span class='blogcount'>(483)</span>2016 (483)


There’s been a sharp upward move in European and US stock indices following Sunday’s first round vote in the French presidential election. Initially this appeared to be the unwinding of certain hedges together with an unleashing of “animal spirits”. These had been supressed by concerns that the two Eurosceptic candidates, Marine Le Pen and Jean-Luc Melenchon, could face each other in the deciding head-to-head vote on 7th May. That didn’t happen, so even though Marine Le Pen is still in with a chance of clinching the presidency, markets are reacting positively to the fact that she now faces a far more pro-business and Europhile candidate in Emmanuel Macron than Melenchon would have proved to be. Not only that, but Macron has a substantial lead over her in the polls. Yet investor reaction has propelled France’s CAC40 to levels last seen in early 2008, just as the financial crisis was beginning to hit. So it’s not as if French stocks are just making back ground lost prior to the vote, which was minimal anyway.  Also, while there were some concerns about a Le Pen/Melenchon face-off in the final round, this was far from being the expected outcome. In fact, just about every poll had Macron in the lead with Le Pen a close second which was precisely the outcome.

If we look at US indices, yesterday the NASDAQ100 closed out at afresh record all-time high and soon after today’s open the NASDAQ Composite broke above 6,000 for the first time ever. Meanwhile, both the Dow and the S&P500 are less than 0.5% away from their respective all-time record highs hit at the beginning of March. Bear in mind that this was when President Trump addressed Congress for the first time, giving what was widely considered to be an uplifting, conciliatory, unifying and bullish speech. Yet since then we’ve seen a sharp deterioration in international relations triggered in part by the US missile attack on a Syrian airbase. Not only did this escalate tensions across the Middle East and with Assad-backing Russia, but it also brought relations with North Korea and China into sharp relief. Meanwhile we’ve had another rate hike from the Federal Reserve, while the probability of another 25 basis point increase in June has just spiked up to 60%. Yet just three weeks ago US equities slumped following the release of minutes from the Fed’s March meeting. A number of Fed members expressed the view that equities looked expensive by some valuation measures. But perhaps more crucially, the US central bank indicated it was prepared to start winding down its $4.5 trillion balance sheet before the year-end. All this comes as there’s evidence from both the hard and soft data that US economic growth may be slowing down. That certainly seems to be the message from the US Treasury market where yields on the 10-year dropped below 2.20% this time last week after topping 2.60% straight after the Fed’s rate hike in mid-March. While yields shot higher yesterday, they are currently holding around the crucial 2.30% level. We’ll know more after we see the Advance first quarter GDP number this Friday.

Yet the earnings season has picked up a gear this week and there have been a number of upside surprises. Just today we’ve had significant earnings and revenue beats from Caterpillar, DuPont, 3M and McDonald’s and these have gone a long way from offsetting some disappointing number (notably from Goldman Sachs) last week.

Meanwhile, the Trump administration approaches its first 100 days and has just slapped tariffs on Canadian lumber. On top of this President Trump is still looking to reform healthcare and push tax cuts through Congress, with updates due this week. Meanwhile, in an unusual move Trump has summoned the entire Senate to a White House meeting on North Korea tomorrow afternoon. The president has made it clear that he finds the current situation vis-à-vis North Korea “unacceptable”. But in the meantime investors are making hay while the sun shines.


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

Category: PM Bulletin

Add a comment Add comment            


© 2018 Spread Co Limited. All Rights Reserved.

Spread Co Limited is a limited liability company registered in England and Wales with its registered office at 22 Bruton Street, London W1J 6QE. Company No. 05614477. Spread Co Limited is authorised and regulated by the Financial Conduct Authority. Register No. 446677.

Spread betting and CFD trading are leveraged products and can result in losses that exceed your deposits. Ensure you understand the risks.

Losses can exceed deposits. Click here to learn more.