Incisive market commentary from David Morrison

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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

Macron clinches French presidency

US payrolls mixed, but good enough

There’s been widespread relief that Emmanuel Macron clinched the French presidency in yesterday’s vote. However, that has failed to translate into a big risk-on move across Europe, or anywhere else for that matter. Few investors were really worried about the outcome, so it wasn’t as if the danger of a Le Pen win had been priced in to any appreciable degree. That could be viewed as foolhardy as a Le Pen win would have led to a catastrophic “risk-off” move across all financial assets. Instead, investors appear to be taking their cue from Wall Street. Friday saw the NASDAQ and S&P500 end the session at fresh record highs, with the Dow Jones lagging slightly. Friday’s US employment data was mixed, but decent enough to persuade investors that the economy continues to improve. This, in turn, suggests the Fed will proceed with a rate hike next month, as expected. 

The first quarter earnings season is winding down now and most analysts consider it a success. The question now is whether equity markets can push on from current elevated levels without the support of corporate earnings. Now focus turns back to economic data, geopolitics and the success or otherwise of the Trump administration in pushing plans for fiscal stimulus through Congress.

Stock Index Update

European indices slip despite Macron win

Payrolls mixed, but S&P hits fresh record

It’s a measure of the big poll lead that Emmanuel Macron had going into Sunday’s election that has seen global stock indices little-changed following the result. All the major European index futures were sharply higher over the Asian Pacific session, but pulled back ahead of this morning’s open.

European and US stock indices rallied modestly following Friday’s US Non-Farm Payroll update. April Payrolls rose by 211,000 comfortably above the 194,000 expected. However, it’s worth noting that March’s dismal reading of 98,000 was revised down to 79,000. Despite this, there was widespread relief that the number wasn’t worse. After all, another sub-100,000 reading would have flown in the face of the Federal Reserve’s insistence that recent weak data is “transitory”. The payroll number should keep the Fed on course to raise rates by 25 basis points at its meeting next month.

Crude oil bounced back sharply. But as equities managed to hold up during the recent sell-off, they were also relatively unaffected by the recovery. Nevertheless, both the NASDAQ and S&P managed to close out last week at fresh record highs.

Commodities Update

Crude bounces on cut extension rumours

Precious metals steady but vulnerable

Crude was a touch firmer first thing on Monday. The move came after 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. However, traders have heard all this before so are cautious about taking on too much exposure, despite the plunge in prices over the past three weeks.

Crude prices rallied sharply on Friday, but still failed to make back the losses made on Thursday, let alone make a dent in the sell-off since mid-April. The near-collapse in crude has done immense damage technically and although there is some widespread relief that there was some recovery at the end of last week, there are concerns that prices could fall further.

What’s been interesting about last week’s slump in crude is that it has been largely ignored by equities. Investors focused on corporate earnings, the near-inevitability of a Macron win in the French presidential election and a dialling down in geopolitical risk rather than the obviously negative effects the sell-off in crude is having on the energy sector. However, we’ll see if this continues to be the case now that we’re near the end of the earnings season and the French election has been decided.

Gold and silver are steadier this morning following last week’s slump. Prices in both precious metals have dived since the beginning of May adding to the losses which have accumulated since mid-April. Back then gold and silver were trading at their highest levels since early November, just after Trump’s surprise victory in the US presidential election. The two precious metals got a lift after the dollar pulled back from the 14-year highs it hit against the euro at the beginning of the year, together with safe-haven demand on rising geopolitical tensions. Since then, those tensions have taken a back seat while precious metals traders have effectively ignored movements in the dollar. This week could be crucial in signalling where gold and silver go next. If they are unable to hang on to current levels then we can expect gold to retest $1,200 and silver to head below $16.

Forex Update

Euro gives back overnight gains

Dollar pricing in Fed rate hike next month

The euro popped higher overnight following confirmation of Emmanuel Macron’s French presidential election victory. However, gains were short-lived as the result was widely priced in. Instead, the dollar is back in the driving seat as investors position themselves for a Fed rate hike in June.

There was an early risk-off move on Friday which saw losses for the euro and gains for the Japanese yen.  Investors tempered their exposure ahead of yesterday’s French presidential election and on the back of last week’s slump in crude oil. But the euro subsequently popped higher, or rather the dollar fell, following the latest US Non-Farm Payroll release. The headline number was better-than-expected while the Unemployment Rate fell to 4.4% - a 10-year low. However, March’s dismal number was revised down to 79,000 from 98,000 and the participation rate slipped. Nevertheless, the data won’t defect the Fed from its intention to raise rates again at next month’s meeting. 

Upcoming events

Today’s significant events and economic data releases include German Factory Orders, Euro zone Sentix Investor Confidence and US Labour Market Conditions index. It’s a Bank Holiday in France.


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Posted by David Morrison

Category: AM Bulletin

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