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)
Expand April <span class='blogcount'>(31)</span>April (31)
Expand March <span class='blogcount'>(38)</span>March (38)
Collapse February <span class='blogcount'>(36)</span>February (36)
Market awaits Trump, and Fed reaction
28 Feb 2017
Markets on hold ahead of Trump speech to Congress - AM Briefing
28 Feb 2017
Fibonacci Retracement - an introduction - Trading Guides
27 Feb 2017
Investors shrug off concerns ahead of Trump speech - AM Briefing
27 Feb 2017
Equities drifting lower ahead of weekend - AM Briefing
24 Feb 2017
Dollar sells off after FOMC minutes - Video Update
23 Feb 2017
FOMC minutes send dollar lower - AM Briefing
23 Feb 2017
Crude oil pushes up against resistance - Video Update
22 Feb 2017
FOMC minutes in focus - AM Briefing
22 Feb 2017
Gold pulls back from resistance - PM Bulletin
21 Feb 2017
US traders return after market holiday - AM Briefing
21 Feb 2017
Identifying market tops, or the trend is your friend - until it isn’t
20 Feb 2017
Kraft Heinz pulls Unilever bid - AM Briefing
20 Feb 2017
Major indices drifting lower as weekend approaches - AM Briefing
17 Feb 2017
US Indices hit fresh record highs
16 Feb 2017
Trump tax promise continues to drive risk appetite - AM Bulletin
16 Feb 2017
Yellen testifies in Washington
15 Feb 2017
Yellen testimony helps lift sentiment - AM Bulletin
15 Feb 2017
Silver hovers around resistance at $18
14 Feb 2017
Focus turns to Yellen’s testimony in Washington
14 Feb 2017
An introduction to the Relative Strength Index - Trading Guides
13 Feb 2017
Equity rally continues - AM Briefing
13 Feb 2017
Trump tax talk boosts risk appetite - AM Briefing
10 Feb 2017
US dollar drivers - Video Update
09 Feb 2017
Recovery in crude lifts equities AM Briefing
09 Feb 2017
Crude volatility picking up - Video Update
08 Feb 2017
Crude lower as inventories soar - AM Briefing
08 Feb 2017
Politics set to drive FX - PM Bulletin
07 Feb 2017
Major indices drift in featureless trade - AM Briefing
07 Feb 2017
MACD - an overview -Trading Guide
06 Feb 2017
European equities drift in quiet trade - AM Briefing
06 Feb 2017
Non-Farm Payrolls in focus - AM Briefing
03 Feb 2017
Non-Farm Payroll look-ahead - Video Update
02 Feb 2017
BoE meeting in focus - AM Briefing
02 Feb 2017
FOMC meeting tonight - Video Update
01 Feb 2017
Markets steady ahead of Fed meeting - AM Briefing
01 Feb 2017
Expand January <span class='blogcount'>(39)</span>January (39)
Expand 2016 <span class='blogcount'>(483)</span>2016 (483)


European indices slip back from best levels

Concerns grow over affordability of Trump’s promises

European stock index futures were firmer open in pre-market trade this morning. However, all the major indices pulled back from their best levels soon after the open. The moves follow on from yet another positive close across Wall Street last night which saw the Dow record its 12th consecutive record close. Yet despite this there’s an air of caution around equities and other financial markets as investors prepare themselves for President Trump’s speech to both houses in Congress later this evening. Technically this is not a State of the Union address as by tradition these aren’t given by first-year presidents. But it is viewed as crucially important and is expected to focus on Trump’s plans for tax reform, cuts in regulations, health care, border security and labour issues. White House spokesman Sean Spicer said that the theme would be “the renewal of the American spirit.”

Yesterday the president announced an increase of $54 billion in defence spending to be offset by cuts to federal agencies and other non-defence sectors of government. President Trump said it would not “add a dime to the deficit.” This news helped to boost risk assets as investors viewed the promise as yet another indication that Trump’s pro-America, business-friendly rhetoric would lead to a dynamic upward shift in the US economy as the new administration aims for GDP growth above 3% per annum. The trouble is that there are many who say that the promises are undeliverable without a huge increase in the national debt and without Congress agreeing to raise the debt ceiling when it meets next month.

Stock Index Update

Another record close for the Dow

LSE/Deutsche Boerse merger in jeopardy

The major US indices managed to eke out modest gains last night and the Dow recorded its 12th consecutive record close. Yet despite this there was an air of caution around equities and other financial markets as investors prepare themselves for President Trump’s speech to both houses in Congress later this evening.

European equity markets were firmer in early trade yesterday. Investors appeared to shrug off many of the concerns which overhung the markets at the end of last week. These included a mixed end to the fourth quarter earnings season and caution ahead of President Trump’s address to both houses in Congress which takes place later today. Even investors in the UK’s FTSE100 seemed unfazed by news over the weekend that the €29B merger of the London Stock Exchange (LSE) and Deutsche Boerse may not go ahead. The LSE said it was unable to execute all the antitrust demands made by European regulators so there was little chance of getting approval by the European Commission.

European equity markets gave back early gains around lunchtime. But they subsequently picked up again as the US major indices shrugged off initial losses. Investors increased their risk exposure after President Trump said that defence spending was set to increase by $54 billion.

In other news Jens Spahn, Germany's deputy finance minister, said Greece must not be granted a "bail-in" that would involve creditors taking a loss on their loans. In this he emphasised the German government's opposition to debt relief arguing that if Greece was given this help then this opened up the door for other troubled Euro zone countries to demand the same latitude when it came to debt negotiations.   

Commodities Update

WTI breaks above $54

Precious metals rally as USD slips

Crude oil bounced in early trade on Monday after being knocked back from its best levels by a burst of profit taking at the end of last week. Yesterday’s recovery saw WTI push back above resistance arounds $54 while Brent briefly broke its own resistance around $57. On Friday the US Commodity Futures Trading Commission (CFTC) said that money managers had increased their bullish positioning on crude futures and options to record levels for the week ending 21st February. This has led some traders to speculate that there can’t be much more upside in oil as there’s now likely to be a shortage of potential buyers out there. While that’s certainly true, it is also the case that markets can remain overbought (or oversold) for a considerable period of time. The real danger comes when unexpected news leads to investors wanting to cut back their exposure. This can lead to an avalanche of selling (or buying) which can lead to dramatic prices moves - and painful losses for traders unable to get out in time.

Gold and silver drifted lower in early trade yesterday. However, both metals managed to find some support as the session wore on and were back in positive territory by the European close. Traders kept a close eye on the US dollar which pulled back from highs made early in the session.

Investors are wary ahead of Donald Trump’s speech before Congress later today. There’s a feeling that if the president announces a large package of fiscal stimulus then this could see the dollar rally and a corresponding sell-off in precious metals. Fiscal stimulus should prove inflationary and should help the Trump administration achieve its 3% growth target. But it is also likely to lead to tighter monetary policy from the US Federal Reserve. This should all help to push the dollar higher and keep further downside pressure on gold and silver.

Last week brought the release of minutes from the last Fed meeting. FOMC members seemed in favour of further monetary tightening, but were also concerned about continued uncertainty surrounding the fiscal outlook. This led credence to fears that Trump may fail to deliver on his big promises of tax reform and infrastructure spending. Last week his Treasury Secretary Steven Mnuchin suggested that the administration’s reforms could take time to implement. This appeared to be preparing investors for possible disappointment.

Forex Update

Sterling slips on fears of second Scottish referendum

Dollar drifts ahead of Trump speech

Sterling fell sharply in early trade yesterday. This followed talk that Scotland’s First Minister Nicola Sturgeon may call for another referendum on Scottish independence once the UK government triggers Article 50 next month. Back in September 2014 Scotland voted to remain part of the UK by 55% to 45% - a substantial margin. However, Ms Sturgeon has been agitating for a second referendum on the basis that a significant majority of Scottish voters favour remaining part of the European Union. Previously Ms Sturgeon had indicated that the polls would need to show a big swing in favour of Scottish independence before she insisted on a fresh referendum. That’s not currently evident. The big question is whether UK Prime Minister Theresa May decides to call Sturgeon’s bluff or not. The referendum remains a big risk for both politicians: Ms Sturgeon as another “no” vote in Scotland would close down the argument for at least a generation. Mrs May because she risks being responsible for breaking up the United Kingdom. Cable briefly broke below 1.2400 to hit its lowest level in a fortnight.

In other FX news, the US dollar drifted lower after a quiet morning. Once again, this would suggest that investors really don’t believe that the Fed is preparing to raise rates at next month’s FOMC meeting. In addition, it appears there’s some nervousness ahead of Donald Trump’s speech to Congress later today. Investors began to worry that the president may prove to be economic with details over his much-anticipated tax reforms and plans for infrastructure spending.

Upcoming events

Today’s significant economic data releases and events include French CPI and GDP. From the US we have the first revision to 2016’s fourth quarter GDP, Wholesale Inventories, the S&P/Case Shiller House Price Index, Chicago PMI, Consumer Confidence and Richmond Manufacturing Index.


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: AM 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.