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)
Collapse July <span class='blogcount'>(32)</span>July (32)
Using the RSI in FX - Trading Guide
31 Jul 2017
HSBC share buy-back helps lift indices - AM Briefing
31 Jul 2017
Amazon triggers tech tumble - AM Briefing
28 Jul 2017
Fed reinforces dovish credentials - Video Update
27 Jul 2017
Facebook results boost NASDAQ - AM Briefing
27 Jul 2017
Crude breaks above resistance - PM Bulletin
26 Jul 2017
Equities rally on positive earnings - AM Briefing
26 Jul 2017
Look-ahead to tomorrow’s rate decision from the Fed
25 Jul 2017
Alphabet/Google falls 3% in after-hours trade
25 Jul 2017
Equities start the week on back-foot - AM Briefing
24 Jul 2017
Euro surges on “hawkish” comments from Draghi - AM Briefing
21 Jul 2017
Equities firmer ahead of ECB meeting - AM Briefing
20 Jul 2017
Europe firmer after late US rally - AM Briefing
19 Jul 2017
US Fed turns dovish - PM Bulletin
18 Jul 2017
Dollar slumps on US healthcare gridlock - AM Briefing
18 Jul 2017
Wall Street leads equity rally - AM Briefing
17 Jul 2017
US bank earnings in focus - AM Briefing
14 Jul 2017
Yellen flip-flops to reassure investors - AM Briefing
13 Jul 2017
Oil rallies, but volatility high - Video Update
12 Jul 2017
Yellen to testify in Washington - AM Briefing
12 Jul 2017
A look-ahead to Janet Yellen’s testimony - PM Bulletin
11 Jul 2017
Second quarter earnings in focus - AM Briefing
11 Jul 2017
Jobs data boost sentiment ahead of earnings - AM Briefing
10 Jul 2017
Investors nervous; Non-Farm Payrolls in focus - AM Briefing
07 Jul 2017
Non-Farm Payroll look-ahead - Video Update
06 Jul 2017
Investors shrug off FOMC minutes - AM Briefing
06 Jul 2017
Investors shrug off FOMC minutes - AM Briefing
06 Jul 2017
Look-ahead to FOMC minutes - Video Update
05 Jul 2017
Markets quiet and waiting for fresh guidance from US - AM Briefing
05 Jul 2017
Crude continues to push higher - PM Bulletin
04 Jul 2017
Dow closes at fresh record high - AM Briefing
04 Jul 2017
Positive start to second half of 2017 - AM Briefing
03 Jul 2017
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)
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)


Early moves

European equities mixed in early trade

Fed’s FOMC minutes released later this evening

It’s been a mixed start to early European trade with the major stock indices little-changed one hour after the open. Traders are picking up from where they left off yesterday afternoon as the US was closed for Independence Day so was unable to provide any leadership. However, there was some mildly positive news this morning as the EU approved the €5.4 billion state bailout of troubled Italian bank Monte dei Paschi. Under the deal the bank said it will eliminate its bad debt by 2018.

Later this evening we have the release of minutes from the Federal Reserve’s key FOMC meeting from June. This was when the US central bank raised rates by 25 basis points as expected. However, commentators were surprised by the hawkishness of the accompanying statement and Summary of Economic Projections. These indicated that the Fed was prepared to hike rates again and begin reducing its $4.5 trillion balance sheet before the end of this year. There are hopes that the minutes may provide some clues as to the Fed’s thinking on when balance sheet reduction could start. The current consensus view is that the US central bank will commence the process after the September meeting and then hike rates once more in December.

Stock Index Update

US holiday dampens activity

Index futures sell off in after official close

US markets were closed yesterday for 4th July celebrations. Nevertheless, there was some limited trade on US stock index futures and these registered modest gains for all the majors.

European stock indices were weaker first thing yesterday morning. Investors seemed unwilling to push equities higher following Monday’s sharp gains. No doubt this reluctance had something to do with US Independence Day which meant a reduction in liquidity and a lack of guidance from across the Atlantic. On top of this, there was a modest pull-back in crude early on which was the trigger for some mild profit-taking in the energy sector following last week’s rally. Miners were also under pressure, thanks to a sharp sell-off in copper and other base metals.

The European indices all bounced off their lows as the session progressed. Some of this was due to crude oil which made back early losses to trade in positive territory for most of the session. This meant that the major indices ended the day relatively little-changed.

Commodities Update

WTI breaks above $47

Gold and silver close to breaking support

Crude oil drifted lower in early trade yesterday and looked as if it was on course for its first negative session after eight consecutive positive closes. However, it soon managed to inch its way back into positive territory and spent most of the session trading in the black. However, many traders were away from their desks celebrating US 4th July. Consequently we’ll get a clearer picture over how oil is performing once volumes pick up later today.

Traders will be keeping an eye on the latest US inventory data from the American Petroleum Institute (API) which is due to be released after tonight’s close. Then we get a further update tomorrow afternoon from the Energy Information Administration. It’s worth bearing in mind that last week’s build in crude stockpiles was one of the sparks that helped to ignite the latest round of buying. This time round the forecast is for a crude drawdown of around 2.4 million barrels. Traders are also keeping a close eye on the $47 level for front-month WTI. If prices manage to hold above here over the rest of the week then we could see further gains.

Gold managed to steady yesterday following Monday’s precipitous decline. At the start of the week gold slumped below support around the $1,240 and posted its largest one-day drop since early May. Yesterday it held above the $1,220 level throughout the session but was dangerously close to taking out the low of $1,214 hit on 9th May. A break below here would open up the possibility of a retest of $1,200 - and below here there’s very little in the way of support until it hits $1,120 - the low from December 2016. Meanwhile, silver is already retesting the lows from 9th May and a break here means it’s a very short step back to the December 2016 low of $15.60. All-in-all, the two precious metals remain out of favour with investors whose risk appetite remains high. It feels as if it’s going to take much more than a North Korean missile test to get people interested in holding non-yielding safe havens such as gold and silver.

Forex Update

Dovish RBA sends Aussie dollar lower

US dollar and euro little-changed in quiet holiday session

It was a mixed session in FX yesterday with no clear overall trend. The EURUSD and Dollar Index were little-changed first thing suggesting that the US Independence Day holiday would mean an overall lack of liquidity and low trading volumes. But while this was undoubtedly true, there was some activity away from the world’s major currency pair. First off, the Australian dollar fell sharply following a rate decision from the Reserve Bank of Australia (RBA). Traders rushed to dump the Aussie after the RBA kept rates unchanged. While this was as expected, most observers were surprised that the RBA hadn’t been more hawkish in its outlook.

There was also evidence of some safe haven trading as both the Japanese yen and Swiss franc were in demand early on. This followed the news of another missile test from North Korea. There were early reports that the missile ended up in Japanese territorial waters. The news reminded investors that the atmosphere remains tense in that part of the world and it would only take a small miscalculation, or maybe a deliberate provocation, for the situation to escalate quickly. But more generally the yen continues to lose ground as there seems very little likelihood that the Bank of Japan will call a halt to monetary stimulus anytime soon. In contrast the Federal Reserve has signalled its intention to tighten monetary policy further before the year-end.

Upcoming events

Today’s significant events and economic data releases include Spanish, Italian, French, German, Euro zone and UK Services PMIs. We also have Euro zone Retail Sales, US Factory Orders and the minutes from the June FOMC meeting.


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.