Incisive market commentary from David Morrison

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OPEC agrees to production cut - Video Update
30 Nov 2016
OPEC meeting in focus - AM Briefing
30 Nov 2016
A look-ahead to tomorrow’s OPEC meeting - PM Bulletin
29 Nov 2016
Mixed start for equities; crude lower - AM Briefing
29 Nov 2016
An introduction to technical analysis - Trading Guide
28 Nov 2016
Softer tone across risk assets - AM Briefing
28 Nov 2016
Crude, dollar and equities slip in holiday-shortened session
25 Nov 2016
ECB warns of uncertain outlook - Video Update
24 Nov 2016
Slow start as US closed for Thanksgiving - AM Briefing
24 Nov 2016
Gold slumps below key support
23 Nov 2016
Probability of Dec Fed hike hits 100% - AM Briefing
23 Nov 2016
Sterling slips ahead of Autumn Statement - PM Bulletin
22 Nov 2016
US stock indices hit fresh record highs - AM Bulletin
22 Nov 2016
How to read candlestick charts - Trading Guides
21 Nov 2016
US dollar pulls back from highs - AM Bulletin
21 Nov 2016
Dollar continues to surge - AM Bulletin
18 Nov 2016
Crude rebounds despite inventory rise - PM Bulletin
17 Nov 2016
Equity rally slows - AM Bulletin
17 Nov 2016
US dollar continues to rally - Video Update
16 Nov 2016
Dollar holds recent gains - AM Bulletin
16 Nov 2016
Dollar Index tests resistance - PM Bulletin
15 Nov 2016
Dollar soars as bonds slide - AM Bulletin
15 Nov 2016
What is Swing Trading?
14 Nov 2016
Markets adjust to Trump presidency - Weekly Bulletin
14 Nov 2016
Trump win sees investors rethink their portfolios - AM Bulletin
11 Nov 2016
Equities up, but bonds are down - PM Bulletin
10 Nov 2016
Market responds to Trump win - AM Bulletin
10 Nov 2016
US Election fall-out - Video Update
09 Nov 2016
Markets react to Trump win - AM Bulletin
09 Nov 2016
US Election – possible outcomes and market reaction - Video Update
08 Nov 2016
US election result is all that matters now - AM Bulletin
08 Nov 2016
What is day trading? - Trading Guides
07 Nov 2016
Election uncertainty spooks investors - Weekly Bulletin
07 Nov 2016
Market info update: US Election Market Changes
04 Nov 2016
US Non-Farm Payrolls in focus - AM Bulletin
04 Nov 2016
Non-Farm Payroll look-ahead - PM Bulletin
03 Nov 2016
Equities mixed ahead of BoE Inflation Report - AM Bulletin
03 Nov 2016
Central bank meetings and election polls - Video Update
02 Nov 2016
FOMC rate decision ahead - AM Bulletin
02 Nov 2016
Bounce-back in precious metals - PM Bulletin
01 Nov 2016
RBA and BOJ leave rates unchanged - AM Bulletin
01 Nov 2016
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Early moves

US dollar flat

- Crude oil slips as OPEC looms

It’s been a mixed start this morning for European equity markets but with a slightly negative tone. This follows on from last night’s modest pull-back across US stock indices. These have been on a rip ever since Donald Trump defied the polls and pundits by snatching victory away from Hillary Clinton in the US presidential election.

There’s a feeling that the rally across risk assets is somewhat overdone and that a pull-back, or at least some consolidation, is in order. However, there’s still a feeling that US equities remain the asset of choice for investors, particularly given Trump’s promises of less regulation, lower taxes and $1 trillion-worth of infrastructure spending.

But it’s worth remembering that the outlook for global growth remains patchy, even as the US Federal Reserve prepares to hike rates in two weeks’ time. The Dollar Index remains close to a thirteen and a half-year high and at some stage the strength of the dollar will weigh on US multinationals when it comes to overseas sales and earnings.

In the meantime, all eyes are on the oil market which is proving particularly volatile. Crude is weaker in early trade. However, so far it has only given back a small proportion of yesterday’s gains. Traders are busy positioning themselves for tomorrow’s key OPEC meeting in Vienna. This is when the 14-member cartel attempts to agree production cuts. There are also hopes that non-OPEC producers such as Russia will also agree to curb output in order to support the oil price. However, everything appears to hinge on whether Saudi Arabia will agree to the exemption demanded by Iran.

Stock Index Update

- European banking stocks lead decline

- Italian referendum causing jitters

Global stock indices fell sharply yesterday. Investors booked some profits after the rally which followed Donald Trump’s unexpected election victory earlier this month. Last week it felt as if some of the upside momentum had been lost due to the Thanksgiving holiday. However, investors are also looking ahead to a raft of important risk events as we get closer to the year-end. First up is tomorrow’s key OPEC meeting. It remains uncertain whether Saudi Arabia and Iran cab agree to production cuts. Without that, crude could sell off sharply and this would put downside pressure on equities.

European banking stocks fell sharply yesterday. Investors are getting nervous ahead of Sunday’s Italian referendum. Prime Minister Matteo Renzi has staked his position on the outcome of the vote on constitutional reform that is necessary for him to undertake far-reaching economic changes. However, there’s a feeling that the anti-establishment, anti-EU vote will win the day and this will make it much harder for Italian banks to raise much-needed capital.

Commodities Update

- Oil volatile ahead of tomorrow’s OPEC meeting

- Gold and silver manage to rally

Volatility in the oil price has picked up as traders position themselves for tomorrow’s key OPEC meeting in Vienna. This is when the 14-member cartel attempts to agree to production cuts. There are also hopes that non-OPEC producers such as Russia will also agree to curb output in order to support the oil price. However, Iran wants an exemption from any production cut as it struggles to rebuild its oil industry after years of sanctions.

At the end of last week oil prices slumped after Saudi Arabia said they would not attend yesterday’s pre-meeting of OPEC and non-OPEC producers. However, crude rallied after Iraq’s Oil Minister Jabbar al-Luaibi said he was “optimistic” that a deal could be reached which would be "acceptable to all." Yesterday, both Brent and WTI sold off in early trade only to bounce back sharply later in the session.

Gold and silver rallied sharply in early trade yesterday. This was a continuation of the price action from the end of last week when both precious metals managed to stage a modest bounce-back. The move came as the dollar fell in early trade. But the two precious metals pulled back from their best levels as the dollar made back its early losses. Yet despite this, both managed to hold on in positive territory. Last week both precious metals ended lower for the third consecutive week having broken below a number of key support levels. Gold bulls are now hoping the metal can consolidate above $1,180. If it can form a base here then it could have a chance of rallying into Christmas. Key support for silver comes in around $16. However, everything rather depends on the US dollar. If the greenback continues to rally from current levels then gold and silver will find it very difficult to make back the losses which followed Donald Trump’s presidential victory.

Forex Update

- Dollar recovers after initial sell-off

- Canadian dollar rallies as oil bounces

The US dollar fell against all the majors in early trade yesterday. This continued a move that began on Thursday, when trading volumes were light during the holiday-shortened week. However, the dollar began to recover as Monday’s session progressed - at least against the euro and British pound.

Ahead of last week’s Thanksgiving holiday the Dollar Index hit its highest level since the first quarter of 2003. The EURUSD traded at its lowest level since March 2015 when it briefly broke below 1.0500 and the Chinese yuan hit an 8-year low. The Dollar Index is up around 6% since the Trump clinched victory on 9th November. The EURUSD is down close to 7% over the same period.

The dollar broke out of its trading range soon after Donald Trump clinched victory in the US presidential election. The move came as investors reassessed the outlook for the US economy given Trump’s campaign promises to slash regulation, cut taxes and boost infrastructure spending. All these measures are viewed as both pro-growth and inflationary. Not only are investors expecting the US economy to pick up sharply, but they are also expecting the US Federal Reserve to tighten monetary policy as a result. This is all viewed as dollar-positive. However, this assumes that interest rates lag inflation and don’t choke off growth if it proves weaker than expected. This positive assessment also assumes Trump is able to push his policies through Congress.

Upcoming events

Today’s key economic data releases include French Consumer Spending, Spanish Flash CPI and German Preliminary CPI. From the UK we have Net Lending to Individuals, M4 Money Supply and Mortgage Approvals. From the US we have Preliminary GDP, the S&P Case Shiller House Price Index and Consumer Confidence. We also have speeches from FOMC voting members William Dudley and Jerome Powell. 


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Posted by David Morrison

Category: AM Bulletin

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