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)
Collapse May <span class='blogcount'>(35)</span>May (35)
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
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

OPEC expected to agree 9-month extension

Equity investors cheered by FOMC minutes

European stock index futures were indicating a sharply higher open first thing. This followed on from a strong close across Asian Pacific markets and gains for the US majors as well. Last night the NASDAQ and S&P500 closed out at fresh record highs and built on those gains this morning. However, it wasn’t long before European indices began to turn lower, although the mark-down has been modest so far.

The biannual OPEC meeting takes place today in Vienna. Considering comments made by a number of participants it looks as if all parties will agree to extend output cuts by nine months. The consensus view is that the daily reduction - 1.2 million barrels from OPEC and 558,000 from non-OPEC producers - will remain unchanged. But we have had a few surprises from OPEC in the past, so we should be prepared. The worst case scenario is no extension, followed by an extension of only six months. This would see oil prices nose dive. The best case is a nine month extension with deeper cuts, with more countries joining in, or existing countries making a bigger sacrifice. That should see WTI and Brent break above resistance around $54 and $57 respectively.

Last night the dollar fell following the release of minutes from the Fed’s last FOMC meeting. The initial takeaway was that the Fed members were wary of raising rates in the current environment given the recent softening of US economic data. But reading on it became apparent that most Fed members believe the downturn in data is transitory. Consequently, most analysts still believe the Fed will raise rates by 25 basis points next month. On top of this, traders were pleased that the Fed is planning a measured wind-down of its $4.5 trillion balance sheet.

Stock Index Update

European indices end Wednesday mixed

Draghi pushes back against tightening

European stock indices were mixed on yesterday’s close with modest losses for most of the majors and a small gain for the UK’s FTSE100. Marks and Spencer (MKS) ended the day 1.5% higher despite reporting a 63.5% plunge in pre-tax profits for the year. The fall was mainly the result of restructuring costs and investors decided to give the troubled retailer the benefit of the doubt.  The current chief executive Steve Rowe has just completed his first full year in the job. There’s also hope that ex -ASDA head Archie Norman will turn things around once he assumes his role as chairman this September.

Yesterday ECB President Mario Draghi delivered a speech in Madrid. Mr Draghi insisted that the side-effects of the central bank’s unconventional monetary policy (chiefly its monthly bond purchase programme) were contained. Consequently, there was no reason to end it early. This means that yet again the ECB chief is pushing back against Germany and other members on the Governing Council who feel the time is fast approaching for the ECB to wind down its asset purchases.

Commodities Update

US inventory drawdown lift oil - temporarily

Gold and silver post modest gains

Crude oil was firmer in early trade yesterday but then gave back gains ahead of the latest inventory update from the Energy Information Administration (EIA). Oil bounced straight after the release which showed a much larger than expected drawdown in stockpiles for the week ending 19th May. Crude inventories fell by 4.4 million barrels compared with a forecast drawdown of 2.4 million.

But traders were unwilling to push prices much higher ahead of today’s OPEC meeting in Vienna. Most observers expect OPEC and non-OPEC producers to extend their production cuts by nine months to March 2018. This should help support prices to some extent. However, with global inventories still at record highs, an uncertain outlook for demand growth plus increasing output from US shale oil producers, it looks likely that price rises will be capped around the mid-$50 area over the next few months.

Precious metals were lower first thing yesterday, extending a sell-off that began just after the European close on Tuesday. The pull-back saw gold dip below $1,250 and silver break under $17 for the first time since the beginning of this month. Both metals steadied later in the session although traders seemed unwilling to take on any additional exposure ahead of last night’s release of minutes from the last FOMC meeting. However gold and silver eventually ended yesterday’s session with modest gains thanks to a late pull-back in the US dollar. The FOMC’s minutes revealed that the Fed is preparing a gradual wind-down of its balance sheet.

Forex Update

Dollar slips on Fed minutes

Yen falls as risk appetite picks up

The dollar fell following the release of the Fed’s minutes from its last rate setting meeting held earlier this month. The initial takeaway was that the Fed members were wary of raising rates in the current environment given the recent softening of US economic data. But reading on it became apparent that most Fed members believe the downturn in data is transitory. Consequently, most analysts still believe the Fed will raise rates by 25 basis points next month.

The FX market was quiet again yesterday with traders holding off from taking fresh positions ahead of the release of minutes from the last FOMC meeting. There was hardly any movement in the key EURUSD pair and the day’s biggest mover was the Canadian dollar. The “Loonie” rallied after the Bank of Canada left its key interest rate unchanged for the 15th consecutive meeting. The central bank’s statement was a touch more hawkish than anticipated. 

The only other currency to show any clear direction was the Japanese yen. The yen fell against both the dollar and euro as US equities were once again back in favour. Investors sell (borrow) the low-yielding Japanese currency when risk appetite is high and use the proceeds to buy up riskier (and higher-yielding assets, such as stocks). By yesterday afternoon the S&P500 index was trading around 2,400. This meant this key index had made back all its losses and more following last week’s sell-off. Back then, sacked FBI Director James Comey alleged that President Trump had intimidated him into dropping an investigation into Michael Flynn. Mr Flynn was Trump’s original pick as National Security Advisor but was forced to resign earlier this year after he was caught lying about his contacts with Russian officials.

Upcoming events

Today’s significant events and economic data releases include the UK’s second estimate of First Quarter GDP, Preliminary Business Investment, Mortgage approvals and Index of Services. From the US we have Weekly Jobless Claims, the Goods Trade Balance and Wholesale Inventories. OPEC meetings take place in Vienna and there’s a speech from FOMC-voting member Lael Brainard.


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.