Incisive market commentary from David Morrison

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Collapse 2017 <span class='blogcount'>(348)</span>2017 (348)
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Bounce in oil helps to steady equities - AM Briefing
30 Mar 2017
US stock indices consolidate - Video Update
29 Mar 2017
Risk appetite returns - AM Briefing
29 Mar 2017
S&P500 - Topping out, or consolidating? PM Bulletin
28 Mar 2017
Risk appetite returns after the Trump wobble - AM Briefing
28 Mar 2017
Beware hidden relationships between seemingly unrelated markets - Trading Guides
27 Mar 2017
Risk assets slump in wake of Trump’s healthcare debacle - AM Briefing
27 Mar 2017
Congress vote puts markets on hold - AM Briefing
24 Mar 2017
Markets on hold ahead of crucial vote - Video Update
23 Mar 2017
Tranquil markets await big data - AM Briefing
23 Mar 2017
Investors rattled after equity sell-off - Video Update
22 Mar 2017
US Markets Snap 109-Day Streak - AM Briefing
22 Mar 2017
Crude oil update - PM Bulletin
21 Mar 2017
European markets stable on the open - AM Briefing
21 Mar 2017
Dollar slips after G20 communique - AM Briefing
20 Mar 2017
FOMC post-mortem - Video Update
16 Mar 2017
Rate hike sends stocks higher - AM Briefing
16 Mar 2017
FOMC rate decision and Dutch election in focus - Video Update
15 Mar 2017
Oil rally gives markets lift - AM Briefing
15 Mar 2017
Crude trades at lowest levels since production cut agreement - PM Bulletin
14 Mar 2017
Politicians take centre stage again - AM Briefing
14 Mar 2017
Trading Psychology: Risk Management - Trading Guides
13 Mar 2017
Article 50 deadline approaches - AM Briefing
13 Mar 2017
European stocks push higher after Draghi’s hawkish stance - AM Bulletin
10 Mar 2017
Non-Farm Payroll look-ahead - PM Bulletin
09 Mar 2017
Fed rate hike seems certain - AM Briefing
09 Mar 2017
Market expects Fed to hike rates next week - Video Update
08 Mar 2017
Another twist in the French election - AM Briefing
08 Mar 2017
Odds slashed on Fed rate hike - PM Bulletin
07 Mar 2017
Investors lacking direction this morning - AM Briefing
07 Mar 2017
Fibonacci Retracement - extensions - Trading Guides
06 Mar 2017
Equities slip in early Monday trade - AM Briefing
06 Mar 2017
Modest profit-taking sees US indices post rare loss - AM Briefing
03 Mar 2017
Crude struggles to break above resistance - Video Update
02 Mar 2017
UK baffled by the origins of their favourite brands - PM Bulletin
02 Mar 2017
Fresh record highs for major indices - AM Briefing
02 Mar 2017
All eyes turn to the Fed - Video Update
01 Mar 2017
Markets react positively to Trump speech - AM Briefing
01 Mar 2017
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

A calm morning in Europe ahead of Congress vote

It’s been a slow start for European equities this morning following a mixed close on Wall Street last night. There has been some relief that so far there’s been no follow-through to Tuesday’s stock market sell-off which saw both the Dow and S&P500 close down over 1% for the first time in over three months. However, all the main reasons behind the move lower remain in place and unresolved. Top of the agenda for investors today is this key vote in Congress to repeal and replace the Affordable Care Act, or Obamacare. Getting this through the House is seen as the first hurdle which must be crossed before the Trump administration ploughs on with its promises of tax reform, regulatory roll-back and infrastructure spending. However, just yesterday it appears that there could be as many as 27 Republican representatives prepared to vote against Trump’s proposed replacement for Obamacare. This would scupper the bill and push back any hopes of quickly driving through legislation to boost fiscal stimulus. As this has been the driving force behind the stock market rally since the Presidential Election in November, it’s clear to see why investors are nervous.

Meanwhile, the dollar remains under pressure with the Dollar Index close to critical support around 99.00. However, US yields ticked higher last night and this is helping to hold up the greenback for now. Similarly, oil prices have steadied despite another unexpectedly-large pick-up in US inventories. This is helping to keep WTI above its own crucial support around $48.

So far precious metals prices look contained as gold has repeatedly failed to break above resistance around $1,250 - the 38.2% Fibonacci Retracement of the Dec 2016 to July 2017 rally.

Stock Market Update

Next profits fall for first time in eight years

Tesco takes Heineken brands off shelves

Next shares shot up on the open this morning despite reporting the first fall in profits for eight years. The clothing and homeware retailer saw pre-tax profits decline 3.8% to £790.2 million for 2016 and warned 2017 would be another tough year as they predict a squeeze on UK wages combined with inflation and a shift towards saving rather than spending. This may sound like bleak news for the high street regular, but the buying is seen to be a result of Next warning last year of a tough year, yet the firm remained in a healthy amount of profit. Next is a notoriously strong investment for the British retail sector, so today’s rally could possibly indicate investors using Next as almost a safe haven amongst the retailers.

UK supermarket Tesco has made a brash move lately by removing eight Heineken brand beers from their shelves as the brewer attempts to raise its prices to what Tesco feel are unacceptable levels. The drinks include Amstel, Sol and Kingfisher, as the brewer believes the price hikes are justified by the rise of British inflation since the EU referendum. With this factor already pushing up costs, the unexpected increase in alcohol taxes announced in the spring Budget a couple of weeks ago.

Commodities Update

Oil recovers losses from previous session

Gold pulls back from recent highs

Oil prices bounced off their November lows this morning as the crude contracts met enough support to prevent further declines after it was confirmed by the Department of Energy data that US stockpiles indeed saw a much larger than expected increase. Brent crude temporarily swapped hands below $50 a barrel for the first time in over four months. Despite this recovery, traders are all too conscious of the pressure felt on crude prices by these inventory rises in the US and an overall concern that the OPEC-led production cuts are barely leaving a mark on the global supply glut.

Gold prices have trickled slightly lower this morning but keeping within a very tight range. Investors will be eagerly awaiting the outcome of the Trump administration’s healthcare reforms in Congress before reassessing their portfolios, as some doubt whether the Trump rally in stocks have them a little too exposed to risk. The outcome will also do well to predict how easily some of Trump’s more stimulating proposals can be passed, something not just investors will be wary of, but also the Federal Reserve in deciding when the next rate hike could be.

Forex Update

Sterling unfazed by London attack

Dollar steadying despite downside pressure

What was presumably a terrorist attack in Westminster yesterday which left at least four people dead, including the assailant, the pound took a slight knock before powering on through to continue its gains as it finally looks to break through $1.25 against the US dollar for the first time in a month.

The dollar has not seen much movement in early morning trade after a week of losses for the greenback. Against the yen, the dollar has lost 3.5% in the past ten days, but all has gone quiet with this slump as the pair settle above 111 yen. The same story goes for the euro, as the EURUSD pair continues to trade just below the $1.08.

Upcoming Events

Amongst today’s significant economic data releases and events, aside from the vote in Congress we have retail sales figures out of the UK this morning, followed by the ECB’s final short-term funding program, a speech from Janet Yellen before the US markets open and another FOMC member Robert Kaplan after the close. We will also have trade balance figures from New Zealand this evening. 


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Posted by Michael Campbell

Category: AM Bulletin

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