Incisive market commentary from David Morrison

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Collapse 2017 <span class='blogcount'>(348)</span>2017 (348)
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EURUSD breaks above resistance - PM Bulletin
31 Jan 2017
Equities recover after Monday’s sell-off - AM Briefing
31 Jan 2017
Trending markets and Andrews’ Pitchfork -Trading Guide
30 Jan 2017
Investors rattled by Trump’s curbs - AM Briefing
30 Jan 2017
Dow holds above 20,000 as dollar firms - AM Briefing
27 Jan 2017
Dow breaks above 20,000 - Video Update
26 Jan 2017
Dow at 20,000 boosts risk appetite - AM Briefing
26 Jan 2017
Dow finally breaks 20,000 - PM Bulletin
25 Jan 2017
Wall Street leads stocks higher - AM Briefing
25 Jan 2017
Consolidation continues - Video Update
24 Jan 2017
Dollar recovery helps lift sentiment - AM Briefing
24 Jan 2017
Money management and stop-losses -Trading Guide
23 Jan 2017
Stocks fall on US protectionism fears - AM Briefing
23 Jan 2017
Trump inauguration in focus - AM Briefing
20 Jan 2017
A look-ahead to Trump’s inauguration - Video Update
19 Jan 2017
ECB President Draghi’s press conference in focus - AM Briefing
19 Jan 2017
Dollar steadies after sell-off - Video Update
18 Jan 2017
Equities drift in featureless trade - AM Briefing
18 Jan 2017
Dollar pull-back lifts precious metals- PM Bulletin
17 Jan 2017
Dollar slumps in early trade - AM Briefing
17 Jan 2017
Charting analysis for beginners - Trading Guide
16 Jan 2017
Sterling slumps on “Hard Brexit” concerns - AM Briefing
16 Jan 2017
Earnings in focus - AM Briefing
13 Jan 2017
Fourth quarter earnings in focus - Video Update
12 Jan 2017
Market Info Update: Martin Luther King Day Monday 16th January 2017
12 Jan 2017
Dollar lower as Trump skips stimulus talk - AM Briefing
12 Jan 2017
Trump news conference - Video Update
11 Jan 2017
Trump press conference in focus - AM Briefing
11 Jan 2017
Has gold turned a corner? - PM Bulletin
10 Jan 2017
Another mixed start for Europe - AM Briefing
10 Jan 2017
Trading Psychology - Trading Guides
09 Jan 2017
Sterling slips on "Hard Brexit" fears - AM Briefing
09 Jan 2017
Non-Farm Payrolls in focus - AM Briefing
06 Jan 2017
Non-Farm Payroll look-ahead - Video Update
05 Jan 2017
FOMC minutes viewed as hawkish - AM Briefing
05 Jan 2017
Look-ahead to release of FOMC minutes - Video Update
04 Jan 2017
FOMC minutes in focus - AM Briefing
04 Jan 2017
Strong start to 2017 - PM Bulletin
03 Jan 2017
Equities push higher in first session of 2017 - AM Briefing
03 Jan 2017
Expand 2016 <span class='blogcount'>(483)</span>2016 (483)


Early moves

- Wall Street slips ahead of Trump inauguration

- Dollar see-saws in quiet trade

We’ve seen another mixed start for European equities this morning as the major indices struggle to find direction. Last night the US majors closed out with modest losses although all remain within striking distance of the record highs hit at the beginning of the New Year.

It feels as if investors are unsure what to do now. It’s almost as if they are somewhat shocked and embarrassed to realise that they have participated in such a substantial risk-on rally simply on the back of Donald Trump’s campaign promises and his bullish victory speech on 9th November. Of course, if it soon becomes apparent that President Trump really does have a chance to bulldoze through tax cuts, infrastructure spending and regulatory reform then the rally in the dollar and equities will not only be justified, but also just the beginning of a larger move. But there are still plenty of Republicans who are sufficiently concerned about budget deficits and overall national debt to throw a spanner in the works. So the next 100 days are critical.

Donald Trump will be sworn in as the 45th president of the United States at 5:00 pm GMT. He will then deliver a speech lasting around 20 minutes or so. It would be very surprising if there was more than a passing reference to fiscal stimulus. However, the hope is that President Trump will deliver something inspiring and unifying which could bolster confidence over the next few months. If only he could grow a thicker skin when it comes to dealing with his enemies and detractors.



Stock Index Update

- Global indices mixed again

- Shrug off dovish Draghi

The major European stock indices drifted lower yesterday in lacklustre trade. Once again, there was a cautious tone as investors try to work out if equities need to consolidate or even correct before they can push higher. Yesterday ECB President Mario Draghi appeared to leave the door open for further monetary easing from the central bank. This came as he talked down the recent pick-up in Euro zone inflation. Mr Draghi said that the unexpectedly-sharp pick-up in Euro zone CPI at the end of last year had much to do with the rise in energy prices. He also said he saw no convincing upward trend in underlying inflation and that the risks to the ECB’s economic outlook remained to the downside. Mr Draghi’s dovishness weighed on the euro but did nothing to bolster European equity prices.


Commodities Update

- Crude reacts to inventory data

- Gold and silver test support

Crude oil rallied in early trade yesterday. The push higher followed on from the release of US inventory data from the American Petroleum Institute (API) after Wednesday’s close. This showed a drawdown of over 5 million barrels in crude for the week ending 13th February. This was way above the 1 million barrel drawdown expected. However, the gains were capped to some extent by large builds in gasoline and distillates.

Yesterday afternoon the US Energy Information Administration released its own inventory data. This contradicted the API numbers by showing a build in crude of 2.3 million barrels. The news saw both WTI and Brent pull back sharply, although support around $52 and $54 for WTI and Brent respectively is holding so far. Meanwhile, Saudi Arabia’s energy minister Khalid Al-Falih tried to keep a bid under the oil price saying he "would not exclude" another output cut agreement if oil couldn’t hang on to higher prices.

Precious metals fell in early trade yesterday. Gold and silver both dipped back below their significant support levels of $1,200 and $17 respectively. This was despite a pull-back in the dollar which typically helps to lift precious metals prices. The two metals struggled to make back these early losses, particularly once the dollar began to rally once again. This followed the ECB rate decision and Mario Draghi’s subsequent press conference. In its accompanying statement the ECB’s Governing Council left the door open for both monetary tightening and easing in the future. But the euro really lost ground after Mario Draghi appeared to dismiss the significance of last month’s surprise pick-up in Euro zone inflation, as measured by CPI. Mr Draghi said he saw no convincing upward trend in inflation and that the risks to the ECB’s economic outlook remained to the downside.


Forex Update

- Euro slips after ECB press conference

- Investors buy dollars ahead of Trump inauguration

The US dollar was weaker in early trade yesterday. The pull-back in the dollar followed on from a rally late on Wednesday night. Investors reacted to a speech from Federal Reserve Chair Janet Yellen when she said that the US was close to maximum employment and inflation was near target. Her speech was interpreted as being more hawkish than anticipated. However, she couldn’t give any clear guidance over the timing of the next hike, which would depend on the economy “over the coming months.”

Yesterday the dollar picked up sharply as European Central Bank (ECB) President Mario Draghi held his scheduled press conference. Earlier in the day the ECB kept its main interest rates and bond purchase programme unchanged. Back in December the central bank extended the duration of its bond-buying programme while reducing the monthly amount. Then last month Euro zone inflation came in above expectations and many analysts expected Mr Draghi to take a more hawkish stance as a result. However, the ECB President said there was no evidence that inflation was trending higher. He said that underlying inflation pressures remained subdued and that much of the recent pick-up was due to the increase in energy prices. He also stated that the ECB hadn’t discussed reducing stimulus. Overall, his comments were considered more dovish than anticipated which put downside pressure on the euro.


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Posted by David Morrison

Category: AM Bulletin

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