Incisive market commentary from David Morrison

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Collapse 2017 <span class='blogcount'>(348)</span>2017 (348)
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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
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Early moves

Trump’s troubles see “risk-off” move

Equities fall while precious metals and yen rally

We’re seeing a sharp sell-off in US stock index futures this morning and this is weighing on European equities. Investors are dialling back their risk exposure as the Trump administration takes further flak over the president’s behaviour. The White House was already reeling from criticism over Trump’s firing of FBI Director James Comey and accusations that the president disclosed classified information to Russian officials. Now Comey has fired back saying that Trump requested that the FBI Director drop a probe into Michael Flynn, Trump’s original pick as National Security Advisor, over his ties to Russia.

Yesterday the US dollar fell back to levels last seen in early November - just after Trump clinched victory in the US presidential election. Gold and silver also continue to make gains on safe haven demand. The prevailing view in the markets isn’t so much that Trump faces the possibility of impeachment, but more that this constant barrage of bad news will hold up plans for tax cuts, regulatory reforms and infrastructure spending - all the things that contributed to the “risk-on” trade since the election.

Stock Index Update

Vodafone jumps on positive guidance

UK inflation continues to tick higher

European stock indices ended mixed yesterday, although the FTSE100 ended the day just shy of 1% higher and at a fresh record close over 7,500. Vodafone posted a loss of €6.1 billion for the last twelve months. However, the stock ended 3.8% higher on the day after the company produced some upbeat forward guidance and reported a jump in free cash flow for the current year.

Meanwhile, the UK’s inflation data, as measured by Headline CPI, Core CPI and the RPI all came in above expectations. Once again, this showed that inflation, even as measured by Core CPI (which excludes food and energy and is currently the most benign of all measures) is well above the Bank of England’s preferred 2% target. The news helped to lift sterling as investors believe the Bank may have to consider tightening soon, even if that means just reversing the ridiculous 0.25% cut made in the aftermath of the Brexit vote. Despite this, the FTSE100 led the march higher throughout yesterday’s session.  Euro zone ZEW Economic Sentiment came in at 35.1, way above the prior reading of 26.3 and bursting through the expected 29.1.

The buying picked up as the US session opened. This was despite the release of weaker-than-expected housing data. Both Building Permits and Housing Starts came in below expectations. Instead investors cheered as Industrial Production recorded a 1% month-on-month increase in April - its fastest monthly rate in more than three years.

Commodities Update

Crude pulls back on profit-taking/inventory build

Precious metals gain on safe haven demand

Crude oil rose again in early trade yesterday. This was a continuation of Monday’s rally which followed comments from energy ministers from Saudi Arabia and Russia. Both said that the current output cut agreement should be extended beyond its current cut-off date of June this year through to the end of March 2018. While this has been mooted for some time, this was the first time there’s been public agreement between the world’s two top producers. It also means that there’s leadership for OPEC (from Saudi Arabia) and non-OPEC (Russia) producers.

But both WTI and Brent gave back early gains as the session wore on. The sell-off accelerated after the American Petroleum Institute released its latest inventory update. This showed a hefty build in crude stockpiles, which was something of a surprise given last week’s large drawdown. The official Department of Energy numbers are released later today.

It’s worth noting that while oil has put in a solid performance since its snap-back earlier just under a fortnight ago. Nevertheless, a look at the monthly chart still shows a commodity that’s struggling with the potential to fall further before hitting significant support.

Gold and silver were beneficiaries of yesterday’s sell-off in the US dollar. The greenback came under pressure as the controversy over Trump’s meeting with Russian officials last week comes under deeper scrutiny. The president has been accused of disclosing classified information to Russia - a charge he strenuously denies. Nevertheless, it feels as if Mr Trump goes from one controversy to another and this has led investors to increase their exposure to such safe havens as gold, silver and the Japanese yen.  

Forex Update

EURUSD hits six-month high

Trump comes under fire

The dollar fell further yesterday with the euro being the main beneficiary. The EURUSD hit its highest level since 9th November - just after Donald Trump clinched victory in the US presidential election. The dollar sell-off follows allegations that President Trump disclosed classified information to Russian officials during a White House meeting last week. Trump has insisted that he had every right to share facts “pertaining to terrorism and airline flight safety.” But the controversy comes hot on the heels of Trump’s sacking of FBI Director James Comey which some commentators say is part of a cover-up into the president’s Russian dealings.

But the euro is also back in favour. There’s been a wave of relief that far-right parties were defeated in Dutch and French elections and much of the risk associated with holding the euro has subsided. On top of this, recent growth numbers from the Euro zone have been highly encouraging and inflation is picking up. This is putting pressure on Mario Draghi and the ECB Governing Council to start tightening monetary policy.

Upcoming events

Today’s significant events and economic data releases include the UK Claimant Count Change, Unemployment Rate and Average Earnings Index. We also have Euro zone CPI and US Crude Oil Inventories.


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Posted by David Morrison

Category: AM Bulletin

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