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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Indices Update

Global stock markets all shot higher yesterday following the news that the FBI once again cleared Hillary Clinton of potential criminal charges in its private email server probe. The news helped to lift stocks generally following last week’s sell-off. This followed the FBI announcement that it had reopened the investigation after discovering 650,000 “new” emails possibly relating to Mrs Clinton while she was Secretary of State.

Investors are now purely focused on tonight’s vote. The most market-positive result would be an outright win for Clinton. This would effectively eliminate market uncertainty as a Clinton presidency is seen a continuation of the status quo. A Trump win is viewed as a jump into the unknown as far as Wall Street is concerned and so negative for equities, at least in the short-term. However, investors would also be unhappy in the event of a Democratic clean-sweep if the party was to win back control of the Senate and House of Representatives. This is because there is a fear that an unchecked Democratic Congress and presidency would bring in legislation to curb Wall Street’s excesses. It also makes tax increases on the highest earners inevitable and could unleash uncontrolled government spending. This may benefit certain companies but would add to the deficit and federal debt. Whatever the result (assuming we have one on Wednesday), it’s important to bear in mind that the initial market reaction may be short-lived. But perhaps the worst outcome as far as markets are concerned relates to no clear winner emerging after the vote. This could come about because the losing candidate refuses to concede and challenges the result. Or it could be that one of the other three candidates wins a state and a few Electoral College votes and thereby denies either Clinton or Trump the 270 Electoral College votes needed for a majority. This would prove to be a dismal environment for equities in general.

The FTSE 100 ended the day 113.6 points higher at 6,806.9

The German DAX rose 197.8 points or 1.9% to end the day at 10,457

The US30 closed 371.3 points higher to finish at 18,259.6 The S&P 500 ended up 2.2 % at 2,131.5 while the Nasdaq 100 rose 2.4% to close at 4,773.7


HSBC (HSBA) reported an 86% drop in pre-tax profit for the third quarter. This came in at $843 million, down from $6.1 billion for the same period last year. The consensus expectation had been for pre-tax profits of $2.4 billion. But adjusted profit, which excluded one-off costs such as the disposal of its Brazilian unit, rose 7% to $5.6 billion, which was better-than-expected. Shares in the banking giant ended the day 4.6% higher at 622.3 pence.

Ryanair (RYA) was up over 6% at one stage yesterday. The budget airline raised its long-term growth forecast by 10% and predicted it would fly 200 million passengers by 2014 - up from the 180 million previously estimated. Ryanair posted a profit after tax of €1.17 billion euros in the first six months of 2016 which was in line with expectations. The company also said it would slash planned growth in the UK to 5% from 12% and expand in Italy and Germany instead.

Equities were generally firmer after the FBI once again cleared Hillary Clinton of potential criminal charges in its private email server probe. However, there were a few losers including Tesco (TSCO) which ended the day 1.1% lower following news of a hack attack with money stolen from around 20,000 customers.

Commodities Update

Crude rallied in early trade yesterday along with just about every other “risk asset.” Investors piled back into equities, bonds and the dollar while simultaneously dumping safe havens such the yen, Swiss franc and precious metals. The move followed renewed confidence in a Clinton win in today’s presidential election. This came after the FBI suddenly concluded its latest investigation into emails from Mrs Clinton’s private email server. Some observers (and Donald Trump) expressed surprise that the FBI had managed to trawl through the contents of 650,000 emails in little over one week.

Crude also got a lift after OPEC insisted that it would stick to its commitment to cut output. The 14-member cartel is set to meet at the end of this month and it is widely expected that it will announce details of production cuts then. But it’s also fair to say that yesterday’s initial bounce was technical to some degree. Last week WTI and Brent both briefly tested support levels around $43.50 and $45.50 respectively.

Crude gave back some of its gains as yesterday’s session progressed, but then pushed higher again into the close. Those support levels may need to be revisited and retested to see whether a more sustainable corrective bounce-back is in order. It could be - after all, crude is down around 15% since mid-October. However, despite OPEC’s assurances, many analysts doubt that the group will be able to agree to production cuts, let alone ensure compliance. Iran, Iraq, Nigeria and Libya are all demanding that they are exempted from any cut, or freeze, in output.

Gold and silver slumped yesterday after the FBI passed Hillary Clinton with a clean bill of health. There may still be a bad smell lingering over the Clinton Foundation but that looks like a problem for another day.

Investors piled out of the two precious metals as the dollar soared. Gold and silver both rallied sharply last week on safe-haven demand as Trump recovered in the polls. But Clinton is now widely considered the favourite for the presidency and that is now reflected to some extent in the prices of the two precious metals. But it’s worth noting that despite gapping down sharply in Asian Pacific trade, both precious metals are some way off the lows hit in early October. That was when Clinton established a healthy poll lead over Trump and appeared to have things sown up. The bottom line is that a Clinton win tomorrow could lead to further losses for gold and silver, at least initially. However, both could benefit from either a Trump win, or if there’s no clear victor on Wednesday.

Forex Update

Yesterday’s big news in FX was the sharp recovery in the US dollar. The greenback soared following the surprise news that the FBI had cleared Hillary Clinton over any wrongdoing concerning use of a private email server while she was Secretary of State. The announcement came just two days ahead of tonight’s vote in the presidential election and was seen as boosting Hillary Clinton’s chances of clinching victory. Mrs Clinton suffered a serious pull-back in the polls last week after the FBI said it had reopened its investigation following the discovery of a huge cache of, potentially compromising, emails. The dollar sold off on last week’s news as investors suddenly had to price in an increased probability of a Trump win. Mr Trump is considered to be a destabilising force while Mrs Clinton is viewed as the establishment candidate whose victory would ensure the continuation of the status quo. On top of this, yet related to it, the consensus view is that a Clinton win raises the likelihood that the US Federal Reserve will hike interest rates in December. This, of course, is dollar-positive.

US voters now head for the polls and investors are hoping for a clear and unambiguous result by Wednesday morning. If this happens and Clinton wins outright then expect the dollar rally to continue - at least in the short-term. The only exception to this is should the Democrats also win back majorities in the Senate and House of Representatives, which is also dollar-negative. A Trump victory would also see the dollar sell off and lead to gains in most other currencies - except the Mexican peso. In addition, if there is no clear-cut winner, either because one or more of the three other candidates steal a state or two preventing Clinton or Trump from getting 270 Electoral College votes, then the dollar will suffer. We should also expect further problems for the greenback if either candidate refuses to concede, or launches a legal challenge over the result.

Upcoming events

Today’s key event is the US election. Aside from this we have ECOFIN meetings and Manufacturing and Industrial Production from the UK.


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Posted by David Morrison

Category: AM Bulletin

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