Incisive market commentary from David Morrison

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Expand 2017 <span class='blogcount'>(348)</span>2017 (348)
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Expand December <span class='blogcount'>(23)</span>December (23)
Collapse November <span class='blogcount'>(41)</span>November (41)
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
Expand October <span class='blogcount'>(37)</span>October (37)
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Early moves

 - Global stock indices continue to rally

- Latest move fuelled by oil rise

European equities have soared higher in early trade, taking their cue from last night’s record closes for the major US stock indices. This time, the driver was yesterday’s surge in the oil price which comes ahead of next week’s key OPEC meeting. Investors are betting that OPEC, together with Russia, will announce an agreement to cut production after the 30th November meeting. However, very few analysts believe that any major oil producer will stick to the deal.

Stock Index Update

- US majors all hit fresh record highs

- Central bank speakers feature in holiday-shortened week

It was a lacklustre start to the trading week yesterday morning. However, most of European stock indices managed to finish the session in the black lifted by the US majors. Later on, the Dow, S&P and NASDAQ all went on to close out at fresh record highs, driven by a sharp rally in the oil price. We’re now seeing a broad-based equity market rally which has replaced the sector rotation which followed Donald Trump’s election victory. In essence, we now have an indiscriminate buying spree going on driven by the belief that Mr Trump’s presidency will be marked by wild splurges of infrastructure spending and widespread tax cuts. That may be the case. However, it should be borne in mind that the Republican majority in Congress is not known to favour heavy government spending, unfunded tax cuts and an ever-expanding national debt. Add in rising bond yields and there’s a danger that equity markets are beginning to get ahead of themselves.

This is a holiday-shortened week with US markets closed on Friday for Thanksgiving. As far as events are concerned, focus will be on speeches from central bankers and once again it is monetary policy which should take centre stage. On top of this, UK Chancellor Phillip Hammond will deliver his first Autumn Statement tomorrow.

Commodities Update

- Crude hits highest level in November

- Precious metals recover as dollar slips

Both WTI and Brent rallied sharply yesterday. The move followed a story over the weekend that Iran may be exempted from production cuts at next week’s OPEC meeting, assuming Tehran agrees to an output freeze instead.  OPEC's technical committee met yesterday to discuss implementation of the cartel’s commitment to cut production made at the end of September. In addition Russian president Vladimir Putin said he saw no obstacle to non-OPEC member Russia agreeing to freeze oil output, which at more than 11 million barrels per day is at a post-Soviet high. All-in-all, there’s a feeling that a deal will be announced next week. Whether it will be adhered to or not is another matter.

It’s also worth considering what a Trump presidency will mean for oil. Mr Trump wants to tear up regulation, open up Federal land to drilling, and boost investment. Undoubtedly, this means higher US shale production. This could just force OPEC to “agree” to cuts just to give oil an interim boost. After all, it will be many months before anyone will know if all members have been compliant.

Gold and silver popped higher in early trade yesterday thanks to a long overdue pull-back in the US dollar. It’s too early to tell if the sell-off in the dollar will prove to be a brief bout of profit-taking ahead of another move higher, or something more significant. For now it appears that traders are focusing on the outlook for inflation and interest rates given President-elect Donald Trump’s election promises. These included personal and corporate tax cuts, a tearing up of regulation in energy and banking and a raft of fiscal stimulus in the form of infrastructure spending. However, it’s worth noting that many in the Republican-led Congress are deficit hawks who won’t want to vote in favour of any unfunded spending or tax cuts as they will increase the deficit and national debt. It’s just possible that the market is getting a little ahead of itself in expecting a strong pick-up in growth or inflation.

Forex Update

- Dollar Index pulls back from multi-year highs

- Sterling rallies after May speech

The US dollar fell sharply in early trade yesterday. The sell-off came on the back of some political developments across the Euro zone which helped lift the euro. Firstly, German Chancellor Angela Merkel confirmed that she would be seeking re-election in the third quarter of 2017. Mrs Merkel’s popularity rating has taken a dive over the past year. Nevertheless, she doesn’t have much competition when it comes to serious challengers and she is seen as a stabilising presence. Over the weekend Former French President Nicholas Sarkozy’s political come-back came to a humiliating end. He was ousted from the presidential election race in the first primary. Analysts feel his elimination has reduced the prospect of a win by far-right candidate Marine Le Pen. The Dollar Index fell back below 101.00 while the EURUSD managed to climb up above1.0600. This could just be a brief bout of profit-taking by dollar-longs who have enjoyed stunning gains since it became apparent that Donald Trump had clinched the White House. We’ll have to see how trade pans out over this holiday-shortened week. Sterling shot higher mid-morning after UK Prime Minister Theresa May delivered a speech to the CBI. In it she suggested the UK should seek a “transitional” deal with the EU, something popular with the City.

The dollar recovered much of its losses as the trading session progressed. Investors are still mindful of the divergence that exists between developed-world central banks. The probability of a Fed rate hike at the meeting in December is now hovering around 95%. As such it is inconceivable that the Fed will risk wrong-footing the markets by delaying any further. But there is a concern that the US central bank is set to tighten despite there being a downward trend in GDP growth.

Upcoming events

Today’s key economic data releases include UK Public Sector Net Borrowing and CBI Industrial Order Expectations. We also have Canadian Retail Sales and Euro zone Consumer Confidence. From the US we have Existing Home Sales and the Richmond Manufacturing Index.


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Posted by David Morrison

Category: AM Bulletin

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