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Dark clouds ahead?
29 Jul 2016
BOJ underwhelms – JPY soars
29 Jul 2016
PM Bulletin: BOJ look-ahead
28 Jul 2016
AM Bulletin: FOMC leaves rates unchanged
28 Jul 2016
PM Bulletin: Yen swinging wildly on stimulus talk
27 Jul 2016
AM Bulletin: Fed rate decision and FOMC statement in focus
27 Jul 2016
PM Bulletin: FOMC look-ahead (and Japanese stimulus talk)
26 Jul 2016
AM Bulletin: FOMC meeting begins today
26 Jul 2016
Platform Tours: CFD Trading - Check Open P & L
25 Jul 2016
PM Bulletin: EURUSD breaks below 1.1000
25 Jul 2016
Weekly Bulletin: Fed and BOJ in focus
25 Jul 2016
PM Bulletin: Sterling looking vulnerable again
22 Jul 2016
AM Bulletin: Stocks lower as oil weighs
22 Jul 2016
PM Bulletin: The EURUSD and the ECB
21 Jul 2016
AM Bulletin: ECB rate decision ahead
21 Jul 2016
PM Bulletin: ECB look-ahead
20 Jul 2016
AM Bulletin: Q2 earnings keep markets buoyant
20 Jul 2016
PM Bulletin: A look at the yen
19 Jul 2016
AM Bulletin: More records for US equities
19 Jul 2016
PM Bulletin: Precious metals pull back
18 Jul 2016
Weekly Bulletin: It’s all about stimulus
18 Jul 2016
PM Bulletin: European banks in trouble
15 Jul 2016
AM Bulletin: Sombre mood following Nice atrocity
15 Jul 2016
PM Bulletin: The BoE rate decision
14 Jul 2016
AM Bulletin: All eyes on Bank of England
14 Jul 2016
PM Bulletin: BoE Rate Decision in focus
13 Jul 2016
AM Bulletin: Equities drift lower after record US close
13 Jul 2016
PM Bulletin: Global indices pushing higher
12 Jul 2016
AM Bulletin: Equity rally powers on
12 Jul 2016
PM Bulletin: Fresh record high for S&P500
11 Jul 2016
Weekly Bulletin: The markets called, NFPs answered
11 Jul 2016
AM Bulletin: The calm before the storm; Markets await today’s NFPs
08 Jul 2016
PM Bulletin: Non-Farm Payroll look-ahead
07 Jul 2016
AM Bulletin: As the Fed turns dovish, the markets turn bullish
07 Jul 2016
AM Bulletin: Concerns continue as Sterling touches $1.27
06 Jul 2016
AM Bulletin: Markets open higher, weak UK Construction PMI data removes confidence
05 Jul 2016
Weekly Bulletin: Central Banks react to Brexit vote
04 Jul 2016
AM Bulletin: When Carney speaks, the markets listen
01 Jul 2016
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Economic outlook

Friday saw the markets get their monthly fix of volatility from Nonfarm Payrolls. After a dismal May figure of 38k, analysts were expecting somewhat of a recovery to 175k, attributing much of the fall a month prior to a strike from some 40,000 workers at Verizon. What they got was much more than simply a recovery, as the result shattered expectations, rising to 287k. Initial reaction was to buy stocks, sell safe havens, as the dollar and US stocks surged, whilst gold, the yen and Swiss franc fell off. Japanese firms were counting their lucky stars to see that, as the strength of the yen lately has been chipping away at profits, making their exports much less competitive. Their markets did not have a chance to react to the report, awaiting Monday’s open to likely surge. Strangely enough, despite the impressive NFP result, the US unemployment rate was actually worse than predicted, but only slightly, coming in at 4.9%. The NFP results are indicative of a relatively healthy US economy, but with so much uncertainty around the world will it be enough to warrant an interest rate hike from the Fed? We may get a clearer indication this Tuesday when St Louis Fed President James Bullard gives the first speech since the jobs report.

As is clear by now, European markets are worried. The vote by the UK to leave the EU has sent shockwaves throughout the region, with both the pound and the euro suffering as one of the bloc’s strongest members decided to part ways. Since the referendum result, several other countries have also showed strong support for the breakup of the Union, none more so than Italy. This is one crisis which, for the most part, has gone unnoticed, left to wallow in the Brexit shadow. Put simply, the Italian banking system is in trouble, with The Economist even going as far as to say it could be worse for the markets than this Brexit fiasco. The region as a whole is in a bad state – 50-year Swiss bonds are now yielding negative returns – but few have seen the raw end of the deal more than Italy. Italian public debt currently stands at 135% of GDP, while adult unemployment dwarfs all but Greece. The banking system as a whole has over €360 billion of “souring” loans, equal to a fifth of the country’s GDP, for which the banks have only provisioned for 45% of. The problem was bad a month ago, but the Brexit vote has proven to be the sucker punch it didn’t need, intensifying the situation. One such example can be seen in Monte dei Paschi di Siena, the world’s oldest bank, which is currently worth just 10% of its book value. This bank has been in constant operation since 1472, and yet many fear 2016 could be its Lehman moment. The cause? They are blaming EU regulations. The current deal prevents bailouts from the EU without bond holders first taking a hit, which, in a country like Italy where €200 billion of bonds are held by retail investors instead of large institutional banks, this means the people must bail out the banks before the government can. The single currency is also limiting to them, as a situation like this could be aided by devaluation or fiscal plans, which are now beyond the national leaders. The EU now have some tough decisions to make, with many believing that were Italy to leave the EU, the Union will not survive.

This Thursday could prove to be the most vital for the UK, as the Bank of England meet for the first time since the vote to leave the EU. Pressure is sure to be mounting on Mark Carney’s shoulders, as investors around the globe will be watching him and his peers decide how best to heal a limping economy. Many are expecting stimulus in the usual forms of Quantitative Easing and an interest rate cut, however, the bank have to be careful with how they act, seeing as the pound treads water above the 31-year low set on Wednesday. It also has the bond market to think of, as QE would reduce the number in circulation thus potentially pushing yields closer to negative territory. As it stands, 10-Year Gilt yields are down 62.5% year-to-date, standing at just 0.735%. Go back just 18 months and this figure was above 3%. The Bank has already given the green flag for banks to lend as much as they can after reducing the counter-cyclical capital buffer from 0.5% to 0%. The rate cut seems the most likely to precede the meeting, with odds of its occurrence up from 11% pre-Brexit to now 74% and rising. Whether the BoE choose one or both of these options, the pound will likely weaken due to either lower borrowing costs, a larger supply of the currency in circulation, or both.  Some sceptics have even gone as far to suggest parity with the euro, while others argue the worst is already priced into the pound. Whatever the result, expect a busy end to the week for UK-related assets and global safe havens.

This week’s major economic releases include:


EUR Eurogroup Meetings; CAD Housing Starts; USD FOMC Member George Speaks; GBP BRC Retail Sales Monitor; AUD NAB Business Confidence


EUR German CPI; GBP Inflation Report Hearings; USD FOMC Member Bullard Speaks, JOLTs Job Openings, 10-Year Note Auction, Federal Budget Balance; AUD Westpac Consumer Sentiment


JPY Industrial Production; EUR French CPI; EUR Industrial Production; USD Export Price Index, Import Price Index; CAD Interest Rate Decision; USD Crude Oil Inventories; GBP RICS House Price Balance; AUD Employment Change, Unemployment Rate


CHF PPI; GBP BoE MPC Vote, BoE Interest Rate Decision, BoE Minutes, BoE Asset Purchase Facility; USD Core PPI, Initial Jobless Claims; CAD New Housing Price Index


EUR CPI, Trade Balance, Core CPI; USD Core CPI, Core Retail Sales, NY Empire State Manufacturing Index, Retail Sales; CAD Manufacturing Sales; USD Industrial Production

Equities Outlook

Weak UK PMI Monday

Fed minutes, US trade balance, US service PMI, first 3 property funds frozen in UK Wednesday

Second 3 property funds frozen in UK Thursday

Understandably, European markets had a tough week. The Dax was seen to lose almost 500 points by Wednesday afternoon, before attempting a last-ditch effort towards the end of the week, fuelled by strong NFP results. The surprise market was the UK’s headliner, the FTSE 100. After opening the week at a 10-month high, reality soon struck that UK stocks were in fact worth much less than what they appeared, due to the sharp decline in the pound. Under the influence of some weak PMI data, the FTSE headed downwards, before Carney’s suggestion of central bank stimulus once again aided the shorting of the pound, and therefore cheaper stocks for investors. As the week went on and Sterling continued to weaken, stocks continued to drift higher. Exporters and miners saved the index from closing in the red, as their products were now seen as much cheaper than their European competitors and safe haven metal prices soared. Meanwhile, more UK-focused stocks on the FTSE 250 suffered. The FTSE finished the week up at 6,590.64, its best close in eleven months, while the Dax was up on the day, down on the week at 9,629.66.

US markets experienced a gentler week than their European counterparties, with the Dow erasing all post-Brexit losses once NFPs gave it the boost it needed to close the week above 18,000, a rise of 1.1% over the week. The S&P also settled desperately close to its all-time high, ending the week at 2,129.90, a mere 0.92 points off the record level. The broad index was up 1.3% for the week.

With Asian markets unable to react to Friday’s Nonfarm Payrolls, they were still suffering from a worryingly strong yen. With the memory of a dire NFPs last month still at the back of traders’ minds, the yen seemed one of the safest options. The downside to this move was the pain caused to Japanese stocks, the majority of which are export-oriented. The Nikkei closed Friday’s session a further 1.1% down, while the Hang Seng fell 0.9% and China’s Shanghai Composite slumping 1%. Monday’s session should prove to be positive for at least the Nikkei, as the yen finally saw some relief after the positive US jobs data.

Commodity/ FX Outlook


Oil prices suffered their worst week in nearly six months last week, as prices were seen falling over 7% for both Brent and US crude contracts. Stalling demand sent oil prices back below $50 a barrel on Monday, blaming the current global economic outlook. With comments from oil heavyweight Vitol stating they do not see much more of a rise for the year, the markets knew to listen and sell. The rest of the week saw prices time and time again try to break $50, to no success. Fears of oversupply and decreasing demand still weighed on both Brent and US Crude. API Inventories were seen to be over-confident of the supply cut in the US, with their 6.7 million barrel reduction proving to be well off the 2.223 million. Although inventories still showed a considerable decline in stockpiles, it was not enough to convince the markets, with both contracts suffering 5% declines by the close in New York. This left the WTI contract down at $45.14 and Brent at $46.40. Friday’s NFPs gave oil a slight lift, but nowhere near enough to erase the losses felt during a tough week.


Money poured into precious metals at the start of the week, as both gold and silver hit 2-year highs in Asian trade on Monday. Silver was up at $21 an ounce but soon settled back down in the $20 region. The gains came amid speculation of increased stimulus from European central banks in the aftermath of the Brexit vote. Gold, too, trickled down from its high after facing strong resistance, hovering around $1,343.76 an ounce. By the end of the second trading day safe havens were once again back up in the green, with investors increasing the percentage of metals in their portfolios to provide some stability. Gold was then up 26% for 2016. Both metals seemed to hold their ground in the build-up to NFPs, as is usual around this time of the month. A combination of predictive data, including ADPs, pointed towards a strong NFP result late Thursday, causing the rise of the metals to grind to a halt. By Friday morning gold was seen trading around $1,358.36 an ounce, while silver was settling at $19.73. NFPs did not instil enough confidence in the markets for everyone to abandon the safe havens, with gold only losing 0.27% for the day. Year-to-date, gold is up 28.77%, but the real success story over the past twelve months has been silver, gaining an impressive 46.40% since 8th July 2015 after moving up another 2.63% to end the sixth straight week higher.


Another miserable week for any Brits looking to go abroad this summer, as the pound fell once more as the post-referendum blues continued. Taking a broad look at the week’s movements, GBPUSD fell off from a positive Monday close of $1.3287 to end the week below the significant $1.30 level, at $1.2954. Stirling dropped to a new 31-year low against the greenback on Wednesday, touching $1.2798. For the year to date, the pair is down 12.09%. The same story was seen against both the euro and the yen, with GBPJPY down a massive 26.47% over the last 12 months, now down to ¥130.284. GBPEUR hasn’t fared much better, trading at €1.1720 at the end of the week, down 13.64% since last July.

The dollar gained strength over the course of the week, with the dollar index rising from 95.649 on Monday to reach 96.328 Thursday. The Dixy ended the week at a strong 96.302. This move up was seen in the EURUSD pair, which fell over the course of the week from $1.1154 to $1.1051. Aside from the pound, the euro was the biggest loser of the week amongst the majors, falling to ¥111.11 against the yen to make it 14.95% weaker since this time last year. The yen remained strong against the dollar, coming off from the ¥102-mark at the start of the week to spend much of its time hovering over strong support at ¥100. 

Spread Co is an execution only service provider. The material on this page is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by Spread Co Ltd or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.


Posted by Michael Campbell

Category: Weekly Bulletin

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