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Europe higher before US jobs. New BP journey under Bernie

UK & European markets have opened higher on Friday. We are taking heart from the higher close on Wall Street and putting the whipsaw action that got us there to one side. Opening gains are being tempered by caution ahead of a key monthly US jobs report.

Services dragged into the slowdown

We can reflect on yesterday’s dramatic price action in equities to understand the market’s logic going into this month’s NFP (jobs) report. US shares fell in reaction to service sector data that missed expectations but subsequently rebounded on renewed hopes for an October rate cut. Naturally the US dollar dropped and has added to the losses for the same reasons, now down for a fourth day running. The ECB has shown its hand via its QE announcement so moves in the forex market are very much dollar-orientated at the moment.

US jobs report coming up

Little can be gleaned from US futures which indicate a flat open. If jobs numbers meet or beat expectations, it will be welcome news for the US economy but will undermine the case for more aggressive easing from the Fed. The Fed are clearly worried about Trump’s trade war, and the decade low in US manufacturing activity this month supports this view. But we think they only start to react with loser policy when the US consumer is affected, and that will start when unemployment rises. Federal Reserve Vice Chairman Richard Clarida, for his part said yesterday that the consumer is “in good shape”. We think poor US economic data poses downside risk to stocks and the dollar while the Fed maintains the current modest stance on easing policy.

Brexit – response to Boris' plan

Neutral observers seem to have been mostly positive about the kind of compromises presented by Boris Johnson. With more detail, Boris’ deal could be workable. Unfortunately it’s not the neutrals that will make or break a UK-EU Brexit deal. MPs are now so bitterly divided that we are of the view, this parliament will never vote through any deal offered up by Boris Johnson. The EU understands the dynamics in the British parliament and we think, are just paying lip-service to negotiations. Sterling has softened alongside the political uncertainty in the past week, but bigger-picture, we think traders will position for another extension, which favours Sterling-strength pre-October 31.

BP’s Bob Dudley to step down

Upstream business head Bernard Looney will succeed Dudley as CEO when he retires in 2020. The logic seems to be that Dudley has steered the ship well through troubled waters so an insider and one of his team is best suited to take the helm. It’s a new man for new challenges. With Deepwater Horizon in the rear-view mirror, a new era of US shale output and the increasing focus on green energy and the environment, shareholders should feel comforted that succession planning is complete.

18-5-2020

Gold hits 7-year high after Powell Warning
Fed Chair Jay Powell has warned the US economic recovery might last through the end of 2021. The Fed is normally too optimistic in its forecasts so the outlook feels bleak. Still, warm weather is encouraging countries to continue exiting lockdown. If the flu s… Read more

14-5-2020

Powell predicts more pain to come but no NIRP
A warning from the top of the US central bank that there’s more pain to come isn’t going down well across markets. Fed Chair Jerome Powell warned yesterday that more stimulus will likely be needed in the US to fend off the economic damage done by virus and pol… Read more

13-5-2020

“Suffering and death” warning hurts markets
A sense of caution has taken hold across markets. Shares, riskier currencies and oil are pointed lower. There’s a reassessment of the likely timeline for economic reopening. Our sense is markets juiced up by higher liquidity may have gotten ahead of themselves… Read more

12-5-2020

Bitcoin halving, dollar breakout on second wave fears
Market sentiment remains fragile. There’s a lot of emphasis being placed on the virus numbers in economies that have been gradually reopening.  Wuhan, the City in China where it all began reported its first ‘cluster’ of new cases yesterday after lifting restri… Read more

20-4-2020

US oil lowest since 1999, European shares diverge from Wall St
Another oil crash US crude prices have plummeted over 15% to the lowest since 1999. The 21-year low came as sellers were trying to get ahead of the expiry of the May contract tomorrow. Open interest was five times the average. A condition of Super Contango in… Read more

14-4-2020

Lifting restrictions, Softbank & Gold 7-year high
Stocks rising Markets are restarting after a long Easter weekend with a positive tone. Things have moved on from when there was so much bad virus news that the weekend was to be avoided at all cost. European shares look set for a positive open as more nations… Read more

9-4-2020

S&P 500 enters bull market, lockdowns to extend
The mood in markets continues to improve but it’s patchy. Virus cases continue to rise at a rapid clip but markets are extrapolating the data forward and hoping we’re close to a peak.    Asian and European markets are playing catch-up to the rally on Wall St… Read more

8-4-2020

Rally fizzles out, Tesco pandemic costs, Sterling & Boris
Optimism is fizzling out as doubts grow about how and when exactly quarantine and lockdown restrictions will end. The failure of Eurozone finance ministers to agree joint action underscores the limited capacity of governments to cushion the coming economic fal… Read more