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Gold gains may not last as Fed restarts asset purchases

European shares have steadied, making modest gains on Wednesday morning with US futures pointing to another dip at the open.

Now just waiting for trade Talks

This week’s US-China trade talks now look over before they’ve even began so markets are re-pricing the chance of progress. Now it is understood that positions have hardened on either side so investors have dimmed the selling while they wait for the talks to begin.

Merkel crushes any lingering Brexit deal hopes

The pound is down but no out following the latest Brexit twist. In the space of a month, German Chancellor Angela Merkel has gone full circle from the beacon of hope to the bearer of bad news on Brexit. A war of words between Downing Street sources and EU officials has seen a souring of the mood. There is a glimmer of hope from a scheduled meeting between the British and Irish Prime Ministers this week, but we like most, think a deal at this stage is lost. The fall in Sterling in our view is not so much disappointment that a (never very likely) deal will now not get though. This new stand-off means a higher chance that Boris is forced to run an election campaign on No Deal.

As we noted yesterday, legal texts saying the PM will extend on October 19 limits the downside for Sterling. Boris sneaking a No Deal through a legal loophole / backdoor wouldn’t be a good look for any forthcoming election, so we don’t see it as a likely proposition. For now our base case is a “reluctant extension” and a modest recovery in Sterling.

GVC shares looks good after OTC pickup

Shares of GVC rose over 2% after the betting firm raised its full-year guidance in its latest update. The stake-limit has killed off the Fixed Odds Betting terminals business so its welcome to see other areas of the business taking some of the slack. Online gaming has been a steady source of growth for GVC so the positive surprise was the pickup in the OTC (over-the-counter) business. Gains were capped by a warning from the company about the regulatory uncertainty in Germany. We view the regulatory interventions in the UK and Germany as an opportunity to position for the long-term potential growth from US sports betting at a lower valuation.

Gold gains may not last as Fed restarts asset purchases

Some are taking a positive view that the Fed re-starting asset purchases is the first step towards QE and that should be good for gold. Indeed gold prices are higher since the announcement. We are a little more glass half-empty on the yellow metal short term. We take the Fed at their word on this, that the resumption of asset purchases is to fix issues in the repo market, nothing else. If this is not an under-the-table-QE, then it is more evidence of reluctance from the Fed to acknowledge they have begun a full-blown easing cycle. The gains in gold were probably more a reaction to Fed Chair Powell making a robust signal that another rate cut is coming October, which does slightly improve the allure of non-interest-bearing assets. Our expectations are for another drop through $1485 per oz, though this view will need re-evaluation if gold rise above $1535.

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