Bearish Yellen sparks global selloff

Market volatility heightens as fundamental and political uncertainty dominates the agenda.

Janet Yellen
Source: Bloomberg

Europeans on edge as Brits head to the polls

The topsy-turvy markets seen in recent weeks have been personified perfectly today, with the FTSE 100 oscillating with little sense of direction. Eurozone glee at a strong set of PMIs and news of Greece's latest €200m payment to the IMF has done little to boost the DAX which continues to be dominated by talk of Grexits and Brexits. With only one day to go until election day, markets have shown the same kind of indecision that is plaguing the 25% of undecided UK voters. Markets will no doubt hope for the status quo yet ultimately the worst thing for them would be a rerun, which would see businesses continue to hold off on investment in a manner that sent the construction PMI to its lowest level in almost two years yesterday.

Today's big services PMI beat shows that the economy is on the right path and Q2 GDP is highly likely to be a big improvement on Q1.

UK supermarket Sainsbury's has posted its first pre-tax loss in a decade, as the competition within the sector promises to ramp up even further following another £50 million dedicated to price cutting under a price war driven by its more 'economic' competitors.

GlaxoSmithKline has been forecast to return to growth between 2016-2020 following its decision to switch its focus towards healthcare and vaccines to reduce its over-reliance on pharmaceuticals.

Weak ADP figure does little to lift the market

A third disappointing ADP payrolls number today compounded the feeling that Janet Yellen and co will be increasingly likely to hold off on interest rates for the time being. While Friday's headline figure can often bear little resemblance to its ADP relation, the release of the lowest ADP payrolls number in ten months points to continued weakness in the US labour market.

Despite the dovish connotations of today's ADP miss, US markets have sold off sharply following Janet Yellen's announcement that at current levels, equity valuations seem a little overcooked. In general, such statements largely serve ulterior motives and to me, Ms Yellen is seeking to take the heat out of the market to help avoid a sharp selloff once monetary tightening does begin.

US oil inventories fall for first time in 2015

An unexpected fall in US oil inventories saw WTI extend the gains which have seen it regain almost $20 since the March low of $42. Continued build up of oil in the US has been threatening to derail this recent rally and the news that this has begun to fall shows that the depressed prices of late have finally made an impact upon suppliers in the US.

This will be music to the ears of those at OPEC whose goal it is to price US producers out of the market. However, with the largest ever US stockpile still in place, the threat of another crash remains.

EUR/USD gives euro bulls something to celebrate

EUR/USD has punched above a crucial resistance point at $1.13 today, following a surprisingly strong three weeks for the single currency against the greenback. Despite worries surrounding a Grexit amid signs that no sides will be willing to concede, there is clearly a feeling that EUR/USD weakness seen throughout early 2015 has overshot somewhat and for now, the recovery is expected to continue.


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