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Market Overview

U.S. Stocks Tank as Political Jitters, Weak Earnings Trigger Broad Selling

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U.S. stocks just posted their biggest decline in three months, as disappointing earnings and political jitters drove volatility through the roof.

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Wall Street Slams on the Breaks

Stocks declined across the board on Thursday, with the S&P 500 Index falling 1.5% to 21,750.73. All 11 sectors tracked by the large-cap index finished in negative territory, with eight reporting declines of 1.3% or more.

The S&P 500’s information technology index led the decline, falling 2%. Industrials plunged 1.7%, while telecom and discretionary shares sold off 1.6% apiece.

The Nasdaq Composite Index was the biggest loser in percentage terms, falling 1.9% to 6,221.91.

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The Dow Jones Industrial Average fell 274.14 points, or 1.2%, to close at 21,750.73. All 30 index members posted declines for the first time since September.

Volatility Spikes More than 30%

Wall Street’s fear index spiked on Thursday as selling pressure engulfed equities. The Chicago Board Options Exchange (CBOE) Volatility Index rose 32.5% to 15.55, on a scale of 1-100 where 20 represents the historic mean.

The so-called “fear index” surged by a similar amount last week as geopolitical risks drove investors into the safety of haven assets.

The VIX is riding a wave of momentum, based on the RSI and MACD. As the following chart illustrates, the volatility index trades inversely with the S&P 500 the majority of the time.

Cisco, Wal-Mart Deliver Quarterly Earnings

Mixed earnings from Dow 30 juggernauts Cisco Systems Inc. (CSCO) and Wal-Mart Stores Inc. (WMT) also weighed on markets.

Cisco’s share price declined 4% after the company lowered its guidance for the first quarter of fiscal 2018. The company reported per-share earnings of 61 cents for the quarter on revenue of $12.1 billion.

Wal-Mart delivered solid results, but that wasn’t enough to prevent it from falling 1.6%. The retailing giant reported earnings of $1.08 a share on sales of $123.36 billion. Both figures topped forecasts.

President Trump Faces Backlash

President Trump is fending off criticism from Democrats and fellow Republicans over how he handled the Charlottesville race riots. Trump says “two sides” share the blame for the violence, a statement that was bitterly condemned by mainstream media. In response, business leaders cut ties to the president’s manufacturing council, with at least two high profile CEOs resigning this week.

Trump swiftly disbanded the panels in a decision that was publicized via Twitter.

The Day Ahead

A tumultuous session on Wall Street is expected to trigger similar volatility in global markets. Asian stocks are down across the board at the start of Friday trading, mirroring futures activity during the pre-market hours.

Europe’s main stock futures are also lower, hinting at a rocky start to the Friday session.

A lack of market-moving data will keep investors focused on Washington, where an embattled president is struggling to move forward with his agenda.

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Market Overview

Asian Market Update – Wednesday: Coins fall back after strong rally; Asian stocks mixed ahead of Fed decision

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Falling

Litecoin surged 60 percent on Coinbase, but other exchanges are lagging behind

The main cryptocurrencies took a hard hit on Wednesday morning in Asia, after strong gains the day before.

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On Coinbase, bitcoin fell 4.79 percent to $16,880 at midday in Asia. The virtual currency had a nice run on Tuesday before erasing nearly all gains for the day on Wednesday morning.

Though investors are optimistic that bitcoin could hit the $20,000 mark any time soon ahead of more futures markets being launched next week, some government officials in South Korea and Australian appear to be very skeptic about the rise of bitcoin.

In Australia, the head of the country’s central bank, Philip Lowe, said that bitcoin rise is a “speculative mania” and that it was more of a payment method for the black or illegal economy. In South Korea, the government said in a statement on Wednesday that it will consider taxing capital gains from cryptocurrency trades, though this is something many other countries are already practicing.

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Ethereum fell sharply on Wednesday morning, after a solid upswing on Tuesday. At midday in Hong Kong on Wednesday, the cryptocurrency was down 5 percent to $646. On Tuesday, ethereum posted a gain of more than 32 percent to hit a record high of $686.

Litecoin also lost about 6 percent to $325 on Coinbase Wednesday morning. Litecoin made headlines across the crypto world of on Tuesday after an extreme surge on Coinbase of over 60 percent in a single day.

There are now significant price differences between Coinbase and other exchanges on the LTC/USD pair. While litecoin has been gaining across the board, no other exchanges have come close to the prices seen on Coinbase over the past few days.

Main Market Movers – Mid-day Asian Trading Session

Indexes Value at Midday Daily Change
Japan- Nikkei 225 22,697 -0.73%
China-Shanghai Composite Index 3,276 -0.12%
Hong Kong –Hang Seng 28,884 0.31%
South Korea-KOSPI 2,478 0.71%
Australia-ASX 200 6,008 -0.08%
S&P 500 E-Mini Futures 2,661 -0.27%

Major Asian equities were in mixed mode on Wednesday morning, as investors were waiting for an interest rate decision from the US Fed later in the day.

Overall, markets were down in Japan, the Chinese mainland and Australia, while indexes were pointing slightly higher in Hong Kong and South Korea.

the S&P 500 E-Mini Futures was off 0.27 percent at 2,661 at midday on Wednesday.

In Hong Kong, the Hang Seng Index edged up 0.31 percent to 28,884 at midday.

In South Korea, the Kospi was 0.71 percent higher to 2,478 at midday. Positive news regarding North Korea came out of Washington on Wednesday, when US Secretary of State Rex Tillerson indicated that the US is ready to talk with North Korea.

In Japan, the Nikkei 225 Index lost 0.73 percent to 22,697 at midday.  A debate on the BOJ’s monetary policy next year is ongoing, but the latest news reports suggest the central bank is likely to keep rates low.

On the Chinese mainland, the Shanghai Composite Index was off 0.12 percent to 3,276.

Down under, the ASX 200 was down 0.08 percent to 6,008 at midday.

The US Fed is scheduled to conclude its two-day policy meeting on Wednesday, and markets are cautiously waiting for any clues of the Fed’s decision on interest rate hikes. If the Fed indicates a more hawkish tone, it would likely put pressure on emerging markets equities and currencies.

Currencies

The Japanese yen firmed 0.26 percent against the US dollar at midday Wednesday, changing hands at 113.26 per dollar.

The Chinese yuan gained 0.04 percent against the US dollar at 6.6183 per dollar.

The Australian dollar firmed 0.29 percent on the dollar, changing hands at 1.3195 per dollar at midday.

Commodities

WTI Oil was up 0.14 percent to $57.51 per barrel.

Brent Crude edged up 0.16 percent to $63.92 per barrel.

Gold was down 0.01 percent to $1,244 an ounce.

News across Asia

In China, Google Inc. announced in Beijing on Wednesday that it would open an artificial intelligence (AI) research center in China, which it said would be the first of its kind in Asia.

Take away: With laser-like focus from the Chinese government on AI, Google is trying to tap into China and get ahead in what could be a game-changing technology that has a wide range of applications.

In Japan, Reuters reported on Wednesday that the Bank of Japan is set to keep an assumed interest rate at a record low of 1.1 percent. The central bank has been keeping its rates low and in turn borrowing costs low, albeit missed inflation targets and signs that the economy is improving.

Take away: There are different voices within the BOJ, where some are pushing for an end to ultra-easy monetary policies, while others are advocating for a continuation of those polices.

Featured image from Pixabay.

Disclaimer: The author owns bitcoin, ethereum and litecoin. He holds investment positions in the coins, but does not engage in short-term trading.

Important: Never invest money you can't afford to lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here.



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Bitcoin

Is Bitcoin Stealing Gold’s Luster?

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It may still be too early to gauge Wall Street’s attitude towards bitcoin but so far the sentiment we’re seeing is extreme caution.

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Yesterday, the CBOE’s new contracts saw just 411 coins traded, which comes out to about $7.3 Million, or about 0.062% of the total amount traded on the world’s largest exchange sites.

The SEC financial regulator in the United States has now issued a warning on cryptotrading and especially on ICOs saying what most of us in the industry already know. If something looks like a scam and smells like a scam, it probably is one.

Furthermore, by calling something an ICO it does not change the underlying nature of the asset itself. If a company is offering a token that acts as an investment in the success of that company, it still falls under the jurisdiction of the same regulations as any other financial asset.

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We can expect them to continue to crack down on specific companies who have intentionally tricked investors in this space as they probably should have been doing right from the start.

In today’s update, I’d like to explore with you the relationship between the world’s newest financial asset and it’s oldest most established store of value. Please keep an open mind as I’d love to hear your opinion after you read it.

@MatiGreenspan
eToro, Senior Market Analyst

Today’s Highlights

Oil & Ice in London

Bitcoin Replacing Gold?

Some Data and a Question

Please note: All data, figures & graphs are valid as of December 12th. All trading carries risk. Only risk capital you can afford to lose.

Market Overview

Stocks in the United States climbed further yesterday nearing all-time record highs powered by advances in tech stocks and the energy sector.

The UK’s main North Sea pipeline has been shut down for repairs due to a hairline crack and will likely be out of commission for a couple weeks. There’s a yellow weather warning out in London telling residents to prepare for ice.

The combination of greater demand and less supply has sent the price of oil up in the UK but even the West Texas Instruments oil that is traded at eToro is seeing a significant surge toward the highs.

The price of oil has been rising steadily thanks to efforts from OPEC to reduce the global glut. Still uncertain, how US oil producers are going to react to all this.

Stock markets in Asia did not continue New York’s sentiment and the China50 index fell 1.8% today. The European markets are opening just now but looking rather flat.

In addition, we’re seeing a notable risk-on sentiment in the currency markets, with the safe haven’s (USD, JPY), and Euro) down and the risky currencies gaining in comparison.

What about Gold?

Normally, we would look to gold to understand investor attitude towards risk on any given day. After thousands of years of acting as a store of value and a solid place to keep your money in times of crisis, it has forged a sturdy relationship with other assets and served as the main barometer for risk sentiment.

Indeed, with the markets showing risk on today, we do in fact see gold taking a dive. However, what’s more interesting to investors at the moment is gold’s relationship with bitcoin.

An analyst on from ACG on CNBC yesterday made the claim the bitcoin was stealing some of gold’s market share, saying the the crypto-market is now standing at about 23% of the liquid “tradeable” gold in the market.

Seemingly in response, an analyst from Goldman Sachs was quoted in the Financial Times as saying that this is not happening and that the markets remain unconnected.

Let’s take a look at some charts

Over the last few weeks, we can spot a rather clear reverse-correlation between the two assets with the chart creating a rather large X as bitcoin surges and gold declined over the same period.

but the most interesting thing that I’m seeing is actually what’s happened in the last 20 hours or so. Here, take a look at this snapshot.

Of course, it’s a very small amount of data, but at least from 16:00 yesterday afternoon bitcoin and gold are trading in a lockstep mirror image.

Deeper in the data

In eToro, it’s no secret that we’re seeing a lot of new customers mainly thanks to the rise in populist finance surrounding the cryptocurrencies. I’d like to take this opportunity to welcome everybody, I hope you’re enjoying the platform so far. 🙂

After an extensive conversation on the above question with one of our senior officers in the trading department. It seems that what we’re seeing in eToro is actually a trickle-down effect.

Meaning, yes. We’re seeing volumes on bitcoin going through the roof but the volumes on gold are rising as well. Of course, this is only an initial finding and we’ll need to pour into the data a bit further later on, but it seems that the volumes that we’re seeing on gold so far this year have more than doubled what we saw last year.

In comparison, we are also seeing increases in the volumes of Oil and the Euro Vs the US Dollar but the increase on these assets is not as much as the increase that we saw in gold.

This indeed could be a remarkable find in behavioral economics. Similar to when a new Pizza Shop opens up just down the street from an established one. It would seem initially that they would now need to fight over market share but in fact, as the awareness grows so does the hunger for investments and in fact, both end up benefiting as a result.

As this is only my personal view from where I sit. I do believe that this question is more of an emotional one that should be put to the general public and not one to be answered by financial analysts such as myself who may be already stuck in a certain way of thinking.

If you have a moment, please reply on this post either by Email, or with a comment below (depending where you see it), or just tag me on social media with your thoughts and opinions.

This content is provided for information and educational purposes only and should not be considered to be investment advice or recommendation.
The outlook presented is a personal opinion of the analyst and does not represent an official position of eToro.

Past performance is not an indication of future results. All trading involves risk; only risk capital you are prepared to lose.

Important: Never invest money you can't afford to lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here.



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Market Overview

Asian Market Update – Tuesday: Litecoin price skyrockets despite creator’s warning; Asian stocks down

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litecoin

The Big Question: What’s going on with litecoin?

Bitcoin might very well be the top story these days, but an explosive run by litecoin in recent days has gotten the attention of the cryptocurrency world and beyond.

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After gaining more than $68 to hit a new record of $235 on Coinbase on Monday, litecoin prices continued to surge Tuesday morning in Asia. At midday, the cryptocurrency was up 17 percent to $255, another all-time high.

Though litecoin has been in a strong uptrend all year, its appeal has been hidden in the shadow of bitcoin. That was until last weekend when the price exploded, sending the coin surging by more than 150 percent over the past 5 days. Having gained more than 4,000 percent this year (more than bitcoin’s 2,000 percent), litecoin may be ready to take the step into mainstream following bitcoin’s enormous success.

Litecoin’s rapid increase in value comes after creator Charlie Lee even warned of the risks of buying litecoin, saying on Twitter:

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“Sorry to spoil the party, but I need to reign in the excitement a bit… Buying LTC is extremely risky. I expect us to have a multi-year bear market like the one we just had where LTC dropped 90% in value ($48 to $4). So if you can’t handle LTC dropping to $20, don’t buy!”

According to CryptoCoinsNews, some of the reasons reported for litecoin’s price surge may be:

  • An increasing user base on Coinbase, being the most popular platform for new investors in cryptocurrencies. Litecoin is one of few cryptocurrencies available on the platform, and many new users may simply be buying litecoin because they learn about it from Coinbase.
  • Appearances of Charlie Lee on several prominent news networks, including CNBC, may have boosted public interest.
  • Gaming giant Steam has replaced bitcoin payments with litecoin citing rising costs for bitcoin transactions for small purchases.

Also, a strong fan base for litecoin is in the making. Many argue that litecoin is bitcoin’s younger sibling and could rise to where bitcoin is today.

Ethereum also continued on a strong upswing on Tuesday morning. At midday, ethereum was up 2.70 percent to $532 -a record high for the cryptocurrency. Tuesday’s gain followed a huge gain of $71 to a high of about $518 on Monday.

Bitcoin was nearly unchanged on Tuesday, after a big surge on Monday following bitcoin’s debut on the on the CBOE Futures Exchange in Chicago. At midday on Tuesday, bitcoin price was down 0.7 percent to $16,765 on Coinbase. Bitcoin gained more than $1,600 on Monday.

Main Market Movers – Mid-day Asian Trading Session

Indexes Value at Midday Daily Change
Japan- Nikkei 225 22,900 -0.17%
China-Shanghai Composite Index 3,303 -0.57%
Hong Kong –Hang Seng 28,832 -0.46%
South Korea-KOSPI 2,459 -0.47%
Australia-ASX 200 6,009 0.18%
S&P 500 E-Mini Futures 2,666 0.08%

Major Asian equities were narrowly down on Tuesday morning, after three days of straight gains that continued on Monday, following strong performance on Wall Street overnight.

The slow Asian trading was led by stocks on the Chinese mainland. The Shanghai Composite Index edged down 0.57 percent at midday on Tuesday to 3,303. That came after the People’s Bank of China injected 150 billion yuan (about $22.7 billion) into the financial markets through a reverse bond repurchase arrangement on Tuesday.

In Hong Kong, the Hang Seng Index was down 0.50 percent to 28,832.

In South Korea, the Kospi lost 0.47 percent to 2,459 at midday.

In Japan, the Nikkei 225 Index was off 0.17 percent to 22,900.

Stocks moved up a bit Down under, with the ASX 200 up a slight 0.18 percent to 6,009 at midday.

The S&P 500 E-Mini Future was up 0.08 percent to 2,666.

Investors are closely watching meetings of the Fed and the ECB this week. The Fed will conclude its two-day meeting on Wednesday and markets are looking for cues of rate hikes in 2018. The Fed had previously signaled three hikes in 2018, but recent positive economic data could change the number of rate increase, some analysts say. The ECB, which is scheduled to meet on Thursday, is not expected to make any major changes.

Meanwhile, tax reform talks in the US, trade talks among North American countries and Brexit negotiations are continuing.

Currencies

The Japanese yen firmed 0.06 percent against the US dollar at midday Tuesday, changing hands at 113.47 per dollar.

The Chinese yuan lost 0.02 percent against the US dollar at 6.6214 per dollar.

The Australian dollar firmed 0.10 percent on the dollar, changing hands at 1.3273 per dollar at midday.

Commodities

WTI Oil gained 0.47 percent to $58.27 per barrel.

Brent Crude edged up 0.96 percent to $65.32 per barrel.

Gold was up 0.18 percent to $1,244 an ounce.

News across Asia

In China, officials and experts are warning Chinese companies that do business in Australia of potential changes in policy, as China-Australia relations have worsened. Aussie officials have voiced sharp criticism of China over alleged Chinese influence in Australian politics through business operations.

Take away: China-Australia trade ties have traditionally been strong, with China importing tens of billions of dollars worth of Australian goods. But recent signs show that that could change as China shows willingness to use trade as leverage in political disputes with Australia.

In the Philippines, a bank that has been blamed for being used to steal $81 million from Bangladesh’s central bank has accused monetary officials there for covering up their negligence and making the bank a scapegoat. Bangladesh Bank has asked US officials to join a lawsuit against the Philippines’ Rizal Commercial Banking Corp (RCBC) over the stolen funds. Unidentified hackers stole the money from Bangladesh Bank and sent it to RCBC.

Take away: The case, if Bangladesh Bank wins, could provide precedent for other hacking incidents where a company or bank were unknowingly involved.

Featured image from Pixabay.

Disclaimer: The author owns bitcoin, ethereum and litecoin. He holds investment positions in the coins, but does not engage in short-term trading.

Important: Never invest money you can't afford to lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here.



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