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Market Overview

U.S. Stocks Cling on to Gains as Fed Minutes Underscore Inflation Concern

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U.S. stocks traded in record territory on Wednesday as the risk of persistently weak inflation hung over the Federal Reserve’s most recent policy meeting.

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Fed Debates Inflation

Federal Reserve policymakers last month debated whether stubbornly low inflation was transitory or permanent, with several voicing concerns that it could be the latter.

“Many participants expressed concern that the low inflation readings this year might reflect not only transitory factors, but also influence the developments that could prove more persistent,” the minutes of the September 19-20 Federal Open Market Committee (FOMC) revealed on Wednesday.

Several Fed officials said their decision to move forward with policy tightening this year would depend on economic data tied to inflation and growth.

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The FOMC held interest rates steady last month and outlined a plan to begin unwinding the $4.5 trillion balance sheet beginning in October. Although the Fed’s dot plots imply one more interest rate increase before year’s end, the minutes struck a decidedly dovish tone.

The next reading on inflation comes Friday when the Department of Labor issues the Consumer Price Index (CPI) for September. CPI is a closely-watched inflation measure, but not the one the Federal Reserve uses to measure cost pressures. That distinction belongs to the core personal consumption expenditures (PCE) index, which is packaged with the monthly personal income and outlays report.

Stocks Close at Record Highs

Wall Street advanced in mid-week trading, with all three major indexes closing in record territory.

The large-cap S&P 500 Index climbed 0.2% to close at 2,555.24, with eight of 11 sectors contributing to the gain. Among them, information technology and utilities rose 0.5% apiece.

The Dow Jones Industrial Average rose 0.2% to 22,872.89. The Nasdaq Composite Index reported a gain of 0.3% to close at 6,603.55.

A measure of 30-day volatility known as the CBOE VIX fell back into the single digits, signaling prevailing calm on Wall Street. The VIX Volatility Index slipped 2.3% to 9.85, on a scale of 1-100 where 20 represents the historic mean.

Stocks are on an unstoppable run ahead of earnings season, which is expected to show another solid quarter of year-over-year gains for Wall Street. The benchmark indexes have returned between 14% and 22% this year alone.

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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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Market Overview

Welcome to the Party

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The first bitcoin futures contracts are now up and running on the CBOE. The excitement was everything we expected and more.

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Overall, $40 Million worth of volume was added by Wall Street, which comes out to about 0.3% of yesterday’s total volume. A slow but significant start.

The lack of short sellers emboldened the entire crypto-market causing prices of bitcoin and many other tokens to skyrocket towards their all time highs.

CBOE’s circuit breakers that are designed to halt trading should the price swing too wildly kicked in… twice.

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In addition, the CBOE’s website experienced a remarkable surge in visitors causing the website to crash several times and delayed service, though the trading mechanisms held up well.

Welcome to the party. You’ve got a lot of catching up to do.

@MatiGreenspan
eToro, Senior Market Analyst

 

Please note: All data, figures & graphs are valid as of December 11th. All trading carries risk. Only risk capital you’re prepared to lose.

Market Overview

The US Jobs report comfortably beat expectations on Friday causing the stock markets to rise nicely. The momentum seems to have carried through the weekend with Asian markets up this morning and futures pointing to a positive open in Europe.

In addition, the Federal Reserve is expected to raise their interest rates this Wednesday and a fresh round of stimulus from the People’s Bank of China may be on the cards shortly after.

Thursday will be a huge day for Forex traders as we get interest rate announcements from the Swiss National Bank, the Bank of England, and the European Central Bank.

Though the Fed is gradually tightening their belt, money around the world is still cheap and easy, which is why many stock indices are breaking new record highs.

Trouble on the Border

The ground-breaking deal that was reached between the UK and the EU last week hinged heavily on the deal that the UK reached with their neighbors in Ireland. The idea is that the border between Ireland and Northern Ireland will not revert to a hard border.

Meaning, that the UK will need to keep the flow of goods and services into North Ireland following the regulations dictated by the EU. However, over the weekend we saw some controversy as the UK government tried to backpedal a bit on this deal saying that it was contingent on the upcoming negotiations with the EU.

The Irish were notably miffed as they understood these negotiations to be final and we’re now back at a point of contention.

The GBPUSD is once again testing the rising support level that it has been building since early November. So much rests on a comprehensive and favorable deal to be struck.

Crypto Gone Wild

In the old markets, we used to say “buy the rumor sell the news.” In what is being called the new normal we say “buy the rumor buy the news.”

In crypto, we just say “buy everything as much as you can.”

Though this market is extremely risky, investors in this space don’t even seem to notice. With the introduction of Bitcoin futures on Wall Street came a strong and powerful rally across the crypto-world. Out of the top 100 biggest cryptocurrencies, 94 of them are in the green today.

Revision: In Friday’s update we mentioned that there is a chance that the price of the CBOE futures may become disconnected from the rest of the market. A few readers have pointed out that this is not correct.

The CBOE’s XBT futures are actually fixed to the price traded at Gemini.com and are settled in cash daily. The CME Group’s contracts will be a bit more advanced and the price will be set by an index that is derived from several exchange sites.

Regardless of the excitement in the market, we must remember that Wall Street has only so far dipped their toes in the water and it may take a month or two to really understand how much they will be able to impact the prices around the world.

The good news is that the bitcoin miners have been working hard over the weekend and managed to reduce the backlog of unconfirmed transactions. The mempool is back under 100,000. 🙂

Keep a close eye on the all time highs of your favorite coin. If we start seeing any breakouts, there’s no telling how high we might go.

Have an amazing week ahead!

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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