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Wall Street’s Selloff Quickly Spreads East as Nikkei, Shanghai Composite Fall Hard

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Asian stocks posted huge losses at the start of Friday trading as a third round of Wall Street selloffs triggered fresh tumult in global markets.

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Asian Markets Follow U.S. Stocks to the Basement

Equity markets were down at least 3% across Asia, with mainland China leading the decline. The Shanghai Shenzhen CSI 300 Index was down more than 4% early Friday, extending its monthly loss to 8%. The Shanghai Composite Index was also down 4%.

Japan’s 225-issue Nikkei was off more than 700 points, extending its four-week slide to a staggering 11%.

Meanwhile, Australia’s benchmark S&P/ASX 200 Index fell more than 1%.

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Investors quickly sought shelter in safe havens such as the Japanese yen and Swiss franc, which rose sharply on Thursday. Both currencies were little changed versus the dollar on Friday.

Gold, long valued for its risk-off properties, snapped a three-day slide on Thursday, but failed to generate additional momentum. Bullion contracts for April delivery last traded at $1,320 a troy ounce.

Wall Street, the Center of Global Chaos

U.S. equities were once again the center of market turmoil as rate-hike jitters stoked a sharp rise in bond yields. In general, higher bond yields impact stocks negatively by increasing borrowing costs, which means companies have to pay more to finance important business processes. Higher yields also tend to dampen risk appetite, leading investors into assets deemed more stable.

For skeptics of the bull market, higher borrowing costs aren’t necessarily a bad thing. According to a recent report from S&P Global Ratings, the number of firms deemed to be “highly leveraged” is higher now than it was before the financial crisis. Although the end of cheap money may be bad for stocks, it could help slow the rise of borrowing that is leaving the economy dangerously exposed to risk.

However, the impact of higher interest rates is more complicated when we factor how much the economy actually depends on cheap money to survive. This conundrum was recently outed by Peter Schiff, the renown financial commentator and chief global strategist of Euro Pacific Capital:

“The economy is not good, right? And even if it was good, it ain’t gonna stay good. Because it’s not just the stock market that needs cheap money. It’s the economy. It’s this phony, bubble economy. That is its life-blood, its mother’s milk. You can’t take that away. But that is exactly what is in the process of happening.”

Schiff, a skeptic of cryptocurrency, believes gold prices will rise now that the stock market is finally cratering.

Gold prices have shown strong upward momentum in recent months, but have failed to breakout in convincing fashion.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.5 stars on average, based on 404 rated postsSam Bourgi is Chief Editor to Hacked.com, where he specializes in cryptocurrency, economics and the broader financial markets. Sam has nearly eight years of progressive experience as an analyst, writer and financial market commentator where he has contributed to the world's foremost newscasts.




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Market Overview

Weekly Forecast: Economic Data, Post-Consensus Wrap-Up and Zcash’s Gemini Listing

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It’s shaping up to be another active week in the financial markets, as currency and stock traders shift their attention to economic data and geopolitics. Cryptocurrency traders will be looking for clues about the direction of the market following a highly successful Consensus blockchain summit.

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To get a better sense of what’s ahead, we encourage readers to go over latest Week in Review.

Consensus 2018: The Aftermath

The year’s biggest blockchain event was greeted positively by policymakers, academics and industry proponents. However, unlike the previous three years, Consensus failed to spark a sustained rally in cryptocurrency prices.

Though Consensus usually generates double-digit gains for bitcoin during the event, the bulk of the rally occurs long after the summit has taken place. Since 2015, post-Consensus gains have ranged between 78% and 138%. With this precedent in mind, traders will be closely monitoring market activity over the next few weeks to see if price action follows a similar trajectory.

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In addition to Consensus, the blockchain industry is riding a wave of momentum tied to institutional adoption, innovation and sanguine comments from regulatory agencies. These stories have counterbalanced negative headlines concerning fraudulent ICOs and the massive carbon footprint of bitocin mining.

Zcash Lists on Gemini

The privacy-focused Zcash cryptocurrency has been cleared by U.S. regulators to be listed on the Gemini exchange. The exchange, which is led by Cameron and Tyler Winklevoss, began accepting ZEC deposits on Saturday with full trading expected to begin on Tuesday. ZEC values surged to two-and-a-half month highs following the news.

By listing on Gemini, Zcash could enjoy higher liquidity and become a front-runner in the launch of cryptocurrency derivatives products. That’s because Gemini provides pricing data to CBOE, which was the first regulated exchange to launch bitcoin futures. According to some analysts, the addition of Zcash could hasten the production of ZEC derivatives products.

Economic Calendar

Traders with exposure to stocks, currencies and commodities can expect a steady stream of market-moving events throughout the week.

Monday

Three members of the Federal Open Market Committee (FOMC) are scheduled to deliver speeches on Monday, including Raphael Bostic, Patrick Harker and Neel Kashkari. The Fed’s policy-setting board is widely expected to raise interest rates at its next meeting in June.

Fed fund futures prices imply two more rate hikes for 2018, with a third upward adjustment a strong possibility.

In terms of economic data, the Chicago Fed will release the national activity index at the start of New York trade.

Tuesday

The United Kingdom’s House of Commons will hold inflation report hearings on Tuesday. In North America, the U.S. Richmond Fed will release its monthly manufacturing survey for May.

Wednesday

Wednesday is the most active session of the week from a data perspective, with IHS Markit scheduled to release a deluge of PMI reports for Japan, Eurozone and United States.

The U.K. Office for National Statistics will release headline inflation figures, including the consumer price index and producer price index for the month of April.

In the United States, the Federal Reserve will release the FOMC meeting minutes for May.

Commodity traders will be keeping close tabs on weekly crude inventory data courtesy of the U.S. Energy Information Administration (EIA). Crude inventories are forecast to fall by nearly 1.8 million barrels in the week ended May 18.

Thursday

A meeting of the Eurogroup will be in the headlines in the second half of the week, although it is not expected to generate any strong signals about monetary policy. In terms of data, GfK will report on German consumer confidence and the U.K. government will issue its monthly report on retail sales.

The European Central Bank (ECB) will release the monetary policy meeting accounts of its most recent gathering, where officials voted to keep interest rates on hold.

The Fed’s William Dudley and Patrick Harker of the FOMC are also scheduled to deliver speeches.

Friday

Japanese inflation data and the latest GDP figures for the U.K. will headline the economic calendar on Friday. In the United States, a report on monthly durable goods orders will also make headlines.

Federal Reserve Chairman Jerome Powell will participate in a panel discussion on financial stability and central bank transparency in Stockholm, Sweden.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.5 stars on average, based on 404 rated postsSam Bourgi is Chief Editor to Hacked.com, where he specializes in cryptocurrency, economics and the broader financial markets. Sam has nearly eight years of progressive experience as an analyst, writer and financial market commentator where he has contributed to the world's foremost newscasts.




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Market Overview

Rome wasn’t built in a day

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As blockchain week in New York winds down, we’re seeing several articles like this one

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What the writers of these articles fail to realize is the underlying principle behind the so-called “consensus effect” and what it’s all about.

This is not “pump” and it was never about speculation or crypto trader exuberance. The theory championed by Tom Lee and others is about the construction of infrastructure.

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During the event, we witnessed a flurry of exciting product launches, new partnerships, groundbreaking initiations, and investment commitments. These are the type of things that tend to have a large impact on market prices, but not instantly.

In the last three years, we have seen that bitcoin stayed flat for weeks after the Consensus conference and then took off about a month later. This graphic does a rather good job of displaying the delayed fuse…

Our CEO and co-founder of eToro Yoni Assia took the center stage several times during the conference and this morning wrote us a powerful letter. Here is small excerpt…

Rome wasn’t built in a day.

@MatiGreenspan
eToro, Senior Market Analyst

Today’s Highlights

  • Rome Rebuilt
  • Chinese Stocks Boost
  • The Bitcoin Chart

Please note: All data, figures & graphs are valid as of May 18th. All trading carries risk. Only risk capital you can afford to lose.

Traditional Markets

In the last hour, Italy’s Five Star Movement has announced that they’ve finalized a contract with the League, and will vote on it shortly. It looks like the nation will finally have a working government, possibly as soon as this weekend.

The good news is that it seems they will not be asking the EU to write off their €250 billion debt. The idea was gaining traction within the country, but as we saw with Greece not too long ago, it would be very difficult to get any European leaders to simply erase a mountain of debt.

Some of the highlights of the deal do include….

A quick glimpse at Italian bond yields shows that investors aren’t exactly thrilled with the new plan.

Putting it in perspective, we can see that the new updates are far more impactful than the recent election…

eToro’s top Italian analyst writes…

The main issue is: how do they think they will get the necessary financial coverage for those reforms? (Citizenship Income, Pension Fornero’s Law, Flat Tax)
Do they really think that Brussels will allow them to create new spending initiatives (immigration for example) without batting an eyelid?
It does not seem like the new coalition will have the necessary strength to get the weight in a Europe to affect any real change.

-Gabriel Debach
eToro, Italian Market Analyst

No Worries

If the international markets are concerned about any of this, it sure isn’t showing up in asset prices today. Stocks are mostly flat around the world, with the exception of the China50, which is flying…

This could be due to a softer outlook for the US-China trade negotiations, or possibly just because the index is currently 15% from the top.

Either way, it’s the only real mover today other than crypto.

Crypto Drop

Digital assets went through a mild sell-off last night. Bitcoin fell through support at $8,250 and is now barely holding $8k.

The good news is that the alleged Upbit scandal that smacked EOS and the rest of the crypto markets seems to be resolved now. Bad news always travels faster than good news. Though there was a sell-off when this news hit, the resolution doesn’t seem to be having an opposite effect.

Nothing affects sentiment like price, and as the price drops it is important to put things into perspective. This graph shows the long-term trend line that’s been a foundation of support for the market in the last few months.

Judging by this, it is a distinct possibility that we’ll be testing this line again circa $7,100. The blue line (200DMA) and the round level of $10k will certainly be a hard walnut to crack, but if we do somehow get on top of it…

Let’s have an amazing weekend!

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.

Cryptocurrencies can widely fluctuate in prices and are not appropriate for all investors. Trading cryptocurrencies is not supervised by any EU regulatory framework.

 

Best regards,
Mati Greenspan
Senior Market Analyst

eToro: @MatiGreenspan | Twitter: @MatiGreenspan | LinkedIn: MatiGreenspan | Facebook:MatiGreenspan

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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Market Overview

Market Update: Stocks Give Up Gains as Treasury Yields Climb

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U.S. stocks struggled to hold gains Thursday, as rising bond yields pressured the major indexes ahead of a planned interest-rate hike next month.

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Stocks Drift Lower in Afternoon Trade

All of Wall Street’s major indexes closed well off their daily highs, with the S&P 500 Index finishing down 0.1% at 2,720.13. Only four of 11 primary sectors reported clear-cut gains, with energy shares jumping more than 1%. On the opposite side of the ledger, utilities and telecom were the biggest decliners.

The Dow Jones Industrial Average fell 54.95 points, or 0.2%, to close at 24,713.98. Meanwhile, the technology-driven Nasdaq Composite Index slipped 0.2% to 7,382.47.

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The CBOE VIX – a measure of anticipated volatility over the next 30 days – held lower on Thursday, reflecting underlying calm on Wall Street. The so-called “fear index” closed at 13.43 on a scale of 1-100 where 20 represents the historic mean.

Stocks were pressured once again by rising bond yields, with investors continuing to bet on higher interest rates to tame inflation. The yield on the benchmark 10-year U.S. Treasury more leaked at 3.1% Thursday, the highest since 2011.

Geopolitics Drive Commodities

Geopolitics was the main focus for commodity traders Thursday, as investors became more convinced that Iranian sanctions would limit crude exports from the Persian Gulf.

According to some analysts, restoring sanctions on Iran could disrupt oil shipments from the country by as many as 1 million barrels per day.  Others say the impact won’t be nearly as severe given continued support for the Iran nuclear deal by China and America’s European allies.

Oil prices on Thursday rose to their highest level since 2014, with Brent crude topping $80 a barrel on London’s ICE Futures exchange. In New York, West Texas intermediate (WTI) broke above $72 a barrel.

Crude prices rallied even as the U.S. dollar reached its highest level in five months. A stronger dollar often dissuades international investors from purchasing commodities denominated in the U.S. currency. The U.S. dollar index (DXY) reached a daily high of 93.57.

Cryptocurrency Prices Struggle for Direction

The cryptocurrency market fell deeper below $400 billion on Thursday, as prices failed to build off overnight gains. The market’s total capitalization fell to $376 billion after peaking at around $390 billion, latest figure from CoinMarketCap show.

Digital currencies have struggled for momentum in recent weeks even as the value proposition for investing increased. The blockchain industry is brimming with confidence on signs of wider institutional adoption, growing use cases and support for innovation from governmental agencies.

Though bitcoin prices have struggled below $9,000 this week, a former trader at JPMorgan Chase recently predicted new record highs for the digital currency this year.

Danny Masters, who now chairs investment firm CoinShares, believes prices are destined for $20,000 this year as market structures continually improve.

“We need to see the custody solutions come and be provided. We need indices and we need performance measures where we can actually start to understand what we’re talking about and measure our performance,” Masters said, as quoted by CCN.

Bitcoin drifted 1.5% lower on Thursday to trade around $8,200.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.5 stars on average, based on 404 rated postsSam Bourgi is Chief Editor to Hacked.com, where he specializes in cryptocurrency, economics and the broader financial markets. Sam has nearly eight years of progressive experience as an analyst, writer and financial market commentator where he has contributed to the world's foremost newscasts.




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