Market Review 19-11

Market Review 19-11

Forex News

Dollar pauses as Fed officials caution about global growth


The greenback has enjoyed a strong run this year thanks to the Fed’s steady policy tightening on the back of a robust economy and rising wage pressures. A fourth rate hike for this year is expected next month and policy makers had indicated two more by June 2019.

But comments on Friday by Richard Clarida, the Fed’s newly appointed vice chair, put to the test market expectations for a steady pace of tightening. Clarida cautioned about a slowdown in global growth, saying “that’s something that is going to be relevant” for the outlook for the U.S. economy.

Federal Reserve Bank of Dallas President Robert Kaplan, in a separate interview with Fox Business, also said he is seeing a growth slowdown in Europe and China.

The comments may hint that the Fed is set to slow down its pace of monetary tightening and led some traders to question whether the dollar’s rally was nearing its end, with the benchmark U.S. 10 year treasury yields pulling back slightly.

New York Fed President John Williams will speak later on Monday and traders would be waiting to see if he echoes the same theme as his colleagues.

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Pound steady at start of potentially volatile week


The pound held steady at the start of what could be a volatile week, as the weekend failed to produce neither more MP resignations on Brexit, nor a challenge to PM May’s leadership. That may not remain the case as this week progresses, with market speculation suggesting members have collected enough Tory members’ letters to mount a challenge, but may struggle to accrue the required number of votes in parliament to win the vote of no confidence. Without that, an unsuccessful challenge would leave May immune to any further attempts to oust her for 12 months.

GBP/USD was confined to a tight range, despite the lack of news and the release of weaker economic data. The Rightmove house price index fell 1.7% m/m in November, the biggest monthly decline in three months. GBP/USD is currently holding at 1.2838, with the 55-hour moving average, now at 1.2846, acting as a near-term barrier to the upside since last Thursday.

NOTE: Leveraged funds’ positioning in GBP turned net long for the first time since the week ending June 26, according to the latest data snapshot as at November 13 from CFTC, published last Friday

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Stock Market News

Asian Stocks Turn Positive Amid Mixed Signals on Sino-U.S. Trade


Asian markets turned positive in afternoon trade on Monday amid mixed signals on the prospect of a truce in the ongoing Sino-U.S. trade dispute.

Last Friday, U.S. President Donald Trump said that he might not impose more tariffs on Chinese imports after Beijing sent a list of measures it was willing to take to resolve trade tensions. U.S. stocks closed higher on Friday following his comments.

However, reports that leaders of the Asia-Pacific Economic Cooperation (APEC) failed to agree on a communiqué for the first time in history put Asian stocks under pressure earlier today.

Papua New Guinea Prime Minister Peter O’Neill, who chaired the meeting, said “the two big giants in the room” were the two members of the APEC that could not come to an agreement.

O’Neill added that Beijing and Washington could not come together on whether “World Trade Organization and reform of the World Trade Organization” should be in the Leaders’ Declaration.

U.S. President Donald Trump did not join the meeting. Vice President Mike Pence attended instead.

“The comments from Trump were seen as offering a glimmer of hope that further tariff action could be held in abeyance,” said NAB’s head of FX strategy, Ray Attrill.

“The exchange of barbs between Pence and Chinese President Xi Jinping in PNG on the weekend continues to suggest this is unlikely.”

The Shanghai Composite and the Shenzhen Component were up 0.8% and 0.4% respectively by 1:45 AM ET (06:45 GMT). Hong Kong’s Hang Seng Index gained 0.8%.

The shares of China Environmental Technology Holdings Ltd (HK:0646) bounced back 9.6% on Monday, after a nearly 50% slide on Friday. The plummet came after the company’s second-largest shareholder escaped Hong Kong police on the same day, according to sources cited by the South China Morning Post.

Japan’s Nikkei 225 advanced 0.6% after data from the Ministry of Finance showed the country’s exports rose 8.2% in October from the same period last year, compared to the expected 9.0% increase.

Official data released last week showed Japan’s economy shrank more than expected in the third quarter due to natural disasters and sluggish exports.

“Japan’s exports rebounded from a decline caused by natural disasters, but they are losing momentum compared with last year due to sluggish shipments to Asia caused by China’s slowdown,” said Koya Miyamae, senior economist at SMBC Nikko Securities.

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Alibaba Sold in 1 Day Just as Much as Amazon Sells in 3 Months


Chinese e-commerce leader Alibaba (NYSE:BABA) just completed its ninth annual Singles Day sales event and smashed all previous records by selling $30.8 billion worth of goods.

To put that in perspective, the five-day kickoff to the Christmas shopping season that begins on Thursday, Thanksgiving Day, and runs through the following Monday, known as Cyber Monday, generated sales of $19.6 billion. And that’s for all of retail. Alibaba’s sales figure don’t include the sales generated by other Chinese retailers, such as its biggest rival, (NASDAQ:JD), which sold $23 billion worth of merchandise (albeit over an 11-day period, though the bulk came on Singles Day itself).

Put another way, it took (NASDAQ:AMZN) three months to sell $33.7 billion worth of goods in the third quarter, which also included its best-ever Prime Day event that sold an estimated $3.4 billion — and that was over 36 hours. Alibaba generated over $1 billion in gross merchandise value (GMV) in the first minute and a half and surpassed last year’s $25 billion total in just under 15 hours.

A sales tsunami

It’s clear Alibaba’s Singles Day is a monumental event. Begun as a way for Chinese college students to celebrate being single, the day falls on Nov. 11, or 11-11, which in Chinese culture represents “bare branches,” or a way of saying someone is single. It has since become a cultural phenomenon.

Alibaba began using the event in 2009 to boost sales and generated about $7.5 million in GMV that first year. It has since grown every year thereafter, but the rate of growth is slowing. The nearly $31 billion in sales it generated is 21.7% more than it did in 2017, but is down from the 42% gain made last year. Three years ago, Alibaba’s sales were more than double the current rate.

Of course, you can’t expect sales to continue growing at such a torrid pace, not when you’re discussing sales in the tens of billions. Yet it also mimics the slowdown Alibaba is experiencing overall as it recently revised lower its full-year sales growth guidance to just 4% to 6%. Alibaba shares are down 27% over the last six months, which itself reflects general worries about a slowing Chinese economy and a trade rift with the U.S.

China’s economy grew 6.5% in the third quarter, missing analyst expectations and coming in lower than a year ago. Retail sale for the period, however, grew 9.2%, beating forecasts of a 9%. Even so, experts remain skeptical of any official government data.

Make it global

Singles Day is still a huge success for Alibaba, which created something out of nothing, but as the phenomenon grows, U.S. retailers may want to latch on to it. There are several reasons to recommend the strategy.

A number of U.S. retailers already partner with Alibaba and its Tmall subsidiary to offer sales during the event, though they don’t make them available to U.S. customers. Doing so ought to be a simple process.

Also, because the event takes place in November, it could help retailers boost sales for Christmas soon. Holiday creep is already in full swing, so starting two weeks before Thanksgiving is almost right in stride for many retailers.

Retailers have begun riding the coattails of Amazon’s Prime Day, offering their owns sales events and specials, and as more people here become aware of Singles Day, extending their sales to coincide with it could kick off Christmas early for them.

Alike but different

As amazing as Alibaba’s numbers are, there are a few caveats. Retailers participating in Singles Day actually rack up sales in the days leading up to the event, but only process the orders on Nov. 11, making it more than just a one-day phenomenon. If promoted its Prime Day for days or weeks ahead of time, generating orders for it but not processing them until the day of the sale, its sales figures would be higher as well.

Also, Alibaba is more like eBay than Amazon, hosting third-party retailers rather than selling goods itself, so Singles Day and Prime Day are not quite analogous, though Amazon does also host third-party retailers and their own sales exceeded $1 billion.

Moving $30 billion worth of goods in such a short span of time is no small feat, but it may soon reach a saturation point for growth.

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Cryptocurrency News

Japan Mulls Crypto Wallet Regulation, Twitter’s Bitcoin Scam Done Via Third Party


Japan’s Financial Services Agency (FSA) had a plan for crypto wallet service regulation on its meeting agenda for a recent gathering of its crypto study group, reported. As it stands, crypto wallet providers aren’t currently treated the same way as cryptocurrency exchanges as they do not engage in cryptocurrency trading. Instead, these providers transfer and manage digital currencies. According to the report, the plan homes in on service providers as opposed to manufacturers or developers of wallets. Some of the regulatory measures could be financial audits and internal controls, among others. At the same time, the group reportedly talked about wallet risks such as wallet failures and cyber attacks.

In other news, the Securities and Exchange Commission (SEC) announced in a press release on Friday (November 16) that two issuers of initial coin offerings (ICO) have agreed to settle with the agency. The issuers have agreed to register their tokens as securities, pay penalties, give the commission periodic reports and return funds to investors. In a press release, the agency said that both issuers had their ICOs following a DAO Report of Investigation that warned that the offerings can be securities. SEC Enforcement Division Co-Director Stephanie Avakian said in the press release, “These cases tell those who are considering taking similar actions that we continue to be on the lookout for violations of the federal securities laws with respect to digital assets.”

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