Brexit

Market Review 22-03

Market Review 22-03

Forex News

GBP/USD: Recovery underway towards 1.3190/1.3260, Brexit developments in spotlight

From: FXstreet.com

  • Brexit deadline extension has its own challenges for the UK PM Theresa May
  • The quote needs to cross 1.3190 and 1.3260 resistances in order to justify its bounce off 1.3000 round-figure

The British Pound (GBP) is taking the bids near 1.3140 versus the US Dollar (USD) ahead of London open on Friday. The GBP/USD pair has been on a recovery mode since Thursday-end as EU leaders finally agreed over the Brexit deadline extension with the two-factor system giving unconditional stretch till April 12. Though, uncertainty over the Brexit still remains on cards as the UK PM Theresa May has to jostle with the British parliament soon. Also directing the immediate trade sentiment will be second-tier data from the US.

The EU lawmakers agreed to shift the Brexit deadline off from March 29 during late-Thursday. The news report triggered the GBP/USD pair’s U-turn from 1.3000 round-figure and has been pleasing buyers off-late as the USD is likely witnessing profit-booking after yesterday’s overall advances.

In spite of getting unconditional deadline extension till April 12, PM May has to convince lawmakers at home to support her plan in the parliament’s voting sometimes next week in order to grab the May 22 data for the Britain to leave the EU. Having been defeated twice at home, it would become tough for PM May to persuade British politicians for her third Brexit plan considering the fact that it won’t be too different from the previous one.

Other than Brexit uncertainty, US data could also play their role in directing near-term trade sentiment. Among them, the current month Markit composite purchasing manager index (PMI) and February month existing home sales could gain market attention.

The US Markit PMI composite could soften to 55.2 from 55.5 but likely increase in existing home sales to 5.10M over 4.94M earlier might favor the greenback.

GBP/USD Technical Analysis

While a descending trend-line joining highs since March 19 offers immediate resistance around 1.3190, a week-long resistance-line at 1.3260 could limit the pair’s further advances.

On the downside, eleven-week old ascending trend-line and 50-day simple moving average (SMA) around 1.3060/65, near to recent low at 1.3000 round-figure, can please sellers ahead of questioning their strength by 200-day SMA figure of 1.2980.

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Trump Aides Play Down Odds of Swift China Deal Ahead of Talks

From: Bloomberg.com

  • Lighthizer, Mnuchin will head to Bejing for more trade talks
  • U.S. officials say deal not expected until Trump and Xi meet

U.S. officials are downplaying the prospect of an imminent trade deal with China as President Donald Trump’s top negotiators prepare to head to Beijing for a fresh round of talks next week, according to people familiar with the matter.

Trump has said that he wants an agreement that could be enforced, not a quick deal. U.S. Trade Representative Robert Lighthizer, who is leading the talks for Trump, and Treasury Secretary Steven Mnuchin will travel to Beijing for meetings at the end of next week, and Chinese Vice Premier Liu He will then come to Washington in April to continue the discussions, the Chinese Ministry of Commerce said on Thursday.

The two sides have continued negotiations on a 150-page agreement through telephone calls and video conferencing, including one held late Wednesday, said the people, who asked for anonymity because they were not authorized to speak to the press. They added that while there had been progress, negotiators wanted to meet face to face.

The goal is to reach an agreement in the days after Liu’s visit to Washington, potentially with a meeting between Trump and his Chinese counterpart, Xi Jinping, at Mar-a-Lago, they said. A date for that has not been set, but officials say that meeting could pushed as far as into the end of April.

Some American negotiators have become concerned that the Chinese are pushing back against U.S. demands, according to people familiar with the negotiations.

Trump on Wednesday said he would keep tariffs on China until he’s certain that the Chinese are complying with any new trade agreement, rejecting expectations that the two nations would agree to roll back duties as part of a lasting truce to their trade conflict.

“We’re not talking about removing them, we’re talking about leaving them for a substantial period of time, because we have to make sure that if we do the deal with China that China lives by the deal,” Trump told reporters at the White House on Wednesday before leaving on a trip to Ohio. “They’ve had a lot of problems living by certain deals.”

The president’s comments dimmed hopes that round-the-clock trade negotiations between the world’s two biggest economies could lead to them removing the roughly $360 billion in tariffs they’ve imposed on each other’s imports. Beijing has pushed the Trump administration to remove tariffs as part of any deal.

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Stock Market News

Dow Racks up Triple-Digit Gains as Tech Triggers Rally

From: Investing.com

The Dow soared on Thursday as tech stocks rallied, led by Apple and Micron.

The Dow Jones Industrial Average rose 0.84%, the S&P 500 gained 1.09%, while the Nasdaq Composite surged 1.42%.

A wave of buying in tech pushed the broader market higher as Wall Street analysts turned bullish on Apple (NASDAQ:AAPL) ahead of its event on March 25, when the company is expected to launch a television and video service in a bid to bolster its services revenue and reduce its reliance on iPhones.

Needham upgraded its rating on Apple to strong buy and raised its price target on the stock to $225 from $180, saying the tech giant should be should be viewed as an ecosystem rather than a product company, which merits a higher valuation.

“We anticipate better than previously expected results from both Services and Wearables, Home and Accessories, as well as valuation upside created by falling churn and strong barriers to entry” for competitors, Needham analyst Laura Martin said in a note.

Citigroup raised its price target on Apple to $220 from $180, betting the company will launch a $100 billion buyback program and boost its dividend next month.

Semiconductor stocks also played a big role in the rally, thanks to swashbuckling gains in shares of Micron.

Micron Technology (NASDAQ:MU) soared 9.6% after reporting earnings that beat estimates and announced that it would look to cut memory production in a bid to stave off the impact from falling demand.

But financials lagged. Along with pressure on bank stocks from a dovish Fed, Wells Fargo (NYSE:WFC) fell 1.1% after the New York Post reported that directors of Wells Fargo were talking to Harvey Schwartz, a former top executive at Goldman Sachs (NYSE:GS), about replacing current CEO Tim Sloan. Banking stocks were also weakened by the Federal Reserve’s signal a day earlier to stand pat on rate hikes through 2019.

Homebuilders were also in favor as mortgage rates fell to their lowest levels in more than a year following the Fed’s dovish statement.

The average rate on the popular 30-year fixed rate mortgage fell to 4.34%, the lowest in more than a year and 19 basis points lower than a year ago, according to Mortgage News Daily.

PulteGroup (NYSE:PHM), DR Horton (NYSE:DHI) and Lennar (NYSE:LEN) ended the day sharply higher.

In other corporate news, Levi Strauss & Co (NYSE:LEVI) rallied 31.8% on its debut following an IPO that raised more than $600 million.

Top S&P 500 Gainers and Losers Today:

ConAgra Foods (NYSE:CAG), Western Digital (NASDAQ:WDC) and Micron Technology (NASDAQ:MU) were among the top S&P 500 gainers for the session.

Biogen (NASDAQ:BIIB), Monster Beverage (NASDAQ:MNST) and Fifth Third Bancorp (NASDAQ:FITB) were among the worst S&P 500 performers of the session.

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JPMorgan’s Kolanovic Says Bad Liquidity Is Behind Stock Chaos

From: Bloomberg.com

  • Says risky assets haven’t fully reflected the monetary shift
  • Low equity exposure means stocks have some room to advance

On the way down, and on the way up, a common theme unites the drama in equities over the last six months: thin liquidity.

That’s according to JPMorgan strategists led by Marko Kolanovic, who say the market’s inability to absorb trades easily conspired with other fundamental factors in fomenting wild swings. In the fourth quarter, the firm’s measure of market depth based on S&P 500 e-mini futures dropped to less than one-third the average seen during other sell-offs of the past decade.

To Kolanovic, it’s key to understanding why stocks bounced back so fast even as many buyers sat on their wallets. While the S&P 500 has surged 20 percent from its December low, almost every category of investors tracked by JPMorgan, from individuals to hedge funds and computer-driven traders, have shown little inclination to chase the rally. Their equity exposure sits at the low end of a historic range.

“Liquidity thus explains how the market could go down and up so much on a relatively small change in positioning, and we would argue a small change in fundamentals since December,” Kolanovic wrote in a note to clients. “If liquidity was only a half or a third, it is reasonable to expect two or three times the speed of market moves for a particular level of flows.”

Dwindling liquidity is often dragged into discussions of market meltdowns. In December, for instance, when the S&P 500 plunged toward the brink of a bear market, both President Donald Trump and strategists from Goldman Sachs flagged it as potentially escalating the sell-off.

JPMorgan’s latest note highlighted a less scrutinized phenomenon: liquidity’s role in driving stocks higher. While the strategists didn’t give a reason why liquidity has stayed thin, they consider it part of an environment that sets the stage for further gains.

“Given liquidity, it is plausible that just short covering, buybacks, dealers’ gamma hedging, and some limited re-leveraging drove the entire recovery,” Kolanovic said. “This, in turn, opens the possibility that the current rally can continue during the spring.”

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Cryptocurrency News

Crypto Markets Descend While Tech Stocks Surge

From: Cointelegraph.com

Most of the top 20 coins by market capitalization are in the red, showing slight losses on the day, down from one to four percent.

The leading cryptocurrency Bitcoin (BTC) is trading at $4,027 at press time, down about one percent over the 24-hour period. BTC has been trading sideways as of early trading hours, following a drop to as low as $4,007 in the middle of the day.

The top altcoin Ethereum (ETH) has seen a 1.87 percent downturn on the day and is trading at $137.21 at press time.

As reported earlier today, Vitalik Buterin said that high ether prices are important both for network security and the wider ecosystem’s development. In response to the question as to whether protocol designers and project leaders should be focusing on the question of a cryptocurrency’s price, Buterin referred to the “earlier rhetoric” of the Ethereum project, which had explicitly downplayed the importance of the asset’s value.

Ripple (XRP) has also lost about two percent over the past day and is trading at $0.312 at press time. The coin started the day at $0.318, dropping as low as $0.309 in the middle of the day.

On CoinMarketCap’s listings, Tezos (XTZ) is the biggest gainer, up by 25.77 percent on the day and trading at $0.771 to press time.

Total market capitalization of all cryptocurrencies is around $139 billion at press time, down from its intra-day high of about $141.9 billion.

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