News & Analysis

Weekly Summary: A Week Of Messy Politics

November 16, 2018

Market Overview

Tariffs and Brexit negotiations have made headlines throughout the week, driving the financial markets into a volatile ride. The CBOE Volatility Index surged higher this week, indicating weaker sentiment for riskier assets. The economic calendar was relatively busy, although political issues were shown to be the main market-movers.

The only major economic release to end the week was the inflation figures in the Eurozone area.

Equity Markets

The equity markets are battling several headwinds at the same time. Throughout the week, sentiment swung from risk-off to risk-on. Investors are now worried as the following issues are highlighting the fragility of the markets:

Peaked earnings
Rising borrowing costs
Slow growth in China
Reduction in global demand
Italy’s budget woes
Brexit jitters
The rout in the oil markets

Apple shares fell in a bear market territory, shaking the technology sector. Being the bellwether of technology stocks, the rout in Apple shares over the iPhone sales put downward pressure on one of the most-watched industries on Wall Street.

Reports that China and the US will start negotiations again did little to help the markets, given the current negative factors that are engulfing the equity markets. Investors are aware that China’s move is positive, however the US is demanding fundamental changes and wants more concrete commitments from China. It is likely that the trade negotiations will still be ongoing and challenging.

On the political front, Brexit headlines have been a bit all over the place with conflicting information. The draft text brought a spark of relief, but the challenge in Parliament hovers over the markets’ sentiment. Similarly, in Europe, the Italian budget-jitters have deepened the demand for European stocks.

Currencies Markets

The Pound Sterling stole the show this week. The markets digested a lot of Brexit news, taking the Sterling pairs on a roller-coaster ride. Most pairs gapped lower on Monday, making a sound recovery during the week on the back of the positive Brexit news. The primary catalyst changing the direction of the price movement of the Pound was the resignation of four UK ministers.

Source: GO MT4

In Europe, the standoff between Italy and the European Union persists. Italy refused to curb its big-spending budget and will be defying the EU’s demands. The shared currency was strained by the current headwinds. The data releases came out mixed this week for the Eurozone economy. There was an uptick in the industrial production and a fall in employment change. The shared currency is finding bullish momentum ahead of the release of the CPI figures, and EURUSD has so far recovered the losses from Monday.

A weaker US dollar has allowed the other rival currencies to be driven by domestic economic and political factors. The Antipodeans found support on the retreat of the US dollar. The Aussie calendar was busy this week, and the local currency rallied on the back of a robust jobs report. The unemployment rate holds steady at 5.0 %, and the participation rate rises to 65.6%. The drop in the unemployment rate lifted chances of a further pick-up in wages.

Commodities Markets

Fears of the plunge in the oil markets have been the primary concern in the commodities markets this week. After 12-consecutive sessions of sharp decline, oil prices rebounded slightly and recovered a semblance of normality. Being one of the most substantial pullbacks in the oil prices since 2014, investors panicked, deepening the bearish sentiment. Saudi Arabia tried to intervene, but the positive news was clouded by President Trump’s tweets against the production cut.

Source: GO MT4

Cryptocurrencies Markets

Cryptocurrencies came under heavy selling pressure in the last 24 hours ahead of a bitcoin cash fork. Trapped in a bearish trend since the beginning of the year, Bitcoin fell below the psychological level of $6,000. News that cryptocurrency exchanges’ support the fork is emerging in an attempt to keep investors reassured and put a halt to the sell-off.

Monday, 19 Nov 2018 Indicative Index Dividends ^{Dividends are in Points}
ASX200	WS30	US500	US2000	NDX100	CAC40	STOXX50
0.348	0	0.079	0.074	0.101	0.231	0
ESP35	ITA40	FTSE100	DAX30	HK50	JP225	INDIA50
0	33.956	0	0	0	0	0