Jump to content

Tech Sell-off Leads Global Decline - EMEA Brief 11 Oct

Sign in to follow this  
IGAaronC

  • US sees largest market fall in 8 months with the Dow Jones losing over 800 points  in the main session.
  • Asian markets followed suit with both Tokyo and Hong Kong down over 3%. The Taiwanese index was down 6% with the MSCI Asia Pacific average coming in at an average loss of  3.5% for the region
  • The tech sector saw the biggest losses yesterday with FANG companies losing between 4-9% 
  • Oil saw its biggest 2 day loss since July as supply concerns continue. The US are set to announce their inventory levels later today
  • Hurricane Michael has continued to batter the South-East coast of the country and is reportedly the largest hurricane to hit the area since 1992 but has now been downgraded to a tropical storm
  • The Cryptocurrency market lost over $12 billion of market value after a period of relatively low volatility, something the asset class isn’t particularly known for. Bitcoin now stands 68% lower that it’s all time high. This comes amidst reports that theft of the digital currency has hit 1 billion in the last 9 months.
  • Going into Thursday, volatility may continue with US CPI numbers being released. Bulls will be hoping to beat forecasts of 2.4% to help recover yesterday’s movements. Gold is likely move if there is a divergence from forecasts. The VIX pushed past 20 after yesterdays volatility.
  • The dollar declined against all G-10 peers following the sell-off.

Asian overnight: Chinese espionage tensions continue as the US accuses a Chinese operative of spying on US aerospace companies. Meanwhile, Trump has also lashed out at South Korea for not paying for the deployment of a missile defense system on the peninsula.

The effects of the trade war are creating some interesting trade options, especially in the EM arena where price action is dictated by USD and CNH price action, industrial manufacturing and economic growth, and export deficits throughout the East. Notably the 25% tariffs imposed on the US has caused the price of Soyabeans (used for oils and meal) to skyrocket in Brazil, pushing suppliers to offload significant quantities of reserves pushing stockpiles dangerously low. Going forwards we could see buy side pressure from Brazil taking up the surplus now seen in the US. You can trade USDCNH, Soyabeans, EM currencies such as the Brazilian real, EM ETF’s and diversified trackers (linked to manufacturing, industrial production or soft commodities) all through IG.

UK, US and Europe: The markets began their large decline around 12pm BST yesterday showing investors bearish attitude as the Dow remains near its all time high. Mortgage application rates falling for the second week in a row following the Feds interest rate hike gave the bears the ammunition then needed to begin the sell off. However mortgage providers fared fairly well compared to other sectors in the US. Tech took the brunt of the hit with some shares losing up to 10% , possibly suggesting that the trade war is likely to hit tech. Going into Thursday, the futures market implies the bearish attitude is likely to continue. Donald Trump has also blamed the fed interest rate for yesterday’s sharp fall. When asked if it could have been due to trade war tensions he stated there was no reason to raise interest rates and that the fed were acting ‘loco’. 

US Treasuries also saw a fall yesterday as investors began to sell causing yields to rise which can further influence consumer interest rates. This is particularly concerning to investors as bonds are seen as a safe haven during turbulent equity market movements.

South Africa: Gold has struggled to find safe haven demand in the current equity market selloff and trades marginally lower this morning. Brent crude is under pressure despite hurricane Michael threatening the Gulf of Mexico and shutting down a lot of production within the area. Tencent Holdings is down 7% in Asia suggestive of substantial weakness to follow for major holding company Naspers (which has a 20% weighting in the Jse Top40 Index). BHP Billiton is down 3.8% in Australia suggesting a soft start for local resource counters.

Economic calendar - key events and forecast (times in BST)

Economic Calendar 11.10.PNG

Source: Daily FX Economic Calendar

1.30pm – US CPI (September): prices forecast to grow 2.8% YoY and 0.2% MoM, from 2.7% and 0.2% respectively. Core CPI to be 2.3% YoY from 2.2% and 0.2% from 0.1% MoM. Market to watch: USD crosses

4pm – US EIA crude oil inventories (w/e 5 October): stockpiles to fall to 5.08 million barrels. Markets to watch: Brent, WTI

Corporate News, Upgrades and Downgrades

  • WH Smith saw an overall rise of 2% in revenue for the year, to £1.26 billion, although the like-for-like figure was flat. Group profit from trading operations was up 3% to £163 million. The group has announced a restructuring of its high street division, closing some initiatives and shutting around six stores. 
  • Johnson Press is putting itself up for sale, following a strategic review of the business. 
  • Hargreaves Lansdown reported a 3% in assets for Q1, to £94.1 billion. 29,000 net new clients were added during the period.
  • Jupiter reported a drop in assets under management to £47.7 billion for Q3, from £48.2 billion in the previous quarter. The fixed income division saw the bulk of the outflows.  
  • Tesla are looking to appoint a new chairman following controversy with Elon Musk and the SEC.
  • Natixis confirms it is examining deal with French payment processing company Ingenico

TechnipFMC Upgraded to Buy at SocGen
Norsk Hydro Upgraded to Buy at Arctic Securities
ElringKlinger Upgraded to Hold at DZ Bank

Ferrari Downgraded to Hold at Jefferies
Capgemini Downgraded to Neutral at Oddo BHF

IGTV featured video

Information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary

Sign in to follow this  


0 Comments

Recommended Comments

There are no comments to display.

Your content will need to be approved by a moderator

Guest
You are commenting as a guest. If you have an account, please sign in.
Add a comment...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

  • Blog Statistics

    • Total Blogs
      3
    • Total Entries
      280
  • Our picks

    • The pattern continues - APAC brief 12 Dec
      The pattern continues: Wall Street indices have been swinging about madly again. The pattern continues: an open, a rally or fall, then a retracement or recovery. Today we’ve had an open, a rally, then retracement, then a recovery again. There were stories behind this price-action. Everything that happened overnight appeared perfectly explicable. One wonders though if the swings in trading activity are being overly attributed to headlines. Or perhaps it’s the case that higher volatility and sensitive nerves are leading to accentuated moves. Whatever the cause, fundamentally, the bears still have control of the equity market. There is a softer intensity to the selling on Wall Street this week. However, with the extremeness of last week’s moves having not been unwound yet, what we are seeing is sellers piling in on top of sellers, bit by bit.

      ASX200: SPI futures have turned positive, after oscillating wildly during the overnight session. That contract is indicating a 17-point jump for the ASX200 at time of writing. Yesterday was a tepid but respectable day for Australian shares, managing to muster a 0.4 per cent gain for the day. Volume was slightly above the 100-day average and breadth was okay. Growth stocks led the charge, following US tech’s gains the night prior, with the health care sector up 1.7 per cent, courtesy of a strong bid for CSL and ResMed. The materials space was the biggest points score for the index, adding 8 to the overall index’s performance. The trend is still down for the ASX200, as it is with global equity indices presently. However, yesterday’s daily candle, combined with a bullish divergence on the RSI, suggests some buyers are re-entering the market in the short-term, potentially offering temporary upside to ~5700.
      • 0 replies
    • Trading in Asia was mixed as US shares stabilized overnight. In the meanwhile, the ongoing discussions between China and the US adds uncertainty.
      • 0 replies
    • Brexit pains - APAC brief 11 Dec
      Day 1 of 5: Monday looks like it may be one of those days where Wall Street hesitantly pulls itself up out of the dirt in the final hours of trade. There is just under two-hours to go in the US session, and at a high level, things appear not-too-bad. Let's return to America a little later. Whichever way we happen to end the first 24 hours of trade for the week, heightened risk, growth fears and bearishness is still driving sentiment. There has been no shift in market behaviour to indicate a market turnaround is upon us yet. If anything, the headlines regarding the macro-landscape added to the negativity. The data traders received was mixed; rather it was the numerous developments in the politico-economic sphere that inflamed trader's trepidation.

      The Brexit tragicomedy: The big story overnight must be Brexit. This week ought to be about the state of Europe, and at its outset, it has been. If the potential consequences weren't so dire, the situation would appear comical – akin to some absurd, but all-too real life Waiting for Godot re-boot. First-up, the European Court of Justice released a ruling that the UK could unilaterally cancel Brexit and revoke its action of Article 50. UK Prime Minister Theresa May has dutifully shut down that notion. But things did get sticky when Prime Minister May announced she would delay a vote in Parliament of her Brexit bill, on the understanding she lacked anywhere near the required votes to get it passed lawmakers.
      • 0 replies
  • Latest Forum Topics

×