Latest Market Trading News
06 December 2024
Mixed Job Report Sends U.S. Dollar into Retreat
Dollar pullback – The latest U.S. job data showed a rise of the unemployment rate from 4.1% to 4.2% in November. The greenback has been pulling back as traders braced for the last nonfarm payrolls of the year. Before the report, the market had priced in a 70% chance of a rate cut on December 18, but that probability has now climbed to 87%. The prevailing sentiment is that Fed officials are already inclined toward a rate cut, and it would take a much stronger report to change their stance. The market now expects 90 basis points of easing next year, up from the previous expectation of 82 basis points, offering fragile support to the dollar in the process.
Oil stabilisation – WTI crude steadied around its 3-month low after the OPEC+ group which includes Saudi Arabia and Russia postponed its planned production increase amid sluggish global demand, notably due to China’s economic struggle and competition from non-member producers like Brazil and Argentina. The recent lows also corresponds to the trough seen in December 2021, indicating the market’s concern about the lingering supply and demand imbalance. Market participants may look to thread the needle with their year’s end positioning as the price walks on thin ice.
Trump effect – Bitcoin’s value soared past the $100,000 mark after Trump announced plans to nominate former Securities and Exchange Commission (SEC) commissioner Paul Atkins to lead the regulatory body. Atkins is widely regarded as more cryptocurrency friendly than the incumbent Gary Gensler. The president-elect had earlier vowed to position the U.S. as the “crypto capital” and his celebration on social media with messages like “Congratulations Bitcoiners” and “You’re welcome!” would draw more public attention to the digital asset. Traders have started to bag some profits but sentiment supported by the trend remains overwhelmingly positive.
29 November 2024
Final Push as Markets Look to Regain Volatility
Calm before volatility – Trading volumes have thinned around the U.S. Thanksgiving holiday this week but market lethargy may give place to renewed volatility in a busy data-driven week. Investors are likely to take advantage of the last nonfarm payrolls on Friday and reallocate their books before going into the Christmas holiday season. Until then weak tech earnings and the Nvidia sell-off could continue to be the theme that has been driving major U.S. indices.
Oil uncertainty – Oil prices stabilise as traders look for signals from the upcoming OPEC+ meeting on the 1st of December. The market widely expects production cuts from January. However, artificial restraints on supply may not suffice to lift depressed prices in the current environment. Global fundamentals remain uncertain at best as bidders may be reluctant to hold large positions into the new year with American protectionism looming as Trump is scheduled to retake the reins.
Lost shine – Gold remains under pressure weighed down by the recent recovery of the U.S. dollar across the board. Meanwhile physical investments in China, the precious metal’s No.1 consumer country, have tanked amid growing economic uncertainty and geopolitical friction with the West. The price is hovering above the $2600 mark and trying to find support and now the question is whether bullion’s safe haven status would bring in more inflows in the weeks leading to the year’s end.
22 November 2024
Market Confidence Fuels Tech and Digital Assets
Arms race – Russia missile strikes on Ukraine in response to the use of Western made missiles by its neighbour have triggered another round of escalation in the 1000-day conflict. What worries traders is whether this could open doors for more unprecedented events in the months to come. Safe haven assets like gold and the Japanese yen have held their ground and found renewed interests as market participants look to hedge their risk appetite.
Under pressure – US indices are holding onto their gains as investors anticipate a 25 basis point cut by the Fed at its December meeting. High watermarks in US equities reflect the market’s confidence in its economy, offering better yields in a lower interest rate environment as well as safety backed by the American government. Individual stocks have found a boost from bright quarterly results from the likes of Nvidia, furthering cementing the confidence, so much that even the news of a possible breakup of Alphabet, parent of Google by the US Department of Justice have left the market unfazed.
To the moon – Bitcoin continues to stay well-supported as it pushes its way to the landmark $100,000. Fundamentally, expectations of a more friendly business environment with an end to scrutiny from US regulators, growing popularity in bitcoin ETFs as well as escalations in geopolitical events bringing in more flows are major tailwinds for the digital asset. Technically, the question is who dares to say ‘this is good enough’ and put their money where their mouth is by taking the other side of the trade. Until then the momentum may stay strong.
15 November 2024
Risk Assets Push Forward as Trump Secures both Houses
Dream team momentum -The market is on its toes as President-elect Donald Trump taps into personal ties to shape the next government. His comeback may have a large impact as a mix of tax cuts, immigration control and trade tariffs could go through with the blessing of a Republican-controlled Congress. The US dollar’s strength and overall volatility can barely hide expectations of a dramatic shift in US policies.
Euro’s struggle. – Whispers of parity are back in the market, a reminiscence of the energy crisis back in 2022. This time around, investors fear that Mr Trump will be back to take care of his unfinished business with more tariffs. On the ECB’s monetary policy, faster interest rate cuts than in the United States would put the single currency under further pressure.
Crypto president – Bitcoin hitting an all-time high above $90,000 is a telltale sign that traders are embracing the upcoming US administration for the best, and potentially the worst. The crypto industry is betting on a friendlier regime to trigger a broader adoption, leading up to another round of bull market. Meanwhile, outperformance by digital gold compared to altcoins may suggest traders’ hedging of possible escalation in geopolitical disputes.
Tech optimism – Stock market sentiment remains risk-on as a lower interest rate environment compounds the prospect of Republicans’ laissez-faire agenda with tax cuts and looser regulations. Options players are piling into riskier assets notably the technology sector which they believe could reap a massive windfall from Trump’s victory, supporting the current rally.
07 November 2024
The Day After: Global Market Reactions to Trump’s Victory
Donald Trump’s confirmation as the next US president has boosted stocks and assets that are seen as favourable to his administration. His agenda is set to bolster traditional industries such as construction, infrastructure, and energy. The policies announced by Donald Trump during his campaign were generally seen as inflationary, due to tariffs and onshoring, pro-growth, and as adding to the already burgeoning federal deficit, thanks to proposed tax cuts. How these policies affect the economic backdrop is likely to be one key driver of US stock market returns in the next four years.
In the US, stocks soared last night to record highs with the S&P 500 jumping 2.5% to close at 5,929.04, while the Dow Jones surged 3.6%, reaching 43,729.93. The tech-rich Nasdaq Composite advanced 3% to 18,983.47. The yield on 10-year US Treasury notes rose to 4.435% from 4.411% late on Tuesday.
Stocks in Asia recovered from early losses after US stocks jumped to record levels as investors tried to assess the impact of Donald Trump’s return to the White House on the global economy. The Hang Seng climbed 2% in Hong Kong, and the Shanghai Composite was 2.6% up by the end of the session.
Meanwhile, the Chinese government reported that exports jumped nearly 13% in October compared to a year earlier, the fastest pace in more than two years. However, the Nikkei slipped 0.3% on the day in Japan, reflecting worries over the potential for a revival of trade tensions under a Trump administration.
The FTSE 100 and European stocks pushed higher in the Thursday early morning session as the Bank of England (BoE) is expected to cut interest rates again at noon. Money markets are strongly betting on a 90% probability of a quarter-point cut — that the benchmark rate will fall from its current level of 5% to 4.75%. It is the first announcement since the UK government unveiled their budget last week and comes as CPI inflation and wage growth continue to cool.
Traders are now turning their attention to the US Federal Reserve and Bank of England’s decisions on interest rates later today. The Federal Reserve is also expected to cut interest rates again this evening by 25 basis points, amid a moderating inflation rate and a softening labour market.
However, analysts have warned that it is the return of Donald Trump to the White House, and concerns that he might seek significant influence over the central banks’ policy decisions, that will be the main driver in the global financial markets.
The pound dived against the dollar, following Trump’s claimed victory over Democratic candidate Kamala Harris in the US presidential election. The pound’s decline marks a significant sell-off as traders brace for a shift in US economic policy under the prospect of a second Trump administration. Yesterday the US dollar surged to its largest single-day gain since March 2020, climbing 1.5% against a basket of major currencies.
Gold prices were lower as investors moved away from the safe haven and into assets that could benefit under the new Trump administration, with spot gold currently trading lower at $2,665.00 per ounce. The drop in gold signals a broader market reaction to the US presidential election, which is dominating investor sentiment this week.
The Fed’s outlook to be announced later today, could also influence the direction of gold in the coming weeks, as rising rates tend to weigh on the precious metal.
Oil markets were pressured by the results from the US elections and the latest weekly US oil inventory report from the American Petroleum Institute, with Brent crude futures trading at $71.87 per barrel. Oil prices have shown a dip as markets prepare for the uncertain geopolitical landscape with Trump’s victory.
A new Trump administration would favour domestic fossil fuel producers as he aims to enhance America’s energy security. Approximately two thirds of the exchange-traded fund iShares Oil & Gas Exploration & Production (IOGP.AS) is held in US-listed assets. Trump is also likely to prioritise increased domestic oil and gas production.
04 November 2024
Trading Trump (vs) Harris - Election Anxiety Spikes
The FTSE 100 and European stocks are showing a mixed picture on Monday as traders anxiously await the outcome of the US presidential election, as well as a decision on UK interest rates from the Bank of England on Thursday, which is expected to make a quarter-point cut for the second time this cycle, taking UK interest rates to 4.75%.
The U.S. election could bring unprecedented market swings across various asset classes and will shape the direction of the global financial markets and geopolitics for the next four years, with potential policy changes impacting stocks, commodities, forex, and other assets. Historically, election uncertainty has led to extreme volatility. During the 2020 election, financial markets experienced a $5 trillion fluctuation in market value in the weeks preceding and following the election: the VIX (Volatility Index) jumped by over 50%, and global markets experienced turbulence throughout the election cycle.
Traders around the globe, are closely watching as Kamala Harris, running for the Democratic Party, races against leading former President Donald Trump, the Republican candidate. The outcome of the election will define the policies of the next administration which would have a tremendous impact on economic trends, international trade, and market stability.
The outcome may not be clear on election night or even soon after if the results are close enough to trigger recounts or legal challenges.
This volatility may present both risks and opportunities in the trading environment, therefore it would be prudent for traders to keep their trading accounts sufficiently funded in advance. This will allow them to manage margin requirements effectively, capitalise on potential opportunities, and mitigate any market risks.
Potential Implications and Market Reactions
The race remains neck-and-neck as we approach tomorrow’s vote, and investors have been positioning for the fallout of a victory by Donald Trump.
In the US, Trump would likely shake up the status quo far more significantly than Harris, who has served as President Joe Biden’s vice president for the past four years.
Trump’s focus on fiscal expansion and tariffs which would is expected to trigger higher inflation and would have a strong influence in Treasury and FX markets, as well as risk-on in equity markets favouring US cyclicals. Tax cuts would also be expected as part of Trump’s economic policy.
In emerging markets, the main risk stems from Trump’s plan to enact tariffs, which would weaken their exports and demand for their currencies. Markets are pricing in some of the risks associated with Trump returning to the White House, suggesting that a Harris victory would trigger a bullish move for emerging markets, while factoring in the likely impact of higher taxes on earnings and reinforcement of wider macro forces.
Trump’s tariff plans carry particular risks for China for levies of 60% or more, which will increase pressure on the Chinese economy while the government is already struggling to revive the faltering economy.
Asian currencies including the Chinese yuan and the South Korean won, may also come under pressure with tariff increases. The Yuan’s one-month implied volatility soared to the highest in two years last month.
Developing nations such as South Korea and Taiwan, with high exposure to the US and strong reliance on Chinese inputs could also face pressures from such an escalating trade war, as they would be affected by increased costs and supply-chain disruptions.
Trump’s statements on the US commitment to alliances such as the North Atlantic Treaty Organisation and to Ukraine’s efforts to defeat Russia, have weighed on local bonds of certain eastern European countries and lifted Ukraine’s dollar debt on speculation that Trump’s election may push it to cut a ceasefire deal with Russia.
What if the Result is Contested?
The counting of the votes may only be the start of a new process that financial markets will struggle to interpret.
Markets are expected to be volatile not only on the night of the election, but potentially in the days or weeks to follow. Declarations and rumours around key swing states like Pennsylvania will be particularly important and algo-driven markets could be particularly sensitive to such risk.
The greatest risk for global markets to consider would be if the election result is bitterly contested afterwards by the ‘losing’ party. Because the polls remain so close, the election creates a great deal of uncertainty with traders trying to price for a binary outcome. Key policies, particularly around trade, tariffs and the outlook for the US debt, will be greatly affected by the outcome and so the results will drive price action.
The biggest uncertainty facing the market is if the result is contested. It took days to declare Biden officially the winner in the 2020 election, while Trump contested the result almost until the January inauguration. The highest risk is that neither side is willing to concede, leading to a high-stakes legal roller coaster, which could in theory last not days but weeks. This outcome has the largest potential for a negative risk catalyst in the global markets.
Oil prices heading for their biggest weekly gains in over a year
04 October 2024
After a night of intense air strikes by Israel on Beirut, oil prices are expected to remain volatile in today’s session. Oil prices posted their biggest one-day rise in almost a year, surging by more than 5%.
Brent crude futures rose 0.4% to around $77.90 a barrel. Weekly prices have experienced their biggest weekly percentage point gain since early 2023. Traders are concerned that potential supply disruptions may occur after President Joe Biden suggested that American officials were “discussing” whether to support an Israeli attack on Iran’s oil facilities.
In other news around the world, traders are watching the US jobs report due to be released at 13:30 BST today. With inflation declining, the crucial parameter now is the job market. According to consensus estimates reported by Bloomberg, the US economy is expected to show 150,000 jobs were added last month up from 142,000 reported in August, while the unemployment rate remained flat at 4.2%.
Traders are trying to forecast how aggressively the Federal Reserve will proceed with interest rate cuts. In the above scenario, the Fed will probably cut interest rates by a quarter of a percentage point at its next meeting in November, smaller than its half-point cut in September. In Asia, China’s stimulus package announced recently, continued to support markets higher into Friday’s trading, with the Hang Seng index in Hong Kong closing the session 2% higher. In Japan, the Nikkei 225 also closed 0.2% higher this morning, following a volatile week of trading caused by central bank announcements.
17th September 2024
Pound Rally Against US Dollar Continues ahead of Interest Rate Decisions.
The European markets as well as the FTSE 100 are on the rise today, as investors are focusing on key central bank decisions later in the week from the Bank of England and the US Federal Reserve.
The US Federal Reserve is expected to move towards cutting interest rates more aggressively as it meets today and tomorrow.
A 25 basis-point reduction by the US Federal Reserve would be a pivotal move, as investors hope that the decision could lower borrowing costs for companies and improve overall earnings growth. A more aggressive 50 basis points cut on the other hand would be the biggest single rate cut in 16 years triggering concerns of economic trouble ahead.
The likelihood of a 25 basis-point reduction fell to 37% from 50% at the end of last week, according to the CME FedWatch Tool.
The Bank of England will also announce its interest rate decision this Thursday. The market expectations are leaning towards holding rates at their current level.
The pound has rallied against the dollar ahead of these major interest rate decisions, with the US currency trading near its lowest levels of the year.
12th September 2024
Risk Appetite Returning to Global Markets
Risk appetite has returned to the markets after the world’s largest technology companies made a bounce on Wall Street on Wednesday.
Europe’s Stoxx 600 index advanced by 1.2% yesterday, the most single day jump since mid-August, while Futures for the S&P 500 were up 0.2%, treasuries were steady, and the dollar remained flat.
In Asia, The MSCI Asia Pacific Index climbed the most in a month, supported by gains in the technology sector. In Japan, the Nikkei index reversed its seven-day losing streak, while the yen declined from its strongest level against the dollar since December.
Traders are still focusing on interest rate developments, with the FTSE 100 and European stocks joining the global rally today, advancing in early trade ahead of an interest rate announcement by the European Central Bank.
US inflation data for August supported the expectations for a Federal Reserve rate cut next week, but fueled speculation that the move will be gradual.
Market sentiment has been characterised by optimism that the Fed will drive the US economy to a soft landing and fear that the Federal Reserve has waited too long to cut rates. Swaps have now priced in a 25-basis point rate reduction next week, however there is an argument over the path for further reductions.
Oil continues its gains from Wednesday as Hurricane Francine destroyed key oil-producing zones in the Gulf of Mexico triggering bearish bets, while Gold is still trading above $2,515 per ounce.
Global Stocks Tumble as Flight from Risk Continues
4th September 2024
A global flight from risk assets continues on Wednesday due to fears around the US economy and a sharp decline in US stocks especially in the big tech sector on Tuesday after the labour day holiday weekend.
Traders are fearing additional swings, looking for clues on whether the US economy is threatened by a recession, and the Federal Reserve’s next adjustments to its monetary policy.
A US job openings report expected today will indicate whether there is further cooling in the labor market, marking a 5th consecutive month of contraction in manufacturing activity. The market is shifting its focus from inflation to concerns over economic growth, causing turmoil in stocks and other risk assets.
Traders are expecting the Federal Reserve to start easing its policy in September by reducing rates by more than two full percentage points over the next 12 months, this is the steepest drop since the 1980s outside of a downturn. Furthermore, payrolls data is due on Friday and will be crucial in defining the magnitude of the initial rate cut.
In currencies, the dollar snapped a five-day winning streak whilst the yen extended its gains.
Oil dropped further after crashing to the lowest level this year, with Brent futures falling to around $73 a barrel due to growing concerns that weak demand and restored supplies from OPEC will create a new surplus.
Gold futures are hovering above $2,515 per ounce, down from their all-time high last month but still up almost 22% year to date. The precious metal remains the traders’ favourite hedge against geopolitical and financial risks, gaining additional support from expected Fed rate cuts later this month and ongoing EM central bank buying. Traders are pricing in a 31% probability of a 50-basis point cut instead of 25 basis points according to the CME FedWatch – CME Group.
24th August 2024
Powell’s keynote address at Jackson Hole sets the tone for rate cuts
The recent statements by Jerome Powell, Chairman of the Federal Reserve, in his keynote address at the Jackson Hole meeting on the August 23, signaled a potential shift in the central bank’s approach to monetary policy. The indication of a forthcoming reduction in interest rates reflects a response to the current economic indicators, such as the proximity of inflation rates to the Fed’s target and the uptick in unemployment figures. The balance between price stability and maximum employment is a delicate one, and the Fed’s dual mandate requires careful navigation of these economic waters.
The Fed’s inclination towards easing monetary policy suggests a prioritisation of employment over inflation concerns, a stance that is underscored by the current labor market conditions. The rise in unemployment to 4.3% from a lower point earlier in the year is not trivial, and the Fed’s acknowledgment of this trend is telling of its current focus. The increase in the labor supply, as mentioned by Powell, indicates a complex labor market dynamic that is not solely driven by job cuts but also by more individuals entering the job market.
Powell’s remarks about the ‘direction of travel’ being clear but the ‘pace of travel’ being uncertain encapsulate the current economic sentiment. The central bank’s cautious approach to adjusting policy, while recognising the need for action, reflects the uncertainties inherent in economic forecasting and policy implementation. The labor market cooling, as described by Powell, is a significant factor in the Fed’s policy considerations, as it seeks to avoid exacerbating any potential downturns in employment.
The Fed’s stance on not welcoming further cooling in the labor market conditions, despite the rising unemployment rate, is indicative of its commitment to fostering a robust job market. This is in line with the broader goal of ensuring long-term economic stability and growth. The absence of immediate concerns about a recession from Powell’s perspective offers a somewhat reassuring note amidst the complexities of the current economic landscape.
In summary, the Federal Reserve, under Powell’s chairmanship, appears to be preparing for a careful recalibration of its monetary policy in response to the evolving economic situation. The focus on maintaining employment levels while managing inflation reflects the intricate balance the Fed aims to achieve in its pursuit of economic stability and growth. As the next monetary-policy meeting approaches next month, all eyes will be on the Fed’s actions and their implications for the economy at large.
The economic landscape, as outlined by Mr. Powell, reflects the intricate balance central banks worldwide strive to maintain. The pandemic’s onset brought forth challenges that tested traditional economic models, revealing the complexity of global supply chains and the unpredictability of consumer behavior. The Federal Reserve’s response, characterised by agility and informed by evolving data, underscores the dynamic nature of modern monetary policy. This adaptability is crucial in a world where economic conditions can shift rapidly, and policies must be responsive to these changes.
The anticipation of a quarter-point reduction by the Fed, as inferred from bond-market pricing, suggests a cautious yet responsive approach to the current inflationary pressures. It’s a delicate maneuver, aiming to temper inflation without stifling economic growth. The investors’ expectations of about two more percentage points of cuts during the coming year indicate a belief in the Fed’s commitment to recalibrate its strategies in the face of persistent inflation.
On other news around the globe, Japan’s nuanced inflation metrics tell a story of an economy grappling with its own unique set of challenges. The rise in the core-inflation rate to 2.7% in July from 2.6% in June. However, the drop in the “core-core” rate to 1.9%, from 2.2% which was the first time it fell below the Bank of Japan’s 2% target since September 2022, paints a picture of an economy where external factors like food and energy significantly influence inflation. The Bank of Japan’s decision to raise interest rates last March for the first time in nearly two decades marks a pivotal shift, suggesting a move towards normalising monetary policy after 17 years of unprecedented stimulus measures.
In essence, the economic narratives from the United States and Japan highlight the ongoing efforts of central banks to navigate the post-pandemic recovery. They must balance the need to support economic growth with the imperative to maintain price stability. The actions of the Fed and the Bank of Japan will continue to be closely watched as indicators of how central banks might approach policymaking in an era marked by rapid change and heightened uncertainty. The global economic community remains attentive to these developments, understanding that the decisions made in Washington and Tokyo have far-reaching implications. The path forward is one of cautious optimism, with a keen awareness of the lessons learned during the pandemic and a forward-looking stance ready to adapt to the ever-evolving economic landscape.