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Experts see helicopter boom

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18.01.2020 – Special Report. The helicopters rev up their engines – soon they will be loaded with new government money to throw on the road. Recently, the Americans received a cheque for 600 dollars. Soon they will be joined by a second gift from Father State for $1,400. Many bucks should flow immediately into the stock market, some professionals believe. Because retail traders are investing as if there were no tomorrow. We analyse the background.

2,000 dollars from the state

A new round in Modern Monetary Theory: to stimulate the economy and finally create inflation, the government is bypassing the banks and transferring money directly to the citizens. Now it will only be a new stimulus cheque in the amount of 1,400 dollars that Joe Biden wants to distribute to Americans. Some media had mused about 2,000 new dollars. But together with the first helicopter money of 600 dollars, it will be 2,000 greenbacks.

Fresh concentrated feed for traders

The financial blog ZeroHedge therefore sees the S&P 500 pulling away above the 4,000 mark. This is because much of the money is likely to flow immediately into the stock market. Bloomberg also just noted that the first 600 dollars had meant a strong boost for options trading and for the business with penny stocks. The news agency noted that across all income groups, trading was up 30 percent in the first ten days of January compared to December. And people with incomes above $75,000 increased their trading by a particularly strong 53 percent.

The bubble continues to grow

Peter Cecchini, founder of AlphaOmega Advisors commented:”If the additional $1,400 goes to the same income levels it did before, we are highly likely to see additional speculation in stocks, which could continue to inflate an already-existing bubble. If it goes to people with below-average incomes, speculation will be less likely.” ZeroHedge commented: The money will now flow not only into high-risk asset classes such as cryptos, but into penny stocks, dubious start-ups and other cash burners. „we are at peak euphoria. In fact, the options market saw its second busiest day ever for bullish equity calls this week and penny stock volume is up 6x from last year.“

Unbridled appetite for risk

In fact, Goldman Sachs just reported a level of 1 in its own Risk Appetite Indicator – the RAI had thus reached its highest level in four years and was scratching the all-time high. So we have reached a bullish extreme: the RAI has been above 1 in only 1.7 percent of all cases. Goldman went on to say that at current levels the market is more vulnerable to negative growth or interest rate shocks, triggered for example by fiscal policy disappointments or new negative Corona news. However, Greg Marcus of UBS Private Wealth Management said, “I think the market is very much looking through the pandemic, and that’s why we see it continuing to drift higher.” Goldman, meanwhile, does not expect any new stimulus from monetary policy: in the coming months, the appetite for risk will be triggered primarily by growth and a reflationary sentiment.

value

Passive funds as boosters

But as reported more frequently recently, the fear of a bubble remains. In fact, a new study supports the assumption that investments by passively managed funds have inflated the prices of the largest stocks into a bubble. That’s what a team from Michigan State University, the London School of Economics and the University of California Irvine found, analysing data from 2000 to 2019. The study states that “noise traders” (passive investors) “tend to push up the price of fashionably big companies as they enter the S&P 500”. This ensures that these companies are given greater weight, which in turn leads to a self-fulfilling prophecy when new passive traders enter the market.
In other words, everyone wants the shares that are in demand anyway. Such a trend can, of course, quickly turn into the opposite. But there is a remedy: according to the study, small caps offer both protection against a setback and the chance of outperformance. Our conclusion at this point: there is a lot to be said for a continuation of the bull market. If you don’t want to see the purchasing power of your savings destroyed by helicopter money, you have to invest. But at some point the bubble will burst. The Bernstein Bank wishes you successful trades and investments!


Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

Morning Stock News

The US dollar turns around

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Gold  1837,425
(+0,65%)

EURUSD   1,2075
(-0,03%)

DJIA  30687,50
(-0,11%)

OIL.WTI  52,185
(-0,09%)

DAX   13757
(+0,02%)

One look at the chart below is enough to scare those who are short the US dollar. Technical analysis tells us that the first support for the EUR/USD can only be seen at 1.16.


EURUSD

EURUSD


Why might the dollar rise sharply?

As an example, we can look at the chart of the S&P 500 index, where a reversal is also visually outlined. The decline of the main US stock index by only 3-5% can lead to a global sell-off in foreign stock markets. Further, there will be a traditional flight to the dollar, which acts as a defensive asset.
Why is the situation in the US stock market so important for the dollar now? The thing is that there are statistics according to which the negative close of January of the S&P 500 index indicates that the same dynamic is likely to continue throughout the year. And given the fact that a large number of stock buyers are leveraged, the situation could get out of control very quickly.
We understand that a similar decline as last spring will not happen. The Fed will come back on stage, reassure everyone and promise to buy a new load of arbitrary, even extremely toxic assets.
Monday is a holiday in the US. Normally when there is no trading in America, during the Asian and European sessions, there are small movements in the EUR/USD pair. It will be all the more interesting to see what happens in the market tomorrow. A sharp downward move and the removal of stops behind the 1.20 mark is possible.

03.00 China Retail Sales for December
03.00 China GDP for Q4 2020
05.30 Japan Industrial Production for November


Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

Morning Stock News

Bitcoin could upset everyone again

By | News | No Comments

Gold  1850,84
(+0,28%)

EURUSD   1,2141
(-0,10%)

DJIA  30745,50
(-0,53%)

OIL.WTI  53,215
(-0,94%)

DAX   13958
(+0,02%)

The first cryptocurrency is once again showing its strength and once again attracting even more attention. After correcting to the $30K level, the cryptocurrency changed its trend very sharply and is once again storming the $40K per BTC level. What’s going on anyway?


Bitcoin

bitcoin

What has actually been happening with bitcoin for a very long time. Most of the time, the bitcoin price is influenced by “whales” with a lot of free money and cryptocurrency already bought. The entire cryptocurrency market is approaching USD 1 trillion, which is negligible compared to the US stock market. This allows the big players to manipulate the price to some extent and do as they see fit.
There is now another bitcoin buying hype going on, both by small players and big players. In a month, the top 100 bitcoin wallets have shown bullish momentum. In total, about 350,000 new coins were added to these wallets. Quite an impressive amount at current exchange rates.
It is also worth noting that most of the top 100 bitcoin holders had almost no reaction to the recent correction, which once again confirms the possibility of some kind of collusion between them, as well as possible manipulation of the price in the future.

Once again we can conclude that bitcoin is completely unpredictable. If you have the gift of reading the minds of those people and companies who can drive the market, you can probably make a very good profit. Otherwise, the first cryptocurrency remains a mega-volatile instrument.
It is worth realising that when you buy a cryptocurrency you are not investing, you are just floating along with all the other bitcoin owners. Bitcoin is not a dividend stock, it is not a company that has a growth plan, and bitcoin cannot be touched like gold or the dollar.
Right now, the only way to predict the price of a cryptocurrency is to analyse investments in the crypto market. Since the start of the year, institutional funds have invested just $10 million in bitcoin, up from $1 billion in December. If the amount invested does not increase by the end of January, it is likely that bitcoin’s growth will be in doubt, as the big money would rather bide its time.


What’s in store for us today?

8.00 UK GDP for December
11.00 EU trade balance for November
14.30 US Retail Sales in December
16.00 US Consumer Sentiment Index for January from the University of Michigan


Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

Morning Stock News

Can oil resist COVID-19?

By | News | No Comments

Gold  1842,68
(-0,11%)

EURUSD   1,2152
(-0,04%)

DJIA  31048,50
(+0,27%)

OIL.WTI  52,835
(+0,01%)

DAX   13939,50
(+0,01%)

While stock markets are in waiting mode for Biden’s statements on the economic support package, it is worth taking a look at the commodities market. The oil market has been rising for quite some time. Will a rise in coronavirus disease give the bears a chance?


OIL.WTI

Oil.WTI

For several months, oil continued to renew its highs. All was going well enough until a new, more contagious strain of COVID-19 emerged. Everyone remembers well how after the first wave of infection and the closure of countries to quarantine around the world, oil prices dropped precipitously. Now the situation remains questionable in China, where a rise in the disease has been recorded in Hebei province. China is a major energy importer and if it has a problem, it will automatically affect the price of energy.
In 2021 the price of WTI oil rose by more than 10%. Quite an impressive growth in the current difficult economic and epidemic situation. One of the growth drivers was Saudi Arabia’s announcement to reduce oil production by more than 1 million bpd.
Fuel consumption data from America is also worth a closer look. Gasoline demand has fallen to some of its lowest levels since the COVID-19 pandemic and distillate stocks continue to rise.
Finally, the US dollar, in which contracts are traded, has a direct role in the price of a barrel of oil. When the US dollar weakens, the price of oil rises, as it allows the contract to be concluded at a better price for the buyer. Over the last few months, the dollar has weakened significantly against other world currencies and this trend is likely to continue. Joe Biden’s economic stimulus plans will be known by the end of this week and they will have a direct influence on the USD’s exchange rate against other currencies.
The bottom line is that at this stage, the price of WTI oil is at a level where it will balance, considering all the factors mentioned above. There are no clear advantages for both bulls and bears. Still, a lot will depend on oil demand in China. In the first wave of the pandemic it almost single-handedly pulled the oil price out of a prolonged dive.
In the short term, it is more likely that the price initiative will be on the buyers’ side. The price might try to come down to the $55/barrel level. We wait for Biden’s programme and only after that do we draw conclusions.


What are we waiting for today?

8.00 German GDP for the quarter
13.30 ECB Monetary Policy Statement
14.30 U.S. initial jobless claims
18.30 Address by Mr Powell, Head of US Federal Reserve System


Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

Morning Stock News

Biden is ready to hand out money

By | News | No Comments

Gold  1858,79
(+0,24%)

EURUSD   1,2213
(+0,06%)

DJIA  31019,50
(+0,17%)

OIL.WTI  53,755
(+0,95%)

DAX   13910,50
(+0,03%)

Coronavirus is starting to make an increasing number of adjustments to the chief financial administrations of developed countries. An avalanche of new diseases in the UK and Ireland puts economic growth in doubt for the first half of 2021.


S&P500

S&P500

Another conflict between Democrats and Republicans is brewing in the US. The FBI has even warned of possible armed protests in connection with Joe Biden’s inauguration as president. In parallel, the US parliament wants to vote to impeach Trump. All this political turmoil is not good for the current market situation. Investors are eagerly awaiting Biden’s speech, which is expected to outline future stimulus measures.
There are rumours that there will be a lot of money coming into the economy, up to USD 3 trillion. Biden will try to make this aid package as universal as possible to meet the expectations of the electorate.
However, already now the S&P500 index is at its all-time highs. Excessive investor optimism could lead to some corrections in the equity markets.
There is also some news from the US Federal Reserve. Officials are beginning to hint that perhaps bond purchases will be reduced by the end of 2021. Of course, the coronavirus could make unpredictable adjustments, but such statements could support the US dollar against the Euro and other major currencies.
The possibility of an additional lockdown is growing in Europe. Angela Merkel is considering extending the quarantine. This means that it is likely that one of Europe’s biggest economies will continue to be bogged down by COVID-19 throughout the first quarter of 2021. Other European Union countries are concerned about a sharp rise in infections with the new type of coronavirus in the UK and Ireland.
Uncertainty in the US markets, together with a strong rise in Europe, signals that a difficult time is beginning for all market participants. Long-term decisions will not be possible and will have to be analysed almost on a daily basis.
In the current situation, the S&P500 index could go into a small correction before Joe Biden’s statement and the release of details of his programme.


What’s in store for us today?

10.00 ECB President Christine Lagarde to give a speech
14.30 US Core CPI for December
16.30 US Crude Oil Stocks


Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

Stock Trading

Cryptos in selloff

By | News | No Comments

12.01.2020 – Special Report. Carnage among cyber currencies: The price of Bitcoin plummeted by double digits on Monday. A warning from England was to blame. And a major investor threw in the towel. Previously, investors had increasingly bet on cyber currencies: After the Senate election in Georgia and the promised inflationary orgies of the coming US administration, the crypto market has exceeded the $1 trillion mark for the first time.

Selloff because of FCA warning

It can happen that fast: Last week, the crypto market had reached around 1.1 trillion dollars. To date, it has lost around 200 million dollars in value. Bitcoin slipped from around 40,000 to around 32,000 dollars. One of the reasons is the surprising strength of the dollar for the market.
In addition, a warning from the British Financial Conduct Authority (FCA) sent cryptos south: investors should be prepared to lose everything. A press release stated: “Investing in cryptoassets, or investments and lending linked to them, generally involves taking very high risks with investors’ money.” In addition, “The Times” reported that some banks refused to execute transfers from crypto exchanges. Incidentally, the major trading venue Coinbase was unavailable for the second time in three days, which caused some nervousness in the market.

Guggenheim shoots down the Cryptos

Finally, Scott Minerd of Guggenheim took aim at e-currencies. He tweeted: “Bitcoin’s parabolic rise is unsustainable in the near term. Vulnerable to a setback. The target technical upside of $35,000 has been exceeded. Time to take some money off the table.” The man knows what he is talking about, he had set the $40,000 as a target in December.

The mother of all bubbles

A few days ago, Bank of America also called Bitcoin “the mother of all bubbles”. Analyst Michael Hartnett stated: “violent inflationary price action past two months, bitcoin is up 180%, with the cryptocurrency market now more than $1tn as Bitcoin past 2 years blows-the-doors-off prior bubbles.”

bitcoin

Hartnett’s conclusion: the bursting of the bubble remains the biggest bull risk. And just as an aside, he also warned of the growing polarisation in the US electorate, just as we did in our recent Special Reports. Here are his words: “decade-long backdrop of maximum liquidity and technological disruption has caused maximum inequality & massive social and electoral polarization…value of US financial assets (Wall Street) now 6X size of GDP.”

Devaluation of the dollar

So much for the bears. Is it going up again? Who knows. The bulls also have some arguments on their side. Above all, the expected inflation had previously boosted the virtual currencies. Investors fear the devaluation of their savings: “The more that people perceive that their assets, particularly their liquid assets such as fiat currencies are eroding in value, the more they will look for alternatives,” said Geoffrey Morphy, president of the Canadian crypto-miner Bitfarms Ltd.

Indirect BTC investment

Virtual space is also safe if the banks collapse. For now. But there is a problem: as you know, we have been warning for some time that Beijing and the rest of the world could eliminate BTC and co. as unloved troublemakers in monetary policy. Simply by banning them, as Ripple recently experienced.
The first smart investment banks are therefore taking a diversion. Morgan Stanley, for example, almost quintupled its shareholding in MicroStrategy to over 10 percent in the fourth quarter. The software company had invested around 250 million dollars in BTC in the summer and has thus become a kind of BTC fund. Morgan Stanley is thus on the safe side in terms of an exit: direct investors will be stuck in Bitcoin if a ban comes. On the other hand, investors will get out of stocks like MicroStrategy.

Caution contraindicators

On Sunday, the Economist, which is of course much more professional in economic terms, pointed out that BTC should continue to rise if portfolio managers step in more – at least the e-currency will have bottomed out. It looks like some investors took advantage of this to cash in in the short term after the news was blown out into the world. Our conclusion: the only thing that is clear is that there is never a dull moment in cryptos. We are curious and will keep an eye on the matter for you!


Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

Morning Stock News

Euro set to hit new heights

By | News | No Comments

Gold  1840,74
(-0,38%)

EURUSD   1,2179
(-0,39%)

DJIA  30789,50
(-0,64%)

OIL.WTI  51,825
(-1,27%)

DAX   14078
(+0,01%)

The aftermath of the Capitol riots in the US was less than significant. The short-term fall in the markets looked like a small pothole in the road. However, it is worth noting that most of the branches of government have been taken over by the Democratic Party. Will this be a problem for the markets?


EUR/USD

EURUSD

First and foremost, the US government will be able to pass important new legislation more easily. With this in mind, the US Federal Reserve may expand QE significantly in order to support the servicing of government debt. This is a bad signal for the dollar. An additional weakening of the US dollar could lead to so-called currency wars. Neither China nor Europe will want to lose markets so they will try their best to keep up with their currencies.
On January 27, the first minutes of the Fed meeting of the New Year will be released. Until then there is almost no chance of the US dollar strengthening. Chances of a “bearish” trend for EUR/USD in the near future are negligible.
Most leading analysts believe that the downward trend of the dollar will continue throughout 2021. The huge amount of new dollars is likely to bring additional inflation to emerging markets, which will inevitably lead to higher prices, especially for food. The stock market bubble will continue to be pumped with cheap money, which could have unpredictable consequences in the future.
The US labour market remains in focus. ADP data showed a fall of 123k in December, the first fall since April. US Fed is watching the labour market closely and if the trend continues, additional stimulus measures are likely to be taken.
In the short term, hawkish pronouncements by Fed officials may locally strengthen the US dollar as it did on January 7-8. But in the medium term EUR/USD is still targeting the key 1.25 level, so there is a good chance for the bulls to enter the market.


What’s in store for us today?

01.30 Australian retail sales for November
02.30 China Consumer Price Index for December
15.00 Bank of England spokesman S. Tenreyro Speech


Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

Morning Stock News

What is a protective asset?

By | News | No Comments

Gold  1908,05
(+5,36%)

EURUSD   1,226
(-0,04%)

DJIA  31120,50
(+4,26%)

OIL.WTI  51,055
(+17,45%)

DAX   13992,98
(+5,63%)

The occupation of the US Congress building in Washington by demonstrators will long be discussed by politicians and analysed by historians. We will look at the situation through the eyes of traders. And we will ask a logical question. Which assets will go up in value if anarchy sets in? Why are we comparing this situation to anarchy? Just for the record, the last time the US Congress was invaded was over 200 years ago, during the Anglo-American War.


BTC

BTC

For example, stocks of arms manufacturers traded on the Nyse are up 15-20% at the moment.
We are used to the fact that whenever there is any financial, political or economic crisis, investors immediately run to protective assets. First and foremost the Japanese Yen and the Swiss Franc. Were they up Tuesday night? No, they did not. The defensive asset is the U.S. dollar, but it is down altogether.
Our attentive subscriber, who has not been following what has been happening in the market, will tell you that gold must have risen sharply. Indeed, it did go up momentarily, but only by 1.5%-2%, and by the end of the trading session it had fallen altogether.


How is that possible?

This is the new reality we have been writing about since the second half of 2020. The only asset that rose sharply was bitcoin. On the news of the storming of the US Congress, it fell for 5-10 minutes and then rocketed upwards. At the same time, it did not stop rising at all during the next 24 hours, showing a momentum of +15% over the past 24 hours.
It is bitcoin that becomes the world’s top asset in 2021. When the excitement dies down, we will definitely revisit what happened on Tuesday night. And let’s speculate as to why investors, especially US investors, rushed to buy bitcoin.

07.45 Swiss unemployment rate for December
08.00 Industrial production in Germany for November
14.30 Canada Unemployment Rate for November


Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

Morning Stock News

What to expect from the Japanese yen

By | News | No Comments

Gold  1920,68
(+6,06%)

EURUSD   1,2314
(-0,11%)

DJIA  30860,50
(+3,39%)

OIL.WTI  51,035
(+17,40%)

DAX   13856,59
(+4,60%)

Japan’s central bank is in a nightmare situation…and so is the economy of the Rising Sun. The Japanese yen wants to rise sharply against a basket of major world currencies. The Japanese central bank wants to weaken it in order to ease the burden on exporters.


USDJPY

USDJPY

The situation has reached an impasse. Against the background of the global crisis, the yen is set to strengthen sharply. This is always the case when Japanese investors sell assets abroad (including stocks and bonds) and transfer the proceeds into the yen.
A logical question might arise. Why do they do that anyway? The fact is that all Japanese corporations and funds, which work on the domestic market, keep their balance sheets solely in yen. And that means that it is important for them how much yen they have returned to the bank account and reported back to their investors.
Next problem. Fall of the US dollar. The US dollar is falling against the euro, the pound sterling, and emerging market currencies. At the same time it should fall even faster against the yen. However, if you look at the chart above, you can see that the Japanese currency is strengthening against the US dollar at a much slower pace.
The key question is “why”? There are two reasons for that. The Japanese central bank is stimulating the economy by printing huge amounts of new money. And with all its might, it is trying to squeeze that money out of the country (via exchange to the same euro and dollar) to keep inflation from rising.
But even that does not help much. That is why currency intervention is the “weapon of the last day”. It can happen if the level of 100 yen per 1 dollar is broken through. Otherwise, the exchange rate can move sharply towards the 90 level, seeing that the Japanese central bank takes no action.
Conclusion. In the nearest future the Japanese Yen will remain in a narrow descending corridor, which can be easily recouped by a pullback. The main thing to remember is that volatility can jump much higher in both directions, in case of breakdown of the level of 100 Yen per 1 USD.

09.30 Construction PMI for December for Euro Area
11.00 Core Inflation Rate for December for Euro Area


Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

Morning Stock News

What is happening to the oil market?

By | News | No Comments

Gold  1944,09
(+7,35%)

EURUSD   1,2296
(+3,57%)

DJIA  30241,50
(+1,31%)

OIL.WTI  50,015
(+15,06%)

DAX   13705,18
(+3,46%)

The first 2 trading days of the new year have been extremely volatile for black gold. Take a close look at the chart below. On Monday we saw a strong reversal red candle, which first showed a new high for the last 10 months. And on Tuesday another reversal candlestick, but a green one, with an even longer daily range. So what happened in the market?


OIL.WTI

Oil.WTI


Monday

On Monday, two events collapsed the oil price at once. UK Prime Minister Boris Johnson announced the start of the third lockdown. In his statement he mentioned that the number of patients in the healthcare system is already 40% higher than the spring peak. At the same time, the rate of new hospital admissions is increasing. Mortality rates are also rising.
That would be all well and good. But we know that with some lag the situation could repeat itself in continental Europe and then in the US. This would be a huge blow to the already low demand for oil.
Talks that Russia and Saudi Arabia cannot agree on a cap on oil production in the new year have also added fuel to the fire. Against this backdrop, the oil price simply plummeted on Monday.


Tuesday

Tuesday, however, brought us new news. Apparently the OPEC+ countries have realised that the negotiations cannot drag on any longer behind the scenes. Otherwise the situation of spring last year might repeat itself, when even a sharp reduction in oil production could not stop the strongest fall in prices.
Representatives of Russia and Saudi Arabia reached an agreement under which the current limits on the volume of oil production for the first 2 months of this year are fully maintained. This was reported by the Wall Street Journal (WSJ), citing its own sources of information.
This decision is to be approved at the negotiations of OPEC+ countries on 5-6 January. At the same time according to the latest data, Russia will still be able to increase oil production by 65 thousand barrels per day.
On Wednesday, we are in for a very interesting day. A third reversal candlestick in a row is possible. On the back of profit taking after the OPEC+ agreement and the worsening situation with COVID-19.

14.00 German consumer price index for December
14.15 ADP private sector employment report for December in USA
20.00 US Federal Open Market Committee meeting minutes


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