Daily Analysis-Europe Tumbled On Higher EUR And Plunge In Dow
iFOREX | Nov 20, 2018 02:46AM ET
The European market (Stoxx-600) closed around 355.06 Monday, slumped by almost 0.74% on higher EUR, plunge in Dow and oil. The risk-on trade is under stress on fading hopes of US-China trade deal amid the White House warning about the prospect of a China deal and Pence-Xi “war of words”. The Prospect for a US-China trade truce faded after the Asia-Pacific Economic Cooperation (APEC) summit ended in acrimony on Sunday with a fight over Chinese trade practices.
The market is concerned that the US-China trade war/skirmish may persist after the US. Vice President Pence said on Sunday that the US wasn't in a rush to end the trade/cold war and would "not change course until China changes its ways."
Over the weekend, the US Vice President Pence traded sharp exchange of words with Chinese President Xi in back-to-back speeches at the APEC summit in Papua New Guinea, which ended without any official declaration/agreement. The summit ended without a closing statement for the first time since it began in 1993 after both sides failed to agree on a wording.
Pence said before departing the APEC gathering: “President Trump believes that a (trade) deal is possible but we also believe we’re in a very strong position”. Pence also “called on” nations in the region to avoid loans that would leave them indebted to China (alleged debt diplomacy) as US-China is now in a new turf of the cold war.
The risk-on sentiment was also affected after a report that Renault-Nissan-Mitsubishi's Chairman Carlos Ghosn has been arrested in Japan after he under-reported his income over several years and engaged in “numerous other significant acts of misconduct.” The board of Nissan said in a statement that they would seek to ax Ghosn and Greg Kelly as directors of the company. As a reminder, Ghosn was instrumental in world’s biggest auto alliance. Ghosn is widely credited with having saved Nissan from near-bankruptcy, but he is now accused of using the company’s assets for his personal gain.
EUR got a boost after the Eurozone September construction output posted its biggest increase in 1.5-years coupled with some optimistic comments by Germany’s Bundesbank (BUBA). In its monthly report, the Bundesbank said, "the German economy is expected to see fairly strong growth again in the final quarter of 2018”.
USD/JPY
USD was under stress on dovish talks from Fed’s VC Clarida on Friday, arguing for a nominal US rate “just at neutral”. This follows after Fed’s Chair Powell also looked less hawkish than his September speech that the US rate is far away from historical “neutral” and Fed could move above neutral. USD is also under stress on suspense about US-China trade/cold war/truce coupled with a plunge in US Homebuilder confidence data, which tumbled to the lowest level in more than two years as demand stalls.
Get The News You Want
The US dollar index (DXY) tumbled by almost -0.35% after a -0.47% fall on Friday. EURUSD surged by +0.35%, GBPUSD gained +0.20% amid ongoing Brexit chaos and hopes of an extension of transition period up to 2022, although Theresa May denied and batted for a general election in lieu of that. USDJPY is currently trading around 112.55, tumbled by almost -0.25% on subdued US economic data and risk-aversion amid a plunge in Dow.
US 30
The Dow Jones Industrial Average (DJ-30) is currently trading around 25039.90, slid by almost -1.47% (-373.32). The US market is under stress on pressure of Apple (NASDAQ:AAPL) and other techs/chip stocks. Dow tumbled almost -400 points as Apple and Boeing (NYSE:BA) dragged.
Apple plunged after a report that the company has cut production orders for the new iPhones unveiled earlier this year. Other techs/chips tumbled after another report that Chinese authorities have alleged "massive evidence" of antitrust violations by Samsung (KS:005930), SK Hynix, and Micron Technology (NASDAQ:MU). The report also said China would deepen its investigation into the three companies, which are the largest memory-chip manufacturers in the world.
Facebook (NASDAQ:FB)
Facebook tumbled on another report that its CEO Zuckerberg has adopted a more aggressive managerial style as Zuckerberg told 50 of his top executives earlier in 2018 that the company is at war as it receives pressure from lawmakers, investors, and users. Facebook was already under pressure amid a controversy over how its network manages community standards and posts.
Facebook plunged 3% Friday on renewed concerns that the company could face regulatory scrutiny following a report on Wednesday about the company's attempts to deflect criticism of its handling of Russian propaganda. There was a report that Facebook ignored and then tried to hide that Russia used the platform to disrupt the US election in 2016. Facebook COO Sandberg said in a statement responding to the report: "To suggest that we weren't interested in knowing the truth, or we wanted to hide what we knew, or that we tried to prevent investigations, is simply untrue”.
Facebook is now trading around 133.55, tumbled by almost -4.30% and it has almost lost -12% in November after losing around -8% in October on the subdued report card and guidance. So far FB lost almost 25% YTD-2018.
WTI Oil
In commodities space, crude oil (WTI/Jan-19) is currently trading around 56.45, almost flat. Earlier oil slips to a low of 55.28 on a report that Russia may not agree for an immediate production cut next month by OPEC+. The Russian energy minister Novak said Russia need to watch the market in the weeks ahead before making any decisions: "We need to see how the situation develops in November and early December to better understand about the current conditions and the market outlook”.
But oil was supported by a slide in the US dollar index and report that OPEC+ will cut production to avert a global oil glut next year. Also increasing geopolitical risks are supporting oil after the US on Thursday imposed sanctions against 17 Saudi officials over the death of US-based journalist Khashoggi coupled with another report that CIA find direct link of Saudi Crown Prince Salman for the Khashoggi killing. It now seems that if Saudi Arabia goes on for the production cut in December, defying Trump tantrum, Trump may play the game with Saudis with this Khashoggi card.
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