Daily Market Analysis – 16.11.2017

Asian markets were broadly lower at the close on Wednesday, with a weak lead-in overnight from Wall Street and continued weakness from commodities weighing on markets across the region. Japan’s Nikkei fell for the sixth consecutive session, its longest losing streak in 18 months. The drop in commodity prices hurt Australia’s equity market as it is heavily weighted with resource companies. Data showing a slowdown in Chinese growth was a factor in falling equities from the mainland to Hong Kong. Overall, there is little reason for investors to be positive about currently, and we could see further downside from the region through the end of the week.

European markets fell for the seventh consecutive session Wednesday, the longest such losing streak in a year, and taking the broadest measure of European equities to a two-month low. Equities remained under pressure from Euro strength, as well as the ongoing debates in the U.S. over tax reform. Adding to the downside pressure was a drop in crude and metals prices, which sent the oil & gas and natural resource sectors spiraling lower. Investors also have concerns over potentially slowing growth in China after Tuesday’s industrial production report disappointed. In the U.K. stocks fell for the fifth session in a row, as mining shares led the way lower. Oil & gas shares were also weak due to the drop in crude prices.

U.S. markets fell for the fourth time in the past five sessions as risk appetite continues to diminish in reaction to the potential changes to the tax reform legislation by the U.S. Senate. Investors have become worried that any real tax reform is increasingly unlikely to happen. Both the Dow Industrials and the S&P 500 suffered their worst daily percentage losses since early September, with falling crude and metals prices also weighing on equity markets. The S&P 500 saw nine of its eleven sectors ending the day in negative territory, with small gains coming from the financial and telecom sectors. With corporate earnings season past, investors have found little good fundamental news to send stocks higher, and with many equities at record highs, profit taking is likely to continue until some positive developments emerge.

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The leading cryptocurrency is on a tear again. After falling to nearly $5,500 over the past weekend, Bitcoin is now back at the $7,300 level, having gained more than 10% on Wednesday. There seems to be no new catalyst driving price higher at this time, although traders are still looking ahead to the mid-December launch of Bitcoin futures on the Chicago Mercantile Exchange. Some believe this will drive prices to the $10,000 level easily, while others are more cautious, claiming the ability to short via futures is going to produce headwinds for Bitcoin. Other big winners Wednesday in the cryptocurrency space included Lisk and IOTA, up 23.5% and 22.3% respectively.

The pair plunged below the 113.00 level on Wednesday, likely in response to Japanese GDP data which showed another quarter of growth, giving Japan its longest string of consecutive quarterly growth in 16 years. While the drop took the pair beneath the obvious support at the 113.00 level, it was recovering throughout the North American session, and we believe it will trade back above the 113.00 level as fundamentally nothing has changed, and traders are likely to realize that. In fact, we could even see another test of the 114.00 level in the coming days, especially if U.S. lawmakers can finally reach a consensus that allows for the passage of a tax reform bill.

Written By: AvaTrade