Opening Bell: Bitcoin Dominates FX Markets, U.S. Upbeat
Investing.com | Dec 28, 2016 05:30AM ET
by Eli Wright
Though many global markets remained closed yesterday for an extended Christmas break, today brings all exchanges back on-line. The greenback is trading slightly lower this morning but the crypto currency of note—Bitcoin—is beating all competitors. Additional analysis in the FX section, below.
Overnight in Japan, the Nikkei edged 0.01% lower to 19,401.72 on a deluge of mixed economic data; Japan’s year-on-year core consumer prices marked the ninth straight month of annual declines, construction orders and housing starts fell and industrial production rose less than expected. However, retail sales came in 0.8% better than anticipated.
Because of yuan weakness and higher US interest rates, Chinese markets are struggling. Overnight, the Shanghai Composite lost 0.42%, falling to 3,101.59. However, Hong Kong's Hang Seng, rose 0.9% to 21,762.00.
In Europe this morning, the FTSE is up 0.23% to 7,085.30. The DAX and Stoxx 50, however, are both down, 0.03% and 0.04%, respectively.
Holiday cheer seemed to have boosted yesterday's Wall Street return following the long holiday weekend: On lower than usual volume, the Dow rose 0.06% to 19,945.04. The Dow 20K watch continues. The NASDAQ gained 0.45% to 5,487.44; and the S&P 500 finished the day 0.22% higher, at 2,268.88.
In pre-market trading, the Dow is up 0.14%; the NASDAQ is up 0.25%; and the S&P is up 0.19%.
US bond yields declined slightly across the board. The 2-year note is currently 1.274%; the 10-year yield is at 2.56%; and 30-year yield is 3.126.
h3 Forex/h3US Consumer Confidence figures were released yesterday and handsomely beat expectations. Breaking the release down to its components, the Present Situation Index decreased from 132.0 last month to 126.1, but the Expectations Index increased sharply from 94.4 to 105.5, a 13-year high.
Even though the overall outlook remains bullish for the currency, the US dollar is currently lower against a basket of currencies. Of the majors, only the Japanese yen has failed to make any headway versus the USD this morning; it's currently trading at 117.53. The euro and pound each made small gains.
On today's economic calendar, for the USD: Pending Home Sales, with November figures expected to improve 0.4%.
Though overall FX trade has been subdued lately, there's one surprising winner dominating currency markets right now. Care to hazard a guess?
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Believe it or not, Bitcoin (itBitUSD) has gained more than 110% in 2016 – 15% over the past week alone. It’s currently trading at $956.54.
Much of the rise can be attributed to the discontinuation of certain large-denomination notes in India and Venezuela , which have helped to undermine investor confidence in local currencies, which can be printed, cancelled, and manipulated at a government's whim.
Traders in China are using Bitcoin as well, to hedge against the plummeting yuan which has fallen to eight-year lows against the dollar. Adding to Chinese concerns: President Xi Jinping's comments that China no longer needs to meet its 6.5 percent economic growth objectives due to worries about rising debt and an uncertain global environment after Donald Trump’s election win in the US.
Despite Bitcoin’s historical high volatility, the virtual currency’s finite nature – a worldwide cap of 21million – has increased its popularity among safe haven seekers.
As more companies start accepting payment in Bitcoin, the crypto-currency’s popularity could rise even more. Indeed, 2017 could prove to be the year in which Bitcoin surpasses its all-time high of $1,216, made in 2013.
h3 Commodities/h3Oil traders are feeling confident about the OPEC production cuts slated to take effect in January. As of this writing, crude is up 0.29% to $54.16, while Brent has increased 0.27% to $57.10.
Natural gas has also surged, as a frigid December in the United States has driven prices to record levels. Gas is currently trading at $3.739.
The long-term outlook for gold remains bearish. However, bargain-hunters created some demand yesterday, and the precious metal is currently up 0.32% to $1,142.45.
h3 Stocks/h3The S&P gained 0.22% yesterday, with the biggest moves in Materials, which rose 0.46% as a sector. The gains were led by fertilizer manufacturer CF Industries (NYSE:CF), which increased 4.04%; phosphate and potash producer Mosaic (NYSE:MOS) rose 2.95%.
Source: Fidelity.com
The S&P’s second-best performing sector yesterday was Information Technology, which rose 0.52%. NVIDIA (NASDAQ:NVDA), which is the S&P 500's best performing stock in 2016, led the gains, jumping 6.87% (it’s now up 256% YTD); First Solar (NASDAQ:FSLR) rose 4.2%.
The S&P 500 Consumer Discretionary Index rose 0.34%; its biggest gainer was Netflix (NASDAQ:NFLX), which rose 2.2%.
The Energy sector did well too, rising 0.21%. Boosted by rising oil and natural gas prices, Helmerich & Payne (NYSE:HP) led the way with gains of 2.07%. Chesapeake Energy Corporation (NYSE:NYSE:CHK), one of the country's largest natural gas producers, rose 2.07% – up more than 300% since mid-February.
We would be remiss if we didn’t mention two Japanese companies traded on the Nikkei (though available as ADRs in the US) which have experienced massive swings recently: Toshiba (T:6502) and Hitachi Koki (T:6581).
Toshiba plunged more than 23% over the past two days after the company reported it may book a one-time loss of several billion dollars over a nuclear power plant construction company purchased by its subsidiary Westinghouse.
Hitachi Koki gained 16% yesterday as news surfaced that KKR & Co (NYSE:KKR) is in talks to purchase the power tools manufacturer.
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