A tech led correction

Posted on September 25, 2020September 28, 2020 by George Kessarios

Analyst Insights, Friday, 25th of September, 2020

While the headline news partially blames the Fed for not implying that it (the Fed) will add more liquidity to the system, the truth is that valuations are way ahead of the fundamentals. I dare to say that a big percentage of the technology sector is in a bubble, similar to 1999.

While stocks like Apple might be considered simply rich, many others are in bubble territory. And the problem is, the technology sector has such a big weighing in most indices, it’s very difficult for the broader market to try to play catch-up, when big technology names crash.

Yes, there are many opportunities in the market outside the tech sector, but at the same time the market is being dictated by passive investing. In most cases, when investors sell these passive instruments, the baby is thrown out with the bathwater.

And while many of the well know names have corrected 20% or more, they are still very expensive. And I for one do not buy the argument that any stock can be worth 30-50 times revenue because of growth. Valuations in the tech sector need to come down by a lot to get my interest.

The bottom line is that tech is currently in correction mode, mainly because of valuations. In theory the market could absorb an orderly technology correction, but if the correction is volatile like we have seen over the past several days, then tech can bring down the rest of the market as it corrects.

US: Democrats prepare new $2.4 trillion stimulus plan

Posted on September 25, 2020September 28, 2020 by Exclusive Capital Research Team

Market Brief, Friday, 25th of September, 2020

House Democrats are preparing a new, smaller corona virus relief package expected to cost about $2.4 trillion as they try to forge ahead with talks with the Trump administration. While the U.S. has enjoyed several months of strong jobs grow after corona virus-related shutdowns led to widespread layoffs, the national unemployment rate still came in at 8.4% when last measured in August. On Thursday, the Labour Department said initial jobless claims rose slightly to 870 000 last week.

The British pound got a minor lift after the UK finance minister, Rishi Sunak set out his plan to rescue millions of jobs and businesses from a winter crisis amid concerns that resurgence in the coronavirus cases could derail the UK economy. On the other hand, growing market worries about the second wave of coronavirus infections, along with the likelihood of the global economic slowdown continued driving some haven flows towards the US dollar. This comes amid risk of a no-deal Brexit, held bulls from placing any aggressive bets and capped the upside for the major.

The EUR/USD pair seesawed between tepid gains/minor losses and consolidated its recent fall to two-month lows Concerns about the second wave of COVID-19 infections continued weighing on investors’ sentiment. This was evident from the risk-off mood through the first half of the trading action on Thursday and drove some haven flows towards the US dollar. This coupled with signs that the economic recovery in the Eurozone could be running out of steam undermined the shared currency and exerted some early pressure on the major. In the absence of any major market-moving economic releases from the eurozone, the pair remains at the mercy of the USD price dynamics and the broader market risk sentiment.

The optimism over US fiscal stimulus and a thaw in the US dollar’s rally helped Gold recover nearly $30 from two-month lows of $1849. Meanwhile, the yellow metal also cheered concerns about the strength of the US economic recovery, in the wake of the stubbornly high Jobless Claims.

And finally, the WTI bulls taking the baton from the bears on Thursday against an otherwise technically bearish backdrop. Demand-side fundamentals demand greatly on a vaccine. Commodities are performing well as the US dollar starts to show signs of exhaustion in its recent bullish correction

US Stock Markets lower on Big-Tech weakness

Posted on September 24, 2020September 24, 2020 by Exclusive Capital Research Team

Market Brief, Thursday, 24th of September, 2020

The major US stock markets sold off on Wednesday with extensive losses in Big-Tech names. The Nasdaq approached its recent lows of 10675 tradings as low as 10730 while the S&P broke below its recent low trading as low as 3223.

The Asian session followed suit with the ASX and Nikkei both trading 1.1% lower. In China, the Hang Seng is down by 2.3% while the Shanghai Composite is down 1.5%.

US Congress is said to leave the US Capital as early as this week until after the election without putting through any COVID-19 relief packages. This saw immediate risk-off moves across the markets extending stock market losses.

The dollar index traded higher as the risk-averse sentiment and steeper yield curve cause the greenback to trade well above the 94 levels and as high as 94.50 although it has since retraced some of these gains. The EURUSD dropped traded as low as 1.1650 and is currently trading around 1.1660 while GBPUSD is trading around 1.27.

WTI and Brent continued trading sideways although there was spur inactivity after yesterday’s EIA Inventory Report. WTI and Brent are currently trading around 39.58 and 41.50 respectively.

Gold slides 3% on strong dollar, stimulus concerns; silver tumbles

Posted on September 24, 2020September 25, 2020 by Exclusive Capital Research Team

Commodity Update, Thursday, 24th of September, 2020

Gold slumped over 3% on Monday, sliding to its lowest level in more than a month, as a broader market sell-off driven by uncertainty over more U.S. fiscal stimulus pressured the precious complex along with a stronger dollar, with silver plunging 8.3% to $24.53, its lowest level in over a month.

Gold expected to be trading higher on safe-haven demand has been affected by market participants selling off assets across the board

Wall Street’s main indexes hit their lowest levels in nearly seven weeks on Monday, while the dollar index rose 0.8% against its rivals, its highest daily percentage gain since March 19.

With little chance now of Congress agreeing on any stimulus package before January being asymptotically close to zero has also resulted in a strengthening dollar, adding more pressure to the yellow metal

A move back and close above $1,900 is needed to grant a short-term reprieve but looks like price may have to test the lows of the correction, $1,863 at some stage soon.

Crude oil muted ahead of Inventory Report

Posted on September 23, 2020September 23, 2020 by Exclusive Capital Research Team

Market Brief, Wednesday, 23rd of September, 2020

The major US stock markets recovered some of their losses to trade off their recent downtick. The Nasdaq is currently trading around 11160 while the S&P and Dow Jones are trading at 3318 and 270430.

The Asian session was subdued following the long weekend in Japan. The ASX is leading the gain with 2.1% led by tech names while the Nikkei is down by 0.4%. In China, the Hang Seng is down by 0.2% while the Shanghai Composite is unchanged.

The dollar index traded above 94.00 boosted by the breakthrough in Congress over the stopgap funding bill. The EURUSD dropped below 1.17 and is currently trading around 1.1685 while GBPUSD is trading around 1.2724.

WTI and Brent traded sideways on Monday as investors are waiting for the weekly crude oil report later today. WTI and Brent are currently trading around 39.52 and 41.50 respectively.Crude oil muted ahead of Inventory Report

The reality of FED Powell’s speech

Posted on September 23, 2020September 23, 2020 by Exclusive Capital Research Team

Forex Update, Tuesday, 22nd of September, 2020

The dollar was up on Tuesday morning in Asia, clinging on to gains from the previous session as COIVD-19 fears and worries over the U.S. Congress’ stimulus impasse drove a heavy selloff in almost all other assets.

A fresh outbreak of COVID-19 in Europe, with the looming specter of fresh lockdowns, and jitters over the continuing impasse in the U.S. Congress over the latest stimulus measures as the U.S. presidential election draws nearer, also saw investors turning to the greenback.

In retrospect, Federal Reserve Chair Jerome Powell said the ‘U.S. economy is improving but has a long way to go before fully recovering from the coronavirus pandemic. He further confirmed the feds plan to accommodate periods of high inflation to reach it 2% inflation target to get employment figures back to where they were pre COVID without raising interest rates at least till 2023.

The reality of high inflation with low-interest rates, further stimulus, political and geopolitical uncertainty could see investors move back to haven assets which traditionally give a return of 2-3% over and above inflation.