December 18, 2018

 

Global Commentary

Asian markets finished mostly higher Monday, despite caution from investors ahead of the U.S. Federal Reserve meeting, and a meeting of Chinese economic policy makers. Mainland China’s Shanghai Composite managed a 0.16% gain, but the Hang Seng in Hong Kong edged lower by 0.03%. Australia’s S&P/ASX 200 saw the strongest gains in the region, rising 1.0% on the strength from mining shares, while the big four banks lagged. In South Korea the Kospi edged up by 0.08%, and Japan’s Nikkei added 0.62% despite a firming Yen.

European markets fell as the final full trading week before Christmas kicked off, with retailers, banks and drug stocks all weak, while mining stocks provided some relief. The broad based Stoxx Europe 600 finished the session 1.14% lower, with Germany’s DAX losing 0.86% and the CAC 40 in France losing 1.11%. London’s FTSE also fell 1.05% after retailer ASOS issued a profit warning, and there were rumblings of a no-confidence vote from the Labour Party after Prime Minster Theresa May refused to hold a vote on her Brexit proposal before the Parliamentary Christmas break.

In the U.S. markets continued to fall hard, with all the major indices losing more than 2% as investors worried that the Federal Reserve is planning to go ahead with an interest rate hike later this week. The Nasdaq led losses as it fell 2.27%, while the S&P 500 lost 2.08% and the Dow Industrials lost more than 500 points, or 2.11%.

 

Cryptocurrencies

Cryptocurrency markets roared back to life on Monday, with Bitcoin gaining more than 10% at one point and retaking the $3,500 level. The top cryptocurrency finished the day 8.4% higher and all the other top ten altcoins took their lead from bitcoin. EOS was the top gainer in that group, surging 23.7% higher. Most of the other top ten altcoins were up 10% to 13%. The broad based rally had 99 of the top 100 cryptocurrencies finishing higher, and the overall market added nearly $13 billion to its market cap.

 

FOREX

USD/JPY – The pair fell on Monday, gapping down at the open, and trading below the 113.00 level as traders are beginning to get antsy ahead of the U.S. Federal Reserve meeting. Some believe that the Fed will hold off on raising rates at this meeting due to recent weak economic data. That is putting some downside pressure on the U.S. dollar.

USD/CAD- Despite broad based weakness for the U.S. dollar on Monday, this pair gained, retesting the 1.3400 level and settling slightly above the resistance found there. Falling crude prices and the probability of lower prices to come is weighing on the Canadian dollar. Monday’s close was the highest for the pair since June 2017. The next level of resistance for the pair is at the 1.3525 level.

 

Commodities

Metals – Precious metals gained on Monday as the U.S. dollar softened ahead of this week’s meeting of the Federal Reserve. Gold for February delivery added $10.40, or 0.8%, to settle at $1,251.80 an ounce, while March silver rose 0.8% to $14.759 an ounce.

Oil – Crude fell to its lowest level since October 2017 as traders are expecting a climb in U.S. inventory levels this week, and digested a forecast for U.S. shale production to continue climbing. January West Texas Intermediate oil lost $1.32, or 2.6%, to settle at $49.88 a barrel. Meanwhile, February Brent the global benchmark, was down $0.22, or 0.4%, to $60.06 a barrel.

 

Indices

S&P500 – The benchmark U.S. stock index fell 2.08% on Monday, with all eleven subsectors ending the day in the red. The defensive sectors were worst hit, with real estate falling 3.7% and the utilities losing 3.3%. Also taking heavy losses was the consumer discretionary sector, down 2.8%. In addition, the technology, consumer staples and health care sectors were all down more than 2%.

FTSE 100 – London’s benchmark equity index dropped 1.05% on Monday after major retailer ASOS issued a profit warning, dragging the entire sector lower. Banks and drug stocks were weak as well, but the mining sector provided some relief. Investors were also a bit on edge ahead of the Federal Reserve monetary policy meeting later this week, and the Bank of England monetary policy meeting this Thursday.

 

Stocks

UnitedHealth Group – Shares of the health and well being company fell 2.62% on Monday in a broad based selloff for both the Dow Industrials and the health care sector. The diversification of UNH actually helped it from worse losses after a Texas court ruled that the controversial Obamacare health care plan is unconstitutional. The ruling is expected to be beneficial long term for insurance companies, but harmful for hospitals and other health care providers who have benefitted from a drop in unpaid bills. UnitedHealth Group has been considered one of the stronger plays in the sector, and Monday’s drop could present a solid buying opportunity if it becomes more likely the ruling gets overturned later at the Supreme Court.

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