- Yen Strengthens on BOJ’s QE tightening
- 400 days without a 5% correction for US indices
- Samsung chip business undeforms
European markets are trading higher as investors have reacted to positive German industrial data. The number was simply astonishing, and it printed the reading of 3.4% when the market was expecting a number of 1.8%.
However, the Euro-Dollar paid is still facing it’s inevitable correction and this is purely because traders are quick on their feet to take some profit off the table (as the pair touched its high of 1.2083). The strong rebound in the dollar may keep the pressure on the euro for a while but we are not expecting any major selloff. The strength of the Eurozone’s economy is robust and it’s economic indicators are still pointing that the economy would continue to accelerate at a respectable pace in 2018.
The recent CFTC data also confirms that the recent retracement is only a healthy correction as institutional money still holds a record amount of net long positions. The German industrial data released today puts the approval stamp for traders to hold the bullish view for the euro.
The Eurozone’s unemployment number could lift the confidence for amid investors and for the ECB. A Lower unemployment rate doesn’t necessarily mean inflation would improve, a measure which the ECB watches very closely, but it is a step in the right direction.
Looking at the performance of the US indices, one thing becomes apparent that the market has moved higher mostly on basis of positive sentiment. It is this very fact that we have not have seen the usual 5% healthy correction which the traders crave for. A correction of 5-10% mostly represents an opportunity for those who have been sitting on the sideline and have not had a chance to participate. In nearly 400 days, we have seen a 5% correction from its 52 week’s high.
Similarly, the MSCI world index has also logged its longest winning streak in history without facing a 5% correction. Looking at these record numbers, it becomes evidently clear that the odds are stacked in favour of correction and the correction could extend even further from 5% but we do not expect a meltdown in the market because it’s foundation appears to be on strong fundamentals.
The dollar-yen pair is one the most intriguing pair to watch today after the BOJ decided tow tweaked it’s bond purchase program. The bank curbed its buying of 10-to -25 years year debt by 10 billion yen. The first cut in debt purchase since 2016 sends the signal to the markets that the super-loose monetary policy party is also coming to an end.
Bitcoin Above 15K
Bitcoin has broken the 15K level once again, an important junction (because if it stays above this, chances are going to continue to make record highs), due to the regulatory concerns. South Korea wants to tighten the regulatory screw again by looking at some specific accounts and China wants to limit the bitcoin mining operation. But these aspects have proven only a blip for Bitcoin and nothing more. Every time, we have heard any regulatory news impacting the cryptocurrency, it has proven to be only an opportunity for bargain hunters to jump onboard. Of course, one may say that Bitcoin is a bubble and it will burst, but the only reality about bubbles is that once they burst, they never come back again. For bitcoin, we have seen several massive price crashes over time, however, the price has bounced back up. Just like the S&P500 index, the big drop during the financial crisis presented the biggest opportunity in a decade.
Samsung Missed It’s Earning
It wasn’t the kind of quarter that investors were hoping for Samsung. A 1 trillion won or $937 million fourth-quarter profit miss is really a sad news if you are holding Samsung stock. This is primarily due to the downturn in firms chip prices. It was company's strong chip business performance which aided the firm to report robust quarterly earnings in Q2 and Q3. Of course, there is an element of strengthening currency effect which cannot be ignored. Samsung has a strong and prominent position when it comes to its next generation of screens known as organic light -emitting diodes and this area of their business did fuel a rise in sales. Going into Q1 of 201, we do expect their marketing strategies in Q4 of 2017 may bring a steep rise in the top line profit number. Having said that we do believe that their memory chip cycle has peaked as firms like Apple which buys OLED screen and memory chips are looking to make them under their own roof or looking at an alternative method.