The week in markets – May 17th

by | May 17, 2017

The market view

Major stock market indices including the S&P500 and FTSE100 smashed records on Monday, helped by impressive gains in energy, mining and tech stocks. The reason for the upswing was down to two reasons – firstly a significant jump in the price of oil which came after Russian and Saudi Arabian energy ministers announced they would be extending a production cut until 2018.

Brent Crude eventually peaked at over $52 a barrel after the news had broken, representing a more bullish view from investors after a subdued start to the month which saw the price fall to $48. The other key driving force was a move into tech stocks, after concerns about last weeks global malware attacks caused investors to reassess the importance of cyber security which many major tech firms specialise in. 

Though it was not all good news, particularly for stateside investors, and a divergence between the possible future directions of the Eurozone and US economy became starkly clear earlier this week. Though tensions on the Korean Peninsula may have cooled slightly since Vice President Mike Pence visited South Korea several weeks ago, the young rogue leader of the communist country shows little sign of wanting to deescalate tensions – and this is bad news for markets.

Uncertainty due to the possibility of a conflict in Asia, as well as ongoing political gaffes by Trump, (including him sharing classified information with Russian Foreign Minister Sergey Lavrov) are just a couple of the concerns which might be contributing to investor nervousness as of late. invstr CEO and Founder Kerim Derhalli gave his thoughts, saying:

“I feel as if we might be getting close to a major top in the S&p500. The reasons are twofold, firstly North Korea’s latest missile launch represents an ongoing possibility of military confrontation. Secondly, though US indexes are still buoyant right now, the fact is that markets already priced in the good news about Trump. We have to remember that investors bet on the fact that the economy would benefit from his tax reforms and infrastructure spending, but we haven’t got either at the moment – all we do have is major political risk.”

Speaking of risk, if a key gauge of volatility known as the VIX index is anything to go by, investors are not as worried as one might assume given everything thats happening. The index is at a major low, implying that fears are lower than might be expected. Last week it fell to it’s lowest level since 1993, back when Bill Clinton sat in the Oval Office.

Across the pond, the Euro made considerable moves upward this week. This recovery was helped particularly by relief over the French election victory for Emmanuel Macron as well as other good Eurozone economic data.

Is the single currency back in fashion? Kerim Derhalli added, “We are starting to see early signs of an emergence of the Euro vs the Dollar – this might be an indication that people are getting concerned with what’s happening in the US. The fact that people have been buying bitcoin rather than Dollars also implies a lack of confidence.”

In contrast to a weaker US Dollar, The Euro’s bumper week saw it rallying against a basket of major currencies including the Pound Sterling, which continued to slide this week after new data released on Monday showed that UK inflation went up more than economists anticipated last month. An increase in air fares and retail goods put pressure on the currency, causing it to slip further ahead of the general election next month.

Events to watch this week

  • Wednesday – Eurozone consumer price index figures are released, indicating the state of inflation in the Eurozone. Watch #EURUSD, #EURGBP. 
  • Thursday – British retail sales figures will give an indication into how customers are responding to higher prices. This could put pressure on the Pound again. Watch #GBP/USD, #GBP/EUR. 

Company News

  • Easyjet reported a significant loss for the first half of the financial year. Airlines were some of the first casualties as a result of a weaker Pound Sterling after last summers Brexit vote and predictably Easyjet followed suit. 
  • Vodafone also suffered, admitting it had experienced a weak year in the UK. It reported an annual loss of a cool €6.1 billion, due partly to a major fine from Ofcom in the UK and a loss in the value of its Indian business. 

Upcoming Company Results

  • Wednesday – British Land, SSE Group PLC, Brewin Dolphin, Mitchells & Butlers, Cisco Systems. 
  • Thursday – Wal-Mart, 3i, National Grid, Burberry, Booker, Royal Mail, Investec, Thomas Cook, Gap, Alibaba Group.
  • Friday – Foot Locker, Grainger PLC, Campbell Soup Company. 

Oil's Slick Upward Move

Technocratic officialdom just declared UBS, Zurich Insurance, Nestle, and in fact, the entire Swiss stock exchange, 'off-limits.' They've done what, now?

Once upon a time, a complex myriad of red tape allowed Swiss stocks to be traded across the European Union (EU). Brussels said enough's enough to that and decided to craft one deal to rule them all. While that was being drafted, a Swiss subplot started to boil. Elections, euro-skepticism, and trade unionists became a focal point, and the EU's immovable deal hit a Switzerland's unstoppable sentiment. The treaty crumpled.

In short, the EU just sent the bloc's fourth-largest exchange packing. The SIX, valued at $1.7 trillion with Nestle and Novartis on its register, is out it's own bounds. We can't invest in it anymore!

It's hard to tell who has this worst. For a start, Swiss companies may be forced to other stock exchanges outside Switzerland. A few already have. Investors still with access could end up paying more for shares as, with a European third of orders gone, brokers recoup money by setting higher asking prices. And the officials behind all this? Truly at each other's throats. 

Within the political mire, many hoped both sides could iron out their differences and keep the "equivalence" agreement going. Nope. Switzerland is furious with the EU for what it sees as a flex of power in front of Britain, still in its Brexit muddle. Creating a theatre, it sounds like Brussels is shouting 'don't mess with us!' in the direction of the UK, now teetering closer to a no-deal cliff edge. As Brussels endures its own leadership merry-go-round, Downing Street doesn’t even know to whom it should address its strongly worded letters…

All this couldn't happen to British stocks, could it? Could it?!

ALL RIGHTS RESERVED © INVSTR LTD. 2018

Risk Disclosure:
Invstr is a technology platform, not a registered broker-dealer or investment adviser. Invstr does not offer its own recommendations of any security or provide its own research to any user regarding any security transaction or order.

Please note, investing involves risk and investments may lose value. Past performance does not guarantee future results.

Brokerage services of US-traded securities, including fractional trading, are provided to Invstr users by DriveWealth, LLC a registered broker-dealer and member of FINRA/SIPC. DriveWealth may not establish investment accounts to residents of certain jurisdictions. 

DriveWealth provides no tax, legal, or investment advice of any kind, nor does DriveWealth give advice or offer opinions with respect to the nature, potential value, or suitability of any securities transaction or investment strategy. DriveWealth acts as the clearing firm for securities transactions entered on the Invstr mobile platform. DriveWealth is not affiliated with Invstr. Invstr does not participate in DriveWealth’s decision-making.

There is no minimum initial deposit required to open an investing account with DriveWealth. Expenses and Fees associated with the DriveWealth platform in conjunction with Beanstox includes either a monthly membership fee of $4.99 with a commission charge of $0.01 per share* or, in the event the membership fee is not paid, a commission charge of $0.0125 per share applies, subject to a minimum of $2.99 per transaction. There are no monthly minimum fees, or required ongoing minimum account balance. For non-resident aliens, there is a one-time tax verification fee of $5.00 (representing Form W-8BEN pass-through processing cost). View a full list of our fees at http://bit.ly/DWFees

The monthly subscription charge is four dollars and ninety-nine cents (US$4.99) per month plus one cent (US$0.01) per share traded (as examples, for a Transaction of 0.90 shares, the per share traded charge is one cent (US$0.01), and for a Transaction of 1.6 shares, the per share traded charge would be two cents ($0.02), and the quarterly subscription charge is fourteen dollars and ninety-nine cents (US$14.97) every 3 months plus one cent (US$0.01) per share traded. The monthly and quarterly subscription charges may be greater or less depending on additional services offered by a DriveWealth partners as part of the subscription model offering, or based on any subsidies provided by a DriveWealth partner as part of the subscription model offering. For non-resident aliens, there is a one-time tax verification fee of $5.00 (representing Form W-8BEN pass-through processing cost).View a full list of our fees at http://bit.ly/DWFees

This communication is not an offer or solicitation to purchase or sell securities. Investing in securities carries risk, including the loss of principal. Past performance is not indicative of future returns, which may vary. Online trading has inherent risk due to system response and access times that may be affected by various factors, including but not limited to market conditions and system performance. An investor should understand such facts before trading. The risks associated with investing in international securities, including US-listed ADRs and ETFs that contain non-US securities include, among others, country/political risk relating to the government in the home country; exchange rate risk if the country's currency is devalued; and inflationary/purchasing power risks if the currency of the home country becomes less valuable as the general level of prices for goods and services rises. Before investing in an ETF, an investor should consider the investment objectives, risks, charges, and expense of the investment company carefully. ETF prospectuses are accessible within the mobile application via a link under each company’s “Description.”

A fractional share is a share of equity ownership that is less than one full share. Fractional share investing has certain limitations and restrictions that investors should understand prior to purchasing fractional shares: ownership of less than one full share does not give the fractional share owner the right to vote on company matters; fractional shares are non-transferrable, meaning they cannot be transferred to another brokerage firm; and fractional share orders will be accepted as market orders only. For more information and details on fractional shares, and any associated limitations or restrictions please visit: https://drivewealth.com/fractional-shares-disclosure

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ALL RIGHTS RESERVED © INVSTR LTD. 2018

Risk Disclosure:

Invstr is a technology platform, not a registered broker-dealer or investment adviser. Invstr does not offer its own recommendations of any security or provide its own research to any user regarding any security transaction or order.

Please note, investing involves risk and investments may lose value. Past performance does not guarantee future results.

Brokerage services of US-traded securities, including fractional trading, are provided to Invstr users by DriveWealth, LLC a registered broker-dealer and member of FINRA/SIPC. DriveWealth may not establish investment accounts to residents of certain jurisdictions. 

DriveWealth provides no tax, legal, or investment advice of any kind, nor does DriveWealth give advice or offer opinions with respect to the nature, potential value, or suitability of any securities transaction or investment strategy. DriveWealth acts as the clearing firm for securities transactions entered on the Invstr mobile platform. DriveWealth is not affiliated with Invstr. Invstr does not participate in DriveWealth’s decision-making.

There is no minimum initial deposit required to open an investing account with DriveWealth. Expenses and Fees associated with the DriveWealth platform in conjunction with Beanstox includes either a monthly membership fee of $4.99 with a commission charge of $0.01 per share* or, in the event the membership fee is not paid, a commission charge of $0.0125 per share applies, subject to a minimum of $2.99 per transaction. There are no monthly minimum fees, or required ongoing minimum account balance. For non-resident aliens, there is a one-time tax verification fee of $5.00 (representing Form W-8BEN pass-through processing cost). View a full list of our fees at http://bit.ly/DWFees

The monthly subscription charge is four dollars and ninety-nine cents (US$4.99) per month plus one cent (US$0.01) per share traded (as examples, for a Transaction of 0.90 shares, the per share traded charge is one cent (US$0.01), and for a Transaction of 1.6 shares, the per share traded charge would be two cents ($0.02), and the quarterly subscription charge is fourteen dollars and ninety-nine cents (US$14.97) every 3 months plus one cent (US$0.01) per share traded. The monthly and quarterly subscription charges may be greater or less depending on additional services offered by a DriveWealth partners as part of the subscription model offering, or based on any subsidies provided by a DriveWealth partner as part of the subscription model offering. For non-resident aliens, there is a one-time tax verification fee of $5.00 (representing Form W-8BEN pass-through processing cost).View a full list of our fees at http://bit.ly/DWFees

This communication is not an offer or solicitation to purchase or sell securities. Investing in securities carries risk, including the loss of principal. Past performance is not indicative of future returns, which may vary. Online trading has inherent risk due to system response and access times that may be affected by various factors, including but not limited to market conditions and system performance. An investor should understand such facts before trading. The risks associated with investing in international securities, including US-listed ADRs and ETFs that contain non-US securities include, among others, country/political risk relating to the government in the home country; exchange rate risk if the country's currency is devalued; and inflationary/purchasing power risks if the currency of the home country becomes less valuable as the general level of prices for goods and services rises. Before investing in an ETF, an investor should consider the investment objectives, risks, charges, and expense of the investment company carefully. ETF prospectuses are accessible within the mobile application via a link under each company’s “Description.”

A fractional share is a share of equity ownership that is less than one full share. Fractional share investing has certain limitations and restrictions that investors should understand prior to purchasing fractional shares: ownership of less than one full share does not give the fractional share owner the right to vote on company matters; fractional shares are non-transferrable, meaning they cannot be transferred to another brokerage firm; and fractional share orders will be accepted as market orders only. For more information and details on fractional shares, and any associated limitations or restrictions please visit: https://drivewealth.com/fractional-shares-disclosure

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