News & Analysis

Tech recovery lifts Nasdaq and S&P500; Oil reverses on supply worries; GBP – EUR rally on Brexit deal hopes

Sep 11, 2018 | Market Updates

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18:30 GBP Average Earnings Index

U.S stocks finished mixed overnight, tech rebound lead the Nasdaq (+1.20) and S&P500 (+6.40) higher but the Dow Jones (-79.33) closed in the red. Utilities and industrials lifted the S&P500 while gains in Facebook and Microsoft support the Nasdaq.

Tesla shares rose 8.5 percent after an analyst at Baird said investors should buy them “even with drama.” The analyst cited the potential of Tesla’s “Gigafactory” to give the company a competitive advantage long-term. Technology stocks dropped nearly 3 percent last week as investors grappled with the possibility of stronger regulation for social media companies. – CNBC

“Selling pressure has been exacerbated by the concentration of high momentum technology stocks in a multitude of exchanges traded funds,” said Marc Chaikin, CEO of Chaikin Analytics, in a note. “Once the sell orders come in from trend followers, these ETFs must sell all the stocks in the basket, regardless of fundamentals or liquidity.” Chaikin also said, however, these pullbacks are buying opportunities for investors. “While it is true that trees don’t grow to the sky, most of the leaders in the tech sector such as Adobe (ADBE), Apple (AAPL), Amazon (AMZN), Alphabet (GOOGL), (CRM) and Visa (V) are in the midst of a robust revenue and earnings surge.”

European shares ended in the positive, Italian ministers said the country would stick to EU rules in its upcoming budget. EU Brexit negotiator Michel Barnier said it was “realistic” to expect a deal within six to eight weeks. The FTSE dipped 10.95, the DAX added 72.25 and the Euro Stoxx50 added 31.11.

Supply worries sent oil prices lower, traders said weekly data from Bloomberg suggested U.S. oil inventories are rising, contradicting an earlier report from Energy Information provider Genscape, which forecast declining inventories. “This has been a Monday morning special that the Bloomberg or Genscape numbers can kill a rally,” said Bob Yawger, director of futures at Mizuho in New York. USOUSD dropped a 65 cent rally late into the London session to finish 30 cents lower at $67.67.

Gold finished flat after a day of a low price range. The Daily chart shows price sitting in a small ending diagonal pattern, traders should give this pattern time to break out so direction can be seen. price closed at 1194.50, we’re still seeing flat movement this morning.

The EUR and the GBP rallied on Brexit deal hopes. The GBP added 100+ pips to the USD and 155 pips to the JPY. The EUR closed 44 pips higher to the USD and 52 pips higher to the JPY. The USD was mainly lower overnight to risk but made small gains to the CAD and JPY. This morning the USD has jumped to the JPY adding 34 pips, risk is also stronger to the Yen in morning trade. Bitcoin did close slightly lower but price continues to hold support from 6220.

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Sources; CNBC – All times are AEST

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