Daily Market Analysis – 25.10.2017

Market Summary

Asian markets got off to a slow start Tuesday as investors were put off somewhat by the weak lead-in from Wall Street overnight. While most markets remained tepid throughout the day, the Nikkei soon gained strength and moved higher to extend its historic winning streak to a sixteenth consecutive session. The gains of 0.50% for the Nikkei came even as the Yen strengthened against the U.S. dollar, normally a cue for Japanese equities to retreat. While markets across most of the rest of the region were nearly flat at the close, Hong Kong’s Hang Seng erased early gains to finish the day solidly lower. The Hong Kong market, which has been one of the best performings this year globally, has seen a pullback over the past week as investors worry about new banking and property regulations from mainland China.

European markets were mixed on a country-specific basis, but lower as measured by the broadest European equity indices. Trade was somewhat muted as investors continue to struggle with the Catalan independence issue. There is some caution entering markets this week as investors await the Thursday monetary policy meeting of the European Central Bank, where they are expected to announce a cut in their bond-buying program. The FTSE in London edged slightly higher for the day, as caution has entered sentiment for British investors as well. It was the third day in a row where the FTSE closed with a change of less than 0.1%, as investors grapple with mixed messages regarding the Brexit negotiations. On one hand, there have been reports of a stalemate that could keep talks from entering the second phase of negotiations, which would cover important trade agreements. On the other hand, Prime Minister Theresa May has remained upbeat, signaling that there is a “degree of confidence” that talks will make progress before the December European Union summit.

In the U.S. markets moved broadly higher, with corporate earnings once more setting the stage for gains after 3M and Caterpillar blew analyst expectations out of the water. Investors have questioned the high valuations of U.S. equities, but the strength of earnings continues attempting to put these questions to rest. The Dow ended the session at a new record high on the back of strength from 3M and Caterpillar, which were up by 5.9% and 5% respectively. The S&P500 and Nasdaq also gained, but finished the day roughly 0.5% from record closing levels. Heavy earnings reporting continues through the end of the week, and should continue supporting gains as approximately 75% of companies reporting so far have beaten estimates.

Today’s Assets

Crude Oil 

Crude is becoming increasingly interesting as the U.S. benchmark West Texas Intermediate crude reached a six-month high on Tuesday, while Brent crude, the global benchmark, was at a nearly one-month high. OPEC has re-iterated its promise to help balance global supplies, which is bullish for crude, and the current geopolitical tensions in Iraq and Iran have kept concerns over supply disruptions high. In addition, it appears that global demand is staging a recovery, and if this continues we could see crude trading significantly higher in the coming weeks.

Cryptocurrencies  

Those who have been holding the smaller altcoins and waiting for them to recover were rewarded on Tuesday as Bitcoin, the top cryptocurrency fell by more than 6% after the Bitcoin Gold fork, but other altcoins made significant gains. Traders were shying away from Bitcoin after the fork as there remain many questions about the viability of Bitcoin Gold, and many exchanges and wallets are not supporting this fork. Other coins, which have suffered as Bitcoin gained in the past few weeks, saw prices soaring, with NEO adding nearly 13%, and Ripple gaining 7.5%. Ether advanced nearly 5%, while DASH saw a more modest gain of 2.1%.

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