By Deepta Bolaky
On the brink of bear markets levels, the relief rally in the equity markets was widely embraced. Overall, the price action in the financial markets was mostly driven by the headlines emerging from the White House amid a quiet holiday-period economic calendar and thin liquidity in the markets.
The stock markets were flashing red just before Christmas day, and major equity benchmarks were teetering near bear market territory. Investors’ fears were fuelled by the fundamental headwinds and the political turmoil present in the financial markets.
Investors were struggling to focus on the positive factors driving corporate profits and growth in the economy. Therefore, on Wednesday, when the following encouraging factors reassured market participants, equities rallied sharply to the upside:
Technology and the energy stocks gave Wall Street a significant boost and major US equity benchmarks experienced the biggest daily gain in a decade. However, tThe equity markets will probably remain underpinned by political turmoil, concerns over slow growth, trade tensions and higher borrowing costs despite the relief rally.
The US government has been in shutdown for six days now. President Trump remains firm on a no-deal until Congress funds a wall on the Mexican border. While the shutdown is partial and may not have severe repercussions on the markets, a prolonged shutdown can dampen risk sentiment since the financial markets are already fragile and vulnerable to the current headwinds.
Brexit chaos continues, and the pressure from allies and opponents on Theresa May had intensified when the details of the legal advice were revealed. The UK is trapped in a deep political crisis while the possibility of a no Brexit grows. The local currency is, therefore, swinging up and down with every Brexit headlines.
The price action of the GBPUSD pair shows that after the Brexit vote, the Pound remains weak against the US dollar. Any gains are capped around the 1.45 level. In the recent months, the pair was mostly on the back foot and trading in a downtrend.
GBPUSD (Weekly Chart)
Source: GO MT4
It is becoming increasingly difficult to predict the direction of cryptocurrencies. The year 2018 has been a tough year for the crypto- market, and the inherent volatility associated with cryptocurrencies can be overwhelming for investors. After climbing higher at the start of the week, Bitcoin, Litecoin, Ripple and Ethereum dropped and consolidated into a tight range before retracing further to the downside on Thursday.
BTCUSD, LTCUSD, THEUSD and XRPUSD (Hourly Chart)
Source: GO MT4
|Monday, 31 Dec 2018
Indicative Index Dividends
Dividends are in Points