USA tech shares slide on tax reform progress, U.K. FTSE 100 also slumps, gold plunges, U.S. dollar rises
Throughout the analysis, regarding Trump’s intended tax reform programme, which is now set for ongoing debate in the senate until a vote takes place on Thursday, few financial media commentators have picked up on the effect the reforms will have on tech shares. As a consequence of the tax avoidance measures already in place and with certain loopholes likely to be closed, the tax reforms may have a detrimental effect on many tech stocks, including what are referred to as “FANG stocks” (Facebook, Amazon, Netflix, Google), which took a battering on Wednesday, several falling by the most in approx. twenty two months, with the NASDAQ falling by as much as 2.2% at one stage. The DJIA index, containing the stocks most likely to benefit from tax cuts, did however rise.
In terms of fundamental economic calendar news, the USA economy posted encouraging GDP growth figures; beating expectations by coming in at 3.3% annualised. Pending home sales have come in at 1.2% growth YoY in October, missing the forecast, but a considerable improvement on the -5.7% YoY figure printed for September, whilst mortgage approvals fell by -3.1% last week. USD rose versus several peers throughout Wednesday; USD/JPY up circa 0.4%, USD/CHF up circa 0.2%, EUR/USD down approx. 0.1%. In an oil correlated sell off, commodity currencies fell, particularly the Canadian dollar, as WTI oil fell by 1.1% on the day, after whipsawing violently, breaching R1 to crash through S3, to ultimately close the day out at $57.3 a barrel.
Sterling continued the momentum developed late Tuesday evening, as a consequence of a press leak suggesting that the U.K. had finally agreed a Brexit divorce settlement with its remaining E.U. partners. However, the chief E.U. negotiator Michel Barnier appeared to dismiss the stories as a rumour, suggesting that nothing has changed. GBP rose by approximately 0.5% versus the majority of its peers throughout the day. However, in what’s become a negatively correlated trade versus the U.K. pound, the FTSE 100 sold off sharply. Consumer credit issued in the U.K. and the latest monthly mortgage approvals, both missed the forecasts.
France saw its monthly GBP growth figure miss target, however, the 2.2% YoY growth figure was maintained, a considerable improvement on the circa 1% growth figure witnessed in late 2015. The various consumer and business confidence readings for the E.Z. mostly missed forecasts, albeit by marginal amounts, whilst the latest German CPI figure came in at 1.8% YoY, rising from 1.7%.
USD/JPY traded in a bullish range throughout the day, at one point rising through R2, to close the day out at 111.9, up approx 0.4%, just above R1. Price is now above both 100 and 200 DMA, which have narrowed to be similar readings. USD/CHF plunged through the 200 DMA towards the end of last week, subsequently the currency pair has recovered to be trading above the critical moving average. On Wednesday USD/CHF made two attempts to breach R1, eventually retracting to end the day below the first line of resistance, up 0.2% on the day at 0.984. USD/CAD traded in a bullish range throughout the day, eventually breaching R2 and hovering close to the second resistance level during the New York session, closing out up circa 0.6%, at 1.286.
GBP/USD traded in a tight bullish range during Wednesday’s sessions, breaching R1 and staying close to the level throughout the New York session. Closing the day out at circa 1.341, up circa 0.3%, the highest level for two months. Versus the majority of its other peers, sterling made gains of circa 0.5% throughout the day.
EUR/USD fell by circa 0.1% finally, having traded in a very tight bearish range throughout the day. Closing out at 1.185. EUR/GBP closed down circa 0.3% at 0.883, close to the first level of support. EUR/CAD traded in a predominantly bullish range despite whipsawing. The currency pair rose through R1, reverted back through the daily PP, to then once again regain its position above R1, ending the day at circa 1.525, up circa 0.4%.
As always with gold, it’s correlated behaviour with the prevailing risk on or risk off conditions on, can witness any momentum built up over previous sessions, as a result of its safe haven appeal, rapidly destroyed when risk on reappears. XAU/USD initially rose above the daily PP on Wednesday, to then reverse direction and crash through the three levels of support to end the day down circa 1% at 1283. A significant fall from a closing position of circa 1296 the previous day, when many in the analyst community were predicting that the 1300 handle could be tested, or breached. Price is back below the 100 DMA, a level gold investors had hoped not to revisit in the short term.
EQUITY INDICES SNAPSHOT FOR NOVEMBER 29th.
• DJIA closed up 0.44%.
• SPX closed down 0.04%.
• NASDAQ closed down 1.27%.
• FTSE 100 closed down 0.90%.
• DAX closed up 0.02%.
• CAC closed up 0.14%.
KEY ECONOMIC CALENDAR EVENTS FOR NOVEMBER 30th.
• EUR German Unemployment Claims Rate s.a. (NOV).
• EUR Euro-Zone Consumer Price Index Estimate (YoY) (NOV).
• USD Initial Jobless Claims (NOV 25).
• USD Personal Spending (OCT).
• JPY National Consumer Price Index (YoY) (OCT).