“Bitcoin Crashes To Lowest …”

Bitcoin Crashes To Lowest

Bitcoin has plummeted more than 75 percent this year from a peak of $20,000 reached in December 2017.  On Tuesday Bitcoin reached its lowest level this year, tumbling as much as 10 percent, breaching the $4,300 and taking losses in the world’s best-known digital coin to 25 percent within a week.  The sell-off in digital currencies intensified across the board even with other smaller coins as traders said the sell-off is rooted to heavy selling that gathered steam at leveraged Asian exchanges.  The fall followed a sudden plunge last week that took the bitcoin out of a period of relative stability.  Bitcoin sunk to a level of $4,327, its lowest since October 2017, on the Bitstamp exchange.  Meanwhile, other cryptocurrencies also fell sharply with Ripple XRP and Ethereum’s ether, the second and third-largest coins falling 14 percent and 16 percent respectively.   Tuesday’s fall coincided with the broader drop in the financial markets.

Brexit And Theresa May

On Monday, Prime Minister Theresa May vowed to stick to her draft European divorce deal, as lawmakers within her party tried to trigger a leadership challenge.  She pledged to fight on, warning that toppling her, risked delaying Britain’s exit from the EU or leaving without a deal which could lead the fifth largest economy in the world into the unknown.  The EU is due to hold a summit to discuss the draft deal on 25^th November.     Some Eurosceptic ministers in May’s cabinet are reported to want to rewrite parts of it, though EU governments have largely ruled this out.  Michael Barnier, the Brexit negotiator for the EU called the draft “fair and balanced” and offered the orderly exit in March that would be the basis for a future trade deal.  Meanwhile, Barnier met ministers from the 27 EU governments in order to complete a separate non-binding “declaration” on plans for a trade and security relationship with Britain.  This would be agreed by May in a summit to be held in Brussels on Sunday.  Outstanding issues include a Spanish threat to block the so-called political declaration over Gibraltar and problems from other states on fishing rights and future trade ties.   Meanwhile British Prime Minister Theresa May met the European Union chief executive in Brussels to try and secure a blueprint for the country’s post-Brexit ties with the EU.   According to officials, Britain and the EU agreed a draft text setting out a close post-Brexit relationship, however, issues over fish and the future of Gibraltar must still be settled before leaders meet on Sunday.  The news sent the pound nearly one percent higher as investors were relieved that an 18 month of tense negotiations were bearing fruit, keeping Britain close to its biggest market and ensuring nothing much will change for at least two years.

Italy’s Budget, Yields And Italian Banks

There were growing concerns this week about the response related to Italy’s budget from the EU Commission which was due on Wednesday.  The European Commission rejected the budget and said that the Italian budget does not comply with the EU debt reduction criteria and that an excessive deficit procedure is warranted.  Italian bonds on Wednesday rallied, pushing the two-year yields down as much as 23 basis points, as investors focused on the possibility of a compromise between the two sides.   Prime Minister Giuseppe Conte showed his concerns about the Italian bond spread over Germany and that the government will respond with reforms.  The Italian/German 10-year bond yield spread tightened to 313 basis points having widened to 335 bps on Tuesday.  It has more than doubled this year. The Italian two-year bond fell 23 bps to touch 1.15 percent, the lowest in almost two weeks, whilst the 10-year yields were down 13 bps falling to about 3.49 percent. Yields were set for their biggest daily drop in over three weeks, whilst an improved risk sentiment helped the equity markets to stabilise. Meanwhile, Italian banks have lost 40 billion euros in market cap since May amid the budget concerns, eroding the value of their large sovereign bond portfolios and raising the risk of capital shortfalls for weaker lenders.  On Wednesday the EU Commission took its first step towards disciplining Italy over its expansionary 2019 budget which Italy refused to change.   Ahead of that move, investors have increased their bets that Italian banks which hold nearly one fifth of the country’s government bonds will fall further.

European Central Bank October Minutes

The minutes of the meeting held in October show that ECB policymakers stressed the need to reaffirm plans to dial back monetary policy stimulus even as some saw growing risks to the economy.  The ECB rate setters acknowledged the disappointing economic data in October but took the view that the picture was still one of widespread economic growth and accelerating inflation.  At the meeting the central bank kept interest rates at record lows and repeated its intention to stop adding to its 2.6 trillion euros of bonds at the end of the year in view of higher inflation.  The prospect of a new round of cheap, multi-year loans to banks, known as targeted long-term financing operations (TLTROs) was barely raised.  “The remark was made that the maturity of some of the targeted longer-term financing operations would fall below one year in the course of next year, which could impact the evolution of excess liquidity and might affect banks’ liquidity position”, said the ECB.

US Home Builder Sentiment

Data released on Monday showed that US home builder sentiment recorded the biggest drop in November in 4 ½ years as rising mortgage rates and tight home inventory squeezed the real estate sector, according to the National Association of Home Builders on Monday.    This had an impact on the dollar, as it weighed down by the weak US housing data.

US Business Spending

New orders for key capital goods produced in the US were unexpectedly unchanged in October and shipments rebounded modestly.  Other data pointed to home resale, rising last month after six straight monthly declines, whilst house purchases remained sharply down this year.  Sluggish business spending on equipment and lacklustre housing market, could raise fears, that higher interest rates are actually hurting the economy.  Meanwhile, the labour market showed some disappointing news as the number of Americans filing applications for unemployment benefits rose to more than a four-month high last week.  The Commerce Department said the flat reading in orders for non-defense capital goods excluding aircraft, which is a closely watched proxy for business spending plans, followed a downward revised 0.5 percent drop in September, whereas before they were reported to have dropped 0.1 percent.  Last month there were also declines in orders for primary metals and machinery, which offset increases in orders for fabricated metal products, computers and electronic products as well as electrical equipment, appliances and components.

Markets Wrap

On Monday share markets were mixed amid conflicting signals on the prospects of an agreement in the China-US trade dispute. US stocks came under heavy selling on Monday with the NASDAQ falling 3 percent as investors dumped Apple, internet and other technology shares.  Yields on the US 10 year paper have declined to 3.06 percent from a recent top of 3.25 percent.  On Tuesday the Asian stock market skidded and Europe was expected to follow suite after pressure by sharp losses on Wall Street, as technology firms tumbled on worries about slackening demand.  European stocks opened lower with the FTSE falling 0.1 percent, DAX losing 0.5 percent and France’ CAC dipping 0.3 percent.  The MSCI broadest index of Asia-Pacific shares outside Japan fell 1.2 percent.  On Tuesday Italian government bond yields jumped to one month highs pushed up by risk aversion on global markets, tensions over Brexit, concerns about the Italian budget and the sharp losses of tech stocks on Wall Street.   The continuing confrontation with the European Union over Rome’s budget plans is leaving an impact.  A poor initial response for a new “BTP Italia” bond on Monday added to the negative mood.  Italian bond yield climbed as much as 13 basis points, with five-year yields rising 2.97 percent and those on the 10 year bonds reaching a one month high of 3.7 percent.   The German 10 year yield, which is the benchmark for the region, hit a more than three-week low at 0.347 percent.  On Tuesday the S&P 500 hit its three week low amid weak results and forecasts from a bunch of retailers while tech stocks continued to drop on concerns about the Iphone sales.   Apple added to the pressure, as the stock which led the market through most of the bull run, tumbled nearly 20 percent from their record high.   Consequently, the NASDAQ was pushed to more than 7 months low.  Goldman Sachs reduced Apple’s price target for the second time in just over a week stating that the balance of price and features in the new iPhone XR may not be well received by users outside of the United States.  The slowing demand for Apple’s flagship iPhones have many implications for technology and internet companies, at a time when investors are concerned over rising borrowing costs, worries over a peak in corporate earnings growth, and a global economy impacted by trade tensions.  Consumer discretionary stocks also plunged, as several retailers including Target Corp, produced underwhelming quarterly results and earnings forecasts. Wednesday’s stock market activity showed signs that investors were recovering their risk appetite.  World stock markets and oil prices climbed on the day with earnings and gains in tech stocks lifting shares on Wall Street.  The recovery in US tech and other momentum stocks, boosted the benchmark S&P stock index, after it fell 3.5 percent over the previous two sessions.    On Thursday European shares resumed their downward trend hit by disappointing earnings updates from UK utility Centrica and a fall in Italian banks on the continued uncertainty over the outlook for the country’s finances.  The STOXX 600 fell 0.5 percent with most sectors trading in the red, after broad based gains in the previous session, that helped the pan-European index bounce from near two-year lows.   On Thursday the stock market in the US was closed for Thanksgiving.

Currencies

Concerns over the global economy constrained the dollar, as it struggled at a nearly two-week low against a basket of currencies.  The dollar eased slightly, compared to other currencies, after Federal Reserve Officials expressed caution over the global growth outlook.  The greenback this year enjoyed a strong run thanks to the Fed’s policy tightening on the back of a robust economy and rising wage pressures.  The dollar was weighed down after Fed Chair Richard Clarida and Dallas Fed President Robert Kaplan late last week raised concerns over a potential global slowdown.  On Tuesday the Euro fell from a two week high, as a selloff in world stocks and concerns over Italian banks affected the currency and lifted the Swiss franc and the Japanese yen.  On Tuesday the dollar rallied nearly half a percent against its rivals, as US stocks, oil and the euro dropped during the broad based sell-off across the global markets.  The pound fell 0.25 percent at $1.2815, retreating from its day high of $1.2884.  Compared to the US dollar and the Canadian Dollar, which weakened by 0.6 percent and 0.8 percent, the moves in the sterling were tiny.  After Bank of England Governor Mark Carney gave his backing to the Brexit deal struck by Prime Minister Theresa May, the sterling rebounded off the lows.  The growing opposition to May’s draft arrangement has hit the sterling hard in recent days pulling down nearly 3 percent from its level on 7 November of $1.3176.  Meanwhile against the Euro the pound gained 0.3 percent at 88.85 pence.  Sterling fell on Wednesday as Theresa May met with the chief executive of the EU in Brussels.  The Brexit negotiations and the political uncertainty in Britain remain the dominant drivers for the pound and many analysts are cautious about its prospects.  Sterling jumped back up to $1.29 per euro after London and Brussels agreed on key Brexit text.  The dollar index also edged lower for a second day, as traders sold the greenback going into Thanksgiving and after Wall Street saw Apple shares slumping.

Oil

Oil prices suffered their sixth straight week of losses last week but were helped from the expectations that OPEC would cut output.   Brent crude was up 54 cents to $67.30 a barrel, while US crude gained 70 cents to $57.16.  According to the head of International Energy Agency (IEA), Fatih Birol, oil markets are entering an unprecedented period of uncertainty due to geopolitical instability and a fragile global economy. Due to concerns about an emerging production overhang which is similar to the one that led to a price slump in 2014, OPEC is pushing for a supply cut of 1 million to 1.4 million barrels per day.  Meanwhile the US has restored sanctions, that target’s Iran’s oil sector in early November, cutting the country’s crude exports by close to 1 million bpd from a summer peak.  Washington has pledged to eventually halt all of Iran’s global sales of crude oil, whilst eight buyers, China, India, South Korea, Japan, Italy, Greece, Taiwan and Turkey can continue imports without penalty.  In October, Brent crude surged above $86 a barrel mainly due to worries over supply tightness due to the Iran sanctions.  However, since the announcement of the waiver, prices have fallen on concerns about oversupply and a slowdown in global trade.  On Tuesday Brent reached $66 a barrel.   Birol said, “We are entering an unprecedented period of uncertainty in oil markets.”   On Wednesday, oil prices climbed after US government data showed strong demand for gasoline and diesel, although gains were limited by concerns over rising crude supply.  US crude surged 4.25 percent to $55.70 per barrel whilst Brent crude futures rose to $64.02 a barrel, a gain of 2.4 percent.  On Thursday, oil gave up early gains but was still well off its lows, after U.S. inventories swelled to their highest level since December adding to concerns about a global crude glut. OPEC’s talk of an output cut has however limited losses.

Company News

Nissan

Nissan‘s Chairman Carlos Ghosn was arrested for alleged financial misconduct.  Ghosn is also the chairman and chief executive of Nissan’s French partner Renault and chairman of Japan’s Mitsubishi Motors Corp which is the third partner in the alliance. This questions the future of Nissan, which is the biggest partner in the alliance at a time when it is seeing falling profits due to weak US sales and is facing intense competition from rivals who are investing heavily in new growth areas like internet connected cars and self-driving vehicles.   Nissan’s shares fell nearly 6 percent on Tuesday.

Malta :  “Get Ready Scheme” By Malta Enterprise

Malta enterprise launched a “Get Ready Scheme” whereby it provides advisory support to Maltese businesses which are preparing for the various possible future trade relationships that can arise between the EU and Britain after Brexit on 29^th March 2019.  The aid granted should take the form of cash grants covering 50 percent of the costs for advisory services.  The Scheme was launched during a business breakfast, entitled “Brexit: threats, challenges and opportunities,” hosted by Malta Enterprise, the Chamber of Commerce and GRTU.

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