Demand for risk assets in financial markets continues to shrink with two significant drivers. Firstly, sentiment is undermined by the sustained sell-off in equities that has dominated the week during the US trading session. Secondly, China is not backing down on its ideas to limit the strength of the big technology corporations, while the US court decision bit off some profit from Apple.
The US S&P500 came under pressure during the New York session on Friday, with pressure intensifying towards the close of trading, reflecting the wariness of professional managers. The index is again a couple of steps away from its 50-day moving average. The index has fallen to this line around the middle of each month since May, and each time it finds support on dips there.
However, it is dangerous to rely on correlations in the markets as they break too frequently. It is worth paying attention to the performance of the American stocks near the 50-day average and not deciding for a short-term move before it tests these levels. Consolidation under 4430 could launch a deeper correction towards the 200 SMA at 4100. A pullback from 4430 would focus on returning to the historical highs above 4550 within just a week or two.
That said, the markets have a lot to worry about. Two of the world's largest economies are in sync with pressure on their fintech giants. Access to user data and the growth of ecosystems have effectively created new monopolists that have lately been profiting lavishly from this information themselves and preventing others from doing so. In 2007, the phrase "too big to fail" became widespread as the government bailed out big banks and manufacturing companies. Now we are witnessing a U-turn, with governments intent on raising taxes on corporations and limiting their monopoly in certain sectors or crushing companies that have become frighteningly large for even the US and Chinese governments, the world's two largest economies by a wide margin.
China presses Alibaba to spin off its financial arm, Ant Group, into a separate company with state ownership. Restrictions on the use of user data and the need to share it with the government deprive fintech of an essential competitive advantage, causing a reassessment of the sector.
At the same time, fintech is also under pressure in the US. On Friday, Apple lost a lawsuit with Epic Games and must now allow companies to use payment services to bypass those approved on the Appstore. This will result in a loss of billions of dollars a year in revenue. Investors fear that this could be the start of a big wave of pressure on fintech, which has concentrated control first over user data, then over financial flows, and has already started profiting from this information.
Like Alibaba for China and Apple and Google for the US, those companies may just be too big to be.
Trade Responsibly. CFDs and Spread Betting are complex instruments and come with a high risk of losing money rapidly due to leverage. 77.37% of retail investor accounts lose money when trading CFDs and Spread Betting with this provider. The Analysts' opinions are for informational purposes only and should not be considered as a recommendation or trading advice.
Recommended Content
Editors’ Picks
EUR/USD eases to near 1.0850 on renewed USD strength
EUR/USD stays under modest bearish pressure, battling 1.0850 in the European session on Tuesday. The renewed USD strength weighs on the pair. ZEW sentiment survey will be featured in the European economic docket ahead of housing data from the US.
USD/JPY extends rally beyond 150.00 as markets assess BoJ decisions
USD/JPY preserves its bullish momentum after breaking above 150.00 with the 'sell the fact' reaction to the Bank of Japan's decision to end negative interest rates. In the post-meeting press conference, Governor Ueda said they will consider options for easing broadly, including ones used in the past if needed.
Gold price struggles to lure buyers, holds steady above one-week low ahead of FOMC meeting
Gold price ticks lower amid reduced Fed rate cut bets, elevated US bond yields and stronger USD. Geopolitical tensions could lend some support to the safe-haven XAU/USD and help limit losses.
Why is the crypto market crashing?
The two most important contribution to the ongoing bull market is the meteoric rise in Bitcoin due to the ETF approval and the sudden interest spike in Solana ecosystem. But the recent move suggests that the upward momentum is dissipating and a correction looms.
Canada CPI Preview: Inflation pickup could scale back bets on early interest-rate cut
The Canadian Consumer Price Index is expected to have risen by 3.1% YoY in February. The BoC shows no rush to lower its interest rate. The Canadian Dollar maintains its multi-day lows against the US Dollar around 1.3540.