Europe

For those of a superstitious nature, and after the week we’ve seen in equity markets, perhaps a hint of apprehension wasn’t surprising as we came to the final day of trading for this week on Friday 13th.

As it turns out the price action today has been fairly orderly, as well as positive to boot with broad gains across the board, as we look to cap a week of gains for European markets, closing at the highs of the week, while the FTSE100 has lagged.

Today’s gains have been broad based with energy, financials, healthcare, and consumer goods all seeing solid demand.

Higher oil prices are helping push BP and Shell higher.

We’ve also seen an element of bargain hunting as can be seen from the biggest risers for example, Scottish Mortgage Investment Trust is higher having fallen to its lowest levels in two years yesterday, while Dechra Pharmaceuticals has rallied after falling to one-year lows.

Accounting software company, Sage Group is also higher after reporting H1 revenue of £934m, which was slightly below expectations, however profits before tax fell by 1% to £189m. The company kept its full year outlook unchanged, saying they expected to maintain recurring revenue growth of 8% to 9%, driven primarily by the cloud business.         

US

US markets are taking their cues from today’s rebound in European markets, with a positive end to the week, although its not likely to prevent another weekly decline, which would be the 6th weekly decline in a row.

The Nasdaq 100 is leading the gains, helped in some part by the sharp rebound in bitcoin and other related crypto currencies which are all higher, while the S&P500 has managed to claw its way back above 4,000 after falling to as low as 3,859 yesterday.  

Twitter shares have fallen sharply after Elon Musk said the takeover deal was on hold pending details supporting the calculation that spam or fake accounts represent less than 5% of total accounts. This appears to be fuelling concerns that Musk may be preparing the ground for backing out of the deal, although he will take a $1bn hit were he to do so.

The timing does seem curious given the lengths Musk has gone with respect to putting financing in place, after all why go to all that trouble securing secondary financing only to pull the plug at the last minute?

Of course, if Musk feels the deal doesn’t work for him then he will have to pay a $1bn break clause which will probably sting a bit, but he’ll probably view it as a cheap cut, especially since Musk made his bid for Twitter, Tesla shares have fallen over 20%. This fall in value potentially cuts his wriggle room in funding the deal from the value of his Tesla shares.

Tesla shares, on the other hand, are on the up, perhaps on the prospect that a deal has become less likely, or that the deal price might get negotiated down.

Robinhood Markets share are also higher after it was reported that the man who founded cryptocurrency exchange FTX has taken a 7.6% in the business.

The rebound in cryptocurrencies today is also helping the likes of Coinbase and MicroStrategy climb today.

FX

It’s been another solid week for the US dollar, despite today’s weakness, as it pulls back from another 20-year peak, which we saw yesterday. Fed chair Jay Powell’s comments yesterday that he wasn’t minded to go faster than his initial post meeting comments on two 50bps rate rises has prompted a degree of US dollar profit taking. Powell was careful not to rule out a 75bps move if the data warranted it.

The Japanese yen has outperformed this week, helped by the sell-off we’ve seen in US tech stocks which has prompted an element of risk aversion.

The Australian dollar has had a poor week, despite today’s bounce, reflecting concerns about the growth outlook globally and potentially lower demand for raw materials.   

Commodities

Crude oil prices have continued to edge higher, after briefly hitting two-week lows earlier this week, however we still remain on course for a weekly decline. Prices appear to be caught in a pincer of concern about slowing demand due to the impact of higher prices, as well as China’s covid lockdowns and worries about Russian supply and the loss of that due to sanctions.

Gold prices have continued to look weak, falling to a three-month low, and down for the fourth week in a row, as the stronger US dollar continues to dim the appeal of the precious metal.     

Volatility

Starting with fiat currencies today where the Czech Koruna has been in focus following the news that a new central bank governor has been appointed. Anticipation of this news had been weighing on the currency, but confirmation of the post – despite the incoming head being seen as a policy dove – was sufficient to help reverse at least some of those losses. Daily vol on Dollar – Koruna advanced to 20.58% as a result, up from a monthly reading of 13.99%.

The crypto shake out continues, keeping price action levels across the sector incredibly elevated. Perhaps notably, Bitcoin – which has traded in a 25% range against the US dollar this week – re-took that key $30,000 level. There’s a lot of dust to settle here and questions will be asked as to just how badly the credibility of the new asset class has been damaged by this week’s events. Daily vol figures in excess of 300% are being seen across much of the board, with bitcoin the most composed, printing daily vol of 171% against a monthly print of 76%.

Cannabis stocks had a good run across the board yesterday, reversing some recent declines and with that the CMC Markets proprietary basket of medicinal growers found some meaningful support. Daily vol on the index advanced to 164% against 117% on the month.

And rounding off with single stocks, Electronic Arts remains in focus for a second day following that results news. Daily vol advanced slightly further to 193% against 78% on the month, although those earnings driven gains are ebbing away a little.

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