Big Tech Continues to Decline
- The NASDAQ100 index finished lower for the week, registering its worst weekly decline since March. However, despite this correction, it is still more than 20% higher for the year.
- The SPX500 and DJ30 were able to eke out small gains on Friday, but still finished lower for the week.
- This can be seen as a healthy correction: the price of equities at the world level is almost at its highest since the tech bubble of 2000.
- The volatility of big tech stocks, such as Apple, Amazon and Tesla has dominated the markets. They rebounded sharply on Wednesday after three consecutive sessions of drops.
- We could see more volatility, because of the many factors favoring it, including the lack of progress on the fiscal stimulus plan in the US and the increasing number of Covid-19 cases worldwide.
Oil Registers Another Negative Week
- Oil has lost 17% since September 2, corresponding with the start of the financial markets’ risk aversion.
- China which is the world’s largest importer, has lowered its petroleum imports by a million BPD in August.
- OPEC’s largest oil producer, Saudi Arabia, has decided to lower oil export price to Asia in October.
- An independent research reported that China’s crude oil imports fell 7.4% MoM in August.
- Looking forward, next Tuesday IEA will release its monthly oil market report, which may also impact markets.
ECB Takes Hawkish Tone
- On Thursday, investors hoped that ECB President Christine Lagarde would talk down the Euro, but it did not happen. On the contrary: she clearly stated that she is not going to target the Euro.
- A stronger Euro could potentially weaken the EU economy and exacerbate the divergence between the US and the EU economies.
- The ECB was less dovish than anticipated, raising its GDP forecasts for 2020, 2021 and 2022 and boosted its 2021 inflation forecast.
- After this month’s record low CPI report (0.4%), investors worried the ECB would lower its inflation projections, but these upgrades are a reflection of their confidence in the economy.
Bitcoin Holds Above $10,000
- The world’s largest crypto held above the $10K mark throughout the week.
- There are a number of bullish on-chain metrics currently in play: The hashrate, widely regarded as a gauge of bitcoin’s overall health, is at an all-time high. Moreover, Glassnode data showed last week that the overall percentage of Bitcoin unmoved in over three years has hit a two-year high of 30.909%. That suggests an increase in the hodling mentality, which is in turn regarded as a bullish indicator.
The Week Ahead
- Fed rate decision and monetary policy statement (Wednesday).
- Bank of England and Bank of Japan rate decisions (Thursday).
Written by a team of experienced financial analysts at eToro.
This content is for information and educational purposes only and should not be considered investment advice or an investment recommendation. Past performance is not an indication of future results.