Noticias del mercado & perspectivas

The first quarter of 2020 was marred by unpredicted events that rattled the financial markets: Tensions between US and Iran; The extreme weather conditions across the globe as a result of climate change; The novel coronavirus; and An oil price war between Saudi Arabia, the oil kingdom, and Russia. A Trio of Crises Faced by an unprecedented health crisis that caused an abrupt slowdown of activities, forced by governments and an oil crisis derived from a simultaneous demand and supply shock, the world is currently bracing for an economic recession. The markets tumbled like dominoes hit by various headwinds at once.

The freefall in the markets has forced central bankers and governments to implement various stimulus packages, emergency rate cuts and engage in significant bond-buying. Confidence has taken a massive hit as the world faces unprecedented quarantines measures! Volatility Index (VIX) A look at the CBOE Volatility Index shows how investors are reacting to the impact of the coronavirus on markets and the economy.

Also known as Wall Street’s fear gauge, the index is a real-time market index that represents the market expectation of 30-day forward-looking volatility. The Index, on average, has been around the 20 levels but increased to decades high at 82.69 on the 16 th of March 2020. The sharp rise is the reflection of fears and anxieties prevailing in the financial markets.

Source: Bloomberg Stock Market Busts and Circuit Breakers Circuit breakers were first introduced in the 1980s to curb panic selling. For the US exchanges, the S&P500 is used as the pricing reference to measure a market decline and there are currently three levels to the circuit breakers: Level 1 (7%) Trading will halt for 15 minutes if the drop occurs before 3:25 p.m. At or after 3:25 p.m.—trading shall continue unless there is a Level 3 halt.

Level 2 (13%) Trading will halt for 15 minutes if the drop occurs before 3:25 p.m. At or after 3:25 p.m.—trading shall continue unless there is a Level 3 halt. Level 3 (20%) At any time during the trading day—trading shall halt for the remainder of the trading day.

There were four circuit breakers in one month which is a record number ever since circuit breakers were first introduced! The novel coronavirus has created such uncertainty around the globe, which has caused plunges in global equities. Despite the VIX easing to 65.54, further wild swings seem certain in the next couple of weeks.

Source: Bloomberg Rescue Packages In such plunging markets, the focus has been on the rescue packages. Some world leaders were complacent at the beginning, however, we are now seeing highly coordinated intervention measures flooding the markets in an attempt to cushion the effect of the COVID-19 on the global economy. Central banks issued emergency rate cuts as well as other policy tools like quantitative easing (QE).

Major countries like Australia and New Zealand were forced to join the QE wagon to support their respective economies. Governments issued various massive stimulus packages to relieve consumers and businesses from the coronavirus fallout. The US stands out with a $2 trillion stimulus package, the biggest in history.

The rescue packages have not necessarily addressed the full extent of the economic pain which yet to be seen in the coming months, but have provided some relief to wounded economies. Stock Market – A Degree of Calm In the first quarter of 2020, it is evident that the 11-year bull run in the stock markets was over. Major equity indices dropped in bear market territory in what was the worst week since the global financial crisis.

Source: Bloomberg The stock market went on a roller coaster ride as investors pulled out of riskier assets. The degree of calm is driven by various interventions in the financial markets. But, the worst of the virus is not yet over and it may not yet be a lasting rebound.

It could well be a dead cat bounce. Notwithstanding, there are not enough signs to predict whether the stock market has found a floor or is yet to find a bottom. There are too many uncertainties to start pricing-in a recovery.

FX – The King Dollar? The currency market is on the same wild run as other markets. The immediate attention falls on the King dollar.

In the early stage of the outbreak, the US seemed relatively unfaed by the virus and the greenback gathered strength as a safe-haven compared to the rest of the world. As panic gripped markets, dollar funding pressures drove the US dollar index to a 3-year high above the 102 level. Source: Bloomberg Even though the greenback has somewhat retreated as policymakers stepped in to enhance flows, the US dollar index remains in elevated levels just below 100.

A significantly bigger stimulus package compared to its peers are fuelling hopes that the US economy would probably recover faster than other major economies. Gold – The Safe Haven The price movement of the precious metal also depicts the turmoil in the markets. At the start of the year, the US dollar and Gold were moving in tandem due to the prevailing uncertainties.

QE, low-interest rates, trade frictions, geopolitical tensions, global debt and growth uncertainties, gold hoarding by central banks have driven the gold price to a high of $1,680.47. Gold was liquidated due to the wider and rapid spread of the coronavirus across the globe. The precious metal is viewed as a highly liquid asset and investors were in a need of cash due to margin calls and other liquidity requirements.

The greenback and the US dollar have therefore started to diverge from each other. COVID-19-induced liquidity issues caused the yellow metal to plunge to a low of $1,471.24. Source: Bloomberg Once investors were reassured that central bankers are injecting money into the financial system, investors resumed the buying of gold as a safe-haven.

At the same time, gold is facing disruptions in the physical markets due to the shutdown of gold refineries leading to a shortage of gold. A combination of positive fundamentals, weaker US dollar and rescue packages lifted the XAUUSD pair back above the psychological level of $1,600. Source: Bloomberg The economic backdrop is creating a bullish environment for the precious metal.

Amid high volatility, Gold traders are likely going to keep monitoring any updates on the virus, liquidity in the financial markets, and the strength of the US dollar for fresh trading impetus. Volatility Means Opportunities Human lives and the global economy are at risk. The coronavirus has heavily impacted the way the world operates.

Even though the worst of the health crisis is not over yet, and many countries are bracing for another brutal quarter ahead, the health crisis will ease and end at some point. It is not all gloomy in the investment space despite the sharpest falls in history. The panic-driven volatility might present investment opportunities.

Investors will likely be in search of bargains by buying at rock-bottom prices once the number of coronavirus cases starts to slow down. An oil storage problem, higher storage costs, faltering demand and a significant rise in production are creating a perfect storm for the oil market.

The Euro has fallen to 20-year lows as it deals with increasing energy prices and increased bond yields as recession fears rise again. Across both the UK and Europe inflation has been especially high even compared other countries such as Australia and the USA and in response, the EUR has taken a large hit. The recent spike in energy prices has brought back fears into the market that inflation has not yet peaked and will continue to rise.

Two potential opportunities are on the EURCAD and the EURUSD. Firstly, on the EURCAD the price is sitting just above its long term supports and its lowest levels since 2015. With seemingly no fundamental reason for the price to bounce in the short to medium term, it is possible the price sells through the 1.30 CAD level and falls further to the 1.21/1.20 level.

The 50-week moving average is almost in a free fall as the currency continues to sell. In addition, the RSI, whilst in oversold territory, is forming a descending triangle. This indicates that sellers may be gearing up again to begin another move down below the 30 RSI level.

Whilst the EUR continues to be smashed there is always the potential that the market will see value and see a rally in the pair. Therefore, it is important to have risk management tools in place such as a stop loss. A stop loss could be set above 1.32 which would represent a potential risk reward of almost 2.5:1.

The EURUSD is following is showing an even more aggressive sell off. The EUR has fallen to 20-year lows vs the USD. The worrying sign is that the price has faced very little resistance since it began diving in January 2022.

Every long-term support has been sold through with without much of a pullback. With the 1.00 USD level expected to be a tougher level to sell through, short opportunities still exist. The next level of support is around 0.95/0.96 USD which is the next logical target for a short entry.

However, once it reaches this level, it may prove very difficult to fall lower as it would me mean breaching 50 year low prices.

Dicker Data is an Australian-owned and operated, ASX-listed technology hardware, software and cloud distributor. They were founded in 1978. As a distributor, they sell exclusively to a valued partner base of over 5,500 resellers.

Dicker Data distributes a wide portfolio of products from the world’s leading technology vendors. Dicker Data have successfully navigated the end of governmental business stimulus and the impact of a global semiconductor chip shortage to post a net profit of $73.6 million, which is an increase of 29%. Sales figures increased 24% to $2.48 billion for the 2021 calendar year.

Dicker Data declared a final dividend of 15 cents (USD), 100% flanked, on total earnings of 42.6 cents per share. FY21 Results Highlights The company believes that shortages are a part of the computer business and have always planned around it. They identify the software sector to be its highest growth opportunity as dynamic workplaces, which allow employees to work from home, are currently in high demand.

They also identify that there will be a strong demand for audio-visual equipment, such as large format displays for meeting rooms, as workplaces welcome back employees to the offices. The company’s debt over the period has almost doubled to $230.2 million after they have announced debt funded deals to acquire its rival IT distributor, Exceed, for $68 million. They have also recently acquired Hills Ltd’s Security and Information Technology business for $20 million last month.

The company also has their sights on another acquisition in the future, they have been in talks with a few bankers to help finance a potential acquisition of a rival US-based IT distributor, Ingram Micro. Ingram Micro was sold to US private equity group Platinum Equity for $7.2 billion (USD) in July 2021. Prior to this, HNA Group acquired the business for around $6 billion (USD) in 2016.

Co-founder David Dicker stated that his company would have acquired Ingram Micro for $7 billion (USD) if they had been able to raise the capital. Dicker Data share value is slowly trending up since February’s acquisition. However, due to the Russia and Ukraine conflict, the ASX 200 index is currently dropping in value and this can trickle down to companies such as Dicker Data.

Overall, Dicker Data is currently in a growth state and is looking to acquire companies that would help increase the company’s value and offerings to its many clients. They aim to use debt to fund the acquisitions and then issue shares to pay down the debt once the acquisition is successful. The acquisitions have helped the company achieve a profitable year as evident in the earnings report.

With the acquisition target of Ingram Micro, this can be an exciting opportunity to track the progress from start to finish. If you would like to take this opportunity to invest in Dicker Data and don’t already have a trading account, you can register for a Shares account at GO Markets. Sources: ASX, TradingView, AFR.

A sudden rapid increase in commodity prices, propelled by supply concerns stemming from the Russia and Ukraine conflict, has brought about inflationary pressure and moved future inflation expectation. The increase has also pushed indices into a bear market and caused some volatility in global equities. Nickel, European gas and wheat have all hit record highs on Monday.

Copper, Brent crude oil, aluminium and thermal coal are currently sitting at their highest levels in years. The commodities rally has stirred up fears that inflationary pressures will persist as the price increase works its way through the supply chain and slows down economic growth. The Australian 10-year break-even rate is sitting at 2.48%, its highest level since 2014.

The US 10-year break-even rate increased to 2.86% on Tuesday, its highest level since 2005. The German 10-year break-even rate hit a record high of 2.62%. Break-even rates represent the difference between a nominal bond and an inflation-linked bond of the same maturity, implying the average rate of inflation over a given period of time.

The spike in these rates suggests that the bond market is expecting inflation to be far more persistent than central banks and strategists have been expecting. The fear of Russian energy sanctions has led to heavy selling in the global equity markets. The US Dow Jones, Nasdaq, Euro Stoxx 50 and Germany DAX index have slipped into bear markets as shown from the chart above.

The EU50 and DAX are currently down 20% since their peaks in mid-January. The spike in break-even rates comes after the surge in the price of energy as Brent crude has reached a high of $136 USD a barrel on Monday. This rapid increase in the cost of energy, namely the Brent Oil, is currently making its way through to our local petrol pumps.

As the national average petrol price has climbed to 1.839 per litre. Other commodity prices are also beginning to break into new territory and are likely to drive up the cost of goods further down the supply chain. Nickel recently hit a record high of over $60,000 USD a tonne, as supply risks sparked a short squeeze.

About 7 per cent of the world’s nickel is produced in Russia, with the metal being used to produce stainless steel. It is also a major component of lithium-ion batteries, which are used in electric vehicles. The steady surge in commodity prices and their associated inflation risk has created a dilemma for central banks across the world.

Central banks are trying to manage inflation without curbing growth. All in all, commodity prices are currently on the rise as the conflict between Russia and Ukraine continues. Their prices are now on most investors’ watchlists, as it can affect other markets such as Forex and Indices.

If you would like to take this opportunity to invest and do not yet have a trading account, you can open a GO Markets CFD trading account. Source: GO Markets MT5, TradingView, Globalpetrolprices, AFR

Coinbase Global Inc. (COIN) released its financial results for Q2 after the market close in the US on Tuesday. The company reported revenue that fell short of Wall Street expectations at $808.325 million for Q2 vs. $873.82 million expected. Coinbase reported a loss per share of -$4.98 per share vs. -$2.47 loss per share expected. ''Q2 was a test of durability for crypto companies and a complex quarter overall.

Dramatic market movements shifted user behaviour and trading volume, which impacted transaction revenue, but also highlighted the strength of our risk management program. We are focusing on our top business priorities and more tightly managing expenses.'' ''The decline in crypto asset prices significantly impacted our Q2 financial results, which were consistent with the outlook provided in May. Net revenue was $803 million, down 31% compared to Q1, driven by lower trading volume.

Total operating expenses were $1.9 billion, up 8% compared to Q1. Net loss was $1.1 billion and was heavily impacted by non-cash impairment charges. Absent non-cash impairment charges, net loss would have been $647 million.

Adjusted EBITDA was negative $151 million,'' the company wrote in a letter to shareholders. Coinbase Global Inc. (COIN) chart Share price of Coinbase was down by 10.55% on Tuesday, trading $87.49 a share. The stock fell further in after-hours following the release of the latest financial results, down by around 3%.

Here is how the stock has performed in the past year: 1 month +61.65% 3 months +20.13% Year-to-date -65.26% 1 year -67.49% Coinbase price targets Citigroup $105 DA Davidson $90 Mizuho $42 JMP Securities $205 Atlantic Equities $54 Goldman Sachs $45 JP Morgan $68 Coinbase Global Inc. is the 754 th largest company in the world with a market cap of $22.96 billion. You can trade Coinbase Global Inc. (COIN) and many other stocks from the NYSE, NASDAQ, HKEX and the ASX with GO Markets as a Share CFD. Sources: Coinbase Global Inc., TradingView, MetaTrader 5, Benzinga, CompaniesMarketCap

Fears of slowing growth and weak Chinese data have forced China to ramp up its efforts to stimulate its economy and reassure investors: Record $83 billion injection: China injected a large amount of money in its economy. $83 billion was placed in the country’s financial system to avoid a cash crunch that would add further pressure to an “already” weakening economy. Spending Plans: Amid a raft of measures, China has approved a whopping $125bn of new rail projects over the past month. China is increasing its approvals for new projects and fiscal spending to counteract the slowdown.

Tax Cuts: China has put forward plans for the private sector and small business and is turning to tax cuts as a primary defence for its slowing economy. As uncertainties around tariffs continue, China is helping private companies and small business to obtain financing and increasing consumer spending. As of writing, the GDP (YoY) came at 6.4% from 6.5%, and we expect China’s economy to weaken in the lower range of the 6% mark amid the current external and domestic challenges.

Trade tensions have shaken business and consumer confidence and have further slowed economic growth. Even though there is more optimism on trade talks and higher chances of a truce deal, we expect trade negotiations to be bumpy and lengthy. The real economic implications may become more apparent in the coming months, and this can weigh on risk sentiment.

We expect to continue observing more actions from China during the year. The weak data is also giving room for policymakers to put forward more growth-supportive measures in the near term to stimulate growth and bring stability to its economy. So far, the stimulus actions coupled with positive trade talks helped the Chinese Yuan and the Shanghai Index to climb higher.

After a bruising year, the Index rose by more than 130 points since the beginning of the year.