Emerging market fears & trade tensions send stocks lower – By LCG Research team

 

Wall Street closed in the red but off the lows overnight, as trillion-dollar tech stocks helped counter growing concerns over the health of emerging markets. Each week an emerging market currency takes a serious hit, previously it was Turkey, more recently Argentina, as politicians scramble to gain control of the markets there, and overnight, the revelation that South Africa moved into recession in H1 sent the rand sharply lower. Whilst concerns over the health of emerging markets hit risk sentiment, pulling equities into the red, investors found comfort in tech giant Amazon pushing through the $1 trillion market cap, hot on the heels of Apple. However, the Asian session overnight saw stocks slip as trade tension weighed ahead of the resumption of trade talks between US & Canada. European markets are pointing to a softer start.

Amazon hits $1 trillion

It has taken Amazon just 21 years to become a trillion-dollar company, significantly less than the 38 years that it took Apple, after Amazon stock doubled over the course of the past year as a result of strong retail and its rapidly growing cloud business. Should Amazon continue to grow at its current rate, it will be a question of when not if it overtakes Apple as the world’s most valuable company by market cap.

Emerging market fears remain

Losses in emerging market currencies and other currencies such as the euro helped support the mighty dollar for yet another session. As did impressively strong US manufacturing data blowing way fears that the trade tensions would negatively impact on the sector. In short, the economy is firing on all cylinders and more than able to handle another Fed rate rise.

Strong dollar & trade tensions hit silver

The stronger dollar is not without its casualties. Whilst dollar strength has taken away gold’s shine, overshadowing its safe haven status, silver is also being hit on all sides. Silver plummeted 17% far this year, hitting its lowest level since January 2016 in the previous session. Not only is the stronger dollar hitting demand for silver, but silver’s industrial demand is although being dented as US trade spats with China, Mexico, Canada and other countries continue.

UK service sector data to lift pound?

After 5 consecutive losing sessions, the pound could finally find itself in positive territory today.  After disappointing manufacturing and construction data, expectations are for the UK service sector activity to have increased in August to 53.9, up from 53.5 in July.  This, in addition to rumours that the EU could pass some encouraging remarks regarding Theresa May’s Brexit proposal, offering her support as pressure mounts from Eurosceptic MP’s, help lift the pound. As did confirmation that Theresa May supports BoE Governor Market Carney staying on in his post to see the UK through Brexit.

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About the author

Jasper delivers regular commentary, seminars and webinars on market news, trading analysis, strategy and psychology. He is regularly interviewed by BBC News, Bloomberg, CNBC and Sky News, and has featured in The Times, Guardian and Daily Telegraph. Jasper hosts a weekly charting analysis webinar. He is qualified as a Chartered Market Technician (CMT) with the Market Technician Association, and has a degree in Finance and Economics.