eToro UK markets analyst, Adam Vettese, has provided his daily commentary on traditional and crypto markets for August 28, 2019. The text below is an excerpt and does not contain the full analysis.
Highlights include:
- Telegram Launches Own Crypto: The crypto will be called ‘Gram’ and act as a decentralised structure, where similar to Bitcoin, Telegram will have no control over how and where the coins move.
- Bitcoin Tests $10000: BTC is facing resistance at $11,000 after a bullish run towards $1000.
- GBPUSD Tests $1.22: The GBPUSD trading pair found support from positive sentiment after UK PM Johnson’s meeting last week with German Chancellor Angela Merkel and French President Emmanuel Macron
Please note: All data, figures & graphs are valid as of August 28th. All trading carries risk. Only risk capital you can afford to lose.
Global financial markets are still digesting the latest US-China trade war exchanges. It appears that Monday’s market rally or ‘oversold bounce back’ as many investors consider it, is not indicative of the prevailing sentiment change.
Saxo Bank’s head of equity strategy, Peter Ganry, is unequivocal in his latest note, equities are “treading on thin ice”. The global economy continues to slow down with the OECD’s leading indicators showing the worst economy since 2009 and economic activity close to recession levels. Given the events, we are observing he put the probability of Germany already being in recession at around 80% and the rest of the world seems to be following.
Equities trade lower, gold spikes higher challenging 1545-1550 resistance zone.
The day ahead
We have another very light day for economic data releases ahead of us. The focus will be on Germany’s import data and consumer confidence survey, and the Eurozone’s money supply for July. In the US, we will see the latest data for weekly mortgage applications and the weekly EIA crude oil inventories which are forecasted to come in at a 2.133 million barrels drawdown from previously published 2.732 million drawdown.
Traditional markets
Thomas Cook Group (TCG) – Substantial headway has been made in agreeing the terms of a rescue deal with Fosun Tourism of China. However, shares have slipped over 15% as this deal will result in a significant dilution for existing shareholders.
International Consolidated Airlines Group (IAG) – Pilots for British Airways (an IAG subsidiary) are to go on strike for three days in September, their union said on Friday, in a dispute over pay that could disrupt the end of the summer holiday season.
Facebook (FB) – according to technology website The Verge, Facebook is developing a new messaging app called ‘Threads’. The app is designed to promote constant contact between users and their closest friends and is seen as a possible threat to Snapchat.
Philip Morris International (PM) and Altria (MO) — shares in Altria popped as much as 11.3% after the tobacco giant Philip Morris confirmed the two companies were in merger talks. The deal would be an all-stock merger of equals. This would reunite the two companies after Altria was spun off from Philip Morris back in 2008. Shares of Altria later gave up their gains after CNBC reported that the deal does not envision a premium for the shareholders of either company. Shares in Altria closed down 4.0 per cent on the day at $45.25 and shares in Philip Morris International fell 7.8 per cent to close at $71.70.
Zynga (ZNGA) – shares in social gaming company rose 2.7% on Tuesday after an analyst at Wedbush Securities added the stock to its ‘best ideas’ list. The firm cited the success of Zynga’s popular games ‘Empires & Puzzles’ and ‘Merge Dragons’, as well as three new releases expected this year. Wedbush has a price target of $9 per share for the stock, more than a 50% premium over where it opened trading on Tuesday.
Chipotle Mexican Grill (CMG) — Shares of the Mexican food chain rose 2% after an analyst at SunTrust raised their price target to $900 from $815 which implies an upside of 8.9% from Monday’s close of $826.80. SunTrust cited Chipotle’s national roll-out of its carne asada as a reason for the hike.
Verizon Communications (VZ) — shares rose 1.3% after Oppenheimer upgraded the telecom giant to outperform from perform. Oppenheimer said the potential customer churn created by the proposed merger between Sprint and T-Mobile could allow Verizon to gain customers and that Verizon is poised to be “early and successful” with its 5G network. Oppenheimer has a price target of $70 per share for the stock, about 22% above where it opened trading on Tuesday.
Shopify (SHOP) – An analyst at Rosenblatt Securities hiked his price target on the Canadian e-commerce company to $481 per share from $410. The new price target implies a 22.5% upside from Monday’s close of $395.96. The analyst said Shopify’s fulfillment network revenue could surge to $6 billion by 2025.
Johnson & Johnson (JNJ) — A judge ruled Johnson & Johnson must pay $572 million in an opioid case in Oklahoma. However, while the judge ruled against the company, the penalty was seen as a relief by many who had feared a much larger fine. According to Evercore ISI, investors were expecting the company to be fined between $500 million and $5 billion.
Roku (ROKU)— Shares rose as much as 2.6% before trading up 0.5% after an analyst at William Blair said the streaming company is growing at a faster rate than Netflix was at a similar stage in the company’s life. The firm also said it expects Roku to reach 80 million active accounts by 2025.
Forex
The GBPUSD currency pair trading range is testing new monthly highs around 1.2300. Falling US bond yields caused the US Dollar to soften. The GBPUSD currency pair was supported by positive sentiment after UK PM Johnson’s meeting last week with German Chancellor Angela Merkel and French President Emmanuel Macron.
Yesterday, Johnson also spoke to outgoing European Commission President Jean Claude Juncker. Johnson had a “positive and substantive conversation” with Juncker according to Downing Street. Next month Johnson is due to visit Irish Prime Minister Leo Varadkar in Dublin. The UK Government and Johnson have repeatedly said that they want a new deal, but they have also been clear that they will take the UK out of the EU regardless on October 31. The GBP currency strength was further supported by the fact that the UK opposition Labour party may be looking towards passing a law to stop a no-deal outcome instead of pursuing the course of a no-confidence motion.
For GBPUSD the key trading level is at 1.2200 which is now considered an important psychological support level. The initial upside is capped by resistance at 1.2380-1.2436. A confirmed breakout higher and an end of day close above 1.2436 level could target additional upside resistances at 1.2530 followed by 1.2600. Alternatively, a confirmed loss of the current support at 1.2200 and an end of day close below could change the sentiment to bearish targeting additional downside supports at 1.2120 followed by 1.2030-1.2000.
Crypto
Telegram – The company has told investors it plans to launch it’s own cryptocurrency ‘Gram’ within the next 2 months. Gram will operate in a decentralised structure, similar to Bitcoin and Telegram will have no control over how and where the coins move.
China – The People’s Bank of China’s digital currency may be launched in November and will be first distributed to Alibaba, Tencent and China’s major banks. In addition, an independent source involved in the development of digital currency, confirmed that seven institutions will receive new assets. Sources who have previously worked for the Chinese government have confirmed that the technology behind the digital currency has been ready since last year, and the digital currency may be launched as early as November 11.
Bitcoin (BTC) is currently trading very close to the key support at 10,000. A confirmed loss of 10,000 would support a bearish outlook targeting additional downside supports at 9,960 initially and 9,400 followed by 9,030 and 8,745 levels. Alternatively upside is capped by initial resistance at 11,000.
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