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Stock Futures Trade Mix, Earnings In Focus

Stock Futures Trade Mix, Earnings In Focus

Stock Market Today

Futures in the United States are slightly down while those in Europe are up after major stock market indices closed in the green, backed up by stronger than expected earnings. The Dow Jones Industrial Average surged nearly 1% last week and closed Friday’s session at a record high. Similarly, the S&P 500 had its third consecutive positive week, rising nearly 1.7% last week.

Today, investors will be looking at German ifo business climate data. It’s one of the leading indicators of economic health in Germany and can be used by stock traders to judge how the European region is performing currently as Germany is considered the engine of the region.

Stock Market

The strength seen in corporate earnings is the biggest driver behind stock market gains over the last few days. As these corporations continue to outperform, it is expected that companies in the S & P 500 are likely to expand by nearly 35% in the third quarter.

This week, stock traders will be looking closely at the Nasdaq index as technology giants such as Microsoft, Facebook, and Alphabet are scheduled to release their earnings reports over the next few days.

Growth stocks have been performing relatively better, with the energy sector gaining nearly 11% in October. Similarly, share prices of other growth sectors like manufacturing, construction, and financials have also jumped more than 7% in October. The rise in these sectors indicates that worries about supply chain bottlenecks are starting to wind down.

Investors should note that stock markets around the world have showed strength amid a vast array of risks such as the impending power crisis, rising inflation, and supply chain constraints. According to Janet Yellen, Treasury Secretary of the United States, inflation will likely be a “temporary pain” and will start to subside by June 2022. However, the curbing of historic monetary measures taken by the Federal Reserve to support markets during the coronavirus pandemic will likely be the cause of volatility in stock markets going forward.

Stock traders should also understand that although demand has rebounded internationally, global economic growth is still at risk. This is because China’s economy is at risk of slowing down faster than projections as Beijing goes on with increasing regulations on companies like it did to education technology companies earlier this year. This is in addition to its target of reducing its reliance on the real estate sector, while the nation is also facing a shortage of power. Financial institutions such as Citigroup and Bank of America have already sounded the alarms, warning that global economic expansion will fail to meet the projected 8.2%. Moreover, the slowdown of growth could linger into 2022, dragging economic growth below 5%.

Cryptocurrencies

The introduction of Bitcoin-linked ETFs has been extremely beneficial to the cryptocurrency markets. Bitcoin, the king of cryptocurrencies, has surpassed previous highs and is now aiming for $100,000, which appears to be within reach by the end of 2021. More money is flowing into the digital sector as more investors gain access to ETFs. The $72,500 and then the $89,000 levels are near-term resistance levels north of $65,000.

On the other hand, while bulls are on the rise, investors should keep in mind that countries remain divided in the blockchain space, with Beijing outlawing cryptocurrencies while Western nations launch ETFs and push digital coins to new highs.

One disadvantage of the recent price hike is that Bitcoin miners are relocating to the United States to establish their operations at a time when the world is undergoing an energy crisis.

Miners are likely to put pressure on electricity prices, as was the case in New York, where the city supplied between 10% and 15% of its electricity supply to miners, putting a strain on the grid.

Oil

Oil prices have been rising over the last few weeks as global demand recovers from the doom of the coronavirus pandemic. However, oil supply has failed to meet the growing demand, with OPEC sticking to its initial plan of pumping 400,000 barrels per day. Moreover, oil prices have also surged as a result of a power crisis because of gas shortages. These shortages are likely to push nations toward oil to meet their power generation needs. Brent crude, as a result, is hovering around $85 per barrel after hitting $86.10 on Thursday, its 3-year high.

Traders should note that although oil prices have been on a rising trend, WTI futures are trading below their current prices. Typically, futures act the opposite to what we are seeing now and trade higher than their current levels to incorporate the cost of storage.

Gold

The depreciation of the US dollar has provided some support for the precious metal, pushing gold prices higher. However, the surge in gold prices is unlikely to continue as the Fed begins to wind down its stimulus programme and treasury yields rise. Although the yellow metal is viewed as a hedge against inflation, and inflation is expected to rise until the second half of 2021, the expectation of an interest rate hike by the end of 2022 limits any significant gains. Rising interest rates raise the opportunity cost of holding gold, making it less appealing to investors.

Asian Pacific Markets

Beijing is dealing with another coronavirus wave that has spread across 11 provinces, and Covid cases are expected to rise in the coming weeks. The Chinese government has ordered that the affected regions go into “emergency mode.” However, tight lockdowns are having a toll on the country’s financial institutions, which are requesting the government to reconsider its Covid-zero policy.

As of 11.37 p.m. EST, the Nikkei dropped 0.99% and the Shanghai index surged 0.38%. The Hang Seng index, in Hong Kong, rose 0.23%. The ASX 200 index climbed 0.45% and the Seoul Kospi jumped 0.55%.