Daily Market News: Draghi’s comments downgrade markets outlooks


daily-forex-market-news-analysis

Mati Greenspan, Senior Market Analyst at FX broker eToro, has provided his daily commentary on traditional and crypto markets for July 26, 2019. The text below is an excerpt and does not contain the full analysis.


Hi Everyone,

One question that investors constantly have to deal with is how much of the value of an asset is based on hype and how much on solid fundamentals?

Not that there’s anything inherently wrong for paying more for hype. For example, I’m more than happy to pay $100+ for a pair of Nike shoes when their competitors of equal quality are usually much cheaper.

In the crypto market, a lot of the valuation for specific coins is based on hype as the more well-known networks tend to attract more participants, more usage, and more investments.

It’s always a bit funny to me when this happens in the stock markets though. For example, Tesla Motors is currently trading at a higher valuation than Ford even though Ford earns 7.5 times the amount of money.

Yesterday, stock analyst Charlie Bilello pointed out that Beyond Meat’s market cap surpassed that of Conagra Brands, a company that is responsible for producing many popular food brands and outranks Beyond Meat in virtually every metric.

Certainly, there’s something to be said about impact investing and that investors these days want to support brands that they believe in but my takeaway from all this is that there is still plenty of money to be made in this market for those who know how to do their homework.

Today’s Highlights

  • Low Liquidity Could Bring Crypto Market Surprise: Crypto markets will probably remain calm given low volumes and volatility, but the lack of liquidity could mean that a large buy or sell order would have a larger impact on prices.
  • Draghi’s Comments Downgrade Markets Outlooks: ECB head Mario Draghi’s refusal to commit to further monetary easing sent shockwaves around global markets, with even US investors downgrading their forecast for a rate cut this Wednesday.
  • Tech Giants Report Earnings: Google’s stock is set to rise as they surpassed EPS estimates, while Amazon stock will open lower because revenues for their AWS service “only” grew by 37%.
  • Investing on Hype vs. Fundamentals: Stocks like Tesla Motors and Beyond Meat are surpassing the valuation of companies that are far more established and produce higher revenues.

Please note: All data, figures & graphs are valid as of July 26th. All trading carries risk. Only risk capital you can afford to lose.

Traditional Markets

You can’t always get what you want seems to be the sentiment that Mario Draghi brought to the markets at the European Central Bank’s landmark meeting yesterday. Or at least, I can’t necessarily give it to you.

Economists who were largely expecting an overly dovish Draghi were left choking on the fishbone as the ECB came out extremely non-committal about further monetary easing saying that sovereign central banks and governments should be doing more to stimulate their own economies.

German Finance Minister Olaf Scholz was quick to react to Draghi’s speech in a televised interview with Bloomberg’s Matt Miller.

It seems that Draghi’s comments were so astonishing that it even affected the outlook in the USA as investors quickly downgraded their forecast for a rate cut this coming Wednesday.

Not that they won’t cut. They will. But the perception that they might cut by 0.5% instead of 0.25% seems to have dissipated.

With everything going on, it’s quite fascinating to see the Euro/Dollar rate so stable. Check out this picture-perfect tight trading channel.

Growth and Profits

In a few moments from the time of this email, the United States will be delivering their print for Advanced GDP in the 2nd quarter. As you can see from the gold bar on the right, analysts are expecting the weakest number since April 2017.

Also worth noting the earnings reactions for the gargantuan companies.

Google’s stock is expected to open 9% higher at the opening bell after smashing their earnings per share estimates and Amazon is expected to open about 2.5% lower because revenues for their AWS service only grew by 37%.

Hype-r-crypto

With volumes and volatility still low in the crypto market we can probably expect a fairly uneventful weekend. However, a low liquidity environment like we’re seeing now often leaves the market vulnerable as any large orders, buy or sell, can have a larger impact on prices.

Have a fantastic weekend.


Mati Greenspan can be found on LinkedInTwitter, or etoro

This is a marketing communication and should not be taken as investment advice, personal recommendation, or an offer of, or solicitation to buy or sell, any financial instruments. This material has been prepared without having regard to any particular investment objectives or financial situation, and has not been prepared in accordance with the legal and regulatory requirements to promote independent research. Any references to past performance of a financial instrument, index or a packaged investment product are not, and should not be taken as, a reliable indicator of future results. eToro makes no representation and assumes no liability as to the accuracy or completeness of the content of this publication, which has been prepared utilizing publicly-available information.

Related News

arrow

Daily Market News: Draghi’s comments downgrade markets outlooks

0

Send this to a friend