Global Commentary
Asian markets closed mixed on Thursday after struggling for direction in a lightly traded session in which South Korean, Chinese and Hong Kong markets were all closed. The Nikkei in Japan edged higher by 0.01%, while the Australian S&P/ASX 200 slipped lower by 0.01%. Japanese exporters outperformed on a weaker Yen, but the Australian retail sector underperformed after the country reported a sharp drop in August retail sales.
European markets were mostly higher Thursday, with the IBEX 35 in Spain rebounding from the worst loss in 15 months suffered in the previous session. The rebound came after Madrid suspended a Parliamentary session in Catalonia, thus making it impossible for the state to declare independence, as the Parliament is the only body capable of declaring independence. There was also a call from Spain’s Prime Minister to the secession leaders to forego the independence process, in order to avoid “greater evils”. London stocks gained as the Pound dropped to a four week low against the USD, with the stalled Brexit negotiations as the likely culprit for the falling currency.
U.S. markets began the day cautiously higher, as investors were hesitant ahead of Friday’s employment data from the U.S. The markets picked up momentum in the afternoon however following the passage of a budget resolution by the House of Representatives. The passage of the budget resolution is seen as a precursor for tax reform, and sent financial stocks solidly higher. Technology shares also recovered from the previous sessions’ weakness, heading broadly higher. The increased prospects for tax reform in the U.S. could keep this rally alive in the coming weeks, leading into the next earnings season.
FOREX
EUR/USD
The pair fell on Thrsday, coming down to the support at the 1.1700 level. The move came despite the threat of a Catalonian secession being postponed after Madrid cancelled a Parliamentary meeting next week, as traders are seemingly still skittish over the tense situation unfolding in Spain. The 1.1700 level is an important support level, and if broken the pair could be heading as low as the 1.1350 level before finding support again.
GBP/USD
Concerns that Brexit negotiations are going far worse for the U.K. than politicians are letting on sent the Pound reeling on Thursday. This pair fell below the support at the 1.3200 level, which had been considered a critical support level for the pair. Now the next stop for the pair should be the 1.2900 level, although we could see a rebound Friday if U.S. employment data disappoints.
Cryptocurrencies
Cryptocurrencies remained in their tight ranges on Thursday, with $4,300 presenting resistance for Bitcoin, and $300 presenting resistance for Ethereum. There was news from South Korea that traders will resist the ICO ban there, but there were no details regarding how.
Commodities
Metals
Precious metals were mixed on Thursday as traders paused ahead of the Friday release of non-farm payrolls data in the U.S. Gold remains under pressure as traders see increased signs of economic growth in the U.S., as well as the probability of a December interest rate increase. Currently the support target for gold is around the $1,265 level, but if it gets below that we could have a break that takes the yellow metal all the way to the $1,200 an ounce level.
Oil
Crude moved higher on Thursday as trader sentiment was buoyed by talk of an extension to the OPEC production cut measures. Crude got an additional boost from the greater than expected drop in U.S. crude reserves, as well as oil platforms shutting down in the Gulf of Mexico ahead of tropical storm Nate, which is expected to become a hurricane over the weekend and move through the Gulf, disrupting oil production and refining.
Indices
S&P 500
The benchmark index closed at a record high for the sixth session in a row Thursday, marking the longest such winning streak in twenty years for the S&P500. With investors getting positive news regarding tax reform today we could see several more sessions of new record highs in the coming days as well. Gains were broad based, with nine of the eleven S&P sectors ending the day in positive territory.
IBEX 35
The Spanish benchmark index rallied on Thursday, recouping most of the losses from the previous session as it finished 2.5% higher. The banks led the rally, just as they had led the decline in the previous session. One very interesting piece of news came from Banco Sabadell, which ended the day 6.2% higher after announcing it was considering relocating its headquarters from Barcelona due to the political strife in Catalonia.
Stocks
Tesla (NASDAQ:TSLA)
Shares of the electric car manufacturer saw a dip in September after reporting weaker than expected deliveries of the Model 3 Tesla, but look as if the dip was temporary and the stock is recovering. The dip was a bit deeper than we would have expected, but the uptrend off the July low remains intact, and as such we believe the stock will continue higher from the current $355 level to test the resistance at the $390 level. That resistance should be fairly solid as it has held twice already this year, and above it is uncharted territory.