Daily Digest: Thursday 21st November
Market Round-Up
In the absence of any major macroeconomic updates, UK equity markets were relatively quiet during trading. The FTSE 100 (FTSE) rallied 64.2 points (0.79%) through the afternoon, covering recent losses to close at 8,149.27, extending weekly gains to 0.97%. However, a lack of significant talking points pushed analysts in the direction of a rather concerning public sector borrowing print. During October, the Treasury borrowed £17.4 billion to cover their fiscal spending obligations, placing a significant strain on public finances. This figure came in £4.4 billion above analyst expectations, having increased by £1.3 billion from last month alone. As mentioned, public sector borrowing is a means the government can use to cover a deficit, or gap in their finances between the income they generate and their spending. Higher borrowing is problematic on a number of levels, firstly higher gearing or use of debt can reduce the governments ability to deal with short term or unexpected economic shocks, events which can range from simple economic crashes to more complex health pandemics. Another problem is the cost of debt or interest, the higher level of debt a government takes on, the more costly it becomes. On a basic level, there are two key reasons for this. Firstly, as borrowing figures increase, the amount of interest paid on that debt increases in tandem. The second lies within the debt market concerned with those providing capital. When an entity such as a country takes on a higher level of debt, the entities providing loans will become less willing to offer cheap loans as they are worried over the nations ability to repay. To compensate for this additional default risk, the cost of debt rises, a mechanism played out on the Gilt market. On the continent, the STOXX 600 (STOXX) managed to break a three session losing streak, rising 2.05 points (0.41%) to 502.54.
Market direction in the US was far clearer on Thursday as the Dow, Nasdaq, and S&P 500 all moved higher. The Dow ($INDU) led gains for a second session, rising 461.88 points (1.06%) to 43.870.35, followed by the S&P 500 ($SPX) which rose 31.6 points (0.53%) to 5,948.71, and the Nasdaq 100 ($NDX) which rose 73.68 points (0.36%) to 20,740.78. Outside of the markets, SEC Chair Gary Gensler announced that he will be stepping down from his position in January 2025. At face value, this may not seem overly significant; however, the news should be well received by the cryptocurrency space due to Gensler’s openly critical position on the industry. Hinging on his replacement, this could act as a further bullish signal for the crypto market, supporting momentum as Bitcoin charges toward the $100,000 price level.
Equity markets across Asia seem to have struggled to develop any significant directional momentum this week, with sentiment across the continent mixed. Japan’s benchmark index, the Nikkei 225 (¥N225), fell a further 326.17 points (0.85%) to 38,026.17. On a technical level, the index has struggled since the start of November to stem sell-offs, with the index breaking the psychologically significant 38,000 barrier on at least three occasions during Thursday’s session. On a longer timeframe, the presence of a strong selling trend is indicated by price action and confirmed by multiple indicators. The RSI which on a one day chart is 42.89, 7.11 points below the 50 benchmark, a position supported by the MACD which broke below its signal line last Wednesday and has since failed to breach. Chinese markets have been somewhat sheltered from similar sell-offs as traders are still benefiting from the early stage implementations of recent economic stimulus efforts. The Shanghai Composite (¥SSE) extended its winning streak, rising a further 2.41 points (0.072%) to 3,370.40.
What to Watch Tomorrow
Eurozone Flash Services & Manufacturing PMI
UK Flash Services & Manufacturing PMI
US Flash Services & Manufacturing PMI
Sources:
https://uk.finance.yahoo.com/world-indices/
https://uk.finance.yahoo.com/commodities
https://www.londonstockexchange.com/indices/ftse-100
https://www.binance.com/en-GB/price/bitcoin
https://www.binance.com/en-GB/price/ethereum
https://qontigo.com/index/sxxp/
Stock Market Activity Today & Latest Stock Market Trends | Nasdaq
https://coinmarketcap.com/charts/#market-cap
https://www.forexfactory.com
Definitions:
YoY - Year on Year, or, Year over Year
MoM - Month on Month, or, Month over Month
QoQ - Quarter on Quarter, or, Quarter over Quarter
ECB - European Central Bank
BOJ - Bank of Japan
Fed - Federal Reserve
BOE - Bank of England
SNB - Swiss National Bank
DOJ - Department of Justice
SEC - Securities & Exchange Commission