Essential Market Guide for the Week: November 18–22

 

	United States

 

 

S&P 500, Dow Jones & Nasdaq: These indices experienced a downturn, with markets closing in the red for five consecutive days. The S&P 500 and Nasdaq saw declines of over 2%, reflecting profit-taking after significant gains earlier in the year.

Over the past week, the U.S. stock market major indices recording significant losses. The Dow Jones Industrial Average declined by approximately 1.2%, the S&P 500 fell by 2.1%, and the Nasdaq Composite dropped by 3.15%. This retreat is attributed to investor concerns over potential delays in further interest rate cuts by the Federal Reserve, as indicated by Chair Jerome Powell, coupled with higher-than-expected inflation data.

Tech and Fintech: Notwithstanding the general market decline, fintech and crypto-related stocks like Coinbase ($COIN), MicroStrategy ($MSTR), and BlackRock's Bitcoin ETF ($IBIT) stood out with positive performances due to the crypto market surge.

 The sentiment shifted towards cautious optimism, with investors looking for stability amidst record highs earlier in the year

	Cryptocurrency market

 

 

• In contrast, Bitcoin reached highs close to $91,000, showcasing a strong bullish trend. It outperformed traditional markets, gaining significantly over the week.
• Altcoins: Ethereum and other major altcoins like Dogecoin, Solana, and others saw substantial weekly gains, reflecting a broad-based rally in the crypto sector.

The global cryptocurrency market cap today is $3.15 Trillion, a -1.07% change in the last 24 hours and 118.96% change one year ago. As of today, the market cap of Bitcoin (BTC) is at $1.78 Trillion, representing a Bitcoin dominance of 56.58%.

Hedge funds such as Millennium Management, Capula Management, and Tudor Investment have substantially increased their investments in U.S. spot bitcoin exchange-traded funds (ETFs), driven by an election-induced arbitrage trade. These funds have been capitalizing on the price gap between spot bitcoin and its futures, employing leveraged arbitrage strategies known as the bitcoin basis trade.

Overall, while the traditional stock market faced headwinds due to economic uncertainties and monetary policy concerns, the cryptocurrency market benefited from favourable regulatory outlooks and increased institutional investment, leading to significant gains.

	US Policy related news

 

 

1. Federal Reserve's Monetary Policy Stance

Federal Reserve Chair Jerome Powell announced that the central bank is not in a hurry to implement further interest rate cuts, citing a resilient economy. This statement tempered investor optimism, leading to a decline in major stock indices. The Dow Jones fell 1.3%, the S&P 500 dropped by 2.2%, and the Nasdaq declined by 3.3% over the week. Powell's remarks were also influenced by higher-than-expected U.S. inflation data, signaling that further rate cuts in December are not guaranteed.

2. Proposed Tariffs and Trade Policies

President-elect Donald Trump proposed substantial tariffs, including a 60% duty on Chinese goods and 20% on European goods. These proposals have raised concerns about potential price hikes in electronics and disruptions in the semiconductor industry. Companies are preparing for these potential tariffs by adjusting their import strategies, which could temporarily boost GDP but may create cash-flow issues and affect margins.

3. Impact on the Shipping Industry

Despite the proposed tariffs, the shipping industry may not face severe short-term impacts. The U.S. accounts for a modest portion of global seaborne imports, and anticipation of tariffs could initially boost U.S. imports as businesses seek to stockpile goods. However, prolonged or escalated trade wars could hurt global GDP and shipping demand.

4. Gold Market Reaction

Gold prices experienced their steepest weekly decline in over three years following Donald Trump's US election victory. The strong dollar and anticipation of Trump's potential policies, such as reduced interest rate cuts and higher inflation from tax cuts and tariffs, led to this decline. Gold dropped 7% this month to $2,561 per ounce, with a significant 3.1% drop the day after the election.

These policy developments have introduced uncertainty into the markets, affecting various sectors differently. Investors are closely monitoring the implementation of these policies and their potential long-term impacts on the economy.

	Asian Markets

 

 

Market Overview & Index Performance

Country	Index Name	Change (%)	Notes
China	CSI 300	-1.5%	Inflation concerns, property market support measures, mixed GDP data.
Japan	Nikkei 225	-0.28%	Stronger yen, mixed corporate earnings, anticipation of policy shifts.
Hong Kong	Hang Seng	-0.049%	U.S.-China tensions, mixed signals from mainland economic data.
South Korea	KOSPI	-1.2%	Profit-taking, global market sensitivity, tech sector resilience.
Australia	ASX 200	-0.4%	Commodity price fluctuations, interest rate expectations.
Sri Lanka	CSE All Share	+0.3%	Economic recovery signs, tourism boost, political stability.
India	Nifty 50	-0.8%	Mixed corporate earnings, global cues, domestic policy watch.
India	Sensex	-0.8%	Similar to Nifty, sector-specific performance.

 

	China

 

 

• Economic Sentiment: The market reacted to lower inflation rates and the government's attempts to support the property sector. However, scepticism persists regarding the effectiveness of these measures and the pace of economic recovery.
• Political Context: The focus on technological self-reliance and regulatory actions in the tech sector continues to create a complex environment for investors. U.S.-China relations are a significant overhang.
• Market Impact: The CSI 300's decline reflects concerns over economic growth and policy uncertainty. Investors are treading carefully, with some sectors like tech showing resilience due to long-term growth prospects.

	Japan

 

 

• Economic Sentiment: The market is navigating through mixed corporate earnings, with sectors like automotive showing strength, while others lag. The yen's strength impacts exporters.
• Political Context: Political stability, but with an eye on policy changes that might encourage economic growth or address demographic challenges.
• Market Impact: The Nikkei's slight declines this week indicates a market adjusting to expected policy changes and currency strength. Investors are looking for signs of sustained economic policy support.

	Hong Kong

 

 

• Economic Sentiment: The market reflects concerns over Hong Kong's integration with mainland China and its role as a financial hub amidst U.S.-China tensions.
• Political Context: Continued influence from Beijing, with local governance under pressure to conform to national security laws.
• Market Impact: The Hang Seng's marginal decline shows investor caution, particularly in sectors sensitive to geopolitical developments. Tech and finance sectors remain focal points for market dynamics.

	South Korea

 

 

• Economic Sentiment: Strong in technology, but overall market sentiment is cautious due to global trade tensions and reliance on exports.
• Political Context: Generally stable, with focus on enhancing economic ties with both the U.S. and China while navigating North Korean issues.
• Market Impact: The KOSPI's decline suggests profit-taking and sensitivity to international market cues. The tech sector's performance might cushion some of the market's downturns.

	Australia

 

 

• Economic Sentiment: Mixed due to commodity price swings and expectations around interest rates and inflation.
• Political Context: Stable with a government focusing on economic recovery post-COVID, with an eye on trade relations, especially with China.
• Market Impact: The ASX 200's performance reflects these mixed sentiments, with mining and resource sectors showing volatility.

	Sri Lanka

 

 

• Economic Sentiment: Showing signs of recovery, driven by tourism and debt restructuring efforts.
• Political Context: Political stability post-election has been positive for investor confidence, with reforms aimed at economic recovery.
• Market Impact: The small gain in the CSE All Share index suggests cautious optimism, with potential growth in sectors tied to tourism and fiscal stability.

	India

 

 

• Economic Sentiment: Robust long-term growth outlook, but short-term market movements are influenced by global cues and mixed corporate earnings.
• Political Context: Stable with a focus on economic reforms, infrastructure development, and digitalization, though global political shifts affect market sentiment.
• Market Impact: Market indices like Nifty 50 and Sensex saw declines, reflecting a cautious approach by investors amidst global uncertainties while betting on domestic growth drivers.

 

Conclusion

This week's market performance across Asia reflects a region navigating through global economic shifts, local policy changes, and geopolitical tensions. Each market has its unique challenges and opportunities, but common themes include the impact of global politics, especially U.S.-China relations, on investor sentiment, and the varying effects of local economic policies. While some markets like Sri Lanka show signs of recovery, others like China and Hong Kong face ongoing challenges that could dictate future investment strategies.

	UK Market Report

 

 

Market Overview & Index Performance

Index Name	Change (%)	Notes
FTSE 100	-0.7%	Influenced by global market trends, political developments, and sector-specific news.
FTSE 250	-0.5%	More focused on UK domestic companies, showing slightly better resilience.

 

	Market Sentiment

 

 

• Economic Sentiment: The UK market is experiencing a mix of cautious optimism and concern. On one hand, there's optimism around potential economic growth spurred by new government policies aimed at boosting infrastructure and technology sectors. On the other, there's concern over rising gilt yields, which could signal investor apprehension about government debt levels and future fiscal policies.
• Political Context: The recent budget announcements by the Labour government have led to mixed reactions. While there are initiatives for economic growth, increases in taxes and adjustments in fiscal policy have caused some market unease. The government's emphasis on wealth redistribution and environmental policies adds layers of complexity to market reactions.

Market Impact

• Stock Market
• FTSE 100: Experienced a slight downturn, reflecting concerns over global economic conditions and domestic policy impacts. Sectors like banking and mining, which are heavily weighted in the FTSE 100, are sensitive to commodity prices and international sentiment.
• FTSE 250: Showed a bit more resilience, possibly due to its composition of more UK-focused companies that might benefit more directly from domestic economic policies.
• Currency and Bonds
• GBP Movements: The pound has been volatile, with recent declines against both the dollar and euro, reflecting concerns about economic stability and future interest rate decisions.
• Gilt Yields: An increase in gilt yields suggests worries about inflation and government borrowing. Investors are watching closely for signs of monetary policy adjustments.
• Sectoral Performance
• Energy and Utilities: These sectors saw pressure due to policy changes aimed at combating climate change, with mixed investor reactions to the transition to greener technologies.
• Financial Services: While facing challenges from potential regulatory changes and higher interest rates, there's an expectation of adaptation through innovation in fintech and green finance.
• Technology and Telecom: These sectors have been buoyed by government initiatives to promote digital infrastructure, though investor sentiment is cautious due to the broader economic climate.

Investor Sentiment

• There's a cautious approach among investors, with some moving towards safer assets or looking for opportunities in sectors they believe will benefit from government priorities like green energy, technology, and infrastructure.
• The market is also sensitive to any news related to Brexit adjustments, trade agreements, and the UK's position in global trade post-Brexit.

Looking Forward

• Inflation and Interest Rates: The Bank of England's next moves on interest rates will be critical. High inflation might push for rate hikes, impacting borrowing costs and potentially cooling the housing market.
• Government Policy Execution: The effectiveness of the Labour government's economic policies, particularly in balancing growth with fiscal responsibility, will significantly influence market directions.
• Global Economic Developments: The UK market remains interconnected with global markets, especially the US and Europe, meaning international economic developments will continue to play a pivotal role.

Conclusion

The UK market last week was characterized by a cautious approach, driven by a mix of domestic policy changes and global economic conditions. While there are sectors poised for growth due to government initiatives, the overall market sentiment is mixed, with investors weighing the benefits of policy-driven growth against the risks of increased taxation and regulation. The coming weeks will likely hinge on how these policies unfold, alongside global economic trends and the UK's response to international trade and geopolitical shifts.