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Weekly Feed Mins Read

Kristal Weekly Feed | 24th June 2019

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Got only 15 seconds? Here’s a succinct summary of major global events that transpired last week.

Positives

    • Asian markets gain as Fed holds back on rate cut
    • Gold rushes to its highest in the last six years
    • Bitcoin creeps slowly and surely to the $10k mark
    • Slack is now worth $23 billion after direct listing

Negatives

    • Dollar falls to a new low in Tokyo trading
    • Threat of U.S.- Iran conflict may spell disaster for oil futures

Now, for more detail.

 

Positives

1. Asian shares gain as Fed holds back on rate cut

What You Should Know

The Hang Seng outperformed all major indices in the past week, according to Bloomberg. Hong Kong stocks saw their best rally since November last year, with a jump of 5%. The Hang Seng Enterprises Index saw a 4.8% rise. Shanghai benchmark also saw a hike of 2.6%. The Rupee gained by 20 paise against the dollar in early trade.

What You Should Lookout For

The stock hike on the back of the Fed’s dovish policy spells good news for Asian investors. However, the upcoming G20 summit may just throw a wrench in the works. The U.S. – China trade talks will play a big role in the future of Asian stocks.

Suggested Reading:

Asian shares gain, Shanghai up 2.6%, on Fed rate cut talk

 

2. Gold rushes to its highest in the last six years

What You Should Know

Gold is finally having its moment under the sun and it’s glinting bright! Gold prices are up to $1400 an ounce – the highest since September 2013. So far, gold prices have gained almost by 10% this year. The expectation of a possible rate cut by the Fed in the near future, and an oil crisis in the Middle East are pushing gold prices even higher.

What You Should Lookout For

With expected dovish Fed outlook, US-China trade tensions and lower US interest rates these will continue to push the yellow metal higher in the medium to long-term.

Suggested Reading:

Gold is above $1,400 for first time in years

 

3. Bitcoin creeps slowly and surely to the $10k mark

What You Should Know

The roller-coaster ride the stock market has been on lately seems to have no end. In the interim, alternative currencies like Bitcoin are gaining ground again; and will soon reach the $10,000 mark for the first time since March ‘18. The recent push towards cryptocurrency can be attributed to 2 sources: Facebook (which launched its own cryptocurrency ‘Libra’ last week), and the Fed’s policies.

What You Should Lookout For

As the likelihood of a Fed rate cut in July increases by the day, bitcoins have come into the spotlight. As central banks take measures which will reduce the value of government-backed currencies, alternative currencies tend to become stronger. Fed Chairman Jerome Powell has in fact indicated that U.S. central banks should start looking at cryptocurrencies more openly. If this happens, it will lead to cryptos become more legitimate in the global market.

Suggested Reading:

Facebook co-founder: Libra currency could give firms excess power

 

4. Slack is now worth $23 billion after direct listing

What You Should Know

Tech unicorn Slack may have chosen the road less taken to enter the stock market, but the gambit seems to be working in its favour so far. Slack’s shares opened at $38.50 on Thursday, and were at $38.62 a share at the end of the day. The company’s stocks saw a nearly 50% increase from its reference price of $26; putting its market value at roughly $23 billion.

What You Should Lookout For

As with its Silicon Valley peers, Slack still remains an unprofitable company despite growing revenues. Slack’s revenues have shown a marked increase of 67% from last year (for the period of Feb-April) with a total of $134.8 million. However, its losses have also been substantial. Slack lost $31.9 million for the quarter – for the same period last year, its losses stood at up $24.9 million.
The company could afford a direct listing only because it recently raised funding of $1 billion from investors like SoftBank and Accel. We have seen many tech companies go bust on the stock market this year with their burn-cash-to-grow-revenue model. Profitability is still the litmus test for sustainability, and while the direct listing has worked in Slack’s favour for now, it will still need to clear this final hurdle in the coming days.

Suggested Reading:

Slack is now worth more than $20 billion

 

Negatives

1. Dollar falls to a new low in Tokyo trading

What You Should Know

Situations in the Middle East are affecting the dollar trade in Japan, with the dollar reaching its lowest in 14 months. At the close of business on Friday, the greenback was trading at ¥107.44-45, down from its Thursday price of  ¥107.67-67. The euro, too, saw a fall and ended the week trading at ¥121.54-54, down from ¥121.64-64.

What You Should Lookout For

Iran shot down an American military drone on Thursday; giving rise to rumours of a retaliatory attack from the U.S. The same reports fuelled a dollar sell-off, causing the greenback to fall. Since it was an unmanned vehicle that was downed, experts do not expect the States to go to war about it; despite media reports to the contrary. The Middle East has seen some violence in recent days and the turmoil has only added to market volatility.

Suggested Reading:

Dollar falls to 14-month low, near ¥107, in Tokyo trading

 

2. Threat of U.S.- Iran conflict may spell disaster for oil futures

What You Should Know

Oil supply from the Middle East has been under the spotlight for all the wrong reasons. Earlier this month, two oil tankers in the Strait of Hormuz were attacked. And on Thursday last week, Iran shot down an American UAV. While this has not affected the oil supply in any way, it has certainly increased the political turmoil between the two nations; with analysts predicting it may hamper oil futures.

What You Should Lookout For

Reports of President Trump ordering a strike on Iran and then calling it off surfaced soon after the incident. While there’s not been any military action so far, Daniel Flynn, market analyst at Price Futures Group, says that these actions by Iran have angered the world community and “trade partners will not do business if the U.S. administration backs up the tough talk.”

The events in the Middle East right now are a hark back to the late ‘80s when President Reagan ordered a military offensive on Iranian naval facilities. The oil market saw much volatility back then, and the same – or even worse – can be expected if the U.S. decides to go to war with Iran now. The Strait of Hormuz sees more than one-third of global seaborne transport pass by its shores, so a disruption of this oil supply can cause much heartache across the world.

Suggested Reading:

A ‘tanker war’ with Iran would be more complicated than the 1980s version

Disclaimer

The materials and data contained herein are for information only and shall in no event be construed as an offer to purchase or sell or the solicitation of an offer to purchase or sell any securities in any jurisdiction. Kristal Advisors does not make any representation, undertaking, warranty or guarantee as to the update, completeness, correctness, reliability or accuracy of the materials and data herein. All opinions, forecasts or estimation expressed herein are subject to change without prior notice. Kristal Advisors and its affiliates accept no liability or responsibility whatsoever for any direct or consequential loss and/or damages arising out of or in relation to any use of opinions, forecasts, materials and data contained herein or otherwise arising in connection therewith.

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