Apple Inc Move into Banking
Hi all, this week an explosion in prices has been caused by an explosion in real life, and Apple are yet again increasing their portfolio of services. Investment banks are struggling in a certain area this year and one of London’s exchanges is currently under pressure from investors. Enjoy!
Gas Fire Heats Up Europe
European gas prices have soared once again this week following a fire at one of the biggest liquified natural gas export terminals in the US. The terminal is located in Freeport, a town on the south coast of Texas. The terminal, which takes natural gas and ‘super cools’ it to a liquid state before it’s shipped around the world, is expected to be out of action for at least three weeks. This will reduce the US liquefaction capacity by 20%. The terminal is one of only seven LNG terminals in the US, which have been running at max capacity since the start of the Russia-Ukraine conflict. Upon the news, European wholesale gas prices shot up 10% to €88 per megawatt hour, and in the UK July delivery prices surged by a shocking 25%. A continued squeeze on disposable incomes is likely because of this. A worrying sign for the US and EU economies!
Natural Gas has almost tripled in Price YoY, Source: tradingeconomics.com
Apple branch into Banking
This week Apple announced its new fully independent financial subsidiary for short-term loans. ‘Apple Financing LLC’ will offer its customers short-term loans similar to the likes of Klarna and Affirm, with its new service which will be found within the Wallet app, ‘Apple Pay Later’. The new pay later service is to be accepted by millions of retailers across the world. Apple is making a move into banking which will take some responsibilities away from partners like Goldman Sachs who currently oversee Apple’s lending business, though Goldman will still facilitate the pay later service by using their banking license to give Apple access to the Mastercard network. Apple will have a significant advantage in terms of lending risk as they have bundles of information on each iPhone user and their spending habits through different apps and their use of apple pay. This informational advantage and huge customer platform will definitely have lending competitors worried.
IPO – Isn’t Paying Out
The value of Initial Public Offering deals in the US and Europe has collapsed 90% so far this year. The slump in deals has been down to high volatility in the markets and the Russia-Ukraine conflict, with IPO figures for the end of Q2 expected to be as dry as they were in Q1. This is bad news for investment banks like JPMorgan and Citi, as large amounts of their revenue come from these kinds of deals. Business is slowing, especially in the region of Special Purpose Acquisition Vehicles (SPAC – Public Shell company that raises money to buy out a target company), which had a record year in 2021 but has almost come to a standstill in 2022. It is likely that the IPO sector will remain quiet until macroeconomic conditions stabilise. This inactivity may lead to poor year-end performance reports from investment banks in early 2023.
Source: PwC
LME Attacked
The London Metal Exchange (LME) has come under fire this week by various money managers. US Hedge fund Elliot Management announced they are suing the LME for $456mn worth of damages as a result of action taken by LME head Matthew Chamberlain to cancel billions of dollars of trades in the Nickel Market following a violent spike in Nickel prices on the 8th of March.
This move caused a lot of anger with investors, and it has now shown itself through the lawsuits received this week. The decision made by Chamberlain will go under review by Judiciaries as well as financial regulators to determine whether it was a serious misjudgement or the right call to cancel the trading for over 8 hours. The LME stated action was taken as the market had become “disorderly”, but Elliot believe that they overstepped their powers in cancelling these trades.
Hope you enjoyed this week’s Market Wrap!
Patrick
Technical Update
In this weeks article I will be providing a summary of chart set ups for some of the most popularly traded financial instruments across asset classes such as equities, rates, oil, FX and crypto. These will include the most significant support and resistance levels to look out for from market open on Monday.
I plan on producing a summary of chart set ups every two weeks to keep all readers up to date and aware of technical picture across markets. This is essential for anyone active in the markets whether you are a trader or investor!
S&P500
S&P500
In the equity markets, S&P500 closed bearish for the week down 5.65% at 3906. A technical breakdown from the 4080-4200 range on Thursday was followed a further decline below 4000 on Friday afternoon following the higher than expected US CPI figures that lead to a risk off reaction. SPX is now trades within the 3810-3985 range and is exposed to lower lows and continuation of the higher timeframe downtrend.
Key Resistance Levels:
· 3985 (lower time frames only)
· 4080
· 4200
Key Support Levels:
· 3875
· 3725
· 3585
Strong Uptrend in S&P500 with higher highs and higher lows throughout 2021
NASDAQ
NASDAQ seen an even harsher move down for the week with a 7.16% decline, closing the week at 11854. The index reacted negatively to the surprise higher than expected US CPI figures since the reaffirmation of more hawkish measures being required from the Fed is especially damaging for tech stocks. Having broken below the 12500-12900 range, price has now firmly reinstated itself in the 11700-12220 with exposure to much lower levels if the 11500 May low is breached.
Key Resistance Levels:
· 12220
· 12500
· 12900
Key Support Levels:
· 11700
· 11500
· 11000
US 10Y Treasury Yield
In fixed income markets, US Treasuries have seen more pain this week as the 10 Year Treasury yield gained by 0.21% to close the week at 3.157%. The uptrend in yields was of course exacerbated by the US CPI release on Friday causing Treasuries across all durations to see a substantial sell off into the weekly close. Yields now face the 3.2% May high which if surpassed will pave way toward the 2018 high at 3.25%. If yields reject these levels and form a double top formation, the 3% and 2.725% areas will be the major support levels to look out for.
Key Resistance Levels:
· 3.20%
· 3.25%
Key Support Levels:
· 3.00%
· 2.82%
· 2.725%
Euro Dollar
In FX markets, EURUSD seen a sharp decline of 1.88% this week with the pair closing at 1.0517. Higher than expected US CPI figures lead to a strong upward move in the DXY which reverberated its way through the FX markets with most G10 dollar pairs seeing weakness into the close. EURUSD was range bound between 1.08 and 1.065 over the last two weeks, with the CPI news being enough to breach the range low. Statements from Federal Reserve central bankers will drive FX next week and will determine price movements within the lower 1.05-1.065 range for the Euro. Any further weakness in the Euro could send it toward the May low at 1.035 with possible continuation of the higher timeframe downtrend.
Key Resistance Levels:
· 1.065
· 1.076
· 1.092
Key Support Levels:
· 1.050
· 1.035
· 1.018
WTI Crude Oil
As for energy markets, WTI futures ended the week relatively flat with a slight decline of 0.19% and a closing price of 120.56 per barrel. Any major news on the war in Ukraine or supply developments will drive the price in either direction in the coming weeks. The strong uptrend it has been trading in since March is still intact from a technical standpoint. However the strong bearish divergence in the RSI shows the momentum of this uptrend to be weakening. If this plays out the 115 and 110 regions as well as the March-May upward trend line should act as support. If the uptrend continues, the next major resistance sits a fair distance away at the 2008 high at 147.25.
Key Resistance Levels:
· 123.25
· 147.25
Key Support Levels:
· 117.5
· 115.0
· 111.25
Bitcoin
In the crypto markets, Bitcoin has seen a decline of 2.40% and closes the week below the 30000 level at 29065. Bitcoin has proven to be remarkably resilient in the face of the strong dollar after Friday’s US CPI readings as its price remains firmly within the 2 month 28020-32350 with a much smaller weekly decline than the equity indices covered earlier. Sideways price action within this range is expected to continue until further developments play out where the trade set ups can be made based off the key levels. Price should also be closely monitored if it approaches the March-April downward trend line.
Key Resistance Levels:
· 29250
· 30700
· 31425
Key Support Levels:
· 28650
· 28020
· 25450
See you next week!
Ronan
Disclaimer
This communication is for informational and educational purposes only and should not be taken nor used as investment advice, as a personal recommendation, or solicitation to buy or sell any financial instrument. This material has been prepared without considering any particular recipient’s 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 or future performance of a financial instrument, index or structured product are not, and should not be taken as, a reliable indicator of future performance. I assume no liability as to the accuracy or completeness of the content of this publication.