Stocks begin the week lower on growth concerns; GBP also declines

Summary:

• US and European bourses trading lower

• Markets react negatively to downbeat Caterpillar and Nvidia earnings

• Siemens/Alstom merger making headlines

• Pound pulls back ahead of Brexit vote II

• While Bitcoin falls is it worth looking at “stablecoins”?

It’s been a pretty negative start to the week for stock markets with declines seen almost across the board. The real selling emanates from the US with the benchmarks across the Atlantic on course to post a fairly heavy down day. At the time of writing the US500 has made a daily low of 2626 and is not far from last week’s bottom, should this get taken out to the downside then the recovery seen since the start of the year is under a very real threat.

The catalyst for the heavy selling was two earnings reports out ahead of the opening bell with Caterpillar disappointing and weighing on the Dow before Nvidia also swooned and weighed on the Nasdaq.  Caterpillar is a machinery and construction company while Nvidia makes microchips and they’re both seen as bellwethers of the global economy and it wasn’t so much their past earnings that has spooked the markets but more there warnings regarding economic activity in China. Caterpillar shares are down 8% while Nvidia is off by over 12% on the European close.     

Despite offering new concessions and having strong support of the German and French authorities the European Commission stays reluctant towards the proposed merger of Siemens (SIE.DE) and Alstom (ALO.FR). Margrethe Vestager, the competition commissioner, claimed that remedy package submitted last week came too late and failed to see more decisive measures being considered. Both companies are underperforming on today.

There’s been some fairly broad selling seen in the pound at the start of the new week, with sterling pulling back against all of its peers. The dip seems to be more a case of the market paring its recent gains after a strong run higher of late rather than a clear reversal as once more traders are keenly awaiting a parliamentary vote on the PM’s latest deal. After suffering the heaviest ever parliamentary defeat for government earlier this month, PM May will return to the Commons tomorrow evening with MPs set to vote on her “plan B” which will likely look remarkably similar to “plan A.”

Cryptocurrencies have kicked off the new trading week with some declines with Bitcoin, the largest virtual currency, trading only subtly above $3400. There is no doubt that volatility on the cryptocurrency market tends to be gargantuan. It was especially the case in late 2017 when major digital coins were rising rapidly with Bitcoin approaching the $20k mark. Here, so-called “stablecoins” are coming in. You know, one of the prime features of cryptocurrencies is to store the value. However, it could be hard to achieve or could be even impossible to do if cryptocurrencies’ volatility is so hectic. Therefore, everybody wanting this feature needs to focus some particular coins producing notably less rapid and completely disorderly price movements. What coins are we writing about? Tether could be a nice example whose price always moves around $1. The $64k question is why the Tehter’s price does not move so abruptly as other coins do? Namely these cryptocurrencies are pegged to another asset, such as the US dollar, a basket of national currencies or commodities and so on. The second question is how many stablecoins exist? According to research done by blockchain.com there were as many as 57 such coins (23 already released and 34 being in the planning stages) as of September 2018.