Stocks come back under pressure

Summary:

• Indices sell-off into European close

• 3 markets to watch; S&P, Dax and FTSE

• USDJPY remains driven by risk sentiment

• What next for the pound after retail sales drop

• Small losses seen in crypto

There’s been some pretty strong selling in the final hour of European trade with Italian stocks once more leading the way lower. The ITA40 has taken out its lows seen last week to move below the 19000 mark and the declines can be seen elsewhere with the DE30 and UK100 also dropping sharply. The US is also under pressure and a failure for buyers to stem these declines before the day is out would hand the initiative back to the bears who may well now be seeing this latest move higher as a pullback in the prevailing downtrend.   

Earlier we posted our 3 markets to watch from the stock index space, focusing on the S&P500, DAX30 and FTSE100. This analysis can be viewed here.

The selling in stocks can also be felt elsewhere with the USDJPY continuing to be driven by risk sentiment. The USDJPY often correlates closely with stock indices during times of heightened volatility and the past week has seen the market almost move in lockstep with the US500. Last Wednesday’s declines in both pairs have been recouped to some extent, but the question now is whether there’s a complete recovery ahead or a retest of the lows.

UK retail sales grew less than expected last month on falls seen predominantly in food stores but the pound did not react too much. The GBP is still expected to be driven chiefly by incoming Brexit developments, and macroeconomic readings will be probably set aside at least for the time being. Today’s data revealed that domestic-driven implied inflation stays at the relatively low levels suggesting the Bank of England is no in a rush to resume hiking rates. While the current Brexit uncertainty continues to linger overhead the upside for the pound may seem limited and if investors grow more skittish then some downside could well lie ahead.

The crypto markets have seen some small declines of late, with 4 of the 5 markets on xStation in the red at the time of writing. Ripple is the one bright spot and higher by around 1% on the day while Bitcoin is lower by less than 0.5% and trades 6400 at the time of writing. Cryptocompare, a company aggregating cryptocurrency market data, released a Cryptoasset Taxonomy Report. Report authors compared over 200 different digital assets based on the number of factors including economic, legal and technological features. The report addresses the issue of decentralization and the outcome may be surprising for some. Namely, just 16% of cryptocurrencies are fully decentralized according to the report. Over a half of researched crypto assets (55%) proved to be centralized with the remaining part labelled semi-centralized. The authors found also that just 37% of the so-called payment tokens (assets with main purpose of serving as means of payment) were decentralized.