US stock markets make bright start to the week
Large divergence seen amongst indices due to slump in Boeing
DE30: Another lacklustre data point from Germany
Founder of Ethereum proposes wallet fees
Pound in focus during key week for Brexit
There’s been some sizable gains seen in US stock markets today, with the benchmarks extending the recovery which began on Friday. There’s also been gains for European markets, but these are lagging their peers across the Atlantic once more. The US100 is leading the gains by adding 1.7% as tech stocks go higher and the index is just 1% shy of the ’19 highs.
Shares in Boeing have begun today firmly lower with a large gap to the downside, after several airlines have grounded one of their planes following a fatal crash on Sunday. The disaster involved an Ethiopian airlines plane and has seen China’s airline regulator suspend all Boeing 787 max 8 domestic flights. This is the second tragic crash for this model of plane and has unsurprisingly raised serious concerns about its safety and has led to a double-digit decline in the share price. An interesting by-product of this slide is a large divergence opening up between the S&P500 (US500 on xStation) and Dow Jones (US30). This is caused by the former being weighted on market-cap whereas the latter is based on price. This has resulted in Boeing having a weighting of more than 11% in the Dow, almost twice as much as the next largest component, where as it only has a weighting of less than 1% in the S&P500. This has caused the divergence in the two benchmarks, with the current level the highest seen on any given day since January 2009!
One reason for the underperformance of the DE30 could be due to some more soft data out this morning. The German industrial production figures for January were published at 7:00 am GMT and they are quite worrying. Namely, the production shrinked in January by 0.8% MoM while market consensus pointed to a 0.5% MoM advance. Note that out of 12 past German industrial production readings only 5 did not show a decline on the monthly basis. Moreover, just 1 out of those 12 prints was actually expected to show a drop. This shows that even as everyone is talking about a slowdown in Europe, pace of deceleration is way faster than economists predict. This may lead to downward revisions in short- and medium-term economic forecasts and in turn have impact on asset valuations.
The cryptocurrency market has begun Monday’s trading with a step back. The two largest digital currencies - Bitcoin and Ethereum - saw also some drops during yesterday’s trading. According to CoinMarketCap, the capitalization of the whole crypto market stands around $134 billion handle whereas the largest virtual currency Bitcoin accounts for roughly 51.6% of this value on Monday morning. Vitalik Buterin, the founder of the second largest cryptocurrency Ethereum, proposed crypto wallet fees to support wallet developers. He suggested on his Twitter account that a flat fee of 1 gwei (1$ = ca. 7,300,000 gwei) could raise up to $2 million per year. The founder of Ethereum proposed that such a fee could be a community norm, not a mandatory fee. Moreover, Vitalik Buterin thinks the mentioned way of raising funds could be a “sustainable non-institutionally-biased market-based funding for client/wallet developers”. Note that it is not the first time that Buterin proposed additional fees.
Brexit talks going are to the wire as the Article 50 deadline of 29th March is drawing ever nearer and there’s still no clear indication of what the ultimate outcome will be. The UK Parliament is scheduled to hold another meaningful vote on PM May’s Brexit deal tomorrow (Tuesday) and this could well be a key event for the pound. Read our in-depth analysis on what to expect here.