This week, bitcoin continued its incredible run. Last week, the talk was how it crossed the psychological price of $10,000. As of this writing, it is currently trading at $16,000. The upward moves come as CBOE plans to list Bitcoin futures a move that has been criticized by top banks. The next big step for bitcoin will be the psychological $20,000 which might be reached before the year ends.
This week, deal making was at the core of investors’ mind. Pharmacy giant, CVS announced its plan to acquire Aetna in a $69 billion deal which will be the largest deal of its kind. Also, Disney continued its talks with Rupert Murdoch on the plans to acquire some 21 Century Fox assets. Disney is likely to continue its pursuit for Fox because of its reducing subscriber base. Also, there is a threat of other companies like Comcast and Liberty Media pursuing a deal. This week, also saw the fall of Steinhoff, the South African giant. On Thursday, its stock fell by 60% after the company hired PwC to audit its books.
This week, stocks have had a lackluster performance as investors digest the tax reform issue and government funding. Facing a large deficit, investors are waiting for the final republican bill that will be on Trump’s table for signing. There have been talks that the corporate tax will be hiked from 20% to 22% which the Whitehouse says is better than the current rate. On Thursday, Trump and Democrats agreed to fund the government for the next two weeks, averting a government shutdown that was to start tomorrow.
On currencies, the pound was a big winner this week after talks on Brexit progressed. The pound had a bad start of the week against the dollar as talks of Brexit encountered some problems before bouncing back on Thursday as a deal seemed close.
The dollar regained its momentum after positive data from ADP which released its Employment change of 190K versus the expected 185K. On Friday, the Non-Farm Payrolls data showed that employers added 228K employees versus the expected 200K while the unemployment rate remained steady at 4.1%.
However, as I mentioned yesterday, investors were expecting a closer relation to the average hourly earnings which rose by 0.2% versus the expected 0.3%. This caused the dollar to weaken slightly against the major currencies.
These numbers further raise the probability of a rate hike next week which all signs are pointing towards.
In Australia, the Australian dollar saw a significant loss against the dollar after data showed a reduction of inflation. On Monday, the Central Bank left rates unchanged at 1.5%. This was expected, but the inflation data reduced chances of a near-term hike. Retail sales in Australia improved by 0.5% beating the expectation of 0.3% and the quarterly GDP slowed to 0.6% against the expected 0.7%.
In the oil markets, Brent and WTI lost as investors ‘digested’ the news from OPEC on reducing supply. Last week, at a meeting in Vienna, OPEC members signed a deal to reduce output pushing oil to a three-year high. However, there are concerns about the production ability of the U.S. On Wednesday, data showed that crude inventories in the country are rising. EIA announced inventories of 5.6M against the exected 3.4M. In the long run, it is impossible to gauge the impacts of OPEC moves and those of the United States.
Gold saw a slight decline this week. This can be attributed to reduced tensions on the Russian probe. It can also be associated with the continued rise of bitcoin. Surprisingly, Trump’s decision to move the American embassy to Jerusalem seems not to have a major impact on gold. Traditionally, this would have been a major driver of gold prices because of the increased tensions in the Middle East.
Other notable events this week were the Indian Central bank which retained interest rates at 6.0%, the release of UK’s PMI data, and the surge in manufacturing in the United States.