Weekend Review: Friday’s Crash and Hopes from Germany. Over the weekend, traders and investors from around the world were processing the market crash in the United States.
As you remember, Friday seemed like a good day. In the morning (U.S time), the Bureau of Labor Statistics (BLS) released its highly anticipated jobs numbers. To many investors, a positive reading on this number is usually a positive note; an indication that the economy is doing well.
After the data was released, many traders expected the US market to perform well. Furthermore, the data showed the fastest acceleration of wages in 9 years.
The opposite happened. The markets crashed with the Dow falling by as much as 700 points. The crash was because of the rise in U.S treasury bonds. As shown below, the yields on a 10 year bond rose to the highest level in three years leading investors to dump stocks for the safe bonds.
The chart below shows the 5-day performance of the three biggest indices in the United States.
The question among investors was on whether the stocks crash was a one-off event or the beginning of the end. In an interview on Friday evening, the outgoing Fed chair Yellen said that to her, stocks were currently overvalued.
Another major development during the weekend was from Germany. As you know, since last year’s election, Chancellor Merkel has been unable to form a government. To do so, she needs to either call for another election or form a coalition with the opposition.
A few weeks ago, the two parties agreed to start coalition talks. In these talks, both parties present their agenda and form a compromise. Sunday was the self-imposed deadline for the talks but the parties agreed to extend. According to the Financial Times, both parties were upbeat about the talks and were optimistic of a comprehensive deal.
During the weekend, traders were still watching cryptocurrencies. As you remember, last week, the price of all cryptocurrencies fell with bitcoin trading below $9,000. Bitcoin, ethereum, ripple, and litecoin ended the week down 28%, 23%, 39%, and 35% respectively.
The pain continued during the weekend when bitcoin traded below $7,000 and ethereum below $900. The major news that broke during the weekend is when large United States banks announced that they would stop processing bitcoin payments. They explained that the volatility in the cryptocurrencies market made their services in the space unsustainable.
Traders are now worried that the much-talked about cryptocurrencies crash is just beginning. As you remember, last week, the CFTC launched an investigation to one of the largest exchanges in the world called Bitfinex.
Another major news that happened during the weekend was the announcement by the Fed about Wells Fargo. As you remember, Wells Fargo has been under investigation for defrauding millions of customers. In Yellen’s final act as chair, she asked the bank to sack four directors and halt any future growth plans. By this, the Fed means that the bank could not exceed its assets past the 2017 levels without permission. Traders are waiting for the market to open to see how the banks will trade.