Monday Market Minutes: Ursa Major – ShareCafe

Global equities suffered their biggest decline in more than a year last week, as heavy losses in Netflix shares on Friday accentuated a sell-off in tech stocks that spread to other sectors.

After falling for the fourth straight day on Friday, Wall Street had its worst week in nearly two years, and so far in January the key S&P 500 has had its worst start since 2016.

Tech stocks have been particularly hard hit, with the Nasdaq Composite Index down more than 15% from its most recent high in November and in the midst of a correction. Half of that drop came last week.

Cryptocurrencies were also criticized, with Bitcoin falling below $35,000 over the weekend, down almost 15% in two days.

The Nasdaq Composite was the hardest hit, with Friday’s selloff sending the tech-heavy index to its worst week since 2020, falling 2.7% to 13,768.92. The Dow fell 1.3% or 450.02 points to 34,265.37. The S&P 500 slipped 1.9% to 4,397.94.

The Nasdaq posted a 7.6% loss for the week, its worst since October 2020, and now sits more than 15% below its record November close.

The Dow Jones and the S&P 500 closed their third consecutive week of losses and their worst weeks since 2020. The S&P 500 is down 8.7% from its last record close on January 4 and lost 5.68% for the week. The Dow lost 4.58% last week.

For the week, Eurozone stocks fell 1.6%, Japanese stocks fell 2.1%, but Chinese stocks rose 1% after two rate cuts confirmed that the Xi government is now very worried about the decline in economic activity and in particular real estate – as well as his concern. brains by the continued upsurges of small Covid outbreaks.

Gold rose during the week but ended lower on Friday. Oil, however, ended with another strong gain weakness but experienced late weakness that may continue in trading Monday. Copper and silver also fell on Friday but gained for the week.

All of this ahead of the US Federal Reserve’s first meeting of 2022, which a growing number of analysts and economists believe will reveal the first rate hike in years early Thursday morning Sydney time.

The ASX 200 is heading for another slide when trading resumes on Monday after last week’s big sell-off that saw the market hit 8-month lows.

Friday night trading left the SPI down 49 points, signifying a very weak start today.

On Friday, the ASX 200 index fell 166.60 points, or 2.3%, to 7,175.80, down 2.95% for the week and 3.61% so far in 2022 .

The Materials sector led the losses, losing 3.5% (with BHP and Rio Tinto down sharply). Next came energy stocks, which fell 3%.

Confusion over the short-term impact on market values ​​and levels of the reunification of BHP Group’s listing on the ASX caused much of Friday’s weakness.

It saw BHP shares tumble nearly 5% on Friday and the company’s UK and Australian investors backed plans to scrap BHP’s dual listing in favor of a unified listing on the Australian Securities Exchange.

And shares of Rio Tinto added to the sale, which fell 4% after Serbia revoked the miner’s lithium exploration licenses, citing environmental grounds.

Newcrest Mining has seen shareholders of Canadian gold mining company Pretium Resources approve the Australian company’s $3.7 billion takeover bid.

The change of heart on the dangers of inflation in the thinking of the Fed, particularly Chairman Jay Powell and the slow completion of this week’s meeting saw disarray spill over into bond markets.

Yields rose sharply to over 1.81% for 10-year US Treasuries and over 1% for 2-year bonds, telling us that bond markets are waiting for quick rate hikes from the Fed.

Covid omicron, inflation, supply chain disruptions, mixed employment news (US short-term debt has started to rise in the last couple of weeks or months of falls) and stock rotation technology and growth stocks to value stocks (like most of the Dow), have confused traders and undermined confidence.

Netflix undermined the growth/technology narrative with a surprisingly low Q1 subscriber estimate of 2.5 million as the market sought 5.8 million.

Shares of the streaming giant fell 21.5% (or more than $50 billion) on Friday after the company’s weak fourth-quarter earnings report and slowing subscriber growth.

This fall spread to rivals such as Disney (a Dow share) which lost 6.9%

Netflix was the first major tech title to report earnings this season, with Apple and Tesla due out this week. Apple shares fell 1.28% and Tesla shares slid 5.3% on Friday. Shares of Amazon fell 6% and Meta Platforms (née Facebook) 4.2%.

The Nasdaq is off to its worst start to a year, in the first 14 trading days, since 2008.

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The sell-off has spared no corner of the markets with crypto deeper than other areas (commodities, on the other hand, started 2022 strongly). Among cryptos, market leader Bitcoin has taken a beating, losing 50% since its highs of last November.

Traders estimate that Bitcoin and its various rivals have lost over $1.2 trillion in value since last November’s highs of around $69,000 (when the Nasdaq peaked).

Bitcoin fell more than 9% on Friday to fall around US$36,955 to its lowest level in six months. It fell another 5% or more to around US$34,448 over the weekend.

Ethereum, the second-largest cryptocurrency by market value, fell around 20% to trade around US$2,500 and fell more than 8% over the weekend.

The declines in cryptocurrencies follow Wall Street’s losses on Thursday. The Nasdaq Composite lost 7.6% this week and the S&P 500 fell 5.7% for its third consecutive weekly decline.

Since its peak in November, Bitcoin has lost 50%, dragging other digital currencies down with it. In contrast, the Nasdaq is only down about 15%.

Gold peaked at US$1,870 an ounce on Nov. 17 and was only down a few percent at Friday’s after-hours close at US$1,836 an ounce.

Bloomberg estimated that Bitcoin’s decline since that November peak “wiped out more than $570 billion in market value, and approximately $1.17 trillion was lost in the overall crypto market.”

While there were much larger percentage pullbacks for Bitcoin and the overall market, this is the second largest dollar drop ever for both, according to Bespoke Investment Group.

“This gives an idea of ​​the scale of value destruction that percentage declines can mask,” Bespoke analysts wrote in a note. “Crypto is, of course, vulnerable to these kinds of selloffs given its naturally higher volatility historically, but given the importance of market caps, volatility is worth considering both in terms of raw dollars and in percentage terms.”

With the Fed’s intentions to swing bonds, cryptocurrencies and stocks, Bloomberg points out that “cryptos have twisted and turned in almost exactly the same way stocks have.”

“Crypto is reacting to the same type of dynamic that is weighing on risky assets globally,” Stéphane Ouellette, managing director and co-founder of institutional crypto platform FRNT Financial, told Bloomberg.

“Unfortunately for some of the mature projects like BTC, there is so much cross-correlation within the crypto asset class that it is almost certain to fall, at least temporarily, into a broader market valuation contraction. alt-corners.”

Russia’s decision to join China in banning energy-intensive crypto mining has not helped crypto confidence. Russia is one of the top three countries for crypto mining.

Russia’s central bank has proposed banning the use and mining of cryptocurrencies on Russian territory, saying digital currency poses a risk to “financial stability and monetary policy sovereignty.”

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More quarterly Australian mining production and exploration reports are out this week (which will be interrupted by the Australia Day holiday on Wednesday). There are also some benefits in early December.

Quarterly reports are due from OZ Minerals and Newcrest Mining (both today).

Earnings to be released this week will include Australian Foundation Investment Co (today) and Resmed and Altassian on Thursday.

About Rodney Fletcher

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