by David Jones, a Chief Market Strategist at Capital.com
There’s a famous quote about making predictions on financial markets “Avoid forecasts, particularly those involving the future”. But I think it’s safe to say that this week is going to be a volatile one across all sorts of markets.
The weekend saw the approval by the EU of the UK’s proposed terms for Brexit. The casual observer could be forgiven for thinking that this would come as a major relief to investors, but of course it still has to make it through the UK Parliament – and there is already plenty of opposition to it. There has been a small rise by the pound in early trade – but the hesitancy here shows the uncertainty as to what Brexit will finally end up looking like. There are still many hurdles along the way so it could well be another bumpy week for the UK currency.
The oil price is having a quiet start to the week – but let’s not read too much into that. Crude has dropped by one third in value in less than two months. This is a mammoth move for a major world commodity and the focus this week is on whether the $50 a barrel level is going to be broken, potentially setting up more selling. It has been a relentless slide since the beginning of October and it ended last week still under lots of pressure.
This oil weakness is feeding into stock markets. There are plenty of major energy companies making up global stock indices and their share prices are suffering as oil slides. Due to Thanksgiving it was a quiet end to the week but with US markets slipping back to October lows, some investors will be hoping for at least some sort of oversold bounce for stocks this week.
And finally – Bitcoin. The world’s favourite cryptocurrency – but probably not if you are still holding it – slipped further again this weekend, dropping to September 2017 levels around $3,500. The $3,000 area did prove to be a base all the way back then and the crypto-faithful are no doubt hoping that it prices to be the case this time around. It does feel like any people who bought in during the bubble are now throwing in the towel in the face of the recent weakness – Bitcoin has dropped by around 40% in the past couple of weeks. There’s no signs of a base forming just yet though – do not be surprised if there is more volatility in cryptocurrencies over the next few days.