Golden Brokers

Feb 15, 2021

  • Weekly Review

WEEKLY MARKET NEWS

PAST WEEK'S NEWS (February 8 – February 14, 2021)

 

A

 

Stocks Performance (U.S. Stocks)

 

Global stocks pushed higher as investors continued to take comfort in the persistent expectations for additional fiscal stimulus plan, improving COVID-19 trends and progress on vaccine distribution rate, and positive corporate earnings reports.

The week began with stock gains after the U.S. Treasury Secretary Janet Yellen’s appearance on Sunday talk shows, where she spoke in favour of President Biden’s proposed economic aid package and employment plans. Later in the week, Fed Chair Jerome Powell delivered a speech where he reiterated that the Fed policy would remain stimulative for a long time. Powell’s dovish message, supported by a softer than expected U.S. CPI for January, pressed long-term government bond yields lower in the U.S. during most of the week, before rising growth expectations boosted them higher.

Energy stocks were higher as WTI crude prices climbed to their highest level in more than two years. By sectors, the most outperformed weekly stocks were led by Energy Minerals sector at 3.72%, followed by Electronic Technology at 3.69%, Commercial Services (3.51%), and Producer Manufacturing at 3.48%. Meanwhile, the weakest sectors were from the Utilities at -1.10%, Distribution Services at -0.36%, Communications (-0.25%), and Consumer Durables sector (-0.06%).

 

Indices Performance

AA

 

The major U.S. indexes rose for second week straight. While they couldn’t match the previous week’s strong results, the indexes all posted gains of more than 1% and set new record highs amid mostly quiet trading.

The European markets were mixed. Spain and Germany lost ground, while Italy led the advancers as Mario Draghi moved to form a national unity government.

UK stocks were also higher after reports that Britain’s real GDP was stronger in the final quarter of 2020 than had been forecast.

Asian trading week was shortened by holidays, including China’s Lunar New Year and Japan’s National Foundation Day. The Japan’s Nikkei 225 Index climbed to its highest level in over 30 years, Hong Kong Hang Seng ended at a 3-week high and Shanghai Shenzhen CSI 300 Index jumped to an all-time high.

 

Oil Sector Performance

 

AAA

Oil extends weekly gains amid signs of improving global demand.

On the week's closing, Brent crude price breached the $60 mark and closed the week higher at $62.43 a barrel. The WTI crude price also extended its rally and closed the week higher at $59.47 a barrel.

 

Market-Moving News

 

Record Heights

The major U.S. stock indexes all posted gains of more than 1% and set new record highs amid mostly quiet trading. For the S&P 500, Friday produced the index’s tenth record closing price of 2021. The NASDAQ outperformed the other major indexes and on Tuesday eclipsed the 14,000-point level for the first time to set another record high.

Small-Cap Surge

A big rally on Monday for small-cap stocks lifted the Russell 2000 Index, a small-cap benchmark, to another week of outperformance relative to large caps. The index climbed more than 2% for the week.

Earnings Catalyst

With Q4 results in from about ¾ of companies in the S&P 500, more than 80% have surpassed analysts’ earnings forecasts, according to FactSet. That’s above the five-year average ‘beat’ rate of 74%.

Bitcoin Rally

Bitcoin soared past $47,000, recording a roughly 24% gain for the week, after Tesla disclosed that it had purchased $1.5 billion worth of bitcoin and will start accepting the cryptocurrency as a payment method for its cars.

Inflation Gauge

U.S. government bond yields slipped on Wednesday after a measure of inflation came in lower than expected. CPI remained unchanged in January compared with the previous month.

U.K. GDP Drop

The UK’s economy in 2020 posted the biggest annual GDP decline among the world’s most advanced economies, with a 9.9% drop. However, the U.K. economy grew at an annualized rate of 4.0% in the final quarter of the year, aided by government spending and an uptick in business investment.

Platinum Shines

The price of platinum climbed to a near 6-year high to about $1,231 a troy ounce. So far this year, the price has risen about 14%; about double its March 2020 level.

 

Other Important Macro Data and Events

Quarterly earnings results continued to prosper, as more than 80% have surpassed analysts’ earnings forecasts. The results have been beating expectations by a wider-than normal margin, especially in the technology, communication services and financials sectors.

The optimistic mood also lifted oil and other commodities, including copper and platinum, which reached an 8-year and 6-year highs. Even gold prices, which typically retreat in tandem with falling safe-haven demand, joined in the advance, mainly due to a weaker U.S. dollar.

In U.S. economic news, inflation and jobs data came in below expectations, as growth has stalled, and continuing claims remain significantly higher than pre-pandemic levels. The core CPI unchanged in January, below consensus estimates. Weekly jobless claims fell to 793,000.

Core eurozone government bond yields fell on softer-than-expected U.S. inflation. Eurozone yields also came under pressure from the ECB’s perceived dovishness and the European Commission’s gloomy economic outlook. Peripheral eurozone government bond yields also fell. Easing political tension in Italy helped the country’s 10-year yield hit a new low on Friday. Mario Draghi, the former president of the ECB, was poised to become Italy’s prime minister after receiving the backing of the populist 5-Star Movement, the largest party in Parliament, for his national unity government.

Germany extends lockdown despite vaccination programs implementation, until March 7, while also close its border with the Czech Republic and Austria’s Tyrol region.

In the UK, Prime Minister Boris Johnson said he planned to outline a plan for reopening the economy in two weeks’ time.

The UK economy contracted 9.9% in 2020, its most since 1709. Although the economy grew in the final quarter of the year at annualized rate of 4.0%.

More companies started to venture into the cryptocurrency space. Tesla (NASDAQ: TSLA) disclosed a $1.5 billion investment in bitcoin with plans to accept the digital coin as a payment option, MasterCard (NYSE: MA) said it plans to support cryptocurrencies on its payment network this year, and BNY Mellon (NYSE: BK) reportedly said it will hold, transfer, and issue cryptocurrency for its asset-management clients.

 

What We Can Expect from the Market this Week

 

Going forward, the path ahead for economic and earnings growth remaining favourable, supported by additional fiscal stimulus, accommodative central-bank policies, and the rollout of vaccines.

More light shone into digital currencies/ cryptocurrencies as more companies started to venture into the space.

Important U.S. economic data being released this week include the FOMC minutes, February preliminary Markit PMI, producer inflation, import export and retail sales growth.

Apr 12, 2019

  • Education

Forex explained

What is Forex?


Currency trading also known as Forex or FX trading can be described as the currency exchange market. Forex trading refers to the global, decentralized marketplace where individuals, financial institution and companies exchange one currency for another at floating rates which are given by actual market situation. Forex includes all the currencies in the world.

What is the currency pair?


A currency pair is the quotation of two different currencies, with the value of one currency being quoted against the other. The first listed currency of a currency pair is called the base currency, and the second currency is called the quote currency.

Currency pairs compare the value of one currency to another — the base currency (or the first one) versus the second, or the quote currency. It indicates how much of the quote currency is needed to purchase one unit of the base currency. For example, let’s take most traded currency pair in world – EUR/USD. If value of currency pair EUR/USD is 1.2500, to get one EUR (base currency) you will need pay 1 USD and 25 cents.

How do I earn money trading currencies?


In Forex market you are betting that one currency will be valued more compared to another currency in the future. Forex is the biggest and most liquid market in the world, so the prices of currency pairs change all the time. For example, if a price of EUR/USD changes from 1.25 to 1.30 and you have one EUR and decide to change that to USD you will get 1 USD and 30 cents instead of 1 USD and 25 cents. Thanks to Forex, you can benefit on a movement of currencies in bigger scale thanks to leverage and margin.
Read more

Jun 17, 2019

  • Education

Are diamonds an investors’ best friend?

Although a dramatic change of demand for diamonds, loved by almost every woman, is not in the nearest predictions, production volume in 2018 was lower than in previous years. Global production of raw diamonds accounted for 147 million carats according to the Statista.com statistics. In 2017 this number was higher – at 151 million carats in total value of more than 14.1 billion USD.

Production down by 4 million carats will probably push the diamonds price upwards in the nearest time frame. When looking at historic price evolution, it can be noted that investments into diamonds brings a very interesting yield over the years. In 1960, the price for 1 carat floated around 2700 USD, in 2015 over 15.000 USD and 31.000 USD in 2016. That represents a 106 percent rise in 16 years.

In the first half of 2018 the prices rose at about 5 to 6 percent level, the growth in the second half of 2018 was influenced by excessive supply of small diamonds with lower consumer performance, in Indian and Chinese markets. The strongest focus was directed onto stones with pink and blue colors, with blue being the color that outperforms all other colors since only a minimum of newly-mined stones reach the market. Only diamonds with blue color that may be found in auctions are those that were mined earlier and whose owners decided to sell. That is why their purchasing power increases.

Russia belongs to major producers, with a volume of 19 million carats mined in the last year. Then comes Australia with 17 million carats volume, Democratic Republic of Congo with 15 million carats and Botswana with 7 million. Russia also owns biggest supplies of diamonds in the world, the volume is estimated to 650 million carats. As a comparison, Democratic Republic of Congo owns supplies in the volume of 150 million carats.

Since 2009 till 2016 diamonds production faced drops in the volume by tens of million carats, when compared to previous times. 2017 was the first year after a major rundown, production increased again and reached the level of 150 million carats per year.

 
Read more

Nov 01, 2019

  • Education

Forex over mobile phone – high profits and high risks

Currency trading markets became the biggest and most liquid markets in the world, they became also a magnet for speculators that bet on financial derivates and use leverages.

Forex (also known as FX) is one of the most used words in the world of financial traders. Forex is an abbreviation of Foreign Exchange and it represents exchanging foreign currency. Its market is the biggest and most liquid market in the world, where currency pairs are traded. Daily trading volumes of carried out transactions peak over 5 trillion US dollars. Currency pairs EUR/USD, USD/JPY, GBP/USD and USD/CHF belong among the main currency pairs that are traded. Most traded currency is US dollar. The markets are open 24 hours a day, 5 days a week.

With forex trading comes inherently the usage of leverage products and financial derivatives, that enable the traders to use multiplication of their profits. Using contracts for difference (also known as CFD) with leverage effect leads to high profits even when the currency pairs move just a tiny bit. But it also leads to high losses, if the exchange rate moves in the other direction than what the trader expected.

For a better understanding of forex trading using financial leverage, we prepared a model case with real currency pair exchange rate movements. The currency pair will be EUR/USD. We will now watch the movement on 25 July 2019 between 2.15pm and 3.45pm. The investor will use 10,000 EUR of his own capital.

The table shows the comparison of results when using various levels of financial leverage. The investor speculated on price growth.

 


















































































A model comparison of CFD trading using financial leverage and the EUR/USD currency pair
EUR/USD 25 Jul 2019 2.15pm- 25 Jul 2019 3.45pm
leverage Value at the opening Value at the closing Change (in %) Investment (EUR) Profit/ Loss (EUR) Spread (EUR)
1:30 1.1106 1.1181 0,67 10,000.00 - 2,010 80.4
1:10 1.1106 1.1181 0,67 10,000.00 -670 26.8
1:1 1.1106 1.1181 0,67 10,000.00 -67 8.04

 

*Charges: the table shows so-called spread, that is a charge of the broker which is calculated from trader’s profit from the difference between buying and selling price. More information about charges and detailed calculations are available in https://goldenbrokers.net/.

 

Let’s assume that the investor opened a position on 25 July 2019 at 2.15pm, when EUR/USD currency pair had the value of 1.1106 and then closed the position on the same day at 3.45pm when the value was 1.1181. In this time frame the EUR/USD value rose by 0.67 %. The investor speculated in the wrong direction. EUR/USD is growing which means a loss for the investor. In other case, he would gain profits.

When trading with EUR/USD currency pair using CFD, the leverage may be applied up to 1:30, our model shows also the situations and profits/losses when traders use lower leverages or do not use leverages at all. In the last case the investor would end up with a loss of 67 EUR. This loss becomes more substantial with using leverages, since 1:10 in this case creates a loss of 670 EUR. The maximal allowed leverage for retail investors, 1:30, creates a significant loss of 2,010 EUR, which means 30 times higher loss in comparison to not using leverage at all. It is true, that the profits work in the same way. If we changed the investor’s speculation direction, e.g. he would speculate on decrease, the trader would earn 2010 EUR when using maximal allowed leverage.

The broker is prohibited by capital markets trading law to allow these products to everyone, due to high risks connected to CFD trading and other leverage products. The broker must firstly asses experience, financial situation and client’s preferences through investment questionnaire. Based on its result he may offer products from the least risky to most risky. A solid investor with experience should not have any problems with CFD trading authorization.

 

Robots start to add to the massive spread of online trading

 

Trading brokering through online platforms is so easy that it destroyed most barriers between individual traders and markets, like forex, that were previously only open to big corporate investors.

But there is still a significant progress ongoing at this easily accessible online trading. “Investment robots” belong among the newest technologies. These robots also trade with forex and create trades automatically instead of the trader. They react to pre-set signals with adjustable risk level. Apart from precision of their work they also have another advantage – they never sleep, which means they can trade in forex markets for all 24 hours a day. They do not yield to tiredness or emotions and save work and effort. Do the robots beat the world’s best investors? Not yet. We should firstly warn everyone from robots, or better said their operators, that promise great profits. All people that have at least basic education of economy know well, that a strategy that is available to everyone cannot bring above‑average profits in long-term to everyone. Human intuition and invention still prevail.

 

 
Read more

Nov 02, 2019

  • Education

Commodities over mobile phone – high profits and high risks

Thanks to the financial derivates almost anyone is able to trade commodities. But it also means that it is not enough to “trust the commodity”, it is also necessary to have knowledge about how modern trading works and what risks it brings.

 What actually is a commodity? In simple words, they are products of equal quality and price that are produced by a large number of producers. That means that commodities are not mobile phones that are different in many characteristics. Commodities are divided into several groups: energy such as oil or natural gas; metals, but not only precious metal such as gold, silver, platinum or palladium, but also for example copper; agricultural products (various types of crops, cocoa, coffee, meat, cattle or even orange juice). Every commodity stock exchange where trading is happening have specified required parameters of selected commodities and the quantities that may be traded.

Given the characteristics of commodity stock exchanges where even the smallest price movements are watched closely, it is natural that leverage products – such as contracts for difference (“CFD”) – are used. When prices move, the money difference is paid based on this contract. In the case of price growth, the buyer pays money to the seller, in case of price decrease, money is paid in opposite direction. CFD are derivatives that enable speculations on price movement, without actually owning the underlaying asset – in this case the commodity.

We present you commodity trading using CFD and financial leverage using the following model case. Crude oil Brent had the value of 62.95 USD on 23 July 2019 at 6.45pm and then the value of 64.27 USD at 11.15pm. This represents a growth of 2.09 %.

In the table you may see examples of trades with leverage. Currently a leverage of 1:10 is applied when trading crude oil using CFD, our model in the table shows situations and profits/losses in cases, when leverage is lower or none at all. It is a speculation on price growth, which means we gain profits if the price grows and get losses if the price goes down.

 




































































A model case of how leverage trading with CFD works for oil trading
Brent 23 Jul 2019 6.45pm – 23 Jul 2019 11.15pm
Leverage Value at the opening Value at the closing Change (in %) Investment (EUR) Profit / Loss (EUR) Spread (EUR)
1:10 62.95 64.27 2.09 10,000.00 2,090 158
1:5 62.95 64.27 2.09 10,000.00 1,045 79
1:1 62.95 64.27 2.09 10,000.00 209 15.8

* Charges: the table shows so-called spread, that is a charge of the broker which is calculated from trader’s profit from the difference between buying and selling price. More information about charges and detailed calculations are available in https://goldenbrokers.net/.

 

The scenarios are valid for a trader that has opened his position on 23 July 2019 at 6.45pm while the value of oil was 62.95 USD and closed his position on the same day at 11.15pm at the value of 64.27 USD. In this time frame the Brent oil has grown by 2.09 %. The trader, as mentioned before, has speculated on growth. Without using any financial leverage his profits would be 209 EUR from an investment of 10,000 EUR. We can’t say this would be an unsuccessful trade, rather vice versa. If the trader speculated on price decrease, he would lose money. The speculation on growth was a good strategy in this case.

However, profits may be multiplied using financial leverage, for example in the ratio of 1:5. The trader would then reach a profit of 1,045 EUR from the same investment. When using leverage ratio 1:10, which is currently used for trading oil, the profit would be 2,090 EUR.

Capital markets regulation in the EU allows the maximum leverage level of 1:10 for commodity trading. In the same way in which leverage multiplies profits, it can also multiply losses. If the trader speculated on price decrease, he would end up with a loss of 2,090 EUR when using financial leverage of 1:10. That means he would lose almost one quarter of his investment during mere 4 hours.

As we showed you, it is a very risky product, which also means that no credible institution offers commodity trading with acceptable outcome from investment questionnaire. By law, all potential clients must fill it in before they can be offered such risky products.

 

Leverage trading has a long history

 

A first traded using financial leverage was a purchase of Pan-Atlantic Steamship Company by the company McLean Industries, Inc., in January 1955. Nowadays these trades are known as leveraged buyout. These buyouts were most popular in 1980s. CFD as know them now were introduced in London in 1990s. Brian Keelan and Jon Wood from the company UBS Warburg are usually named as founders of the instruments. CFD were frequently used by hedge funds and other institutional traders thanks to the possibility to trade without actual physical owning of the underlying asset. This way they avoided numerous high charges.

 

Towards the end of 1990s, thanks to the development of Internet and other means of communication, the possibility to trade CFD reached retail investors. Internet and other developments enabled watching every price movement and trade immediately. Many new online trading platforms and mobile applications were created subsequently and simplified trading even more. Thanks to easy access, capital markets trading has become a widespread matter.

 

 

 
Read more

Nov 04, 2019

  • Education

Mobile trading: high profits and high risks

Online trading platform users now have the professional stock traders’ tools at the hand’s reach, but often underestimate risks.

The online world enabled access of stock trading to broad public and it is no longer a privilege of selected groups of people. Nowadays we don’t have to go to a bank or search for a broker, in theory we don’t even have to consult what and how to trade and invest into. We don’t even have to own a powerful computer with lots of screens as we see in movies related to Wall Street investment bankers. We could get similar profits with a simple smartphone where we download trading application for free, for example Metatrader. We can be trading literally anywhere and anytime. And if we don’t trust our judgment, we may use so-called “social trading” which means setting our trading rules in a way that copies investments by a selected investor or a company.

We now show you leverage trading on an investment instrument called “contract for difference”, also known as CFD.

 

Leverage trading: high profits and high losses

 

As opposed to stocks or currencies, contracts for difference have been used in trading and investing only recently – since 1990s. At the beginning they served financial institutions to hedge against exchange rate movements of stocks and other assets. It was only later when they became a product traded by smaller investors and traders.

 

When using CFD instruments, the trader does not become an owner of a physical stock, which means he also does not have any rights to profit or voting rights. On the other hand, the trader does not have to pay any stock charges and CFD trading is faster and easier in comparison to traditional assets.

 

CFD are financial derivatives that are used for price movement speculations. In simple words, CFD is created by opening a position and is finished by closing a position. Traders may speculate on price decrease or growth. When closing a position, trader’s speculation is compared to the real price movement, which means a calculation of a profit or loss. This is then multiplied by financial leverage usage, that enables traders to add usually significantly higher amount of foreign capital to their own capital.

Trading with higher “amount” then leads to profit increase, but also to higher potential losses.

 

For a better understanding of how financial leverage in CFD trading works, we present you a simplified case. We will use Facebook stocks movements between 17 and 18 June 2019. Facebook stocks were valued at 185 USD (on 17 June, at the beginning of trading session). On the following day, the stocks were valued at 185.5 USD, which meant an increase by 1.89 %. In the table you can see examples of trades where leverage is used, from 1:1 ratio to 1:5 ratio. There are three different results according to the leverage level. A profit or loss is created based on the decision to speculate on growth or decrease.

We now present you a case where the trader expected Facebook stocks growth and speculated on it.

 





















































A model case of leverage trading with CFD stocks
Facebook stocks (17 Jun 2019 – 18 Jun 2019)
Leverage Value at the opening Value at the closing Change (%) Investment (USD)   Profit/Loss Spread* (USD)
1:1 185 188.5 1.89 10,000.00 189 2.45
1:2 185 188.5 1.89 10,000.00 378 4.9
1:5 185 188.5 1.89 10,000.00 946 12.25

 

*Charges: the table shows so-called spread, that is a charge of the broker which is calculated from trader’s profit from the difference between buying and selling price. More information about charges and detailed calculations are available in https://goldenbrokers.net/.

 

Let’s assume that the trader opened a position on 17 June at the beginning of a session with the volume of 10,000 USD, speculated on growth and then closed it on the following day in the evening. The market really went up. Without using leverage, the trader would earn a profit of 189 USD. If he used a leverage of 1:5, his profit would be 946 USD. On the other hand, he would have same amount of loss, if he had speculated on price decrease.

 

As you can see in the example, the leverage may help to higher profits, but it may also cause losses of the same height. That’s why it is necessary for the trader to realize, how high his risk affinity is. If the investor requires a low level of risk, stocks trading using CFD would not be his cup of tea. Market beginners are also not encouraged to use leverages. For investors with a positive attitude towards risk, this type of trading may be a welcomed member of the portfolio, although even experienced traders usually do not use higher leverage than 1:5. If the trader incorporates reasonable rules for risk management, a trading system with higher leverage may be created. More information and basic glossary may be found in https://goldenbrokers.net/.

 

 
Read more

Trending now

AAPL

{{ Number.parseFloat(value).toFixed(4) }}

{{ diffInPerc }}%

{{ Number.parseFloat(change).toFixed(4) }}

AMZN

{{ Number.parseFloat(value).toFixed(4) }}

{{ diffInPerc }}%

{{ Number.parseFloat(change).toFixed(4) }}

NFLX

{{ Number.parseFloat(value).toFixed(4) }}

{{ diffInPerc }}%

{{ Number.parseFloat(change).toFixed(4) }}

FB

{{ Number.parseFloat(value).toFixed(4) }}

{{ diffInPerc }}%

{{ Number.parseFloat(change).toFixed(4) }}

Need a help with registration?

Try our 24/5 helpline we are always happy to help.

License and Regulation: Golden Brokers Ltd. is authorised and regulated by the Vanuatu Financial Services Commission (“VFSC”) with company number 40546. As such, Golden Brokers Ltd. is authorised to carry out business of dealing in securities under the Financial Dealers Licensing Act [CAP 70].

Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Please read the full Risk Disclosure.