CURRENCIES

Highlights from Last Week:

• U.S. Dollar Decline: The DXY index dropped significantly due to softer-than-expected consumer price index figures. This reignited optimism that the disinflationary trend, which began in late 2023 but had stalled, is back on track.
• Federal Reserve Speculation: Encouraging inflation data has fueled speculation that the Federal Reserve might ease its monetary policy sooner than anticipated, possibly this fall.
• EUR & GBP Strength: The euro and British pound surged to multi-month highs against the U.S. dollar.
• Precious Metals Rally: Gold is nearing its all-time high, and silver has reached its strongest level since 2013.

Upcoming Week:

Economic Calendar: A relatively light schedule is ahead, with the FOMC minutes and May S&P Global PMI results being the main highlights. This suggests that recent market moves may consolidate as investors wait for more significant catalysts.

UK Economic Focus:

April Inflation Data: Set to be released on Wednesday, this data could be crucial. A stronger-than-expected reading might reduce the likelihood of a Bank of England rate cut in June, while a subdued report could solidify expectations for such a cut.

STOCK MARKET

Key Highlights

Record-Setting Week for Stocks:

• Signs of an inflation cooldown led to optimism about potential Federal Reserve interest rate cuts.
• Major indices hit record highs:
  • Nasdaq Composite (^IXIC) rose over 2%.
  • S&P 500 (^GSPC) increased by more than 1.5%.
  • Dow Jones Industrial Average (^DJI) surpassed 40,000 for the first time.

Upcoming Focus

Nvidia Earnings:

• Highly anticipated earnings results from Nvidia (NVDA) are expected to be the key market catalyst.
• Analysts expect Nvidia’s earnings to have grown by over 400% in the prior quarter, with revenue up 242%.

Other Earnings Reports:

• Target (TGT), Palo Alto Networks (PANW), and Lowe’s (LOW) will also release earnings.

Economic Updates:

• Updates on the manufacturing and services sectors.
• Final reading of consumer sentiment for May.
• Minutes from the Fed’s May meeting to be released on Wednesday.

Inflation and Interest Rates

Consumer Price Index:

• Core prices rose 3.6% over last year, the lowest annual rise in three years.
• Investors are now pricing in two full interest rate cuts this year.

Market Projections:

• Investors aligning with the Fed’s projections of two or three rate cuts this year.
• BMO Capital Markets expects the S&P 500 to end 2024 at 5,600, a 7% increase from the latest close.

Analyst Insights

Fed Meeting Minutes:

• Expected to provide a deeper look at the discussion among officials.
• Bank of America economist Michael Gapen suggests the minutes might sound more hawkish than Chair Powell’s press conference.

Equity Strategist Forecasts:

• Deutsche Bank’s Binky Chadha raised his year-end target for the S&P 500 to 5,500 from 5,100, citing robust earnings growth and an improving macroeconomic outlook.

Nvidia’s Market Impact

AI Leader’s Performance:

• Nvidia’s stock is up more than 86% in 2024 and over 200% in the past year.
• High expectations for continued growth in earnings and revenue.

Broader Market Implications:

• Nvidia’s performance could influence other AI-related stocks and the broader market.
• Interactive Brokers’ Steve Sosnick notes the AI trade’s dependency on Nvidia’s continued success.

Expansion of the AI Trade

Sector Impact:

• AI mentions soared in earnings calls, with significant growth in sectors like Energy and Utilities.
• Dell shares rose about 10% due to bullish AI research from Morgan Stanley and Evercore ISI.

Strategist Views:

• JPMorgan’s Jack Manley highlights the importance of the AI story’s longevity for market stability.

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Dear Client,

Please note that the dividends of the following products will be adjusted accordingly. Index dividends will be executed separately through a balance statement directly to your trading account, and the comment will be in the following format “Div & Product Name & Net Volume ”.

Please refer to the table below for more details:

The above data is for reference only, please refer to the MT4/MT5 software for specific data.

If you’d like more information, please don’t hesitate to contact [email protected].

Dear Client,

Please note that the dividends of the following products will be adjusted accordingly. Index dividends will be executed separately through a balance statement directly to your trading account, and the comment will be in the following format “Div & Product Name & Net Volume ”.

Please refer to the table below for more details:

The above data is for reference only, please refer to the MT4/MT5 software for specific data.

If you’d like more information, please don’t hesitate to contact [email protected].

CURRENCIES

Overview: EUR/USD fails to sustain bullish momentum, GBP/USD pauses after breakout.

Introduction to Contrarian Trading:

• Herd mentality can dominate trading, but experienced traders often explore contrarian strategies.
• Contrarian trading involves recognizing when the majority sentiment may be incorrect and capitalizing on those opportunities.
• Tools like IG client sentiment can identify extreme optimism or pessimism, signaling potential market reversals.
• Contrarian signals are most effective when integrated with technical and fundamental analysis.

Gold Market Sentiment:

• 54.01% of IG clients are net-long on gold, with a buyer-to-seller ratio of 1.17 to 1.
• Increase in net-long traders: +8.22% since yesterday, +1.60% from last week.
• Decrease in bearish bets: -3.65% since yesterday, +2.22% from last week.
• Prevailing bullishness suggests a potential pullback, but mixed positioning trends create uncertainty.
• Key Takeaway: Combine contrarian signals with technical and fundamental analysis for comprehensive trading decisions.

Dow Jones 30 Market Sentiment:

• 75.94% of IG clients are betting on a decline in the Dow Jones 30, with a short-to-long ratio of 3.16 to 1.
• Increase in sellers: +9.59% since yesterday, +8.17% from last week.
• Decrease in bullish exposure: -6.93% since yesterday, -10.37% from last week.
• Overwhelming pessimism may indicate a near-term upside surprise.
• Key Takeaway: Use contrarian signals along with other analysis methods to make well-informed trading decisions regarding the Dow Jones.

USD/JPY Market Sentiment:

• IG data shows a heavy bearish sentiment on USD/JPY, with a short-to-long ratio of 2.37 to 1.
• Decrease in sellers: -0.85% since yesterday, -8.77% from last week.
• Increase in bullish positions: +9.28% since yesterday, -4.13% from last week.
• High bearish bets suggest potential upside, but recent easing of selling pressure introduces uncertainty.
• Key Takeaway: Mixed signals emphasize the need for a comprehensive trading strategy, incorporating sentiment data with price action and fundamental analysis.

STOCK MARKET

Overview:

• President Biden retains Trump’s China tariffs and introduces new levies.
• New tariffs aim to protect domestic industries, especially semiconductors and green energy.

Biden vs. Trump on Trade:

• Both leaders support protectionism but have different approaches and rationales.
• Biden focuses on tariffs for Chinese electric vehicles (EVs) and specific industries.
• Tariff on Chinese EVs raised to 100%, significantly increasing their cost in the US.

Impact on Chinese Imports:

• Tariffs apply only to products shipped directly from China.
• Loopholes exist, allowing Chinese companies to bypass tariffs by producing in other countries (e.g., Mexico, Canada).

Industry Concerns:

• US auto industry worried about Chinese automakers setting up in Mexico or Canada.
• Free trade agreements with these countries complicate direct tariff application.

Political and Legal Challenges:

• Biden and Trump have no clear solutions for the loophole issue.
• Trump’s proposed tariffs on Chinese cars made in Mexico might face legal hurdles.
• Executive action could be challenged in court, with potential long-term litigation.

Legislative Action:

• New laws might be needed to address loopholes, but Congress is not ready.
• Potential hearings and draft bills expected, but real legislative action likely post-election.

China’s Strategy:

• China subsidizes critical industries like EVs and green energy to compete globally.
• Chinese companies could leverage government support to offset tariff impacts.

Election Implications:

• Trade policy on China is a key issue in swing states with manufacturing bases.
• Both Biden and Trump aim to appear tougher on China to win voter support.

Key Takeaways:

• Expect ongoing protectionism regardless of election outcome.
• Addressing trade policy loopholes will be a significant challenge for either administration.
• Political and economic strategies will continue to evolve in response to global trade dynamics.

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Dear Client,

VT Markets value your trading experience and funds security. Effective on May 21, 2024, we are implementing Two-Factor Authentication (2FA) verification measures for Cryptocurrency addresses and E-wallet withdrawal methods.

Here’s the recommended 2FA software download link:

Microsoft Authenticator Download Link (iOS)

Google Authenticator Download Link (Android)

Search “Google Authenticator” on WeChat to download.

Important notice update:

To protect the security of your funds, when you apply changes to your personal information, your withdrawal function will be temporarily restricted as follows:

• Changing registered phone/email or 2FA: 48-hour withdrawal restriction

• Changing the personal account password/trading password: 24-hour withdrawal restriction

If your withdrawals are restricted due to the above reasons, please wait for the specified time before re-submitting your request.

Thank you for your patience and understanding about these important changes.  

If you have any questions, our team will be happy to answer them. Please send an email to [email protected] or contact our customer service online.

Dear valued clients:

VT Markets is committed to providing customers with a faster and more stable trading environment. We will upgrade our server from 02:00 -04:00 and 08:00 – 11:59 server time on May 18^th, 2024 (Saturday).

Please refer to the MT4/MT5 software for the specific update completion and trading opening time.

Please pay attention to the following matters:

1. During the maintenance period and before the opening of the market, the quotation servers will be stopped. You will not be able to open new positions, close, or adjust any existing positions.

2. There might be a gap between the maintenance period and before/after the trade opening time. Pending orders or stop loss/take profit which is within the gap range will be executed at the market price after the maintenance ends. We recommend you pay attention to your positions.

We hope you understand the inconvenience caused by this upgrade and maintenance, and we commit to providing you with better services.

If you have any questions, our team will be happy to answer them. Please send an email to [email protected] or contact online customer service.

Tesla tends to dominate the headlines in the EV market, but Chinese EV brands could potentially seize the crown.

After Tesla’s bumpy Q3 2023 earnings report, traders and investors are starting to scout around for alternatives in the EV market to park their money. Tesla expanded their revenue by a mere 9% YoY, while earnings per share finished at an underwhelming $0.66 (-37%).

Meanwhile, China players like BYD, NIO and XPeng have all been racking up significant delivery growth during Q3.

With these big boys in the rearview mirror, Tesla will soon lose grip on the Chinese EV market if it continues to fall asleep behind the wheel, pun intended.

Picture: Graph shows some of Tesla’s key rivals in China’s EV market

It’s been quite a showdown in the electric vehicle world lately. When Tesla dramatically slashed prices to attract more customers, other EV automakers quickly followed suit, plunging into a full-fledged price war.

Just a while back, the cheapest version of Tesla’s Model Y SUV was sitting at nearly $20,000 above the average price of a new car in the US. But fast forward to April…that price gap vanished into thin air.

What does the EV price war mean for the world today?

The dawn of EVs, traditional automakers exposed

Cheaper EVs mean more options—maybe even more people making the switch from fossil fuels to electric. Legacy automakers like Ford and Volkswagen are now struggling to keep up with Tesla’s price cuts so they don’t get left behind. They’re seen ramping up their EV production in the catchup phase.

A battery price war kicks off, lowering manufacturing costs

The main cost of an EV is its battery. The steep price of energy-dense batteries has kept EVs pricier than their fossil fuel counterparts.

But here’s the kicker: China’s leading the pack when it comes to lithium iron phosphate (LFP) batteries. These batteries are cheaper, as they have no cobalt. With the growing demand for lithium, CATL has spent  $1.4 billion to build lithium extraction plants in Bolivia, adding to a global rush to secure supplies of the battery material.
 
And that’s got consumers excited…it could mean more budget-friendly EVs are hitting the streets.

Mixed views on EV transition in the US Presidency

The effort to accelerate the US transition from gas powered automobile to EVs would largely depend on who’s the victor of the US election 2024.

Team Biden:
Biden’s strategy includes the boost of EVs with subsidies, new emission standards, infrastructure investments, and tax credits, calling it his big industrial and climate plan. He’s been touring assembly lines and battery plants, exploring the possibilities about creation of new jobs.

Team Trump:
Trump and his administration are painting a grim picture, especially in auto-centric Michigan, warning of job losses and touting EVs as too pricey, with infrastructure woes, and are not quite up to the same capabilities compared to their gas-powered peers.

Also: Are you obsessed with politics? Election years could be profitable for traders like you.

Why traders think Li Auto overtakes Tesla in the share market

Looking for an alternative to Tesla? Here’s one many are eyeing: Li Auto.

Despite some challenges when its Mega model tanked, Li Auto showcased impressive results when it released its August 2023 delivery update. The cumulative deliveries of vehicles in 2023 reached 208,165 as of the end of August, an increase of 663.8% Y/Y and 2.3% Q/Q, with monthly deliveries for each of the three Li L series models exceeding 10,000 vehicles. 

And Li Auto was just warming up… the EV automaker exceeded expectations when it released its unaudited Q3 2023 financial results in November, surpassing forecasts with over 105,000 EV sales and a 271% increase in revenue. These financial highlights and growth plans bolstered investor confidence in Li’s market positioning.

The consistent robust performance makes Li Auto an appealing alternative to Tesla for anyone looking to put their money in this exciting industry. For those confident in Li Auto’s trajectory and seeking to capitalise on its growth, CFD trading with leverage can be a powerful tool to enhance investment returns.

That’s why VT Markets’ share trading offers competitive spreads and provides leverage of up to 20:1, allowing traders to amplify their market exposure.

Picture: Li Auto share prices on the rise as seen on VT Markets app.

Should you put your money on Li Auto right now?

Before you do, it’s worth looking to see where Tesla is heading and speculate the market. There are still reasons to remain bullish on Tesla. Recently, Elon Musk made a surprise visit to China with plans to expand Full Self-Driving Technology.

CURRENCIES

GBP/USD:

• Current Sentiment: 56.68% of clients are bearish, with a short-to-long ratio of 1.31 to 1.
• Trend: Increase in net-short bets by 4.62% since yesterday and 33.04% from last week. Bullish bets decreased by 16.10% since yesterday and 36.14% from last week.
• Contrarian Insight: Predominantly bearish sentiment suggests potential for the exchange rate to rise in the near term.

EUR/USD:

• Current Sentiment: Short-to-long ratio at 1.85 to 1, with overwhelming bearish sentiment.
• Trend: Net short positions increased by 3.04% from the previous session and 21.13% from a week ago. Bullish bets decreased by 12.01% from yesterday and 33.13% from a week ago.
• Contrarian Insight: Heavy bearish positioning indicates a potential rise for EUR/USD.

NZD/USD:

• Current Sentiment: 52.92% of traders are net short, with a short-to-long ratio of 1.12 to 1.
• Trend: Net-short positions increased by 13.39% from yesterday and 19.25% from last week. Bullish bets decreased by 19.57% from yesterday and 26.14% from last week.
• Contrarian Insight: Net-short positioning suggests potential for NZD/USD to rise further.

STOCK MARKET

Key Points:

• Mystery Position: Berkshire’s stake in Chubb ends months of speculation about its undisclosed financial firm investment.
• Regulatory Filings: Berkshire disclosed the position reflecting its end-of-first-quarter holdings.
• Strategic Moves: Berkshire has been increasing its equity stakes in banks, insurance, and finance companies while reducing stakes in consumer products.
• Confidentiality: Berkshire’s confidentiality in amassing large positions is to avoid market disruption.

Market Sentiment:

• David Kass Commentary: Finance professor at the University of Maryland noted the importance of confidentiality for Buffett.
• Chubb’s Industry Role: Chubb is a major property-casualty insurer operating in 54 countries, covering various risks.

Berkshire’s Insurance Expertise:

• Core Business: Insurance is central to Berkshire’s operations, with other investments in companies like Geico and National Indemnity.
• Strategic Investments: Berkshire also holds stakes in Aon Plc and has invested in Marsh & McLennan Cos.

Recent Events:

• Baltimore Bridge Incident: Chubb insured the collapsed Francis Scott Key Bridge in Baltimore, with a $350 million payout expected.
• Berkshire’s Recent Moves: At the recent annual meeting, Berkshire revealed trimming its stake in Apple Inc. due to several challenges facing the tech giant.

Financial Performance:

• Cash Pile: Berkshire’s cash reached a record $189 billion at the end of March, projected to hit $200 billion by the end of this quarter.

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Dear Client,

Please note that the dividends of the following products will be adjusted accordingly. Index dividends will be executed separately through a balance statement directly to your trading account, and the comment will be in the following format “Div & Product Name & Net Volume ”.

Please refer to the table below for more details:

The above data is for reference only, please refer to the MT4/MT5 software for specific data.

If you’d like more information, please don’t hesitate to contact [email protected].

CURRENCIES

Upcoming Release

• The U.S. Bureau of Labor Statistics will release April’s consumer price index (CPI) data on Wednesday morning.
• This crucial economic report is closely tracked by market participants for its significance to the Federal Reserve’s monetary policy path.

Context

• Following Tuesday’s elevated producer price index (PPI) results, there’s a slight risk that inflation figures may also disappoint.
• This could undermine confidence in the disinflationary trend observed in late 2023, which seems to have stalled this year.

Consensus Estimates

• Headline CPI: Expected to rise 0.4% on a seasonally adjusted basis, reducing the annual rate slightly to 3.4% from 3.5%.
• Core CPI: Expected to increase by 0.3%, lowering the 12-month reading to 3.6% from 3.8% in March.

Market Implications

• Fed’s Stance: While the Fed has indicated it may wait longer to start dialing back policy restraint, it hasn’t fully committed to new hikes. An upside surprise in inflation data could lead to a more aggressive stance by the FOMC.
• Hot Inflation Numbers: If the inflation data exceeds expectations, it could signal that the recent series of robust CPI readings are part of a new trend of reaccelerating costs, affecting the Fed’s policy decisions.
• Impact on Rate Cut Bets: Higher-than-expected inflation could shift market bets away from a September rate cut, possibly delaying easing to December or beyond, and exerting upward pressure on yields and the US dollar, which would be bearish for gold prices.
• Benign Inflation Report: If inflation data is below Wall Street’s projections, it could lead to lower yields and a weaker US dollar, creating a positive environment for precious metals and reviving hopes of a Fed pivot to a looser stance in early fall.

STOCK MARKET

Upcoming Release

• On Wednesday, investors will review April’s Consumer Price Index (CPI) data, a key factor in the Federal Reserve’s upcoming interest rate decision.
• The inflation report is set for release at 8:30 a.m. ET.

Consensus Estimates

• Headline Inflation: Expected to be 3.4%, slightly down from March’s 3.5% annual gain.
• Monthly Increase: Consumer prices are expected to have risen 0.4% month-over-month, matching March’s increase.

Contributing Factors

• Energy Prices: Higher energy costs, driven by increased gas prices, are expected to contribute to a firmer headline CPI.
• Gasoline Prices: Expected to stabilize in May as geopolitical risks ease, potentially limiting further increases.

Core Inflation

• Annual Increase: Core CPI, excluding food and gas, is expected to have risen 3.6% over the past year, down from March’s 3.8%.
• Monthly Increase: Core prices are expected to have increased by 0.3% in April, compared to 0.4% in March.

Stubborn Core Inflation

• Elevated due to higher costs of shelter, insurance, and medical care.
• March saw significant increases in motor vehicle insurance (2.6%) and maintenance (1.6%), following February’s increases of 0.9% and 0.4%, respectively.

Economist Expectations

• Anticipate slower increases in motor vehicle insurance and maintenance prices in April.
• Expect disinflation trends to improve in rents and healthcare, with weaker car insurance inflation and cooling labor markets contributing to this trend.
• Predict a slight deceleration in healthcare costs, driven by lower health insurance prices.

Federal Reserve Considerations

• Inflation remains above the Fed’s 2% target, with a bumpy path anticipated to reach this goal.
• April’s hotter-than-expected producer prices indicate persistent inflation.

Fed’s Preferred Inflation Gauge

• The core PCE price index has remained steady, with a year-over-year change of 2.8% in March, matching February but slightly above expectations.

Rate Cut Predictions

• Investors expect one to two 25-basis-point cuts in 2024, down from six cuts anticipated earlier in the year.
• Federal Reserve officials suggest rate cuts may be limited this year unless inflation shows further signs of easing.

Market Expectations

• Morgan Stanley predicts three rate cuts in 2024, with the first in September, followed by cuts in November and December.
• As of Tuesday, markets were pricing in a roughly 49% chance of a rate cut at the Federal Reserve’s September meeting.

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