March 5-11, 2018

Issue#: 442/2017

Weekly Macro:

The Dollar Index retreated towards the 90 handle, while Treasury yields fell across the board. Gold and crude oil gained. Safe haven assets rose as investors sought refuge in the yen and gold amid fears that Donald Trump’s recent protectionist moves could spark a global trade war.

 

US Dollar:

  • The Dollar Index remained largely unchanged for the week ended last Friday, paring earlier gains towards the close of the week as trade war concerns drove the DXY below 90 on Friday.
  • As depicted in the chart, the long term trend remains to the downside; the trend channel continues to point towards a weakening USD, although in recent weeks, some consolidation can be seen between 88.50 and 91.
  • Further concerns of trade wars are likely to dent the appeal of the greenback. Though for the trend to resume, a break below 88.50 is essential.
  • To the upside, the DXY rising above 92.64 would signal a reversal of the 2017 downtrend.

 

Treasuries:

  • Treasuries gained across the curve Monday as US President Trump’s recent protectionist announcements were seen to have spurred flight to safe haven assets among investors.
  • On one hand, Fed Chairman Powell appears open to raising rates 4 times this year, more than the central bank currently projects. But Trump’s move to slap tariffs on steel and aluminium imports has stoked fears of trade retaliation and roiled global markets, spurring safe haven demand.
  • The benchmark 10yr Treasury yield slipped towards the 2.80% support Monday. To the upside, the important resistance lies around 3.05%. A breakout above it signals the breaking down of the long-term downtrend since the 1980’s.

 

Gold:

  • Gold bounced off its psychological $1,300/Oz support region Friday for the second time in a month, and continues to display resilience despite increasing odds of the Fed raising rates 4 times instead of the originally-predicted 3 times in 2018.
  • Gold’s shine has increased in recent days amid fears of a global trade war brewing, as well as uncertainty surrounding the outcome of elections in Italy which could spell new concerns for the Eurozone.
  • $1,375/Oz represents a 3-year high and gold’s next resistance. To the downside, below $1,300/Oz, the next support comes in the form of the precious metal’s 200-week average at $1,233/Oz.

 

Oil:

  • Oil gained Monday as geopolitical risk resurfaced, with a halt at Libya’s biggest crude field sparking speculation that supply will tighten and help reduce a global glut.
  • Futures gained about 0.6% to $61.62/bbl after a 3.6% decline last week.
  • Production is said to have been halted at the Sharara oil field, the largest in the North African nation, on Sunday after protests disrupted output at another of the OPEC member’s deposits last month.
  • Oil has been struggling to regain the highs of January as rising US output challenges efforts by OPEC and its allies to ease a supply glut. Surging production from Libya has also been a thorn for the oil market, with concern that further growth may take the country to a level that would test a pledge made to OPEC to help limit an oversupply.
  • Despite its recent weakness, crude oil’s trend persists to the upside. The key support remains at $58/bbl.

 

Upcoming Key Events:

  • The Chinese People’s Political Consultative Conference runs through March 15 and overlaps with the National People’s Congress meetings in Beijing, through March 20.
  • The Bank of Japan deputy governors’ confirmation hearings will be held Monday.
  • Reserve Bank of Australia monetary policy decision on Tuesday, with GDP data due Wednesday.
  • The European Central Bank isn’t expected to change policy on Thursday, but the Governing Council may discuss a change to pave the way for the end of quantitative easing.
  • Bank of Japan monetary policy decision and briefing on Friday.
  • US monthly payrolls data.

 

Weekly Thematic News:

 

Cyber Security:

As SEC officials debate stronger actions to require public companies to disclose preparations for cybersecurity risks and incidents, the pressure is on institutional investors to keep pushing, industry sources said.

The SEC voted unanimously on Feb. 21 to update its 2011 guidance for public companies that aimed to tell public companies how to disclose cybersecurity risks and procedures. SEC Chairman Jay Clayton said the update “will promote clearer and more robust disclosure by companies about cybersecurity risks and incidents, resulting in more complete information being available to investors”. The update added two topics: the importance of having cybersecurity policies and procedures in place, and bans on stock trading by board members and executives after a cybersecurity incident.

With cybersecurity becoming an increasingly important component of businesses, industry growth is expected to continue expanding at an exponential rate. Investors can choose to park some money in this growing trend by buying into the Cybersecurity US portfolio on iAdvisor, which has returned 28.8% from a year ago as of last Friday.

 

Water:

Water scarcity made worse by climate change is a growing issue worldwide, and no place knows that better than Cape Town, the South African city contending with the worst drought on record. According to Sisa Ntshona, CEO of South African Tourism, the city’s tools for reducing water consumption, though, could be used around the world to preserve limited resources.

He added that world class cities such as Los Angeles, Beijing and Sao Paulo, are going through the same thing and a lot of them have had to put in water restrictions. Currently the world is looking at Cape Town to build some form of a playbook to use in response to a water crisis.

Water scarcity is becoming an increasingly pressing problem for countries and is predicted to come under greater focus in the future. Investors can seek to profit from iAdvisor’s water-themed portfolio, which includes companies that derive revenues from activities like water distribution, water infrastructure and water purification. The portfolio has returned 12.8% over the past 12 months.

 

 

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