Risk-off returns for stocks as GBP recovers from BoE slide

Summary:

• Sizable selling seen in US and European stock markets

• Soft German data and dismal Italian GDP forecasts weigh on sentiment

• DE30: Bayer announces refunds to European farmers

• Pound recovers as Carney upbeat despite downward GDP revisions

• Mobile browser allos Scandinavians to buy cryptos

It’s been a pretty big down day for stocks with European markets getting off on the wrong foot and dragging the US down with them. A spike in the Volatility Index providing a warning that we could be in for an eventful day’s trade and on the European close all major US indices are firmly in the red and at their lowest levels of the week. The losses range from 1.1% for the US30 which is holding up the best to the USFANG which is lower by 3.30% on the day.

In Europe on the whole the losses have been larger, but that may be due to their cash session just ending while the US still have over half to still go. Soft economic data on the continent is the most likely cause of the declines with poor readings from both Germany and Italy. First off, industrial production fell by 0.4% M/M vs an expected +0.8% and it is now 3 consecutive monthly declines for this metric. The German chambers of Industry and Commerce (DIHK) also delivered bad news, cutting GDP growth forecasts for the year to just 0.9% from 1.7% previously. The European Commission cut its GDP projection for the euro area to 1.3% from 1.9% for 2019. Italy was affected the most by the new winter forecasts. The EC sees the Italian economy growing barely 0.2% this year, down from 1.2% expected recently.

In company specific news, Bayer (BAYN.DE) announced that it will be recalling from the market rapeseed seeds it produces in Argentina and markets in Europe. This is due to the fact that the French and German authorities found minor quantities of GMO seeds in seed packs sold by Bayer. However, some of those seeds were already planted and as the French law prohibits farmers from cultivating modified food growers had to dug them up. Bayer said that it will refund each farmer with €2000 per hectare of fields he had to dug up. Apart from that, the German company will investigate how seeds became contaminated in the Argentinian GMO-free production facility.

It’s been a bit of a rollercoaster day for the pound and those who are trading it, with sterling first falling to its lowest level in almost 3 weeks and below the 1.29 level against the US dollar before staging a pretty impressive recovery. The reason for this see-saw kind of price action is largely down to the Bank of England who announced at midday that they would keep interest rates unchanged at 0.75% as was widely expected and the initial move lower in the pound came as the bank revised down their economic outlook which now forecasts just 1.2% GDP growth this year - down from 1.7% as recently as November and this pace represents the slowest growth since 2009. The market reaction was actually reminiscent of that seen last month after May’s Brexit deal was rejected, with an immediate sell-off ultimately providing a nice buying opportunity in a kind of sell-the-rumour-buy-the fact trade and since then there’s been a good move higher, aided by a surprisingly upbeat press conference from Governor Carney, and at the time of writing, Sterling is higher on the day against all its peers.

Wednesday’s trading brought some noticeable losses for the cryptocurrency market. However, cryptocurrencies have managed to recoup a part of these drops during Thursday’s trading. According to CoinMarketCap, the capitalization of cryptos stands a little above the $112 billion handle while the capitalization of altcoins sits around the $52.5 billion mark. While we have not come across more interesting crypto-related stories today, one of them seems to be worth looking at. Namely, Opera launched a possibility of buying cryptocurrencies via its mobile Android browser in some countries, as the company announced on Wednesday. Opera started to allow its users to buy Ethereum directly via its browser wallet. To provide such service, the company has partnered with Safello which is crypto exchange regulated by the Swedish Financial Supervisory Authority. “Safello reduces the process of buying cryptocurrency from hours, or even days, to less than a minute”, as the announcement reports. Now only users in Sweden, Norway, and Denmark could buy cryptocurrency using this solution. Let us recall that Opera launched a built-in crypto wallet within its browser in December.