Category: Industry

The benchmark of all equity indices – the SP500 index – traded above 4,500 USD on Monday evening, trying to defend its short-term uptrend.

Rising Yields Still Not Causing Concerns 

Investors continue to ignore rising yields, along with the Federal Reserve's (Fed) aggressiveness in tightening monetary policy. 

US yields continued to increase sharply on Monday, pushing the 2-year yield 6% up, hitting the 2.4% threshold and the highest level since June 2019. Traders are now pricing in a 50 bps rate hike at the Fed's next meeting, while another 50 bps rate increase could follow afterward. Nevertheless, equities have performed well in this environment.

In other news, Russian Foreign Minister Sergey Lavrov said on Monday, "any meeting between Putin and Zelenskyy to exchange views now would be counter-productive."

 Meanwhile, Ukraine's President Volodymyr Zelenskyy has said that Ukraine is to insist on sovereignty and territorial integrity at the next round of talks with Russia in Turkey.

However, it looks like global markets have stopped caring about Ukraine as, for now, it remains a local conflict in a not-so economically important country. So far, the only outcome has been even more inflation, driving bond yields sharply higher. 

Daily Chart Appears Optimistic

"Whilst volume remains light to suggest this is still a rally within a broader range, we continue to see scope for a move above here to test the February highs at 4590/95, but we would expect a fresh cap here. Should strength directly extend though, we would look for a move to next resistance at the 78.6% retracement and price resistance at 4663/68." Analysts at Credit Suisse said on Monday.

Still, as long as the index trades above its 200-day average near 4,490 USD, the medium-term does indeed look bullish.

On the other hand, failure to stay above the mentioned average could lead to a more significant correction, targeting 4,400 USD. The next major support could be at 4,275 USD, followed by the current cycle lows at 4,145 USD.

The European Securities and Markets Authority (ESMA), the EU’s securities markets’ regulator, has published a statement addressed to providers marketing, distributing or selling contracts for difference (CFDs) to retail clients. The statement is in response to various practices and situations observed in the market, which raise concerns of non-compliance with the legal requirements applicable when providing services to retail clients.

ESMA still has serious concerns about firms’ marketing, distribution or sale of CFDs to retail clients and considers it necessary to remind CFD providers about some of the requirements connected with the offering of CFDs. ESMA has identified undesirable practices related to: Professional clients on request; and Marketing, distribution or sale by third-country CFD-Providers.

Steven Maijoor, Chair, said: “ESMA has acted in response to the significant investor protection concerns raised by the offer of CFDs to retail clients and adopted its own product intervention measures in 2018. To date, many NCAs across the EU have adopted similar measures but on a permanent basis. Ensuring investors are protected necessitates that all CFD providers respect all applicable requirements and do not circumvent them using professional client status or third country entities.”

ESMA clarifies in its statement that in the absence of authorisation or registration in the EU in accordance with MiFIR or with the national third-country regimes in force in various Member States, third-country firms are only allowed to provide services to clients in the Union at the client's own exclusive initiative.

Firms must ensure that they are compliant with all applicable legislative requirements and with the relevant product intervention decisions, taking into consideration clarifications provided in relevant Q&As and the content of this statement. ESMA and NCAs will continue to monitor compliance of CFD providers with the product intervention decisions.

Consob introduced in Italy on a permanent basis - pursuant to Article 42 of the EU Regulation on financial instruments markets (MiFIR) and of art. 7-bis of the Consolidated Law on Finance - intervention measures to protect retail investors similar to those already adopted by the ESMA, the European Authority for Financial Instruments and Markets, concerning the offer of binary options and contracts for difference (CFD ).

The measures include: the ban on the marketing, distribution or sale, in Italy or from Italy, of binary options to retail investors; certain limitations concerning the marketing, distribution or sale, in Italy or Italy, of CFDs to retail investors: the setting of leverage limits on the opening of positions; automatic closing when the margin is reached based on the account; protection from negative balance based on the account; the failure to pay incentives by a CFD provider; a warning on the specific risks of the investment, to be prepared according to a standardized format.

The adoption of the measures follows the confirmation of the existence of significant fears for the protection of retail investors in CFDs and binary options. This is due to the complexity and lack of transparency of these products, their peculiar characteristics - which entail, inter alia, disparity between expected return and risk of loss - as well as the methods with which they are marketed and distributed.

The intervention measures will come into force the day after their publication in the Official Journal and will apply, for binary options, from 2 July 2019 and, in relation to CFDs, from 1 August 2019, until their eventual revocation.

ASIC has released a report on the Wholesale FX practices in Australia, summarising its work in wholesale foreign exchange (FX) markets during 2018 and 2019. The report highlights the observations of better practices and some poor practices used by participants operating in the market.

This work included various onsite and thematic reviews of participants, as well as monitoring ANZ Banking Group, Citigroup, Commonwealth Bank of Australia, Deutsche Bank, Goldman Sachs, HSBC, JP Morgan, Macquarie, National Australia Bank, Royal Bank of Canada, UBS, Westpac Banking Corporation compliance with the requirements under their respective FX Court Enforceable Undertakings.

The report provides ASIC's observations in the areas of: governance and supervision, FX mark-ups, last look, handling confidential client order information, surveillance and monitoring, staff training on conduct risk, staff personal training. Participants should review these observations and practices and consider how the better practices may be applied in their own FX businesses to enhance their approach to managing conduct risk.

FX is a key global market and is of systemic importance to the Australian economy. To function effectively, the FX market relies on participants to act with integrity and fairness. As of April 2019, total global FX volume was around USD6.6 trillion per day, and the Australian dollar is the fifth most traded currency in the world.

ASIC Commissioner Cathie Armour said, "As a market and conduct regulator, ASIC has been enhancing our oversight of FICC markets, and has been very active in our surveillance and enforcement of conduct in the FX market. We are pleased to see widespread adoption of the FX Global Code but there are still areas for improvement."

You may check the list of the ASIC-Regulated Brokers.

The Australian Securities & Investments Commission (ASIC) has just announced the imposition of a six-year ban on David Stephen Cornford, a former adviser at Kaz Capital Pty Ltd. Mr. Cornford was employed as an adviser at Kaz Capital Pty Ltd between 2014 and 2017.

The Australian regulator is concerned that Mr Cornford bought and sold listed securities on clients’ accounts without the authorisation to do so; and traded Contracts for Difference (CFDs) in a personal capacity, in a manner that conflicted with the interests of his clients.

ASIC found that Mr Cornford had taken part in transactions that had, or were likely to have, the effect of creating or maintaining an artificial price for trading in shares; and did acts that had, or were likely to have, the effect of creating, or causing the creation of, a false or misleading appearance with respect to the market for, or the price for trading in, shares. He had also provided  a financial service when the Australian financial services licence of Kaz Capital, where Mr Cornford was employed at the time, did not cover the provision of the service.

On 16 January 2019, ASIC imposed licence conditions on Kaz Capital following concerns about the adequacy and effectiveness of its compliance framework. The conditions require Kaz Capital to appoint an independent expert to review the effectiveness of its implementation of recommendations for remediation made by another external consultant. The independent expert will report to both ASIC and Kaz in June 2019.

Friday's ultimate crash brought the West Texas Intermediate (WTI) benchmark from 78 USD to 68 USD as panic selling hit the markets, following news that a new COVID variant has emerged in South Africa. Stocks plunged, yields cratered, and oil collapsed.

Monday saw some dip buying in most of the assets as US equities erased most of their losses, but oil failed to stage a strong rally. 

Bulls cheered after President Biden said that the US wouldn't need shutdowns or lockdowns this winter.  Biden went on to say that "vaccines are the reason why lockdowns are off the table," but added that he "encourages people to wear masks when indoors with crowds."

From the bearish news for oil, Russia's Deputy Prime Minister Alexander Novak said the country is ready to raise production to pre-pandemic levels. If everything goes according to the OPEC+ plan, Russia will reach the pre-pandemic levels in May. 

Additionally, many EU countries are in a lockdown or introducing tight restrictions, slowing demand for oil. Alternatively, winter is coming and it’s expected to be harsh, boosting energy prices worldwide.

The US dollar is also getting stronger every week, halting the uptrend in several commodities. In addition, investors expect the Federal Reserve (Fed) to hike rates two times in 2022, possibly keeping precious metals and oil under pressure.

Technical Analysis is Not so Bullish Anymore

Oil plunged below the psychological level of 70 USD, where the 200-day moving average is also located. However, Monday's rally has brought the price above 71 USD, changing the short-term outlook to bullish as long as the 70 USD is held.

Nevertheless, the technical damage has been done, and many stop losses were destroyed in Friday's crash. The daily and small time frame charts now look severely oversold, possibly leading to another rally.

The next target for bulls will likely be in the 74 - 75 USD area, where previous highs and lows are converged. However, oil needs to climb above 80 USD for the medium-term uptrend to become active again.

Alternatively, the critical support is seen at 70 USD, and if oil breaks below it again, we could see another leg lower, targeting August lows at 62.50 USD.

The UK's Financial Conduct Authority (FCA) and the Bank of England’s Prudential Regulation Authority (PRA) have fined the former Barclay’s chief over lack of supervision of whistleblowing. The fine included a 30 percent discount for Staley agreeing at an early stage to settle. The UK regulators have also reported about specific requirements regarding whistleblowing systems and controls at Barclays.

Barclays is a transatlantic consumer, corporate and investment bank offering products and services across personal, corporate and investment banking, credit cards and wealth management, with a strong presence in our two home markets of the UK and the US.

Back in June 2016, the members of the Bank Board and a senior executive received anonymous letters that raised concerns about a senior employee who had been recruited by Barclays earlier that year. In the letters, the whistleblower included some claims against Mr. Stanley.

Mr. Stanley was aware about the letters and should have maintained a distance from the issue as it wasn't appropriate for him to make any moves in trying to identify the sender of the letters. Instead, in July 2016, he finally made an attempt to identify the whistleblower and exposed himself to regulatory action.

The investigation conducted by the UK FCA and PRA states that Stanley had a conflict of interest to the whole case. Regulators said the fine was only 10 percent of his annual pay package. Also the regulators stated that Mr. Stanley was unfit for his role, because of attempting twice to identify the whistleblower.