Markets Slide on Profit Taking; Tech Concerns

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Markets slide on profit-taking
RBA more upbeat
Nikkei1 0.52% Dax -0.26%
UST 10Y 0.76
Oil $39
Gold $1897/oz
BTCUSD $10736/oz.

Asia and the EU
RBA unchanged

North America Open
No Data

Markets were mildly lower in morning European trade with tech-heavy Nasdaq hit the most on fears that some of the biggest companies in the industry may face greater regulatory scrutiny.

According to Bloomberg, “A House panel led by Democrats investigating competition in the technology sector is poised to propose sweeping reforms to block giants such as Inc. and Apple Inc. from both owning marketplaces and selling their own products on them, according to a critique of the recommendations by one Republican member of the subcommittee.

The critique and the panel’s report are still drafts and the contents of both could change. It’s not clear which members will endorse the report, whose release has been delayed because of last-minute information regarding Facebook Inc., CNBC reported earlier. The report was expected this week, but it’s been pushed back, according to a person familiar with the matter.”

The news knocked the sails out of the Nasdaq rally which rose by more than 1% yesterday as generally positive US ISM Non-Manufacturing numbers and loose monetary conditions continue to support investor sentiment despite the chaos in Washington DC.
The specter of tighter regulatory oversight could weigh heavily on tech leaden Nasdaq which full of monopolistic companies such as Amazon, Google, Facebook, and Apple. These leaders are not only the biggest, most influential companies on the index but are also responsible for the vast majority of stock market gains this year, so any threat to their profitability could affect not only the companies themselves but equities in general. For now, the actions of legislators are only exploratory, but if serious constraints are imposed on these companies including the possible breakup directives the buoyant sentiment of the past few months could quickly evaporate.

In FX meanwhile, the action was much slower. With currencies trading in tight 20 pip ranges. The only point of excitement was in the Aussie which briefly pierced the .7200 figure in the aftermath of the RBA announcement but then spent the rest of the Asian and European sessions giving up the gains. The RBA was mildly more optimistic with regard to its economic outlook noting that decline in growth not as bad as expected while the unemployment rate is likely to peak at a lower rate than earlier expected.

In North America today the calendar is barren and the profit-taking flows may accelerate given the worries over the tech landscape and the still very uncertain outlook on the President who is now in the White House but remains heavily medicated and under a 24 hour watch. With Nasdaq finding some resistance at the 11,500 level that will likely act as a key pivot point all day long.

Boris Schlossberg
Managing Director

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