Two Up and Two Down in Global Industrial Action

Daily Analysis - 08/01/2018

Italy, Oligarchy, Oil and Drugs

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 The Italian stock index is up strongly both for fundamental and political reasons. Oil is strong at $61.61 and therefore so is the Rubble. Merck Sharpe & Dome, the pharmaceutical manufacturer is also strong reflecting a change in strategy by its giant competitor Pfizer.

S&P Milan Index up briskly


The Italian stock index in Milan is moving up quite smartly and is a fine trading opportunity. Not only for the short term but likely for the longer term as well. This is due in some measure to the upcoming election prospects in March. Italian politics are notoriously convoluted and inefficient. They are riddled with special interest and the electoral system itself is stacked against making changes and progress to protect vested interests. Looks like the model the US has adopted, but that’s another story. What could be buoying the markets is the prospect, the likelihood of which is anyone’s guess, but the possibility distinctly exists, that a change in this mish mash of vested interests and archaic rules may be in for a change. The leading party at the moment, the Five Star Movement, barely polling 30%, (no party ever wins anything close to a clear plurality in Italy at least since the days of Caesars Julius and Augustus.) Despite the obstacles to progress, the mere possibility of change, remote as it seems to be now, is a great encouragement to the Italian stock market and likely the greater EU as well. Let us not forget that the Italian economy is nonetheless the eighth largest in the world with a GDP of 1.82 trillion dollars right below India and right above Brazil. She is a heavyweight economy with EU wide influence. Watch for developments in this important country and her upcoming elections and watch her markets because carefully.

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Merck spikes on Pfizer withdrawal form Alzheimer and Parkinson’s research


Merck Sharpe & Dome one of the world’s largest and most sophisticated pharmaceutical developers is seeing a very sharp spike in its stock price today as a result of the decision by the Pfizer management over the weekend to withdraw from two avenues of research that Pfizer has decided they will no longer pursue. Early stage trials on their treatment for Alzheimer’s disease proved to have no efficacy on patients treated with the drug. Pfizer is also withdrawing from the Parkinson’s research that they jointly undertook with Glaxo SmithKline Wellcome and Johnson & Johnson. This decision has boosted Merck’s value due to its strong presence in the neuroscience and neuropharmacology space. Merck UP.

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Silver falling on technicals


Silver is falling today having reached a resistance level twice and failing to break through it. At press time the metal was selling for $17.14 per troy ounce and falling. The tactic to trade this technical movement is to watch for oscillation between the support and resistance levels. These are not carved in stone, but you can see them when you look at an hourly graph. All that means is that there are price levels above which, and below which the market has difficulty moving 17.30 on the top side and 17.13 on the bottom side roughly speaking. These situations occur because a preponderance of trading coalesces around these levels and the buying and selling keeps traders coming back to them. For example, if you bought an asset at a price thinking that it would go up and it falls, well as soon as the price gets within the range of the price you bought you will consider selling to cover the loss and exit the position. This selling causes the price to fall back down. This cyclicality is entirely psychological as traders like to recover their losses and are optimistic that trends will continue. The beauty for us as traders is that these phenomenon are easy to trade and usually profitable. You need to monitor the situation as they do not persist indefinitely. Nonetheless good opportunities to profit.

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USDRUB falling on strong oil price


The Russian economy and therefore its proxy the Rubble don’t have a lot going for them. Besides energy that is. Energy and armaments. Energy in the Russian economy is no trivial matter. It’s a huge business, nee monopoly. Huge and centrally controlled, not in true monopolist terms but in oligopolistic terms. Meaning that Czar Putin’s friends control the business from top to bottom. Let us not forget the trials of poor Mr. Khodorchovsky. It didn’t go well for him or his efforts. And so while there are virtually no products of Russian origin besides energy and armaments, that Russia produces, the economy is highly sensitive to the prices for its energy products. As the price remains high for oil so too does the Ruble strengthen. And hence our chart of the growing Ruble strength at the expense of the dollar. USDRUB Down.

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