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Market News 【TOP1 Evening】Dollar near two-month highs; Oil rises on unexpected draw in U.S. crude stocks

【TOP1 Evening】Dollar near two-month highs; Oil rises on unexpected draw in U.S. crude stocks

Morgan Stanley says emerging stocks may have already peaked; Silver attempts rebound even as retail sweep wanes; Euro hovers near two-month lows against dollar.

TOPONE Markets Analyst
2021-02-03
509

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Gold 


Silver prices attempted a rebound on Wednesday after an over 8% plunge in the previous session prompted some buying, although the social media-driven rally that started last week appears to have cooled off. 


Spot gold fell 0.09% to $1836.21 per ounce, silver rose 0.25% to $26.721 per ounce by 18:00 (GMT+8).


The United States Mint said on Tuesday it was unable to meet surging demand for its gold and silver bullion coins in 2020 and through January.   


U.S. Treasury Secretary Janet Yellen said on Tuesday new growth forecasts from the Congressional Budget Office showed the United States "desperately" needs Congress to act on President Joe Biden's coronavirus rescue package.  


While the silver market has seen unprecedented volatility in the last week, but Goldman retains its upbeat view on the precious metal. The bank sees prices rising as high as $33 an ounce if U.S. President Joe Biden's administration pushes aggressively into solar power.


Forex


The dollar traded near a two-month high versus the euro on Wednesday as investors looked to a widening disparity between the strength of the U.S. and Europe's pandemic recoveries.


The U.S. dollar index rose 0.17% to 91.20 by 18:00(GMT+8).


The greenback's advances come despite a rise in equities amid improving risk sentiment, defying the currency's historic inverse directional relationship with stocks.


However, many analysts expect the correlation to reassert itself as the year progresses, and for the dollar to decline as global growth recovers amid massive fiscal stimulus and ultra-easy monetary policy.


The euro traded near a 2-month low against the dollar on Wednesday, as investors looked to a widening disparity between the strength of U.S. and European pandemic recoveries.


The view was bolstered by moves in Washington toward fast-tracking more stimulus spending that contrasted with concerns about extended European lockdowns and expectations for a decline in euro zone growth this quarter.


"The relative growth dynamics between Europe -- weak -- and the U.S. -- better -- are favouring the USD at the moment, but it remains to be seen if this can be a longer-lasting theme," wrote National Australia Bank F.X. strategist Rodrigo Catril, who expects the euro to weaken below $1.20 in the near-term.


The U.S. currency was little changed at 105.025 yen after gaining to 105.17 overnight for the first time since Nov. 12.


Crude Oil


Oil prices rose on Wednesday after hitting their highest in about a year in the previous session, boosted by an unexpected draw in U.S. crude and gasoline stocks, fuelling demand recovery hopes as OPEC+ forecasts the market will be in deficit in 2021.


U.S. West Texas Intermediate (WTI) crude was at $55.070 barrel, rose 3.09%, Brent was down to $57.942 a barrel, rose 0.47% by 18:00(GMT+8).


Market sentiment was also bolstered by news that Democrats in the U.S. Congress took the first steps toward advancing President Joe Biden's proposed $1.9 trillion coronavirus aid plan without Republican support.


Stocks


Stocks in Asia-Pacific were higher on Wednesday trade.


Nikkei 225 rose 284.33 points or 1.00%, close at 28,646.50.


S&P/ASX 200 rose 62.00 points or 0.92% to close at 6,824.60.


Hang Seng Index rose 58.76 or 0.20% to 29,307.46.


South Korea's Kospi rose 32.87 points or 1.06% to 3,129.68.


Taiwan capitalization-weighted stock index rose 11.27 points, or 0.072%, at 15,771.32. 


GameStop stock has defied gravity in the past and it could again, but there are some signs its stock may be topping out, some strategists say.


GameStop was down sharply Monday, off more than 30% at $225.


GameStop has had a wild ride. It surged to an all time high of $483 last week but appeared to run out of steam Monday, falling well below its Friday close of $325.


After a surge to record highs in January, emerging-market stocks may have already peaked for the year, according to Morgan Stanley.


There are eight reasons why the MSCI Emerging Markets Index won't climb any further, analysts led by Jonathan Garner, the chief Asia emerging-market strategist based in Hong Kong, wrote in an 18-page report. The measure has overshot then fallen below the bank's previously-set year-end target of 1,330.


The arguments include falling copper prices, moderating balance sheets of Group-of-Four nations, peaking sentiment on reflation, tightening liquidity in China, a steadying U.S. dollar, stalling earnings revisions, "euphoric" fund inflows and the relative performance of Korean stocks.


Emerging-market stocks have overshot Morgan Stanley's estimate.


"If we are correct, the key to performance going forward is market, sector and stock selection," the strategists said. "On the market side, we are most bullish India currently, with a favourable budget further boosting the outlook."


Morgan Stanley's bearish warning comes after the MSCI Emerging Markets Index rose as much as 10% in January to a record. The runup came amid optimism that vaccine roll-outs and further U.S. stimulus coupled with a dovish Federal Reserve would create perfect conditions for developing-nation stocks to outperform in 2021.


Focus Tonight


23:00 (GMT+8): United States ISM Non-Manufacturing Business Activity (JAN), Forecast: 57.3; Previous: 59.4;


23:00 (GMT+8): United States EIA Cushing Crude Oil Stocks Change (29/JAN), Forecast: -9.91M, Previous: -2.281M


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