Welcome to another week of trading! In today’s article, we’re looking at the power of random events and how they can move markets. We’ll also let you know what totally-planned key events to look out for this week.
#1 The most expensive blockage Ever (Given)?
We’ve all experienced our fair share of traffic jams. But usually the only real impact is arriving late for lunch or missing the previews at the cinema. If the last couple of weeks taught us anything, it’s that traffic jams can have even worse consequences!
When Ever Given, a 200,000 ton freighter ran aground and got wedged in the Suez Canal a couple of weeks ago, it led to pandemonium. 369 ships were stuck in a tailback waiting to pass through the 193 km canal on either side of the blockage.
It wasn’t a cheap mistake, either. About 12% of global trade, around one million barrels of oil and roughly 8% of liquefied natural gas pass through the canal on a daily basis. Data has shown that the stranded ship was holding up an estimated $9.6bn of trade each day. That translates $6.7m a minute! Eek!
#2 I predict a (HK) riot!
Back in 2019, widespread rioting in Hong Kong plunged the city into chaos. Protests were initially sparked by proposed changes to a law that would have allowed extradition of citizens to mainland China. A little later, the issues broadened significantly, turning into anti-government demonstrations in almost every possible area of governance.
This continued event, combined with the uncertainty around the US-China Trade War, rather unsurprisingly, tanked the Hong Kong economy.
In May 2020, the Hang Seng tumbled after the Chinese government outlined plans to impose a national security law on the city. The index dropped 5.6 per cent on the 22nd of May, its worst single-day performance in nearly five years.
The economy and index only really started picking up at the back end of 2020.
#3 When Hershey lifted the LID on cocoa
At the end of 2020, at a time when many were tucking into some Xmas choccies, US confectionery giant The Hershey Company went to war with West African cocoa farmers.
The issue started in November, when cocoa traders spotted that an unnamed operator had purchased a massive amount of cocoa beans in the futures market. So much, in fact, that prices skyrocketed by more than 30 per cent. Cocoa-crazy!
Source: Trading Economics
The Coffee and Cocoa Council and the Ghana Cocoa Board (who control ca. 70% of the world’s cocoa beans) wasted no time in pointing the finger at Hershey, writing a letter stating:
“This is a clear squeeze on the ICE US Exchange and a clear indication of your intent to avoid the payment of the Living Income Differential — LID.”
LID is an agreement that requires chocolate companies to pay an extra $400 per tonne of cocoa beans to help alleviate the poverty that West African farmers face.
Hershey was trying to save money, to the detriment of their producers. The West African groups hit back stating that the US company would no longer be able to make the claim that their products are not made with beans harvested by children.
In December, Hershey backed down, stating that they would pay the LID as promised. It also refused to comment on the phantom beans that shook the markets the month before.
#4 All that glitters isn’t necessarily gold
Gold is a funny one. It’s finite nature and wide variety of use-cases has long made it the hedge of choice for many a seasoned trader.
Yet, in the middle of a pandemic, a time when you’d typically think traders would be pouring money into the yellow commodity, they’ve suddenly stopped.
Up until Q3 2020, things had been looking pretty shiny, with the price of gold steadily climbing almost 22 per cent. That’s completely tailed off now.
“Why is this happening?” You ask. For a few very important reasons, one of which is a drop in demand for jewellery.
Jewellery sales have been hit hard all over the world. In the first half of 2020, global demand for jewellery fell 46 per cent (YoY) to 572 tons.
So, the event that many thought would send gold to sparkly new highs, has in fact weakened it almost beyond recognition. What funny times we live in!
#5 Almost anything Elon says!
You can’t be too surprised about this one. Elon Musk has got his fingers in the pies lately, mainly via the medium of Twitter. Pledging his support for Bitcoin, Doge coin, throwing his weight behind the Gamestop fiasco and accidentally sending prices of an obscure technology component manufacturing company into orbit!
On the January 7, Musk tweeted the words “use signal”, referring to an encrypted messaging app, a potential alternative to WhatsApp.
Seeing this, hungry investors jumped on Signal Advance, a manufacturing company and very definitely the wrong Signal.
At its peak, the company’s stock jumped 6,350%!
What have we learned?
If these weird events have taught us anything it’s that fundamental analysis, news, random events, even celebrity endorsements on Twitter can all shake the markets.
The moral of the story? Keeping an eye on the latest news and trends is never a bad thing. It might even save your bacon!
What’s on the trading agenda this week?
Here’s everything you need to keep track of this week, it’s not going to be terribly busy — unless something weird happens!
Monday 5th April
No major events scheduled.
Tuesday 6th April
● AUD — RBA Interest Rate Decision
Wednesday 7th April
● CAD — Balance of Trade (FEB)
● USD — FOMC Minutes
Thursday 8th April
● EUR — ECB Monetary Policy Meeting Accounts
Friday 9th April
● CNY — Inflation Rate YoY (MAR)
● CAD — Employment Change (MAR) + Unemployment Rate (MAR)
Here at Contentworks we closely follow market movements and prep content that we think your traders would love to read. Let’s get you started right here.
The Contentworks team