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Energy Shares, Crypto Buck Downtrends

Plus500 | Tuesday 30 August 2022

Volatility is continuing to shake markets from New York to Tokyo as we inch closer to the fourth quarter of 2022. While jitters emanating from the Federal Open Market Committee’s monetary policy trajectory after Chairman Powell’s hawkish statements last Friday may have contributed to the latest drops observed across major Indices, not all sectors have been affected to the same extent. Let’s take a closer look:

Energy and Crypto

Wall Street Continues Dropping

The past few trading sessions may have left an impression that was less than positive on those involved in the markets. Last Friday saw wide drops across major New York City Indices, while yesterday, shares across East Asia took a dip. Based on the final tally reached by the ring of the closing bell on Wall Street yesterday, it’s unsure whether the markets will recover quickly at all.

At the close of trading Monday, the S&P 500 was down almost 0.7%, while the Dow Jones Industrial Average (USA 30) and the tech-heavy Nasdaq (US-Tech 100) had dropped nearly 0.6% and over 1% respectively. Savvy analysts are even saying that the S&P 500 (USA 500) could dip below the low of just over 3,278 reached on June 16th. At the ring of the closing bell yesterday, this key Index had fallen below 4,035; if the drops seen in recent days continue and the S&P 500 drops below 3,900, the low levels reached in June could very well be repeated. Market watchers may want to keep an eye on this possibility for developments. (Source:Market Watch)

Oil Pumps Sector Shares

Shifts on the markets as a whole have boosted energy stocks in particular. As of the time of writing, since the close of last week, the price of petroleum has risen by over 4%, breaking its earlier downtrend and taking related shares with it on the ride.

Yesterday, a posse of major energy companies saw their share prices climb. Texas-based Oil and Natural Gas (NG) firm Diamondback Energy (FANG), jumped by just under 4%. Marathon Oil (MRO) rose by 2.4% over the course of the trading day, while ExxonMobil (XOM) saw an increase of 2.3% in stock price. 

The fossil fuel markets have been buffeted by sharp price drops and falls throughout 2022 as geopolitical tensions emanating from Eastern Europe as well as uncertainty regarding the near-term strength of major industrialised economies kept traders attempting to stay ahead of the curve. It’s as yet unclear whether Oil’s (CL) latest rally can be sustained, and thus whether shares in the sector will maintain their most recent gains.

Crypto Regains Its Shine?

Yesterday’s rises were not limited to traditional asset classes. The beleaguered digital coin sector saw significant drops last Friday, August 26th, tracking traditional Indices, with Bitcoin (BTCUSD) dropping 6.1% and Ethereum falling by just under 11%. However, this trend seems to have been at least partially reversed yesterday.

Much debate in financial analysis circles had revolved around how Cryptocurrencies, being relatively new, are most accurately classified. Coinbase (COIN), the United States’ largest Crypto exchange, is even under federal investigation for improper classification of digital currencies. Furthermore, it has not been unanimously established whether price trends in this relatively new sector track those of more venerable Indices or not.

Be that as it may, yesterday’s Crypto trends were distinct from those on the wider markets. Bitcoin jumped by 3.8%, and Ethereum (ETHUSD) by 8.8%. Despite these most recent gains, one analyst estimated that Cryptocurrencies as a whole have lost about two-thirds of their market capitalisation in the past nine months, even going so far as to compare these medium-term falls to those seen on traditional Indices in the past.

An additional factor that may have changed sentiment toward Ethereum in particular is the coin’s blockchain’s coming upgrade, known as ‘Merge’. This renovation will be focused mainly on making Ethereum more environmentally friendly. Following the ‘Merge’, expected in September, the amount of energy consumed by the Ethereum blockchain could be reduced to 1/2000th of its current level. The direct effects of this green transition are still opaque.

Stock markets and other market sectors have had to grapple with many value-depressing factors in recent months. The falls and drops observed over the course of recent trading sessions, while perhaps not fully understood, seem to presage that an era of stable value increases across the economy is still beyond the horizon. 

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