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Asian Market Update – Friday: Asian tech shares gains on strong earnings from the US while euro takes a hit

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Nasdaq

The Big Question: Can good earnings justify the high valuations?

Major stock indexes in Asia traded higher on the last trading day of the week as strong earnings from US tech giants Google, Microsoft, and Amazon beat market expectations and rallied on Wall Street yesterday.

The gains in tech also contributed to gains in the overall S&P 500 Index, tacking on 0.1 percent to trade near its all-time-high from last week.

Meanwhile, the euro took a hit against most other major currencies as the European Central Bank announced that loose monetary policy will be coming to an end, although at a much slower pace than markets had expected. As a consequence, the euro had its biggest one-day drop against the dollar in 16 months.

In Japan, the Nikkei 225 surged 1.24 percent to 22,008 after midday, following the positive note from Wall Street the day before.

In China, the Shanghai Composite Index gained 0.3 percent to 3,419, while shares in Hong Kong’s Hang Seng Index tacked on 0.33 percent to 28,422.

South Korea’s Kospi Index rose 0.71 percent after midday, trading at 2,498.

As the only looser among the major stock markets in Asia-Pacific, Australia’s ASX 200 lost a slight 0.22 percent to 5,903 at the end of the trading day in Australia.

Main Market Movers – Mid-day Asian Trading Session

Indexes Value at Midday Daily Change
Japan- Nikkei 225 22,008 1.24%
China-Shanghai Composite Index 3,419 0.3%
South Korea-KOSPI 2,498 0.71%
Hong Kong –Hang Seng 28,422 0.33%
Australia-ASX 200 5,903 -0.22%

Cryptocurrencies

Prices of the main cryptocurrencies were not much changed Friday morning in the Asian trading session with only minor changes seen in bitcoin, litecoin, and ethereum.

At midday in Asia, bitcoin was down by a slight 0.85 percent to $5,825, following gains on Wednesday and Thursday.

Ethereum traded on a positive note Friday morning, gaining a slight 0.85 percent to just below the $300 level. Ethereum briefly traded above $300 on Tuesday, but has since fallen back and consolidated just below that level.

Currencies

The Japanese yen lost 0.14 percent against the US dollar at midday Friday, trading at 114.80 per dollar.

The Chinese yuan lost 0.27 percent against the US dollar, trading at 6.6546 per dollar.

The Australian dollar lost 0.24 percent on the dollar, changing hands at 1.389 per dollar at the end of the trading day in Australia. The Aussie dollar has now been stuck in a strong downtrend against the US dollar since Monday this week.

Commodities

WTI Oil was down 0.23 percent to $52.56 per barrel.

Brent Crude lost 0.32 percent to $59.25 per barrel.

Gold lost 0.09 percent to $1,265 an ounce

Business News across Asia

In Singapore, media is reporting that Asia now has more billionaires than the United States. According to a report from UBS, Asia now has a total of 637 billionaires, while the US has 563. China, unsurprisingly, led the growth in the number of billionaires with an increase of 27 percent from last year. Singapore came in second with an increase of 24 percent from the year before.

People familiar with Singapore will probably guess that the large increase is mostly due to immigration of high net-worth individuals, largely from Mainland China, meaning that China is by far the top producer of new billionaires in the world.

Featured image from Wikimedia Commons.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.3 stars on average, based on 37 rated postsFredrik Vold is an entrepreneur, financial writer, and technical analysis enthusiast. He has been working and traveling in Asia for several years, and is currently based out of Beijing, China. He closely follows stocks, forex and cryptocurrencies, and is always looking for the next great alternative investment opportunity.




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Market Overview

Cautiously Flying

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Hi Everyone,

It’s only Monday and already it seems to be one of the most exciting weeks of the year for the financial markets. Asian stocks are flying this morning (the reason for this below) despite some clear signs that investors are still cautious.

One of these signs is the price of gold, which has spiked during the sell-off two weeks ago (purple circle) but is now showing signs that it may be ready to stretch higher (yellow rising support line).

The fact that gold is trading near its highs is not necessarily any indication in and of itself. The upcoming Diwali Festival in India is traditionally a time when gold prices tend to rise.

As we’ll see below, investors are still happy to pour money into this market but they are doing so very carefully right now.

@MatiGreenspan
eToro, Senior Market Analyst

Today’s Highlights

  • Chinese Support
  • Mark’s Market
  • Even more stable crypto

Please note: All data, figures & graphs are valid as of October 22nd. All trading carries risk. Only risk capital you can afford to lose.

Traditional Markets

As we mentioned above, Chinese stocks are flying. The China 50 index is up an astonishing 5.3% as of this writing. This is largely due to strong support from President Xi Xinping…

We’ve seen these type of stunts before from President Trump but this behaviour does seem to be new for the Chinese leader.

The timing is impeccable here too. As we’ve been watching, the Chinese stock markets have been on the ropes after retreating more than 30% since the year’s highs. However, the Xi’s gambit may have fallen short of the mark.

As we can see below, the red line being defended on the China50 is just above 10,500 points. Whereas, to break out of the current range to the upside we’d need to see levels above 12,000.

Cautious Like an Oak Tree

For legendary investor Howard Marks, the markets are not so binary. The co-founder of Oaktree Capital does see the current markets as expensive but adds that this doesn’t mean we’re about to see a crash. The economy is doing well and therefore it pays to be in the market, but defensively.

We all know that markets are cyclical. They go through bull times and bear. However, not every rise is a bubble and not every decline is a crash. In fact, most market moves are a lot more moderate.

Marks’ theories are always fascinating even if they sometimes differ from my own, especially when it comes to bitcoin. I’ve been enjoying his email alerts for a while now, but this interview on Bloomberg opened my eyes in a new way.

Crypto Markets

Crypto markets remain steady and are showing even more signs of stability. Tether seems to have regained most of its composure and is now trading within 2 cents of the $1 mark, right where it should be.

In the meantime, volumes on other stable coins have stepped up to further stabilize the market. In this graph from theblockcrypto.com we can see USDT’s dominance of the stablecoin market dropping sharply since the incident on October 15th.

As we see more stable coins join the market, the safer the market will become. According to CCN there are more than 50 active stablecoins at the moment with more coming out all the time. At the moment, it seems that the one eating into Tether’s market share is Paxos, which is both regulated and rising quickly in volumes.

Wishing you an amazing week ahead!

This content is provided for information and educational purposes only and should not be considered to be investment advice or recommendation.

The outlook presented is a personal opinion of the analyst and does not represent an official position of eToro.

Past performance is not an indication of future results. All trading involves risk; only risk capital you are prepared to lose.

Cryptocurrencies can widely fluctuate in prices and are not appropriate for all investors. Trading cryptocurrencies is not supervised by any EU regulatory framework.

Best regards,
Mati Greenspan
Senior Market Analyst

Connect with me on….

eToro: @MatiGreenspan | Twitter: @MatiGreenspan | LinkedIn: MatiGreenspan | Facebook:MatiGreenspan

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 133 rated postsSenior Market Analyst at Etoro.com.




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Analysis

Pre-Market Analysis And Chartbook: Chinese Stocks Extend Rally

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Monday Market Snapshot

Asset Current Value Daily Change
S&P 500 2,773 0.22
DAX 30 11,629 0.65%
WTI Crude Oil 69.42 0.07%
GOLD 1,226 -0.28%
Bitcoin 6,406 -0.10%
EUR/USD 1.1513 0.01%

Global stock markets started out the week on a positive note, with Chinese equities surging higher, extending their late-day gains from Friday. European and US indices are not that enthusiastic though, and from a technical standpoint, today’s early rally didn’t change anything yet, with the declining trends in the majority of risk assets being intact. With the economic calendar being empty today, technicals, the EU-Italy debate, and the Khashoggi-assassination will likely be in focus.

Shanghai Composite Index CFD, 4-Hour Chart Analysis

The Shanghai Composite gained the most in two days in over 2 years, with the active help of PBOC, and the benchmark is now testing the previous support that held up Chinese stocks during the bear market. The index broke above one declining trendline and that could open up the way for a larger correction, even if the broader trend is still clearly bearish. The 2700 level could be in the center of attention this week, especially if global markets can also rally following two weeks of turmoil.

S&P 500 Futures, 4-Hour Chart Analysis

US stock futures are broadly higher in European trading, but the momentum of the move is very weak, and the gains of the Asian session are already eroding. From a technical standpoint, the short-term picture is clearly bearish and the charts suggest a test of the lows this week, especially as small-caps continue to underperform and market internals are negative.

Treasury yields are unchanged so far, as Italian assets are up today, and safe haven flows slightly reversed in early trading. The short-end of the yield curve is still very close to its recent highs, and with the European Central Bank’s rate decision on tap this week, we expect further fireworks in bonds, and in turn equities.

Currencies Already Active as Emerging Markets Still in Trouble

EEM (Emerging Markets ETF), 4-Hour Chart Analysis

While the Chinese rally helped equities across the board, other emerging markets lagged on Friday, and despite today’s bounce their technical position still suggests troubles ahead. The EEM ETF is set to open well below the break-out level near 41, and with that, the segment is among the weakest parts of the global market. While the most vulnerable currencies are still performing very well, stocks are seemingly sinking into a grueling bear market.

Elsewhere in currencies, we already saw relatively large moves to start the week, as the EUR/USD rallied up to 1.1550 thanks to the optimism regarding the Italian budget. The most traded pair already sunk back in the red, and the Dollar is higher against most of its peers, reversing some of Friday’s pullback. The Japanese Yen is the weakest so far, due to the Asian risk-on shift, and gold is also lower today as safe-haven assets are struggling.

Copper Futures, 4-Hour Chart Analysis

Besides gold, the key commodities are higher thanks to the Chinese rally, but both crude oil and copper are still below key resistance levels, as technicals are unchanged, so far today. The WTI crude contract is trading below the $70 per barrel level, while copper advanced up to the declining trendline of the consolidation pattern that has been dominating trading in the metal for almost a month.

ChartBook

Major Stock Indices

Nasdaq 100 Futures, 4-Hour Chart Analysis

Dow 30 Futures, 4-Hour Chart Analysis

VIX (US Volatility Index), 4-Hour Chart Analysis

DAX 30 Index CFD, 4-Hour Chart Analysis

FTSE 100 Index CFD, 4-Hour Chart Analysis

EuroStoxx50 Index CFD, 4-Hour Chart Analysis

Nikkei 225 Futures, 4-Hour Chart Analysis

Forex

EUR/USD, 4-Hour Chart Analysis

USD/JPY, 4-Hour Chart Analysis

GBP/USD, 4-Hour Chart Analysis

EUR/GBP, 4-Hour Chart Analysis

AUD/USD, 4-Hour Chart Analysis

Commodities

WTI Crude Oil, 4-Hour Chart Analysis

Gold Futures, 4-Hour Chart Analysis

Featured image from Shutterstock

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 380 rated postsTrader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.




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Analysis

5 Things To Watch Next Week

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An Italian Budget Deal?

EuroStoxx50 Index CFD, 4-Hour Chart Analysis

Outside the European Union, the ongoing debate regarding the Italian budget might be quite perplexing, especially given the strong reaction by financial markets. While the relatively small budget deficit of the country is really violating the rules of the Eurozone, we have seen much larger deviations from the fiscal rules without meaningful consequences.

That said, the sorry state of the Italian financial system, the stealth capital flight from the country, and the structural imbalances of the ECB’s bond purchasing program validate the scrutiny of the EU. Some analysts say that the Italian banking system is outright insolvent, but in any case, deep structural reforms would be necessary, and the real issue behind the debate is the populist anti-EU rhetoric of the new government. With that mind, even if the two sides reach a deal on the budget, which could lead to a strong relief rally in Europe, Italy will likely cause further severe headaches down the road.

Trillions in Market Cap Reporting

Nasdaq 100 Futures, 4-Hour Chart Analysis

The US earnings season is entering its crucial phase, with next week being one of the busiest in this quarter. The Nasdaq will be in the focus throughout the week, but the sheer size of the tech giants reporting means that the whole market could experience wild swings.

The three largest companies Microsoft (MSFT), Amazon (AMZN), and Google parent Alphabet (GOOG), alone represent more than $2 trillion in market value, and Intel (INTC), Verizon (VZ), AT&T (T), Visa (V) are also very important for the US and the global economy.

So far, the quarter surpassed expectations, and should the string of earnings beats continue, it could provide stability to the shaky stock markets. Besides the largest firms, we will keep a close eye on anything China-related, to get authentic information on the real state of the country’s economy.

The European Central Bank Behind the Curve, as Usual…

EUR/USD, 4-Hour Chart Analysis

As global economic growth is clearly slowing, and the Italian worries already caused a widening in the yield spreads between the core and the periphery in the Eurozone, the ECB seems to be way behind the curve with its monetary policies.

Although the tightening the schedule of ECB is very gradual, we could still get a hawkish surprise next week, and that could enter the hall of fame among the disastrous decisions by the central bank. The ECB managed to hike rates in the middle of financial crises before (the summers of 2008 and 2011), and although the Euro’s weakness and the Fed’s tightening steps could give the impression that there is room for a hawkish shift, the macro backdrop suggests otherwise. Look for a strong bounce in the Euro and further weakness in equities, should Draghi & Co. confirm our suspicions.

Will the Chinese Bounce Last?

Shanghai Composite Index CFD, 4-Hour Chart Analysis

2018 for Chinese stocks has been nothing short of disastrous, with the key benchmarks entering deep bear markets, fading all rally attempts so far. With the largest credit bubble in history threatening the country’s financial system, and with Chinese growth being more important than ever for the global economy, what happens in the coming months could be crucial for all investors.

On Friday, one of the lowest (official) GDP prints came out from China, while auto sales also dropped for the first time in decades, suggesting that the stock market could be correct in pricing a hard landing. While the verbal and other forms of intervention lifted stocks before the weekend, should another rally attempt fail, the bear market could enter an accelerating, mainstream phase.

US Midterms Drawing Closer

The Chinese problems are likely not caused, but definitely amplified by the ongoing trade spat with the US, and before the midterm elections in three weeks time, it’s unlikely that we will see easing in the conflict. According to polls and prediction markets, the GOP will likely keep the Senate majority. While the Democrats are still expected to take the House, the Republicans and Trump seem to have the momentum.

As stocks usual suffer in times of political uncertainty, risk assets would likely be better of, at least short-term if the current trends would continue, as A blue House + Senate combination could mean two very stormy years in Washington.

ChartBook

Major Stock Indices

S&P 500 Futures, 4-Hour Chart Analysis

Dow 30 Futures, 4-Hour Chart Analysis

VIX (US Volatility Index), 4-Hour Chart Analysis

DAX 30 Index CFD, 4-Hour Chart Analysis

FTSE 100 Index CFD, 4-Hour Chart Analysis

Nikkei 225 Futures, 4-Hour Chart Analysis

EEM (Emerging Markets ETF), 4-Hour Chart Analysis

Forex

USD/JPY, 4-Hour Chart Analysis

GBP/USD, 4-Hour Chart Analysis

EUR/GBP, 4-Hour Chart Analysis

AUD/USD, 4-Hour Chart Analysis

Commodities

WTI Crude Oil, 4-Hour Chart Analysis

Gold Futures, 4-Hour Chart Analysis

Copper Futures, 4-Hour Chart Analysis

Featured image from Shutterstock

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 380 rated postsTrader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.




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Hacked.com and its team members have pledged to reject any form of advertisement or sponsorships from 3rd parties. We will always be neutral and we strive towards a fully unbiased view on all topics. Whenever an author has a conflicting interest, that should be clearly stated in the post itself with a disclaimer. If you suspect that one of our team members are biased, please notify me immediately at jonas.borchgrevink(at)hacked.com.

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