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Asian Market Update – Friday: Cryptocurrencies retreat; Asian stocks muted

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Morning after

The Big Question: Is the party over for bitcoin?

Cryptocurrencies seem to have taken a pause on Friday after a historic bull run that pushed prices of the main coins through the roof. As of midday in Asia on Friday, prices of bitcoin, ethereum and litecoin were all in red, though only slightly, and well below earlier record highs.

Bitcoin lost 2.10 percent to about $9,695 at midday, well below the recent record high of about $11,264 reached late last night. Bitcoin has been trading down sharply since early this morning, falling to as low as $9,422, before regaining some ground.

Ethereum trimmed off 0.69 percent to $431 by midday. The coin dropped sharply overnight, falling from a record high of $518 on Wednesday to as low as $412 this morning. Ethereum now appears to have found some support above the $430 level.

Litecoin was down 0.79 percent to $85.14 at midday in Asian trading. The coin has been in a steep downtrend since Wednesday night, when it reached a record high of $103. However, it has later erased much of the gain, trading down more than $20 at one point.

Main Market Movers – Mid-day Asian Trading Session

Indexes Value at Midday Daily Change
Japan- Nikkei 225 22,724 0.00%
China-Shanghai Composite Index 3,305 -0.35%
Hong Kong –Hang Seng 29,122 -0.19%
South Korea-KOSPI 2,481 0.20%
Australia-ASX 200 5,982 0.21%
S&P 500 E-Mini Futures 2,641 -0.04%

Major Asian equity markets were muted, with only fractional gains or losses in most markets, as the US tax overhaul returns to focus.

In Tokyo, the Nikkei 225 Index erased earlier gains of nearly 1 percent and was flat at 22,724 before midday in Asia.

On the Chinese mainland, the Shanghai Composite Index was down 0.35 percent to 3,305 after it opened 0.19 percent lower. Investors have been cautious lately, with more bad news coming in today about a closely-watched gauge of factory activity coming in short of expectations.

The Caixin/Markit manufacturing purchasing managers’ index (PMI) stood at 50.8 in November, down from 51 in the previous month. The Caixin/Markit index tracks medium and small firms, while the official index tracks large state-owned firms. The official PMI was more positive at 51.8, but the official numbers out of China are often questioned by skeptical market participants.

In Hong Kong, the Hang Seng Index lost 0.19 percent to around 29,122.

In South Korea, the Kospi edged up 0.2 percent to around 2,481 shortly after midday.

Down under, the ASX 200 picked up 0.21 percent to 5,982 at midday.

The S&P 500 E-Mini Futures was down 0.04 percent to 2,641 at midday.

Asian investors are now watching the developments in efforts to reform the US tax code. The latest was that Republican lawmakers were forced to delay a vote on the tax reform plan in the Senate after a hiccup on Thursday that prompted lawmakers to make changes to the plan last minute. Initial signs show that Republican lawmakers might have enough votes to pass the plan.

Currencies

The Japanese yen was flat against the US dollar at midday Friday, changing hands at 112.53 per dollar.

The Chinese yuan was down 0.08 percent against the US dollar at 6.6149 per dollar.

The Australian dollar lost 0.05 percent on the dollar, changing hands at 1.3223 per dollar at midday.

Commodities

WTI Oil was up 0.26 percent to $57.55 per barrel.

Brent Crude gained 0.27 percent to $62.88 per barrel.

Gold was up 0.03 percent to $1,275 an ounce.

News across Asia

In China, officials and experts are pushing back a couple of measures from the US against China in trade, saying that the US is taking protectionist actions. Those actions include a first-in-decades anti-dumping and countervailing duty probe into Chinese aluminum sheets and declining to view China as a market economy.

Take away: Though a trade war between the two countries is unlikely, tensions remain high for the most important bilateral relationship in the world.

In Japan, an official date has been set for the planned abdication of Japanese Emperor Akihito: April 30, 2019. Akihito had previously agreed to step down – the first to do so in centuries – but details remained elusive.

Take away: Akihito rarely appear in public and doesnt have any real power in Japan, and his departure would hardly have any impact on Japan. 

Featured image from Pixabay.

Disclaimer: The author owns bitcoin, ethereum and litecoin. He holds investment positions in the coins, but does not engage in short-term trading.

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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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

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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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Analysis

Volatile and Flat US Session Ends a Hectic Week for Stocks

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The major US indices finished virtually unchanged today, despite the positive open, while short-dated Treasuries closed the week near their multi-year lows. The session had several ups and downs, but the uptick in yields and the weakness in Europe proved too much for a sustained move higher to develop, despite the string of better-than-expected quarterly earnings reports.

S&P 500 Index Futures, 4-Hour Chart Analysis

From a broader perspective we can say that another bounce faded in stocks, with small-caps underperforming yet again, so the risk-off trend got one more confirmation.

Russell 2000, 4-Hour Chart Analysis

We have been tracking the main US small-cap benchmark all week long, as it has been precisely leading the broader market in recent weeks, and today the index got very close hitting a new 6-month low. The next week will be crucial for global risk assets, as given the long-term breakdowns in the main European benchmarks, the new bear market lows in Chinese stocks, and the ugly market internals on Wall Street, this might be the last opportunity to avoid protracted bearish period, or even a global bear market.

While Italian assets are under severe pressure, with government bond yields charging higher, decoupling from the “core” of the Eurozone, credit markets in general are not showing signs of broad distress. With that in mind, we don’t expect 2008-like dislocations in financial markets, for now, but investors should watch high-yield corporate bonds, where large excesses built up in recent years.

Forex Markets Turn Choppy as Dollar Pulls Back Again

EUR/USD, 4-Hour Chart Analysis

The China-led rebound in equities, which faded in late trading, and the Dollar’s retreat were the two main drivers in forex markets today. The EUR/USD recovered above the key 1.15 level after reaching as low as 1.1430 in early trading, while the Dollar index also failed to rise above its recent swing high, so the reserve currency could continue to consolidate before re-testing the August lows.

The bounce in the Euro was helped by the rumors regarding a possible new budget proposal from Italy, and as Moody’s downgraded Italy after the US market close, we will likely see further choppy, hard-to-trade action in currencies, especially given the large moves in US Treasury yields.

Gold Futures, 4-Hour Chart Analysis

Commodities had a mostly bullish day thanks to the Dollar’s dip, with copper and crude oil both recovering after yesterday’s selloff. The WTI crude contract bounced back all the way to the $70 per barrel level, while copper avoided a key breakdown out of its lengthy consolidation pattern.

Gold is also consolidating, albeit in a much different technical position, as the precious metal is trying to form a swing low that would confirm a short-term uptrend after last week’s breakout. A move above short-term resistance would likely lead to a test of the $1245-$1250 zone, with a likely rally up to the next major resistance level near $1260.

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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Market Overview

Market Update: U.S. Stocks Settle Mixed in Choppy Trade; Cryptocurrencies Endure Modest Pullback

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U.S. stocks traded mixed on Friday, as only one of three major bourses managed to bounce back from the heavy losses incurred in the previous session. Cryptocurrencies showed signs of wobbling early on before a modest recovery kept the market near break-even.

Stocks Lose Steam

The large-cap S&P 500 Index held higher up until the final moments of trade before running out of gas. It settled flat at 2,767.78 following a back-and-forth session. Among the 11 major sectors tracked by the index, five reported gains. Consumer staples were the strongest contributors, surging more than 2% as a whole. Utilities companies and financials stocks also reported firm gains.

The Dow Jones Industrial Average also finished in positive territory, adding 64.89 points, or 0.3%, to close at 25,444.34.

Meanwhile, the technology-driven Nasdaq Composite Index fell further into the red, shedding 0.4% to 7,449.03.

A measure of implied volatility known as the CBOE VIX held near the historic average on Friday, as the recent string of tumultuous sessions eroded risk sentiment on Wall Street. The so-called fear gauge closed just below 20 on a scale of 1-100.

U.S. equity markets pulled back sharply on Thursday as China-induced volatility weighed on investors’ sentiment. Chinese stocks led a global recovery on Friday as policymakers offered soothing remarks on the health of the economy. Still, the benchmark Shanghai Composite Index is down double-digits this month.

Earnings Show Promise

Another batch of upbeat corporate earnings have helped smooth out the recent bout of volatility in U.S. markets. On Friday, Dow blue-chip Procter & Gamble (PG) reported better than expected revenue growth as well as the sharpest rise in quarterly sales in five years. The company posted adjusted per-share earnings of $1.12 on revenues of $16.69 billion.

Other companies to report higher than expected results include Honeywell International Inc. (HON) and Schlumberger Limited (SLB).

As of last Friday, 86% of S&P 500 companies had reported earnings surprises for Q3, according to FactSet. The current blended earnings growth rate for S&P 500 companies is 19.1%.

Crypto Volumes Plunge

Cryptocurrency prices saw limited upside on Friday, as a sharp decline in trading volumes kept investors on the sidelines. The combined market capitalization of all coins bottomed near $206 billion overnight Thursday before recovering near $208 billion. Overall, the market is little changed compared with previous sessions.

Trade volumes are down some 6% over the previous day and nearly 20% compared with a week ago. As CCN recently reported, daily turnover in bitcoin is approaching yearly lows – a clear indication that bullish upside is limited.

Bitcoin posted a quick and dramatic upsurge on Monday as Tether’s USDT token lost its peg to the U.S. dollar. According to Galaxy Digital’s Mike Novogratz, the selloff of USDT is due to a lack of transparency at the parent company.

“I think Tether didn’t do a great job in terms of creating transparency,” he said at a recent conference in Frankfurt, as quoted by Bloomberg. Until now, Tether has refused to provide an audit of its dollar-backed reserves, igniting concerns that it was artificially inflating its stablecoin circulation.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of 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 649 rated postsSam Bourgi is Chief Editor to Hacked.com, where he leads content development for one of the world's foremost cryptocurrency resources. Over the past eight years Sam has authored more than 10,000 articles and over 40 whitepapers in the fields of labor market economics, emerging technologies, cryptocurrency and traditional finance. Sam's work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Contact: sam@hacked.com Twitter: @hsbourgi




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