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Asian Market Update – Monday: Equities Mixed over Hurricane in the US

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Hurricane Harvey

The Big Question: Why EU and US officials kept mum about monetary policy direction in Jackson Hole?

Major equity markets in Asia started the week’s trading off in a mixed mode, as investors are keeping a close eye on the impact of a severe hurricane hitting several US states and looking for policy direction after central bankers refrained from hinting any monetary policy direction.

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In the early hours of the Asian trading session on Monday, stock indexes in Japan, Australia and South Korea, which tend to track markets in the US, saw minor losses, while indexes in Greater China gained slightly.

In Japan, the Nikkei 225 was down 0.11 percent, trading at 19,430.65 before midday.

In South Korea, the KOSPI fell 0.38 percent to 2,369.48.

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Down under, the ASX 200 dropped 0.72 percent to 5,702.60.

In Greater China, the Shanghai Composite Index gained 0.95 percent to 3,363.21 and the Hong Kong Hang Seng Index was up 0.62 percent, trading at 28,020.48.

Big market-moving news over the weekend was Hurricane Harvey, said to be the largest in over a decade to hit the US, and the silence on monetary policy direction from a gathering of central bankers in Jackson Hole, Wyoming, the US.

Energy markets are feeling on impact of Hurricane Harvey on refineries along the US Gulf Coast. Some major energy companies, including Shell and Petrobras, have already closed refineries in Taxes due to the weather conditions. The moves send US gasoline futures as much as 6 percent higher on Monday.

Investors are also digesting what central bankers said or didn’t say during their meeting late last week in Jackson Hole.

US Fed Chair Janet Yellen kept away from commenting on monetary policy or the strength of the US economy and inflation rates, giving no indication of any potential changes in the US monetary policy. Yellen focused on the positive post-financial crisis reforms of the financial system, in an apparent move to stand up against Republican lawmakers and President Donald Trump, who are arguing the reforms hurt the market.

ECB chief Mario Draghi also stayed mum about monetary policy in the euro zone and the recent rise of the euro.

The silence gave a fresh boost to the euro, as investors are trying to digest the news and weigh in on why the central bankers kept away from giving any hint of monetary policies.

Market-sensitive news to watch this week: Economic data from Japan, the US, Hong Kong and Australia later in the week; NAFTA talks; UK’s Brexit talks with the EU; and talks of tax reform in the US.

And, by the way, North Korea fired three ballistic missiles over the weekend. Though the launches failed, keep an eye on tensions on the Korean Peninsula.

Main Market Movers – Mid-day Asian Trading Session

Indexes Value at Midday Daily Change
Japan-Nikkei Stock Average 225 19,430.65 -0.11%
China-Shanghai Composite Index 3,363.21 0.62%
Australia-ASX 200 5,702.60 -0.72%
Hong Kong-Hang Seng 28,020.48 0.62%
South Korea- KOSPI 2,369.48 -0.38%

Cryptocurrencies

Bitcoin saw a serious drop on Monday during Asian trading session. Before midday, bitcoin was trading at $4,200.0, plunging 3.17 percent.

Ethereum also dropped 3.42 percent, trading at $336.59. The steep fall came after ethereum rose to more than $347 over night.

Currencies

The Japanese yen gained a slight 0.14 percent against the US dollar at midday. The USD/JPY rate was at 109.17.

The Chinese yuan strengthened 0.08 percent against the greenback, trading at 6.6413 per dollar. The yuan has continued its climb from Friday, trading at 6.6413 per dollar before midday on Monday.

The Australian dollar lost 0.08 percent against the US dollar. The Australian dollar was trading at 1.2597 per dollar before midday.

Commodities

WTI Oil was down 0.31 percent at $47.68 per barrel

Brent Crude gained 0.46 percent to $52.58 per barrel

Gold was up 0.23 percent to $1,294.04 an ounce

Business News across Asia

In China, one of the richest men and real estate tycoon Wang Jianlin and his Dalian Wanda Group is under pressure after rumors are widely circulated online about the company being under investigation by Chinese authorities. Though the rumors were disputed by Wanda, it has a taken a toll on the company’s Hong Kong-listed shares. On Monday, Wanda Hotel Development Co saw its share prices drop to the daily limit of 10 percent.

Take away: Chinese authorities have taken strict measures to curb what they consider irrational investments in overseas real estate, entertainment companies, etc. So far, officials are silent on the Wanda rumors, but surely the company and its outspoken boss is under some serious pressure.

In Japan, embattled Prime Minister Shinzo Abe’s approval rating is recovering from earlier plunges after a series of scandals and missteps. Abe’s approval rating has reached 46 percent, improving 4 percentage points from earlier this month. The recovery came after a major shake-up in cabinet members, but Abe still faces serious doubts among some Japanese voters, per Nikkei Asian Review.

Take Away: With Abe’s approval rating recovering but still facing serious doubts, the future of his economic policies, dubbed “Abenomics”, is still under a cloud of uncertainty.

In India: McDonald’s is under pressure from its employees, suppliers and mall operators after the US fast-food chain decided to close 169 restaurants across India. McDonald’s is in the middle of a legal battle with Indian partner Vikram Bashi. The closures could result in the layoff of more than 6,000 employees, per Times of India.

Take Away: The episode in one of the largest markets for McDonald’s could have a serious impact on its business operation in the country and its share prices.

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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4.2 stars on average, based on 21 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 mainly follows the stock and forex markets, and is always looking for the next great alternative investment opportunity.




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Analysis

Daily Analysis: No Questions Answered

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Thursday Market Recap

Asset Current Value Daily Change
S&P 500 2718 0.97%
DAX 12,468 0.31%
WTI Crude Oil 62.61 2.02%
GOLD 1332.00 0.52%
Bitcoin 9780 -8.00%
EUR/USD 1.2324 0.26%

It was a strange day indeed in equity markets, with mixed signals popping up across the board after yesterday’s crazy quasi-FED day. An ugly overnight session, followed by a strong pre-market rally, an early-day pump, and a late-day dump. That is the summary of the day, but under the surface, there is a real struggle between market forces, with still an edge for bears in the battle for control.

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NASDAQ 100 Futures, 4-Hour Chart Analysis

It seems that the Nasdaq is still the key, as the relative strength of the tech benchmark is the most reliable gauge of the market direction, at least regarding the intraday trends. That said, at the end of the day, the Nasdaq closed in the red 4 times in a row, at least as far as the normal trading day is concerned, and still, the major indices are trading not far off last Friday’s top, despite the downward drift.

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Forex Markets and Commodities

Adding to the confusion, the Dollar corrected lower after a positive period, and with Treasury yields trading all over the place, investors were left scratching their heads yet again. The Japanese Yen was the clear winner of the day among currencies, as the primary safe-haven got bid heavily during the Asian session, and it remained throughout the up-and-downs of the day, despite the strong bounce in stocks and risk-on currencies.

USD/JPY, 4-Hour Chart Analysis

The EUR/USD pair had a very active and volatile session, but the common currency remained above the lows from two weeks ago, while also halting below yesterday’s highs, so all-in-all, no technical conclusion to draw. As in stocks, the next clear directional day will be crucial, as the tug of war is getting tenser and tenser.

EUR/USD, 4-Hour Chart Analysis

The Canadian Dollar plummeted during the day, thanks to the dismal Retail Sales figures, but it finished well off its lows, boosted by the stock recovery and the jump in the price of crude oil. The Black Gold was pushed higher by the surprisingly bullish US inventory data, and the WTI contract closed back above $62.50 per barrel.

USD/CAD, 4-Hour Chart Analysis

Gold continued to follow the Euro, finishing the day slightly higher, but the precious metal showed notable relative strength during the Asian session, and that could be the precursor of a move to new rally highs, should the bearish scenario play out in equities.

Cryptocurrencies

The segment had another bearish session, and the bleeding continued after the US session, with BTC leading the way lower this time around after a long period of relative strength. A crucial test might be ahead of the most valuable coin, as the $9000-$9200 support zone would be a perfect target for the current correction, to keep the uptrend going. That said, that zone is still almost 50% above the prior low, leaving plenty of room for the coin to bottom out.

BTC/USDT, 4-Hour Chart Analysis

With all of the major altcoins also sporting significant losses, bulls would like to see more of the early relative strength that some coins have been showing, to establish a leadership that can guide the segment out of the plunge. For now, the crash lows are way below the current levels, and the bullish long-term scenario remains intact.

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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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4.7 stars on average, based on 111 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

Pre-Market: Bulls Try to Fight Back after Ugly Overnight Session

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Following the steep late-day downturn on Wednesday, which followed the not-to-hawkish FED meeting minutes, Asian markets and US equity futures continued lower with a vengeance. The very active overnight trading is another sign of the regime change in traditional financial markets that we have been monitoring for the last two weeks, ever since the “Black Monday of 2018”.

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Dow Futures, 4-Hour Chart Analysis

EUR/USD Changing Behavior

The European session brought about an oversold bounce that stabilized markets from stocks to currencies. The EUR/USD pair that has started acting “normally” considering its relationship with US Treasury yields lately, is headed south once again, trading only 0.5% above its recent correction lows after clearly breaking below the rising trendline.

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EUR/USD, 4-Hour Chart Analysis

The bull-trap that we identified a few days ago was the start of the current leg lower, and if the regime change will be persistent, the most traded forex pair could be back to the role of the “risk-on/risk-off” indicator that has been the privilege of commodity currencies in the last couple of weeks.

USD/JPY, 4-Hour Chart Analysis

The Japanese Yen is showing notable strength after its overbought dip, and the primary safe-haven currency could be in for more gains, should the risk-selloff continue. The Yen also gained ground on the common European currency, following the dovish ECB meeting accounts and the misses in the German IFO business climate indicator and the British GDP, which all question the European growth-monetary tightening narrative.

Canadian Dollar in for a Wild Ride

USD/CAD, 4-Hour Chart Analysis

With the Canadian retail sales report and the US crude oil inventory data coming out soon, forex traders should expect sizeable moves in the recently weak currency, while the USD should also be very active during the US stock market session.

All eyes are on Treasury yields again, with the slight correction today helping the bounce in stocks and other risk assets. The Nasdaq could be the motor of a stronger rally on Wall Street, but we wouldn’t bet the house on that, as the short-term technical setup remains bearish, and a re-test of the correction lows is still the most likely scenario for the coming weeks.

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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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4.7 stars on average, based on 111 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

Play that Funky Market

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There’s only one way to explain what’s happening in the markets right now.

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It’s FUNK!

@MatiGreenspan
eToro, Senior Market Analyst

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Today’s Highlights

  • More Market Funk
  • No way but Right?
  • More Crypto Vol

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

Traditional Markets Funk

Everything was going fine on Wall Street, they came back from lunch in a buying mood, but somehow things started to turn sour. By about an hour before the close things started to get downright ugly and by now we’re more than 500 points off the peak of that yellow circle and we’re now 3.82% from the all-time high.

Once again, the movement began in the bond markets, with the yields on the 10 Year spiking to a new high of 2.94% by the end of the day.

And of course, volatility can be seen with the VXX shooting up into the close.

Italian Splinters

It’s been five days since Italy stopped publishing opinion polls ahead of the national elections on March 4th in order to stop them having an influence on polling day itself.

That said, as we learned in Brexit and the Trump elections, polls can’t always predict what’s going to happen and in Italy, even less so. And this one is set to be even more interesting than usual.

Nevertheless, some analysts have come to the conclusion that the only party with an actual shot of winning an outright majority is Forza Italia, led by Silvio (I can’t believe I’m even writing this) Berlusconi.

This is still anyone’s game though, and even though there are 945 seats across two Houses of Parliament, alliances are so fractured that candidates are now battling for every single voter.

For the markets it’s still not clear what the effects might be, but as Europe’s 4th largest economy, and with the EU’s 1st largest economy still in a political deadlock, I’m looking squarely at the Euro.

In this chart, we can see the effect that a decisive election had on the EURUSD on April 23rd (yellow circle). Notice the large gap up that seemingly took the market from flat to flying in a single weekend when it became clear that Marine Le Pen had no chance of victory.

Crypto Volatility Continues

When Wal-mart’s stock dropped 10% on Tuesday it was a really big deal but when Bitcoin dropped an equal percentage on Wednesday, somehow it just doesn’t seem all that significant.

On that thought, here’s a meme I made yesterday. 🙂

That’s just the level of volatility that we’ve come to expect from this market. So please be aware that when I say cryptos are volatile, what I mean is they’re extremely volatile.

One thing that I keep noticing in the crypto-market is that when things are going up, we can expect to see different levels of returns in different coins and general divergence. However, when things are going down the correlation gets stronger and everything falls together.
You should be able to see that in this chart pretty clearly…

As always, let me know if you have any questions or if you need anything further.

Have a groovy day!!

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.

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 33 rated postsSenior Market Analyst at Etoro.com.




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