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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.

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.

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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4.3 stars on average, based on 34 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

Fed Tests Big Banks & Adds Support for Crypto

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Hi Everybody,

Every year since the financial crisis the Federal Reserve creates a simulated crisis to see which banks are healthy enough to survive in the event of an emergency.

The tests were particularly difficult this year because the economy is doing well, but it does seem that a few U.S. banks passed by the skin of their teeth.

Here we can see the results for some of the top banks.

It’s important to note that this simulation is not indicative of a real world situation. Next week the Fed will perform a few more tests that should give us a better understanding of the situation.

@MatiGreenspan
eToro, Senior Market Analyst

Today’s Highlights

  • Greek Debt Deal
  • Win for Mom & Pop
  • Fed Adds Ethereum

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

Greek Debt Deal

The negotiations have been going on for far too long and have brought the markets to their knees several times already. Today the crisis has finally been declared over.

Though the Greeks didn’t get anything close to the deal that Prime Minister Alexis Tsipras advocated in his famous 2015 election campaign, they did win a number of concessions from the European Union that will make it easier to operate the country and start borrowing money from the public again.

Much of the €96 billion owed will be pushed back by 10 years, which should allow the country to breathe and grow the economy in the meantime.

The Euro is gaining a bit of ground this morning on the news (purple circle), although hasn’t quite recovered from Draghi’s announcement last Thursday.

Win for Mom & Pop

A landmark case has now passed the US Supreme Court that could have an impact on your portfolio going forward.

Until now, online stores in the United States were exempt from local sales taxes in states where they do not have a physical presence.

Bricks and mortar stores claim that they have been disadvantaged by this for the last 25 years. Some even say that this has been a major contributing factor to the retail apocalypse of the last decade.

Going forward, online retailers will be subject to the same taxes that everyone else is, which should level the playing field a bit, but won’t necessarily reverse the online shopping trend.

The clear winners here are the state governments because they’re about to get billions more in tax revenues. This may be a good time to look at the stocks you’re holding as bottom lines for both online and offline retailers will be affected by this.

Fed adds Crypto

While many old school financial institutions see cryptocurrencies as a threat, the Federal Reserve Bank of St. Louis is extremely supportive of them.

They have already released a significant amount of research detailing how the introduction of a new form of decentralized money can have a stabilizing effect on the global economy.

This week, the Federal Reserve Economic Data (FRED) website, run by the St. Louis Fed, has taken a massive step towards legitimizing cryptocurrencies in the eyes of the financial world by adding price tracking graphs for Bitcoin, Bitcoin Cash, and Ethereum, and Litecoin.

Here’s bitcoin on FRED…

…and Ethereum


Though the United States has been more skeptical about ICOs lately, they’re certainly looking a lot more friendly towards the more established cryptocurrencies.

What Else?

Remember that today is the much anticipated OPEC meeting. Watch for volatility in crude oil throughout the day.

Also, the Turkish elections will be held on Sunday. A month ago this looked to be a clear win for Erdogan the incumbent. Today, the scales have tipped just a little showing a slightly more favorable outlook for the opposition. Don’t get your hopes up too much though. Just keep an eye on the USDTRY.

Wishing you and yours an outstanding weekend 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,

Best regards,
Mati Greenspan
Senior Market Analyst

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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4.7 stars on average, based on 103 rated postsSenior Market Analyst at Etoro.com.




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Analysis

Italy Spooks markets Again as Stocks Remain Under Pressure

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European stocks Led the way lower today despite a bullish start in Asia, as equities gave back their gains when Daimler published a surprising profit warning, which was deeply affected by the recent trade war developments, reigniting fears of a tariff-driven downturn in global trade.

DAX, 4-Hour Chart Analysis

The Old Continent got into more trouble later on, when two anti-EU officials were named in Italy, resurrecting fears of a clash between the systematically crucial country and the core of the Eurozone. Italian yields rose in European trading, and although they are still shy of the levels hit during the May scare, the periphery could be in trouble as the ECB pledged to exit the market by the end of the year.

Nasdaq 100 Futures, 4-Hour Chart Analysis

The main European indices were smashed lower during the session, with the DAX hitting a two month low, still being very weak relatively speaking compared to its US peers. US stocks sold off heavily following the opening bell and they failed to recover, unlike two days ago, and the major benchmarks traded well below yesterday’s levels just before the close.

The Nasdaq and the Russell 2000 lost some of their recent mojo, pulling back heavily of the all-time highs during the day. All in all, the risk off shift continues to dominate across the board, as we expected and we remain negative on risk assets here, especially regarding emerging markets, even as the Dollar’s rally could be over for a while.

Dollar Pulls back as Pound Surges

USD/CAD, 4-Hour Chart Analysis

The Dollar took a beating as the Philly Fed Index came in much worse than expected, and as the Bank of England sent hawkish signals, pushing the Pound and the Euro higher. The central bank left its benchmark rate unchanged at 0.5%, but a rate hike this year got much closer, with a key member of the bank voicing inflationary concerns.

The Greenback fell more than what the events would imply, so a larger scale consolidation could have already started in the currency following the recent gains and the marginal new high yesterday. With the EUR/USD pair nearing the 1.1450-1.15 support zone, the USD/CAD hitting 1.33 and the AUD/USD touching 0.7350, a meaningful counter-trend move would be timely in the surging reserve currency.

WTI Crude Oil, 4-Hour Chart Analysis

Gold continued to drift lower before the Dollar’s reversal and it hit $1262 for the first time since lat December before bouncing back above the $1270 level in late trading. Crude oil also fell sharply in early trading, and the WTI contract traded with a $64 handle before rallying back to $66 per barrel.

The OPEC meeting, which is expected to result in a supply increase by the cartel made the crucial commodity very volatile in recent days, but we expect the bearish trend to continue, with a likely dip to the $60 level in the coming weeks.

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 279 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: Dow’s Slide Hits Eight Days as Trade Risks Reemerge 

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U.S. stocks retreated Thursday, with the Dow Jones Industrial Average extending its losing skid to eight days as uncertainty over international trade undermined risk appetite.

Stocks Turn Defensive

Dow industrials were off 196.10 points, or 0.8%, by the close to settle at 24,461.70. That was the index’s worst settlement in three weeks.

The Dow’s losing skid is now the longest since March 2017. Another fall on Friday would bring the skid to nine days, the longest since 1978.

The broader S&P 500 Index fell 0.6% to close at 2,749.76. Seven of 11 primary sectors fell, led by energy and other commodity-sensitive sectors.

Meanwhile, the Nasdaq Composite Index closed down 0.9% at 7,712.95. The technology-heavy average closed in record territory on Wednesday.

Investor fear over a U.S.-China trade rift returned on Thursday, sending the VIX Volatility Index sharply higher. Wall Street’s gauge of investor anxiety climbed to a session high of 15.18 on a scale of 1-100 where 20 represents the historic average. The index would later settle at 14.68 for a gain of more than 14%.

Trade War Looms Large Over Market

U.S.-China trade tensions were back in focus Thursday after U.S. policymakers urged Google to end its business ties with Huawei, a leading Chinese smartphone maker. Congress recently banned U.S. firms from selling products to Chinese telecommunication giant ZTE, a move that practically shuts down the company.

Under President Trump’s orders, Washington announced last Friday it would implement a 25% tariff on up to $50 billion of Chinese goods, including semiconductors. Trump says additional tariffs of 10% will be applied on $200 billion of Chinese goods should Beijing choose to retaliate.

The first round of tariffs will come into force July 6.

In theory, tariffs will make American-made goods cheaper than imported ones, thereby encouraging consumers to purchase from local producers. Importers themselves will have to pay an additional tax on certain Chinese products they bring into the country – costs that are passed on to the consumer.

Saudi Arabia Proposes Crude Output Hike Ahead of OPEC Meeting

Saudi Arabia, OPEC’s de facto head, is encouraging fellow producers to support a deal that would see oil production rise by one million barrels per day. However, Iran remains the key holdout in the deal, with the country’s energy minister suggesting that a compromise is unlikely before the cartel meets Friday.

Despite Iran’s opposition, the biannual meeting in Vienna is expected to result in the first coordinated output hike since the cartel decided to constrain supplies all the way back in 2016.

The Saudis are banking on a slowdown in U.S. shale production over the next two years until pipeline bottlenecks are solved in the energy-rich Permian Basin, energy minister Khalid al-Falih said Thursday.

International crude prices declined sharply on Thursday, with Brent futures reaching a session low of $72.94 a barrel on London’s ICE Futures exchange. The global benchmark was last down $1.57, or 2.1%, at $73.17 a barrel.

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 462 rated postsSam Bourgi is Chief Editor to Hacked.com, where he specializes in cryptocurrency, economics and the broader financial markets. Sam has nearly eight years of progressive experience as an analyst, writer and financial market commentator where he has contributed to the world's foremost newscasts.




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