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Asian Market Update – Thursday: Asian equities mixed on positive economic data from the US, geopolitical tensions

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yen, dollar, euro

The Big Question: What matters more for Asian investors: Events in the region or in the US?

Major equity markets in the Asia Pacific were in a mixed mode on Thursday, with stock indexes in Japan and Australia making gains on better-than-expected economic data out of the US, while stocks in China and South Korea seeing losses over geopolitical tensions, despite positive manufacturing data in China.

In Japan, the Nikkei 225 edged up 0.7 percent or 136.22 points to 19,642.76 before midday.

Down under, the ASX 200 added 0.77 percent or 43.9 points to 5,713.6.

The gain in Japan and Australia, which closely track their counterparts in the US, followed gains on Wall Street, where the S&P 500 gained 0.46 percent and the Dow rose 0.12 percent.

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The US reported 3 percent economic growth, beating the expected pace of 2.7 percent. Also, the private sector added 237,000 jobs, well above the expected 185,000 jobs.

However, other factors weighed on markets in South Korea and Greater China.

In South Korea, the KOSPI fell 0.35 percent to 2,364.08 before midday. Tensions in the Korean Peninsula showed sign of escalation again on Wednesday, after US President Donald Trump suggested that the US won’t pursue diplomatic talks with North Korea.

In his first response to the latest missile test by North Korea via Twitter, Trump said: “The US has been talking to North Korea, and paying them extortion money, for 25 years. Talking is not the answer!”

Investors could see that as a sign of the US not actively pursuing a diplomatic solution, and tensions might rise if the US were to pursue tougher actions; however, analysts also suggest investors are quick to adopt to the tension in the Peninsula because it’s been a persistent situation for years.

Meanwhile, in Greater China, despite better-than-expected performance in the country’s manufacturing sector, stocks continued lower. The Shanghai Composite Index was 0.61 percent lower before midday to 3,342.95.

China’s official manufacturing PMI, a closely watched gauge of manufacturing activity, rose 0.3 percentage point in August to 51.7 percent, while non-manufacturing (services) PMI was down 1.1 percentage points to 53.4 percent. Both remained above the 50-point threshold, indicating expansion in activities.

The response from the equity markets to the positive data highlighted once again the question: Is China’s stock market out of touch with economic fundamentals?

In Hong Kong, the Hang Seng also lost 0.64 percent to 27,914.21. Share prices of major mainland banks likely weighed on the benchmark. Despite positive earnings reports, major bank shares in Hong Kong fell, with ICBC, the world’s largest bank by total assets, seeing its shares down as much as 3.32 percent, and Bank of China’s shares down 1.21 percent.

Market-sensitive news this week to watch: More economic data from the US, Japan; NAFTA talks; UK’s Brexit talks with the EU; talks of tax reform in the US.

Main Market Movers – Mid-day Asian Trading Session

Indexes Value at Midday Daily Change
Japan-Nikkei Stock Average 225 19,642.76 0.7%
China-Shanghai Composite Index 3,342.95 -0.61%
Australia-ASX 200 5,713.60 0.77%
Hong Kong-Hang Seng 27,914.21 -0.64%
South Korea- KOSPI 2,364.08 -0.35%

Cryptocurrencies

The bitcoin price was up overnight during the Asian trading session, trading between $4,568 and $4,623.

Ethereum was up 0.58 percent, changing hands at $385 after taking a slight drop earlier to $380.

The rally came as more institutions are joining the blockchain revolution. The latest news say HSBC and Barclay are joining a settlement coin using blockchain.

Currencies

The Japanese yen lost 0.29 percent against the US dollar to 110.54 per dollar, after the dollar turned up following better economic data in the US and talks of tax reform.

The economic data also lifted the dollar against the Chinese yuan. The yuan lost 0.07 percent against the greenback, trading at 6.5962 per dollar.

The Australian dollar, which is often sensitive to Chinese economic data, firmed 0.06 percent against the US dollar. The Australian dollar was trading 0.7904 per dollar.

Commodities

WTI Oil was down 0.07 percent at $45.91 per barrel.

Brent Crude gained 0.26 percent to $50.74 per barrel.

Gold was down 0.36 percent to $1,303 an ounce.

Business News across Asia

In China, The BRICS summit kicks off on Thursday in Xiamen, South China’s Fujian Province. BRICS stands for five emerging economies: Brazil, Russia, India, China and South Africa. The bloc holds a meeting each year to talk about intra-cooperation as well as raising their influence in the global economic system. This year Egypt, Kenya and Mexico are also invited to participate at the summit.

Take away: A lot to watch for during the Summit, including their voice in a turbulent global economic system, China-India talks following a lengthy border military stand-off that just ended before the Summit, deals on infrastructure, building a common customs network, etc.

In Japan, UK Prime Minister Theresa May is in Japan to hold talks with her Japanese counterpart Prime Minister Shinzo Abe about a potential bilateral trade agreement following the UK’s exit from the EU. No details of substance have emerged from the talks, which is being held almost simultaneously with divorce talks between British and EU officials in Brussels.

Take Away: May’s intention to expedite talks with Japan is quite telling, coming at a time when British and EU officials are making slow progress in what could be very consequential negotiations. If things are good with Japan, that could improve the UK’s position in the EU talks.

Featured image from Pixabay.

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 33 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

Market Update: Stocks Retreat as Trade Risks Linger; Oil Markets Turn to OPEC

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U.S. stocks drifted lower Monday, as lingering trade concerns between China and the United States curbed investor appetite for riskier assets.

Stocks Decline

Wall Street’s benchmark indexes headed lower in early-week trading, with the Dow Jones Industrial Average recording its fourth straight decline. Dow industrials settled down 102.94 points, or 0.4%, at 24,987.54.

The broader S&P 500 Index declined 0.2% to close at 2,773.86. Seven of 11 primary sectors contributed to the declines, led by a nearly 2% retreat for telecommunication services. Shares of healthcare companies and consumer staples fell more than 1% on average.

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Meanwhile, the technology-driven Nasdaq Composite Index consolidated at 7,747.02, where it was little changed compared with the previous close.

The CBOE Volatility Index, also known as the VIX, rose on Monday following back-to-back declines. The gauge of investor fear edged up 2.8% to 12.32.

OPEC in the Spotlight

The Organization of the Petroleum Exporting Countries (OPEC) will hold its biannual meeting in Vienna, Austria this week, where members are expected to boost production following the yearlong rally in crude prices.

The Saudi-led cartel is reportedly considering an output boost of between 300,000 and 600,000 barrels per day in an effort to maintain market share. However, Iran, Iraq and Venezuela are expected to veto any decision to raise production levels.

“If the Kingdom of Saudi Arabia and Russia want to increase production, this requires unanimity. If the two want to act alone, that’s a breach of the cooperation agreement,” Iran’s OPEC representative told Bloomberg over the weekend.

The Saudis and Russians last month declared their intent to boost output levels at a meeting of energy ministers in Saint Petersburg.

OPEC’s upcoming meeting is scheduled June 22.

Cryptocurrencies Recover Mildly in Afternoon Trade

After flat-lining for most of Monday, cryptocurrency prices edged higher in the afternoon with bitcoin and the ten major altcoins putting up gains.

The cryptocurrency market added roughly $13 billion in value in just over an hour as trading activity picked up across the major exchanges. At the time of writing, the total market for virtual currencies was valued at around $288 billion.

Trading volumes are back up to $12 billion after plummeting to $9.5 billion on Sunday. That marked the lowest turnover in more than two months.

Bitcoin clawed back above the $6,700 handle after falling to the low $6,300 range earlier in the day. Ethereum, the world’s second-largest cryptocurrency by market cap, was back around $520.

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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4.5 stars on average, based on 455 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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Analysis

Europe Drags Stocks Lower while Trade War Fears Return

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The risk-off shift of Friday continued today throughout the major financial markets, with the German political standoff on migration weighing on investors sentiment as well, besides the emerging market troubles, and the trade skirmish between the US and China. All of the major US indices opened the week lower, with Europe clearly underperforming and Asian equities also being under pressure.

As Chinese announced retaliatory tariffs are after last week’s US steps the week could bring upon another round of measures by the Trump administration and with that, the escalation of the trade tensions is very much a possibility again.

S&P 500 Futures, 4-Hour Chart Analysis

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Despite today’s losses, the leading indices, especially the Nasdaq and the small-cap Russell 2000, are still just a tad below their all-time highs, while the relatively weak benchmarks are 5-10% below their yearly highs. The balanced S&P 500 is also shy of its all-time, but the short-term uptrend remains intact, and incredibly enough, the benchmark still didn’t leave the range of the early-February crash which unfolded in just 3 days.

Euros Stoxx 50, 4-Hour Chart Analysis

The divergence between the leaders and the rest of the global market, continues to point to the fragility of the rally, and as emerging market currencies are sill clearly in trouble, we don’t expect a broad march to new highs in the coming weeks and we remain defensive towards global risk assets.

Commodities Smacked Lower amid Risk-Off Shift

DXY (Dollar Index), 4-Hour Chart Analysis

Currencies settled down after their crazy central bank loaded week, with the Dollar pulling back slightly off its highs against the Euro and the Yen, while holding its ground compared to the other majors. The Dollar index broke out of the consolidation pattern as we expected and it is now challenging the multi-month highs set in May.

USD/CAD, 4-Hour Chart Analysis

The Dollar is now trading at a 12-month high against the Canadian Dollar, as the pair left behind the 1.30 level as we expected, while the Aussie is also close to hitting levels not seen since last summer, as Friday’s drop in commodities put pressure on the already weak AUD.

WTI Crude Oil, 4-Hour Chart Analysis

Commodity traders are licking their wounds after Friday’s rout, although crude oil staged an impressive rebound off the two-month low hit in early trading below $64 per barrel with regards to the WTI contract.

That said, the short-term trend is clearly negative, and     new lows are likely in the coming days, although the much-awaited OPEC meeting later on this week could cause wild swings in the key commodity, with speculation already being rampant about the possible output change by the cartel.

Featured iamage 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 276 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

Let’s Break the Internet

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Hi Everyone,

Cardano is by far the most philosophical of all the blockchains in the crypto-space. Its protocol has been described as more of a batch of computer science principles, than a product with a roadmap.

Like Ethereum, NEO, and EOS, Cardano is a platform for creating decentralized applications. It has some really smart people backing its development too, which is one of the reasons this brand new product was able to find it’s way into the top 10 cryptos by market cap.

As such, eToro has now opened up real-time trading on Cardano’s ADA token. After reaching a high of $0.96 at the peak in January, the tokens are now trading just under $0.17.

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To add ADA to your investment profile, please click here: https://www.etoro.com/markets/ada

Remember, cryptocurrencies are very risky so please trade responsibly and diversify yourself with other markets as well.

@MatiGreenspan
eToro, Senior Market Analyst

Today’s Highlights

  • Trade War Continues
  • Sudden Dollar Surge
  • The BS Report on Cryptocurrencies

Please note: All data, figures & graphs are valid as of June 18th. All trading carries risk. Only risk capital you can afford to lose.

Traditional Markets

Want to wish a very happy Dragon Boat Festival to all our clients and colleagues in China.

On Friday, the USA and China added to market tensions with additional tit-for-tat trade tariffs. President Trump struck first by announcing $50 billion worth of new tariff’s on imports from China.

The response from China was swift, immediately matching the US measure-for-measure. The response came within just a couple of hours as the Chinese finance ministry barely allowed the news of the initial tariff’s to penetrate before announcing their retaliation.

Thus, the Chinese counter-measures dominated the news cycle, which will no doubt be viewed as a successful show of strength. In fact, the original Email that came to my inbox from the Financial Times with the headline…

…actually now leads to an article about the retaliatory tariffs.

The Chinese playbook has become quite clear in this case. Perhaps too clear.

An escalation of $50 billion on either side isn’t much, but the speed and scale of the Chinese response may have just tipped Beijing’s hand.

In any case, the measures didn’t seem to have had much effect on the stock markets. In this short-term graph of the Dow Jones, we can see that stocks were already on their way down before the 3.5 hour spat (purple circle).

If we zoom out to the long-term graph, we can see how insignificant the latest progression has actually been. Same purple circle.

As far as markets are concerned, the entire trade war saga is rather like the turbulence on an airplane. It might scare off a few of the newbies but for any seasoned flyer, it’s just time to sip a drink and go back to sleep.

They will, of course, wake up rather suddenly, only if captain Trump decides to do any drastic evasive maneuvers.

What Happened to Gold?

Though the stock markets were rather unaffected by the new trade war progressions, the news may have had some effect on the commodities.

Here we can see gold and crude oil reacting to the updates and plunging rather noticeably from the initial announcement and until well after China’s retaliation.

Oil is also reacting to updates from OPEC and Russia who are supposed to meet this Friday. The expected results of that meeting seemed to be rather clear at the end of last week but this morning there’s a bit of contention as several OPEC members are now opposing the idea of increasing production.

Gold on the other hand, is really confusing. Increased geopolitical uncertainty usually makes gold go up, so it’s kind of strange to see the opposite reaction from Friday’s news.

So if anyone can help me understand why it went down, I’d sure appreciate it.

The Crypto BS Report

Last week we spoke about the incredible update from the SEC where they finally clarified that Ethereum is in fact not considered a security. Though some in the community pointed out that there’s still a lot of uncertainty in the space, with the exception of Bitcoin maximalists, most people seem very happy about the recent update.

This morning there’s a fresh report out, this time from the Bank of International Settlements (BIS). This institution has never been very crypto-friendly and thought the report does highlight some of the positive qualities of cryptocurrencies, the key takeaways seem rather negative.

It pays to point out in this case that the BIS is a key player in the fiat ecosystem and as we saw with Jamie Dimon, Warren Buffet, and Bill Gates would have the most to lose should Bitcoin gain more prominence.

Their concerns over the consumption of electricity used by Bitcoin have been long ago debunked, while the claim that blockchain technology could overload and “bring the internet to a halt” feels sensationalist.

The analysis used to support this hypothesis assumes exponential growth in usage and zero infrastructure growth. It would be like saying in the 90’s that if all data were transferred over the internet, it would not be able to handle the traffic.

Of course, we know that by the time Kim Kardashian published her famous pics on PaperMag, there was more than enough bandwidth to handle all the likes and shares.

Not only is the infrastructure of blockchain technology now being built at a rapid pace, but the groundwork for the next level of innovation is already well underway as…

Let’s have an awesome 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.

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 102 rated postsSenior Market Analyst at Etoro.com.




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