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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.

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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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4.2 stars on average, based on 20 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

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.

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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4.7 stars on average, based on 109 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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Analysis

Daily Analysis: The Usual Post-Fed Pump and Dump…

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Wednesday Market Recap

Asset Current Value Daily Change
S&P 500 2700 -0.51%
DAX 12,470 -0.14%
WTI Crude Oil 61.28 -0.83%
GOLD 1325.00 -0.43%
Bitcoin 10480 -8.71%
EUR/USD 1.2336 0.61%

The script that we laid out for the FOMC meeting minutes has worked almost perfectly, with the major US indices completing a roundtrip that triggered most of the “weak” stop-losses, before a powerful move lower into the close.

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The predictable late-session intraday volatility aside, markets were quiet and choppy for most of the day, and the Dow, the Nasdaq, and the S&P 500, all closed just slightly lower, while covering 2% during the session, with the tech-index’s relative strength evaporating in late trading.

S&P 500 Futures, 4-Hour Chart Analysis

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Forex Markets and Commodities

What drove the decline in equities was the renewed rise in US Treasury Yields, and to answer the most important question of the day; yes, in fact, the yield-Dollar correlation of the past few months broke down, and today the Greenback rallied together with bond yields.

10-Year Treasury Yield, 4-Hour Chart Analysis

While that is how it should work according to common sense and economic theory, the recent inverse correlation helped a lot of trends in reaching extremes, and those extremes now might reverse.

The outperformance of US markets, the Euro strength, and the weakness in European equities were among those trends, and it’s interesting to see that the bullish technical setup in the EUR/USD is crumbling and the US indices are in the deepest correction since the Brexit.

EUR/USD, 4-Hour Chart Analysis

While there is no assurance that these changes are permanent, for now, we remain short-term bearish on US equities, and continue to look for upside in the battered Dollar.

At the end of the day, the Dollar finished higher against all of the major fiat currencies, although the Yen showed notable relative strength amid the stock rampage near the closing bell. Interestingly the USD vs. risk-on pairs trend continues to lead the other asset classes, as we have noted several times, and that could be something to monitor in the coming days and weeks.

Commodities had a mixed but ultimately bearish session, with oil and gold suffering both suffering losses amid the risk-off shift, although crude already traded lower before the FOMC release, while gold traded in close correlation with the Euro throughout the day.

Cryptocurrencies

The segment had a decisively bearish session, with only a few coins showing considerable relative strength amid the sell-off. Bitcoin, Litecoin, Dash, and Monero are still the leaders of this cycle, while Ethereum is the most notable laggard, pulling most altcoins lower as well.

ETH/USD, 4-Hour Chart Analysis

On a positive note, the majors held up relatively well amid the stock turmoil, but the next few days will be crucial, as important support levels could be tested. That said, most of the coins are well clear of the crash lows, and there is more than enough support below that, combined with the still present bullish signs should keep investors confident that a new uptrend is underway and new rally highs are ahead.

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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4.7 stars on average, based on 109 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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