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Asian Market Update – Thursday: Asian Stocks Flat after Weaker Chinese Economic Data

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The Big Question: Is the Chinese economy cooling again?

Major equity markets in the Asia Pacific remain flat, as a set of fresh economic data suggested that the world’s second-largest economy cooled down last month unexpectedly.

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The Shanghai Composite Index skidded 0.03 percent to 3,383.25 before midday on Thursday. In Hong Kong, the Hang Seng Index was down 0.34 percent 27,800.21.

In Japan, the Nikkei 225 was trading 0.04 percent above the flat line at 19,873.62.

In South Korea, the KOSPI index ticked up 0.06 percent to 2,361.50 around midday.

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Down under, the ASX 200 added 0.21 percent to 5,758.70.

As geopolitical tensions on the Korean Peninsula took a back seat, investors appear to be looking at scores of economic data out of China and seeking new direction.

China’s industrial production grew 6 percent in August from a year ago, below a projected 6.6 percent, slowing down further from a 6.4 growth in the previous month.

Retail sales rose 10.1 percent in August from the previous year, lower than the projected 10.5 percent and July’s 10.4 percent growth. Growth fixed-asset investments in urban areas also missed the forecast of 8.2 percent, coming in at 7.8 percent.

The Chinese economy maintained relatively stable and even better-than-expected performance in the first few months of the year, with a GDP growth of 6.9 percent in the first half of the year. Though more data are needed to judge performance, the data on Thursday suggest things are cooling down.

Unsurprisingly, Chinese officials seem to be confident about the country’s economic growth. Premier Li Keqiang, speaking in a meeting with heads of six global economic organizations, said the Chinese economy is strong and will remain stable.

Main Market Movers – Mid-day Asian Trading Session

Indexes Value at Midday Daily Change
Japan-Nikkei Stock Average 225 19,873.62 0.04%
China-Shanghai Composite Index 3,383.25 -0.03%
Australia-ASX 200 5,758.70 0.21%
Hong Kong-Hang Seng 27,800.21 -0.34%
South Korea- KOSPI 2,361.50 0.05%

Cryptocurrencies

Digital currencies continued on a downtrend overnight as both bitcoin and ethereum prices pointed lower.

Bitcoin prices declined 1.73 percent in the Asian trading session to $3,798. The virtual currency dropped below the $4,000 mark on Wednesday and seemed to lack the strength to bounce back up.

Ethereum saw an even larger fall of 2.04 percent overnight, changing hands at $269. Despite an earlier surge to as high as $280 in early morning trading, the ethereum price was in an overall downtrend.

Cryptocurrencies have been having a tough couple of weeks, mainly due to reports out of China about a ban on ICO’s and rumors of cracking down on commercial cryptocurrency trading. This has now pushed down the prices of bitcoin and ethereum from highs of nearly $5,000 and $400, respectively, to way below $4,000 and $300.

Currencies

The Japanese yen lost a slight 0.01 percent against the US dollar overnight to 110.49 per dollar. The greenback has been strengthening against the yen in the last three days after talks of tax reforms and weaker hurricane impact.

The Chinese yuan lost 0.07 percent to 6.5449 per dollar. The yuan has been losing against the dollar after the People’s Bank of China, the central bank, made a couple of adjustments to foreign exchange regulations, indicating it would let the yuan float more freely.

The Australian dollar gained 0.25 percent to 1.2492 per dollar overnight.

Commodities

WTI Oil lost 0.22 percent to $49.18 per barrel.

Brent Crude was down 0.11 percent to $54.98 per barrel.

Gold gained 0.05 percent to $1,321.73 an ounce.

Business News across Asia

In China, officials confirmed that US President Donald Trump will make his first visit to Beijing as president in November, though a specific date has not yet been set. Aides to Trump and President Xi Jinping are reportedly working hard to nail down an agenda for the talks. Trade and North Korea could top that agenda.

Take away: The first meeting of the two in May in Trump’s Florida resort was very positive and boosted financial markets that had worried about a potential trade war between the world’s two largest economies. All eyes would be on this one again because things haven’t been going too well since they met last time, with stalled talks on trade and volatility on the Korea Peninsula.

In India, a visit by Japanese Prime Minister Shinzo Abe has consumed much of the country’s news coverage. Most of the headlines focused on how India and Japan could work together to challenge China, with which both countries are not happy. The visit also saw the launch of India’s first bullet train project with Japanese support.

Take Away: With the positive tone out of New Delhi towards Japan, Japanese companies could get a lot more projects in India, which has a massive demand for infrastructure and other projects.  

Featured image from Flickr.

 

 

 

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 32 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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