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Asian Market Update – Thursday: Asian stocks point higher on prospect of US debt ceiling deal

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Government shutdown

The Big Question: How would a US government shutdown affect the markets?

Major equity markets in the Asia Pacific edged up on Thursday, trimming down earlier losses from sell-offs amid rising tensions on the Korean Peninsula, as investors appeared to be relieved about the reduced likelihood of a shutdown in the US government.

In Japan, the Nikkei 225 reversed a downtrend started earlier this week. At midday, the benchmark gained 0.37 percent to 19,430.19.

In South Korea, the KOSPI index ticked up 1.11 percent to 2,345.59 around midday.

Down under, the ASX 200 added 0.30 percent to 5,707.00.

In Greater China, shares were mixed on Thursday, with the Hong Kong Hang Seng index up 0.24 percent to 27,680.43 and the Shanghai Composite down 0.23 percent to 3,377.71 at midday. Analysts believe the Shanghai bourse still holds great prospects for extending a winning streak, despite some short-term downtrend along the way.

The rise in Asian stocks on Thursday appears to be investors responding positively to a deal between US President Donald Trump and US Congressional Republicans for temporarily raise the debt limit for the US government to prevent it from being shut down.

But analysts in China cautioned that potentially escalated tensions on the Korean Peninsula could spook investors and spark a deep sell-off, not only in Asia Pacific but also other global markets.

It is highly expected that North Korea will launch another intercontinental ballistic missile or ICBM in the coming days and the US, South Korea and Japan could hold joint military drills in show of force. That would raise tensions once again.

Another event to watch is a new hurricane reportedly on its way to hit some states in the US, including Florida. Officials in the state are already warning of severe damages. Coming after a once-in-a-hundred year hurricane just hit the energy hub of Houston, the new hurricane, dubbed Irma, could add to losses in the US economy.

All eyes are on the meeting of European Central Bank on Thursday. The meeting is expected to give some sense of where the euro is headed and could change the direction of the currency and impact financial markets.

Main Market Movers – Mid-day Asian Trading Session

Indexes Value at Midday Daily Change
Japan-Nikkei Stock Average 225 19,430.19 0.37%
China-Shanghai Composite Index 3,377.71 -0.23%
Australia-ASX 200 5,707.00 0.30%
Hong Kong-Hang Seng 27,680.43 0.24%
South Korea- KOSPI 2,345.59 1.11%

Cryptocurrencies

Digital currencies seem to have a hard time regaining grounds following sharp falls earlier in the week. Overnight, both bitcoin and ethereum prices were pointing lower, after slight gains in the previous day.

Bitcoin prices declined 2.20 percent at midday in the Asian trading session, changing hands at around $4,500. The fall came after the virtual currency recovered from a low of around $4,206 the previous day.

A similar trend is seen in the ethereum price. Overnight, the ethereum price dropped 3.56 percent to $325.27. Ethereum bounced from about $269 to nearly $340 in the previous day.

Currencies

The Japanese yen gained 0.09 percent against the US dollar overnight to 109.08 per dollar.

The Chinese yuan gained 0.02 percent to 6.5207 per dollar. Chinese analysts say the yuan now overcomes one-way depreciating expectation and is likely to remain stable against the dollar in the near term, given stronger fundamentals.

The Australian dollar lost a slight 0.17 percent to 1.2515 per dollar overnight.

Commodities

WTI Oil lost 0.18 percent to $49.05 per barrel.

Brent Crude was down 0.22 percent to $54.03 per barrel.

Gold gained 0.08 percent to $1,334.63 an ounce.

Business News across Asia

In China, the question is if Facebook is about to return. Media reports said on Thursday that the US tech giant is secretly scouting out office space in Shanghai in recent months. Sources said Facebook is looking to use the office space to develop hardware and expand its business in China.

Take away: Facebook is currently banned in China, but has shown great interest in the Chinese market. After all, no major Internet company would miss the giant market there. But how Facebook will surpass the strict controls imposed by Chinese officials remains to be seen.

In India, nationalism seems to be on the rise. Indian society has always been filled with tough talks against its neighbors Pakistan and China. But that seems to have escalated. An Indian army chief is making rounds in Indian media after urged to prepare for simultaneous war with China and Pakistan.

Take Away: India just made peace with China over a months-long military stand-off at the border between the two countries. New talks of war and rising nationalism could plague one of the world’s most dynamic economies. Economic growth already slumped to a three-year low of 5.7 percent in the latest quarter ended June.

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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4.3 stars on average, based on 37 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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Analysis

Stocks Mixed as Dollar Tests Highs Again

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Choppy summer trading conditions continue to dominate traditional financial markets, with low train volumes and relatively narrow intraday ranges in most of the asset classes. Despite the low activity, there is still a clear rising trend in US markets, while the rest of the world tries to gather some bullish momentum despite the widespread technical relative weakness.

Trump’s controversial meeting with Putin still made the most headlines, although stocks largely ignored the story, while trade war fears and the Brexit drama had much stronger impacts, with especially the Pound performing weaker than its peers.

Dow Futures, 4-Hour Chart Analysis

The Nasdaq is still trading just below its all-time high, despite today’s weaker session, while the S&P 500 hit another marginal 5-month high today, with the Dow still lagging behind the rest of the market. The ongoing earnings season also adds to the choppiness of the day-to-day price action, and with the deep global divergences still present, we remain defensive towards equities here.

Shanghai Composite, 4-Hour Chart Analysis

Asian equities experienced a bounce in the last couple of weeks, but China which has been the epicenter of the weakness in June is still struggling to join the move. The trade-war torn Shanghai Composite is still trading near its recent lows, confirming the bear market, while the Yuan hit new 12-month lows compared to the USD in the last couple of days again.

Commodities Mixed as Yuan Tumbles but Dollar Rally Looms

Emerging market currencies are generally under pressure, and the Dollar has been pushing higher against its major peers as well today, with the Great British Pound and the Euro both sliding towards their June lows, and the Yen hitting a new year-to-date low before the afternoon pullback in the Greenback.

Dollar Index, 4-Hour Chart Analysis

The Dollar’s rally, which was boosted by the lower than expected British CPI release in European trading paused somewhat in late trading, after the Dollar index got close to its 1-year high. The US housing market showed a huge drop in activity in July, with Building Permits disappointing and Housing Starts falling off a cliff unexpectedly. The rising yields, which are behind most of the moves this year, are talking a tall on the segment, and that could be a major drag on GDP growth in the coming quarter.

Gold Futures, 4-Hour Chart Analysis

Commodities posted a reversal-like performance today, with gold, oil, and copper all rebounding off their early lows, but for now, the bearish short-term trend remains dominant in the segment. The bounce in gold still left the precious metal below short-term resistance at $1240, while copper is still bouncing around just above long-term support. WTI Crude Oil which lost more than 10% in a matter of days, found support at $66 per barrel, entering a consolidation phase after the rout.

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 294 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: U.S. Stocks Rally on Banks, Industrials; Fed’s Powell Sees Big Risks in Cryptocurrencies

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U.S. stocks traded in positive territory Wednesday, as earnings tailwinds propelled banks and industrials companies higher while a slump in energy shares subsided.

S&P 500, Dow Rise

The large-cap S&P 500 Index rose 0.2% to 2,815.62, its highest in over five months. Gains were largely concentrated in just two sectors, with financials rising 1.5%. Industrials stocks, which include airlines and railroads, jumped 1.1%.

On the opposite side of the ledger, consumer staples and utilities companies were the biggest drags on growth, falling at least 0.6%.

Dow industrials added 79.40 points, or 0.3%, to finish at 25,199.29.

The technology-heavy Nasdaq Composite Index finished at 7,854.44, virtually flat for the day after reporting only minor upside earlier.

A measure of implied volatility known as the CBOE VIX touched new six-month lows Wednesday. The so-called “fear gauge” bottomed at 11.44 on a scale of 1-100 where 20 reflects the historic mean.

Powell: Cryptocurrencies Lack Intrinsic Value

Federal Reserve Chairman Jerome Powell lashed out against cryptocurrencies Wednesday in round two of his semiannual testimony before Congress. According to Powell, crypto-assets present serious risks to unsophisticated investors who are more likely to react to large fluctuations in market prices.

“There are investor and consumer protection issues as well,” Powell told the House Financial Services Committee before adding that digital assets lack intrinsic value.

Despite heading the most powerful central bank in the world, Powell’s take on cryptocurrency is hardly unique and suffers from the same ‘lack of sophistication’ that he says characterize bitcoin investors. As Hacked recently showed, arguments against crypto’s intrinsic value fail to take into consideration the vast resources required to maintain individual networks such as bitcoin.

Although Congress remains skeptical about digital assets, federal securities regulators are loosening their restrictions on the market. The U.S. Securities and Exchange Commission (SEC) has deemed bitcoin and Ethereum to be non-securities while at the same time opening up new avenues for security tokens to be traded on regulated exchanges.

Cryptocurrency Market Cap Approaches $300 Billion

Cryptocurrency prices continued higher Wednesday, as bitcoin’s sudden rally sparked a wider uptrend in altcoins, resulting in the highest market valuation in over a month.

Bitcoin traded above $7,500 on major exchanges while major altcoins like Cardano and Stellar Lumens put up double-digit gains. At the time of writing, the total cryptocurrency market was valued at $288 billion, according to CoinMarketCap. The market’s total value peaked above $297 billion.

The large uptrend has been accompanied by an equally impressive jump in trading volumes. Total market turnover exceeded $21 billion for the first time since May. It’s also a 70% increase from week-ago levels.

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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4.6 stars on average, based on 499 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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Market Overview

DJ King Crypto Banker

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Hi Everyone,

If you’re reading this, you probably agree that the old school financial industry is in need of a shakeup. It seems that Goldman Sachs agrees.

This hit track is a remix of the old Fleetwood Mac song “Don’t Stop Thinking About Tomorrow.” It was created by Goldman’s incoming CEO David Solomon (AKA: DJ D-Sol). Named after two ancient kings and an angel, Solomon will assume the throne on October 1st.

Current CEO Lloyd Blankfein was famously indecisive about cryptocurrencies, yet over the last few months, it’s become clear that the bank is ramping up their cryptotrading activities in a big way.

Solomon has been a lot more clear on crypto and has gone on record saying that Goldman is focused on crypto due to a high level of demand from their clients.

@MatiGreenspan
eToro, Senior Market Analyst

Today’s Highlights

  • Dollar Climbs – Gold Falls
  • Bitcoin Party Time
  • Double Double Crypto Day

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

Traditional Markets

President Trump admitted yesterday to making a mistake. After causing a global stir backing Putin over the FBI at the Helsinki summit, Trump has now walked back his comments and even admitted for the first time that he agrees with the assessment that Russia was indeed behind the meddling in the 2016 elections.

Though many remain unconvinced, the markets remain unfazed and instead the focus from many analysts remains on the possibility of a ramped up trade war with China and on the Fed’s actions.

In his testimony yesterday, Fed Chair Jerome Powell did his best not to be political but did note that the effects of further tariffs would likely be felt throughout the US economy. Today Powell testifies before the House Financial Services committee. We can probably expect further questions from the House regarding the specific reaction the economy might have to said tariffs.

Stocks are rather mixed today but we do have notable moves in the currency market where the US Dollar is gaining strength.

The US Dollar Index is once again bumping up against resistance at 95 points. If this level is passed, it could lead to further gains, especially since the United States seems to be a lot more aggressive than the rest of the world on their plans to raise interest rates.

In line with the stronger Dollar, the metals have continued to decline. Gold is now the cheapest it’s been in over a year.

Bitcoin Surge!!

After more than a month of doing nothing, bitcoin broke out yesterday rising $656 in 40 minutes, bringing life and optimism back into the market.

Here we can see the strong break above the key resistance level of $6,800, clearing quickly past $7,000 then spending a short time above $7,500 before a retracement.

By looking at the volumes, it seems that the cause of the surge was from some fresh money entering the market. This graph from www.cryptocompare.com shows the incredible volume spike at the time of the surge.

This one shows the volumes by currency. The blue circle is the exact time of the surge. Notice the spike in USD volumes?

Lately, we’ve been seeing a trend that Tether (USDT) has been becoming more prominent in overall volumes. Tether volumes generally indicate cryptotraders speculation on the exchanges. The fact that this surge happened on USD and not Tether might indicate that it is due to fresh money coming in.

Double Double Crypto Day

Today the US Congress is set to hold not one, but two separate hearings that relate to cryptocurrencies. This is a clear sign that the US government is taking the crypto industry seriously and it seems that point of both hearings will be to help not harm innovation in the space.

The double-header comes as the SEC’s mailbox is reportedly inundated with letters from citizens urging them to approve VanEck’s Bitcoin backed ETF at their hearing on August 10th.

Shifting over to Wall Street, it seems that the bitcoin monthly futures contracts on both the CME and the CBOE group will expire today. As we’ve stated before, there is nothing to fear from the expiration of these contracts. The chances that any large player is trying to manipulate the markets using them is very slim.

Just to get a picture of the volumes of these markets, I’ve pulled the following graph from the Bloomberg terminal for you. This shows the daily volumes on the CBOE’s XBT futures since inception.

The small white line shows the average daily turnover, which is just under 5,000 BTC.

Even though the volumes on the CME are higher, it’s less significant for this analysis since they are using a more complex index as a reference rate for contract settlement and thus would be much more difficult for anyone to try and manipulate.

As always, let me know if you have any questions, comments, or feedback. I’m always happy to hear them. Let’s have an excellent day 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,
Mati Greenspan
Senior Market Analyst

Connect with me on….

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 115 rated postsSenior Market Analyst at Etoro.com.




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