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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

Pre-Market Analysis And Chartbook: Risk Assets Under Pressure as Fed Minutes Loom

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Wednesday Market Snapshot

Asset Current Value Daily Change
S&P 500 2,789 -0.98%
DAX 30 11,715 -0.52%
WTI Crude Oil 69.79 -3.27%
GOLD 1,229 0.13%
Bitcoin 6,429 -0.49%
EUR/USD 1.1528 -0.38%

While yesterday we saw a huge oversold rally in equities, with the help of positive corporate earnings, the easing of the US-Saudi standoff and the stability in Treasury yields, today investor sentiment shifted yet again.

Negative news regarding the US-Chinese trade war, which is very likely to intensify before the US midterms, dismal European car sales, and continued worries with regards to the Italian budget and the Brexit process all acted as bearish catalysts.

DAX 30 Index CFD, 4-Hour Chart Analysis

Although European markets followed the lead of Wall Street and rallied today in early trading, the major indices are already well below their intraday highs, after turning back from the first levels of resistance. The DAX ran into resistance near the 11,850 level, below the crucial 12,000 level that could be the line-in-the-sand in deciding the long-term outlook going forward.

The German benchmark, the FTSE 100, and the EuroStoxx 50 are all in strong declining trends, and with the most important Asian markets also under strong short-term selling pressure, the US markets have a steeper and steeper mountain to climb should they resume the bull market.

Nasdaq 100 Futures, 4-Hour Chart Analysis

The Nasdaq opened slightly below yesterday’s cash close, underperforming the Dow and the S&P 500, and since then sellers have been in control of the market. The Russell 2000 that has been showing the way for the broader market lately is deep in the red as well, and we still think that risk assets are facing a prolonged correction if not an outright bear market.

Treasury yields are stable before today’s most important release, the minutes from the Fed’s latest meeting, but the dynamics of the quantitative tightening (the shrinking balance sheets of the global central banks) are likely behind the faltering of global risk assets.

VIX Pulls Back as Dollar Attempts Rally

VIX (US Volatility Index), 4-Hour Chart Analysis

The US Volatility Index fell significantly amid the bounce in stocks, hitting the key 17 level yesterday after plunging below 20, but the chart of the measure still confirms the regime change that would be consistent with a prolonged bearish period. While the bounce could still continue, forming a more complex pattern, the volatility-conditions could very important to judge the stability of the market.

EUR/USD, 4-Hour Chart Analysis

Forex markets continue to experience heavy trading, and today the US Dollar is trying to gain back momentum after its recent correction. Although the worse than expected housing data (building permits and housing starts both missed expectations) could have been bearish catalysts today, the Greenback held on to most of its early gains.

Should the reserve currency form a swing low and continue its broader rising trend, emerging markets could be back in the crosshairs, and risk assets would face another problem. All eyes are on the support zone near 1.15 in the EUR/USD pair, as a move below that would be a bullish sign for the USD, and it would warn of a test of the August low near 1.13.

ChartBook

Major Stock Indices

S&P 500 Futures, 4-Hour Chart Analysis

Dow 30 Futures, 4-Hour Chart Analysis

FTSE 100 Index CFD, 4-Hour Chart Analysis

EuroStoxx50 Index CFD, 4-Hour Chart Analysis

Nikkei 225 Futures, 4-Hour Chart Analysis

Shanghai Composite Index CFD, 4-Hour Chart Analysis

EEM (Emerging Markets ETF), 4-Hour Chart Analysis

Forex

USD/JPY, 4-Hour Chart Analysis

GBP/USD, 4-Hour Chart Analysis

EUR/GBP, 4-Hour Chart Analysis

AUD/USD, 4-Hour Chart Analysis

Commodities

WTI Crude Oil, 4-Hour Chart Analysis

Gold Futures, 4-Hour Chart Analysis

Copper Futures, 4-Hour Chart Analysis

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 377 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

HODL – No Diggity

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Hi Everyone,

The more I watch this the funnier it gets. Really glad to see it exploding on social media today.

Video: https://youtu.be/Ihd0moB0ehM

Hats off to our amazing marketing and PR teams for continuing to hasten crypto awareness in a fun and friendly way.

@MatiGreenspan
eToro, Senior Market Analyst

Today’s Highlights

  • Lay Down The FOMC
  • May in Brussels
  • Crypto Stability

Please note: All data, figures & graphs are valid as of October 17th. All trading carries risk. Only risk capital you can afford to lose.

Traditional Markets

The US session entered euphoria yesterday as American investors seemed to forget all the friction around the world and buy up stocks like they were going out of style.

However, the rampant enthusiasm has not been shared by Asian or European investors this morning. The rally has now been called into question.

Traders will be looking towards the Fed for guidance today as they release the minutes from their last meeting at 14:00 New York time.

More Brexit

While we await an update from Brussels regarding the Italian budget proposal, on the agenda for today will be Prime Minister Theresa May, who comes to express her proposals for a new exit deal

This evening’s dinner will be attended by Emmanuel Macron, Angela Merkel, and Donald Tusk, among others. However, although her speech is the highlight of the evening, apparently May will not be staying for dinner.

We should watch for updates starting from 19:00 Brussels. What people really want to see is some sort of new solution for the Irish border. This does seem to be the only sticking point left but like a Chinese finger trap, the harder politicians pull the further we get from a solution.

Tracking the strength of the Pound Sterling against the US Dollar has been pretty pointless. Due to the global nature of the Buck, the GBPUSD pair usually reflects Dollar strength more than anything. We can however, get a good picture of the Pound by watching the EURGBP.

As we can see the pair has been in a pretty solid range over the last year and is now near the lows.

Crypto Stability

Fortunately, Tether has come a long way towards recovering its one-to-one status with the USD and is now trading on major exchanges at a small discount of about 4 or 5 cents on the Dollar.

Despite the whipsawing that we’re seeing in virtually all the traditional markets, even including Monday’s Tether wobbles, the crypto market has been extremely stable over the last few weeks.

As we’ve stated before, one of the great attractions of the crypto asset class is that historically it bears little correlation with other markets (this week’s movements being a notable exception), making it a good hedging tool.

Please let me know if you have any questions, comments, or feedback. Let’s have an amazing 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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4.6 stars on average, based on 133 rated postsSenior Market Analyst at Etoro.com.




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Analysis

Stocks Surge on Earnings as Saudi Tensions Ease

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US stocks started the session in positive territory following the positive earnings surprises by Goldman Sachs (GS) and Morgan Stanley (MS), and from then on, the floodgates opened and we saw the strongest rally on Wall Street since March. President Trump’s more diplomatic stance towards Saudi Arabia helped the bounce in stocks, together with the stability in Treasury yields, but the most important driver was the huge bearish move of last week in stocks.

The major indices all gained more than 2% amid the furious oversold bounce, with, unsurprisingly, the Nasdaq gaining the most on the day, but last week’s deep correction is still far from being erased, and given the negative market internals, we remain defensive towards equities, even regarding the short-term time-frame.

S&P 500 Index Futures, 4-Hour Chart Analysis

We were expecting a similar move since Thursday when stocks reached deeply oversold short-term momentum readings, and as we noted then, these rallies should be treated as selling opportunities, due to the broad technical weakness in emerging markets, Europe, and now on Wall Street as well.

The S&P 500 all but cleared the oversold short-term readings thanks to today’s surge and the preceding choppy consolidation phase, and now the index is near the levels where we would look for a swing high in the coming week. The Volatility Index (VIX) plunged back below, and its behavior in the coming days will be key in judging the real strength behind today’s move.

Russell 2000, 4-Hour Chart Analysis

In spite of the strong move in small-caps as well, the Russell 2000 continues to look wounded from a technical perspective, and the index is facing very strong resistance levels. According to almost all breadth measures, under-the-hood, things are also ugly, and even if the US bull market has legs, this correction is very unlikely to end with a V-shaped bottom, as a lot of healing would be needed to maintain a sustained rally.

Calm US Session in Currencies Amid Stock Surge

USD/JPY, 4-Hour Chart Analysis

Forex markets also saw corrective price action, although the main safe-haven assets, the Japanese Yen and gold gave back only a small portion of their recent gains. The Dollar finished little changed before tomorrow’s key FOMC meeting minutes, while the Pound pulled back after a positive European session.

We expect a larger move in the Greenback in the coming days, and the consolidation in Treasuries could also come to an end, and another leg higher in Yields could be the trigger that ends the oversold bounce in stocks.

Copper Futures, 4-Hour Chart Analysis

Commodities had a quiet and choppy session, except the still active gold, and although crude oil managed to bounce amid the risk-on shift, copper failed to build on its recent resilience. the industrial metal is still stuck in a bearish consolidation pattern, with all eyes on the $2.75 support and the $2.87 resistance.

The way Chinese assets will react to today’s rally will be crucial for the commodity, as a meaningful bounce could help copper to a new swing high, despite the bearish long-term pressures.

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 377 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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