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Asian Market Update – Tuesday: Asian Markets Fall on North Korean Missile Test over Japan

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North Korea missile launch

The Big Question: How will the US respond to the latest missile test by North Korea?

Major equity markets in Asia suffered from a North Korean ballistic missile that flew over Japan early Tuesday morning, as investors in the region went into a risk-off mode, searching for safe-haven assets.

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The South Korean stock market saw the steepest fall, as the benchmark KOSPI plunged 1.13 percent to 2343.60 before midday.

In Japan, the Nikkei 225 was down 0.61 percent, trading at 19,330.95 before midday.

Down under, the ASX 200 also dropped 0.91 percent to 5,657.80.

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However, in Greater China, the stocks were mixed. The Shanghai Composite Index gained a slight 0.20 percent to 3,366.13 and the Hong Kong Hang Seng Index was down 0.46 percent, trading at 27,735.83.

The fall in major Asian markets came after North Korea fired a ballistic missile over Japan on Tuesday morning. Such launch over Japan is said to be the first since 2009.

A Japanese government spokesman called the launch “unprecedented, grave and a serious threat” to the country.

The move also highlighted that the North Korean regime is far from backing down on its missile or even nuclear program, despite recent sanctions approved by the UN Security Council.

That prospect of further intensified tension on the Korean Peninsula has rattled investors, who will most likely seek for safe-haven assets such as gold and US Treasury notes.

The missile launch already pushed gold prices up as much as 0.55 percent at $1,316.43 during the Asian trading session.

That could be just the beginning as investors are now waiting for a response from US President Donald Trump, who had previously warned of “fire and fury.” If the US responds to the latest launch with more than words, global markets could enter a risk-off mode.

Market-sensitive news this week to watch: 1. US response to North Korea’s missile launch; 2. Impact of Hurricane Harvey off the US Gulf Coast; 3. Economic data from Japan, the US, Hong Kong and Australia later in the week; 4. NAFTA talks; 5. UK’s Brexit talks with the EU; 6. 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 19,330.95 -0.61%
China-Shanghai Composite Index 3,366.13 0.2%
Australia-ASX 200 5,657.80 -0.91%
Hong Kong-Hang Seng 27,735.83 -0.46%
South Korea- KOSPI 2,343.60 -1.13%

Cryptocurrencies

The bitcoin price is nearly unchanged in the Asian trading session, trading at $4,380.

Ethereum gained 0.48 percent to $348.75, after moving up from about $343 the night before.

Currencies

The Japanese yen gained 0.38 percent against the US dollar at Midday. The USD/JPY rate was at 108.81. The gain came after the North Korea missile launch. The yen had previously lost to as much as 108.86 in early morning trading before it rebounded.

The Chinese yuan strengthened marginally against the greenback, trading at 6.6078 per dollar. The yuan has been rising quite consistently against the dollar since Friday, when the yuan was trading at as high as 6.6667 per dollar.

The Australian dollar lost 0.15 percent against the US dollar. The Australian dollar was trading at 1.2614 per dollar before midday.

Commodities

WTI Oil was down 0.04 percent at $46.77 per barrel.

Brent Crude gained 0.19 percent to $52.07 per barrel.

Gold gained 0.53 percent to $1,316 per ounce.

Business News across Asia

In China, more mergers among State-owned companies. The Chinese government has approved a merger between the two energy giants China Guodian Group Corp and Shenhua Group. The two will form a new joint venture focusing on energy investment. Shenhua’s shares in Hong Kong gained 1.7 percent on Tuesday, while Guodian’s Hong Kong shares were down 1.8 percent in early hours of the Asian trading session.

Take away: The move, followed a few recent high-profile mergers among State-owned companies, highlighted the government’s determination to push forward reforms of the state-owned companies to improve efficiency. The moves will also give private investors a shot in these companies and actually have a stronger say in the decision-making.

In Japan, investors and government officials are stunned over North Korea’s latest missile that flew over North Japan’s Hokkaido Island. The government has responded in tough words, warning grave threats but has not announced any response in action.

Take Away: Japan is unlikely to move ahead with any action on its own, it will consult with the US before any concrete decision. However, that uncertainty might further rattle investors.

In India, the Indian Commodity Exchange has launched the world’s first derivatives trading platform for diamonds. The move is aimed at forming a transparent pricing mechanism for the precious stone. On the first day of trading, more than 3,000 contracts were traded.

Take Away: Though details on the platform still remain murky, this could mean there is a new alternative to gold and other precious metals.

Also noteworthy, a lengthy stand-off between China and India on the border has ended peacefully on Monday, after the troops were withdrawn from the disputed area. Though India and China have different versions of who withdrew from the area, the move, coming ahead a BRICS Summit in China over the weekend, cleared up some tension between the leaders ahead of the summit.

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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