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Asian Market Update – Wednesday: Asian Stocks Trade Higher as China Announces New Leadership, ECB Meeting

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Politburo standing committee

The Big Question: What can markets expect from the new Chinese leadership?

Most Asian stock indexes were pointing higher during the Asian trading session on Wednesday, as they followed the announcement of the new Chinese leadership line-up in Beijing and a meeting of the European Central Bank scheduled for Thursday.

In China, the Shanghai Composite Index was up 0.13 percent to about 3,392 before midday. In Hong Kong, the Hang Seng Index was up 0.68 percent to around 28,345.

In Japan, the Nikkei 225 added 0.12 percent at around 21,830. The benchmark is now shooting for a 17 day long winning streak, though gains getting smaller.

In South Korea, the Kospi moved up 0.07 percent to around 2,492 shortly before midday.

Down Under, the ASX 200 was up 0.12 percent to around 5,904. Fresh data showed that Australia’s third-quarter consumer prices were surprisingly soft, making it the seventh straight quarter that inflation has undershot the country’s central bank target, reinforcing the case for keeping rates low.

Media attention in Asia is focused on the recent announcement of new members of China’s Politburo Standing Committee, the most powerful group of leaders in the country. The new leadership was presented at a press conference in Beijing around noon local time, after emerging from closed-door elections at the end of the weeklong 19th Party Congress that ended yesterday.

Chinese President Xi Jinping and Premier Li Keqiang were both re-elected for another five-year term in the Standing Committee.

Markets are also paying attention to a meeting of the ECB scheduled for Thursday, looking for cues on monetary policy changes. Analysts, however, say the ECB is expected to be very cautious in their statement, with few clear signs of future direction expected.

Main Market Movers – Mid-day Asian Trading Session

Indexes Value at Midday Daily Change
Japan- Nikkei 225 21,830 0.12%
China-Shanghai Composite Index 3,392 0.13%
South Korea-KOSPI 2,492 0.07%
Hong Kong –Hang Seng 28,345 0.68%
Australia-ASX 200 5,904 0.12%

Cryptocurrencies

Prices of the main cryptocurrencies were pointing lower overnight during Asia’s morning trading session on Wednesday.

At midday in Asia, bitcoin was down 1.28 percent to $5,452. Bitcoin has now been stuck in a downtrend for a fourth straight day, falling back from its all-time-high of almost $6,200.

Ethereum also lost 1.87 percent to about $291 before midday. Wednesday morning’s loss nearly erased a major gain seen yesterday, when the virtual currency surged more than 5 percent.

Litecoin was down 1.8 percent to about $54 as of midday in the Asian trading session.

In the News: Central banks appear to have mixed feelings about cryptocurrencies. A Taiwanese central bank official said on Wednesday that anti-money laundering laws should regulate bitcoin trading. On the other hand, Singapore’s central bank chief said his country won’t regulate bitcoin.

Currencies

The Japanese yen gained 0.03 percent against the US dollar at midday Wednesday to 113.86 per dollar.

The Chinese yuan lost 0.11 percent against the US dollar to 6.6408 per dollar.

The Australian dollar also lost 0.62 percent on the dollar, changing hands at 1.2940 per dollar at midday.

Commodities

WTI Oil was down 0.17 percent to $52.41 per barrel.

Brent Crude lost 0.26 percent to $58.36 per barrel.

Gold was down 0.10 percent to $1,274.44 an ounce.

Business News across Asia

In China, US electric carmaker Tesla has confirmed that it will open a factory in Shanghai. Reports said that the factory would be wholly owned by Tesla, making the company the first foreign car company to have a wholly owned operation in China.

Take Away: Chinese regulations require foreign carmakers to partner up with local companies in order to set up an operation in the country. If the Tesla plan goes ahead, it could set a positive precedent for more to follow.

In Japan, Prime Minister Shinzo Abe’s ruling party may have won a majority in parliamentary elections, but half the people said they don’t want him to be the prime minister, a newspaper survey showed. Separately, the Japanese government is reportedly mulling measures to expand tax incentives for companies to boost wages.

Take Away: Though there is little doubt that Abe will remain as prime minister, the opposition appears to be stronger, which could weigh on Abe’s power to push for his policy initiatives in his new term.

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

Volatile and Flat US Session Ends a Hectic Week for Stocks

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The major US indices finished virtually unchanged today, despite the positive open, while short-dated Treasuries closed the week near their multi-year lows. The session had several ups and downs, but the uptick in yields and the weakness in Europe proved too much for a sustained move higher to develop, despite the string of better-than-expected quarterly earnings reports.

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

From a broader perspective we can say that another bounce faded in stocks, with small-caps underperforming yet again, so the risk-off trend got one more confirmation.

Russell 2000, 4-Hour Chart Analysis

We have been tracking the main US small-cap benchmark all week long, as it has been precisely leading the broader market in recent weeks, and today the index got very close hitting a new 6-month low. The next week will be crucial for global risk assets, as given the long-term breakdowns in the main European benchmarks, the new bear market lows in Chinese stocks, and the ugly market internals on Wall Street, this might be the last opportunity to avoid protracted bearish period, or even a global bear market.

While Italian assets are under severe pressure, with government bond yields charging higher, decoupling from the “core” of the Eurozone, credit markets in general are not showing signs of broad distress. With that in mind, we don’t expect 2008-like dislocations in financial markets, for now, but investors should watch high-yield corporate bonds, where large excesses built up in recent years.

Forex Markets Turn Choppy as Dollar Pulls Back Again

EUR/USD, 4-Hour Chart Analysis

The China-led rebound in equities, which faded in late trading, and the Dollar’s retreat were the two main drivers in forex markets today. The EUR/USD recovered above the key 1.15 level after reaching as low as 1.1430 in early trading, while the Dollar index also failed to rise above its recent swing high, so the reserve currency could continue to consolidate before re-testing the August lows.

The bounce in the Euro was helped by the rumors regarding a possible new budget proposal from Italy, and as Moody’s downgraded Italy after the US market close, we will likely see further choppy, hard-to-trade action in currencies, especially given the large moves in US Treasury yields.

Gold Futures, 4-Hour Chart Analysis

Commodities had a mostly bullish day thanks to the Dollar’s dip, with copper and crude oil both recovering after yesterday’s selloff. The WTI crude contract bounced back all the way to the $70 per barrel level, while copper avoided a key breakdown out of its lengthy consolidation pattern.

Gold is also consolidating, albeit in a much different technical position, as the precious metal is trying to form a swing low that would confirm a short-term uptrend after last week’s breakout. A move above short-term resistance would likely lead to a test of the $1245-$1250 zone, with a likely rally up to the next major resistance level near $1260.

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 380 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 Settle Mixed in Choppy Trade; Cryptocurrencies Endure Modest Pullback

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U.S. stocks traded mixed on Friday, as only one of three major bourses managed to bounce back from the heavy losses incurred in the previous session. Cryptocurrencies showed signs of wobbling early on before a modest recovery kept the market near break-even.

Stocks Lose Steam

The large-cap S&P 500 Index held higher up until the final moments of trade before running out of gas. It settled flat at 2,767.78 following a back-and-forth session. Among the 11 major sectors tracked by the index, five reported gains. Consumer staples were the strongest contributors, surging more than 2% as a whole. Utilities companies and financials stocks also reported firm gains.

The Dow Jones Industrial Average also finished in positive territory, adding 64.89 points, or 0.3%, to close at 25,444.34.

Meanwhile, the technology-driven Nasdaq Composite Index fell further into the red, shedding 0.4% to 7,449.03.

A measure of implied volatility known as the CBOE VIX held near the historic average on Friday, as the recent string of tumultuous sessions eroded risk sentiment on Wall Street. The so-called fear gauge closed just below 20 on a scale of 1-100.

U.S. equity markets pulled back sharply on Thursday as China-induced volatility weighed on investors’ sentiment. Chinese stocks led a global recovery on Friday as policymakers offered soothing remarks on the health of the economy. Still, the benchmark Shanghai Composite Index is down double-digits this month.

Earnings Show Promise

Another batch of upbeat corporate earnings have helped smooth out the recent bout of volatility in U.S. markets. On Friday, Dow blue-chip Procter & Gamble (PG) reported better than expected revenue growth as well as the sharpest rise in quarterly sales in five years. The company posted adjusted per-share earnings of $1.12 on revenues of $16.69 billion.

Other companies to report higher than expected results include Honeywell International Inc. (HON) and Schlumberger Limited (SLB).

As of last Friday, 86% of S&P 500 companies had reported earnings surprises for Q3, according to FactSet. The current blended earnings growth rate for S&P 500 companies is 19.1%.

Crypto Volumes Plunge

Cryptocurrency prices saw limited upside on Friday, as a sharp decline in trading volumes kept investors on the sidelines. The combined market capitalization of all coins bottomed near $206 billion overnight Thursday before recovering near $208 billion. Overall, the market is little changed compared with previous sessions.

Trade volumes are down some 6% over the previous day and nearly 20% compared with a week ago. As CCN recently reported, daily turnover in bitcoin is approaching yearly lows – a clear indication that bullish upside is limited.

Bitcoin posted a quick and dramatic upsurge on Monday as Tether’s USDT token lost its peg to the U.S. dollar. According to Galaxy Digital’s Mike Novogratz, the selloff of USDT is due to a lack of transparency at the parent company.

“I think Tether didn’t do a great job in terms of creating transparency,” he said at a recent conference in Frankfurt, as quoted by Bloomberg. Until now, Tether has refused to provide an audit of its dollar-backed reserves, igniting concerns that it was artificially inflating its stablecoin circulation.

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 648 rated postsSam Bourgi is Chief Editor to Hacked.com, where he leads content development for one of the world's foremost cryptocurrency resources. Over the past eight years Sam has authored more than 10,000 articles and over 40 whitepapers in the fields of labor market economics, emerging technologies, cryptocurrency and traditional finance. Sam's work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Contact: sam@hacked.com Twitter: @hsbourgi




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Analysis

Pre-Market Analysis And Chartbook: Risk Assets Higher Thanks to Chinese Bounce

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Friday Market Snapshot

Asset Current Value Daily Change
S&P 500 2,797 0.81
DAX 30 11,568 -0.18%
WTI Crude Oil 69.61 1.35%
GOLD 1,230 0.16%
Bitcoin 6,379 -0.24%
EUR/USD 1.1480 0.24%

Risk assets are having an active and already very busy day after yesterday’s tumultuous session, as volatility continues to be high, especially in equities. All eyes were on Chinese stocks and the Yuan today in early trading, as several key economic numbers were published in the country. Chinese officials lived up to the occasion, doing everything in their power to prop up the market verbally and most likely more directly too.

USD/CNH, 4-Hour Chart Analysis

Chinese stocks started the day lower due to yesterday’s broad global selloff, and although they surged higher towards the end of the session, erasing their early losses, the main benchmarks remain in steep downtrends on all time-frames, and the Yuan is also very close to its cycle lows.

Shanghai Composite Index CFD, 4-Hour Chart Analysis

The quarterly GDP and industrial production came in slightly below expected, continuing the deterioration of the recent quarters, while retail sales beat the consensus estimate, as the consumer segment is still outperforming.

 While the official numbers are far from disastrous, it’s hard to trust the government statistics, given the history of “controlled” releases, and looking at the unofficial indicators, the country’s economy and financial system are under larger stress than reported.

EuroStoxx50 Index CFD, 4-Hour Chart Analysis

Global stock futures celebrated the Chinese rally for a few hours, but a large chunk of the gains is already gone near the end of the European session, and the focus is back on the Italian budget crisis and the looming Brexit deadline.

The Italian banking sector is under heavy pressure on rumors suggesting increased capital flight from the country and although the Euro is stable, the risk-off trade is well and alive on the Old Continent.

The EuroStoxx 50, which has been performing relatively well form a long-term standpoint failed to leave the vicinity of the spring lows, and the mega-cap index is now threatening to join the long-term breakdown of the DAX after the decline of the past couple of sessions.

US Stocks Rebound as Dollar Rally Pauses

Dow 30 Futures, 4-Hour Chart Analysis

The major US indices opened modestly above yesterday’s closing levels, as Treasury yields settled down following the volatile post-Fed-minutes period. The Dow, the S&P 500, and Nasdaq are all stuck in declining short-term trends, and despite the recent strong bounce, last week’s panic lows are still close.

The Volatility Index (VIX) fell back below 20 today, small caps are performing in line with the broader market, so while we remain bearish form a broader perspective, the immediate outlook for equities is mixed, with no strong divergences before the last session of the week.

Today’s bounce is helped by the better-than-expected earnings report of Procter & Gamble (PG), which opened 6% higher, and the slight pullback Dollar, which got close to its 2-month highs today in European trading. Forex markets, in general, are showing a risk-on bias today, with the Australian Dollar and the Kiwi being helped by the Chinese bounce, and with Pound being stable after yesterday’s selloff.

ChartBook

Major Stock Indices

S&P 500 Futures, 4-Hour Chart Analysis

Nasdaq 100 Futures, 4-Hour Chart Analysis

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

DAX 30 Index CFD, 4-Hour Chart Analysis

FTSE 100 Index CFD, 4-Hour Chart Analysis

Nikkei 225 Futures, 4-Hour Chart Analysis

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

Forex

EUR/USD, 4-Hour Chart Analysis

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 380 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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