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Market Update: Asian Stocks Steady as Investors Brace for Most Important Week of the Year

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Stock markets throughout Asia traded higher on Monday, as investors cautiously awaited a flurry of activity tied to geopolitics and monetary policy over the next five days.

Asian Stocks Trade Higher

Markets from Japan to Hong Kong were off to a positive start Monday. Japan’s 225-issue Nikkei gained 0.6% by the early afternoon session. The Topix Index, another Japanese benchmark, gained 0.5.%.

Over in Hong Kong, the Hang Seng Index rose 0.3% by midday local time. Mainland China’s CSI 300 Index was up 0.2%.

Futures trading was mixed for U.S. and European indexes, which pointed to a soft start to the day on Monday. Dow Jones mini futures were up 22 points at 12:29 a.m. ET. S&P 500 and Nasdaq minis were down slightly.

In commodities, U.S. oil futures traded below $66 a barrel after a Friday report showed another uptick in domestic drilling operations. ICE Brent futures also traded slightly lower ahead of a planned output hike from Saudi Arabia and other major producers.

In currencies, the U.S. dollar steadied against a basket of peers as investors awaited new developments on the economic and policy fronts. The dollar index (DXY) is down roughly 1.4% from last month’s high.

Most Important Week of the Year?

The wave of events over the next five days has Bank of America asking clients whether the world economy is headed for the most important week of the year. A tumultuous end to the G7 Summit in Quebec, where President Trump refused to endorse a joint communique, punctuated what is expected to be a volatile week for the financial markets.

Kit Juckes, a global strategist with Societe Generale SA, told investors not to be “lulled into a false sense of security” following Monday’s tepid start.

As President Trump prepares for his summit in Singapore Tuesday with North Korea’s Kim Jong-un, the U.S. Federal Reserve will begin its two-day policy meeting in Washington. The official rate announcement, which is scheduled the following afternoon, could provide important guidance on the pace and timing of future interest rate adjustments.

The European Central Bank (ECB) will also conclude policy talks later this week as policymakers ready for the gradual unwinding of their multi-year stimulus program. Although no change in policy is expected, ECB officials could spell out their plans for July and beyond.

Meanwhile, British Prime Minister Theresa May is expected to urge fellow Conservatives to unit behind the party ahead of a landmark vote on the EU withdrawal bill. Prime Minister May wants to deliver Brexit, but will have to contend with rebels within her own party who oppose her exit strategy.

Brexit Secretary David Davis is scheduled to arrive in Brussels on Monday for another round of neogtiations with EU counterpart Michael Barnier.

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 458 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

Market Update: Dow Drops Nearly 300 Points on Trade War Threat

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U.S. stocks extended losses Tuesday, with Dow industrials registering their fifth consecutive decline after President Trump signaled to his administration that an additional round of Chinese tariffs could be on the way.

Stocks Tumble

All of Wall Street’s major indexes headed for losses as trade and political risks kept equity investors on the sidelines. The Dow Jones Industrial Average plunged 287.26 points, or 1.2%, to 24,700.21. Boeing Co (BA), Caterpillar Inc. (CAT) and DowDuPont (DWDP) were among the biggest decliners, falling at least 2.6%.

The broader S&P 500 Index headed for a loss of 0.4% to close at 2,762.57. Six of 11 primary sectors contributed to the declines, with industrials and materials each falling more than 1.8%.

The technology-driven Nasdaq Composite Index declined 0.3% to 7,725.58.

The CBOE Volatility Index, commonly known as the VIX, surged to its highest level in about three weeks. Wall Street’s preferred measure of investor anxiety jumped 8.5% to 13.35 on the scale of 1-100 where 20 represents the historic mean. The fear index touched a session high of 14.68.

Trade War Threat Escalates

U.S. President Donald Trump has warned China not to retaliate to Washington’s first round of export tariffs, which target up to $50 billion in Chinese goods.

Trump has asked his administration to prepare an additional list of $200 billion in Chinese goods that could be subject to tariffs should Beijing follow through with its threat to tax U.S. exports. This so-called second tranche of goods would be taxed at a rate of 10%. The first round of levies, which was confirmed Friday, will subject Chinese goods to a tax of 25%.

“Further action must be taken to encourage China to change its unfair practices, open its market to United States goods, and accept a more balanced trade relationship,” the U.S. president said in a statement.

China has vowed to implement a tariff policy of equal force and measure to the one Washington announced last week.

Earlier on Tuesday, the Senate passed a measure reinstating a ban on purchases of U.S. components by Chinese telecommunications giant ZTE Corp. that nearly shuts down the company. President Trump had sought to overturn the ban.

Cryptocurrencies Show Poise

Digital currencies continued to hold gains after prices jumped $13 billion in one hour of trading Monday afternoon. At the time of writing, the combined value of all crypto assets in circulation is $291.4 billion, according to CoinMarketCap.

Five of the top-ten coins by market cap are reporting gains over the last 24 hours, led by Tron’s more than 8% surge.

Bitcoin reached a high of $6,843.03, its best levels in a week. The largest cryptocurrency by market cap was last trading at $6,776.

Ethereum peaked at $542.35, its strongest showing in more than a week. Ether prices were last up 3.7% at $537.

The digital currency market has rebounded $27 billion from last week’s swing low. Much of the recent gain has been attributed to New York’s approval of a crypto trading app on Monday. The Department of Financial Services has granted Square’s Cash app a virtual currency license, which gives state residents the opportunity to buy and sell bitcoin on platform.

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 458 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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Analysis

Pre-Market: Stocks Extend Losses on Next Round of US Tariffs

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The main European and Asian indices and US stock futures are all significantly lower just before the Wall Street session, as Donald Trump announced that the administration will seek to extend the trade tariffs targeted at China. The extension would affect another $200 billion of products, and it would be a major escalation of the, so far relatively limited trade skirmish.

Shanghai Composite, 4-Hour Chart Analysis

Asian markets are underperforming as Chinese equities have been smashed below key support in the wake of the announcement, but the previously outperforming US indices are also close to breaking their short-term uptrends. That said, the Nasdaq continues to be relatively strong, and the Russell 2000 is the best performing global benchmarks, as small-cap stocks are benefiting from the trade tariffs.

S&P 500, 4-Hour Chart Analysis

The housing market has been in focus with regards to economic releases, and while housing starts beat the consensus estimate, the more forward looking building permits unexpectedly declined in May. As the Fed is expected to continue with rate hikes, at least until the end of the year, further cooiling of the housing market is likely as mortgage rates are steadily rising.

Dollar and Yen Shine

Dollar Index (DXY), 4-Hour Chart Analysis

Forex markets are reflecting the risk off shift as well, with the US Dollar and especially the Japanese Yen performing well, and the Euro, the Aussie, and the Canadian Dollar lagging behind. Emerging Market currencies are still under heavy selling pressure, as trade war fears sparked flight to safety flows.

USD/TRY (Turkish Lira), 4-Hour Chart Analysis

While European markets are only hitting one-month lows, the Turkish Lira and the Brazilian Real are trading near all-time and multi-year lows respectively, as the Dollar’s strength continues to hut the fragile currencies.

Treasury yields are lower, but as safe haven flows are still concentrated on the longer end of the curve, short-term yield pressures haven’t eased much while the flattening of the yield curve continues in earnest.

Gold Futures, 4-Hour Chart Analysis

Commodities are in the red across the board, as the risk-off trade spread to the segment, with gold outperforming somewhat. The precious metal is still well below the $1300 level after last Friday’s steep drop, and it briefly spiked below the $1275 level as well. We still expect gold to resume it’s uptrend so the current levels could be good for accumulating investment positions in the metal. Crude oil is also lower, as volatile trading continued as expected, with the WTI contract trading near the $65 per barrel level before the OPEC meeting.

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 277 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

Escalation Overflow

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Hi Everyone,

Financial markets appear to be reacting to the latest escalation in the trade war between the U.S. and China.

It now appears that the United States may have the upper hand due to the wide trade imbalance between the two nations. Indeed, it would be very difficult for the Chinese to find $200 billion worth of US imports to curtail.

Under the circumstances, I guess you could say that markets are holding up pretty well, as we’ll see below. Even though the declines are sizeable, this doesn’t come close to the volatility we saw in February.

President Trump’s approval ratings are now as high as they’ve ever been despite outrage over recent hardline anti-immigration actions that saw authorities separating more than 2,300 children from their parents.

@MatiGreenspan
eToro, Senior Market Analyst

Today’s Highlights

  • Stocks Minor Sell-off
  • What Brexit Negotiations?
  • Crypto Off the Lows (Focus on ETC)

Traditional Markets

Looking at the financial markets today it seems there is a bit of fear creeping in.

The Chinese stock market is down 3% and the Japanese market isn’t far behind with losses of 2.5%. Though these are quite substantial movements for any stock index, by putting things in context on the long-term chart we can see that it’s not the end of the world.

Please notice how in February, before the whole trade tensions began, the stocks experienced a much sharper sell-off.

On this chart of the VIX we can also see that even though volatility spiked yesterday, it’s still way below the levels seen in early February.

What is becoming more pronounced lately is the domination of the US Dollar.
The Greenback seems to be rising against just about everything over the last few months.

Here we can see the strength of the British Pound against the Buck since the Brexit referendum in 2016. We’re testing a critical level now at 1.3200

Please don’t make the mistake of thinking that this has anything do with the recent UK government uncertainty either. No matter the level of pressure Theresa May is under, the fate of the Pound may be more reliant on what happens with the US Dollar than on anything else.

As we can see above, the Euro and the Pound have both been pretty weak this quarter. To illustrate this further, take a look at the EURGBP, which hasn’t moved much over the last year.

Crypto Bounce

Digital assets pricing is up 2% to 4% across the board as the market shows exceptional resilience to the FUD.

Bitcoin itself has bounced noticeably above the support of $6,100 per coin and is trading above $6,700 this morning.

Outperforming the market by far is Ethereum Classic, which has seen some remarkable progressions lately in usability and liquidity. ETC is up 8% over the last 24 hours, which is more than any other widely circulating cryptocurrency.

For the first time ever, we can see that Google searches for Ethereum have surpassed those of Bitcoin Cash, the other famous hard fork coin.

Most interesting is the search trends in South Korea, where ETC now trumps BTC.

Looking at the long-term graph, we can see that at $15.33 per coin we’re well off the lows of $12.50, yet nowhere near the highs seen at the beginning of 2018.

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

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 103 rated postsSenior Market Analyst at Etoro.com.




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