U.S. equities posted modest losses yesterday with the volume remaining rather low as market participants preferred to stay on the sidelines ahead of the Federal Reserve rate decision announcement, scheduled for today and ahead of the ECB meeting, scheduled for Thursday. The Dow Jones Industrial Average, S&P 500 and NASDAQ all ended the session into red territory. The Dow slipped 64.33 points, or 0.49%, to finish at 13008.68, while the S&P 500 fell 5.98 points, or 0.43%, to end at 1379.33. The NASDAQ erased 6.32 points, or 0.21%, to close at 2939.52. For the month of July, the Dow advanced 1%, although the number of days the index was down was greater than the number of days the index tarded up. The S&P gained 1.3% for the month, while the NASDAQ inched 0.15% higher. Pfizer was the biggest gainer among blue-chip stocks, while Home Depot weighed on the Dow. The S&P telecom and tech sectors advanced, while consumer discretionary and energy stocks slipped. The CBOE Volatility Index, considered by many as the best indicator of fear in the market, moved above 18.5. Facebook marked a fresh new low as market participants extended their selling pressure after last week’s worse-than-expected company earnings and after the user base of the social media company grew at a slowing pace. U.S. Steel announced better-than-expected earnings for the second quarter, but signaled that the third-quarter results will probably fall as the global economic growth is slowing.
Asian equities dropped on Wednesday as market participants shed their positions in risky assets after the Chinese manufacturing data came in worse-than-expected, although it still indicated that the sector expanded in the last month. Investors also grew somewhat skeptical on the possibility of a further stimulus measures being announced by the U.S. Federal Reserve and the European Central Bank. China’s Purchasing Managers’ Index dropped to an eight-month low of 50.1 for the month of July from a reading of 50.2 for the month of June, indicating that Chinese manufacturing grew only slightly. Analysts were expecting to see an increase to 50.3. The data indicated that the world’s second largest economy is slowing in a response to the signs of decelerating Asian growth, with major Asian economies such as Japan, South Korea and Taiwan all releasing disappointing economic figures on Tuesday. Markets pared some of their early losses after the HSBC Purchasing Managers’ Index (PMI) for China came in slightly better-than-expected, climbing to a five-month high to a seasonally adjusted 49.3 in July. But the index still remains below the important 50 threshold, which is its ninth such month in a row. The FTSE CNBC Asia 100 Index, which tracks the performance of markets across Asia, slipped 0.2%. Shanghai stocks outperformed their Asian counterparts, rebounding from the 41-month low they posted the previous day, propelled higher in a response to the opinion of an official of the country’s securities regulator that companies with adequate capital positions should focus on buying back stocks in the open market. The Shanghai Composite added 0.9% to 2,123.4. The CSI300 Index of the biggest Shanghai and Shenzhen companies advanced 1.1%. The China Enterprises Index of the best Chinese corporations in Hong Kong gained 0.7%, while the Hang Seng Index ended almost unchanged, remaining ahead of its 200-day moving average, a resistance level it had struggled to push above since mid-May. Australian stocks put an end to a four-day winning streak, finishing 0.2% lower, weighed by miners, which were hit hard in a response to the bad manufacturing data coming from China. The benchmark S&P/ASX 200 index dipped 6.35 points to close at 4,262.8. It advanced 0.6% yesterday, which was its fourth day of gains. New Zealand’s benchmark NZX 50 index slipped 0.4% to 3,530.6. Japan’s Nikkei share average snapped out of a four-session winning streak after a large number of companies were hit hard when they announced worse-than-expected earnings, disappointing investors. The Japanese blue chip index slipped 0.6% to 8,641.85 points, pushing once again below 8,687.93, where the benchmark’s 50% retracement of its rally from June 4th to July 4th stands. The broader Topix declined 0.9% to 729.78. Seoul stocks dipped, putting an end to a four-day rally, as market participants shed their holdings in risky assets ahead of the U.S. Federal Reserve and European Central Bank rate meetings. The Korea Composite Stock Price Index (KOSPI) slipped 0.1% to finish the day at 1,879.93 points. In India, the benchmark BSE Index and the 50-share NSE Index both traded flat. In Southeast Asia, Singapore’s Straits Times Index and Malaysia’s benchmark KL Composite both moved 0.1% higher.
European equities inched slightly higher in the early hours of Wednesday, propelled higher by some strong earnings releases. Most traders, however, preferred to stay underinvested ahead of the Federal Reserve and ECB’s meetings, which are scheduled for Wednesday and Thursday respectively. The FTSEurofirst 300 index of the largest European companies advanced 0.2% to 1,065.85 points. Investors are expecting to finally receive a clear indication of the ECB’s future monetary policy and some market participants are expecting the central bank to start buying government bonds again in order to push Spanish and Italian borrowing costs lower. The Stoxx Europe 600 index gained 0.4% to 262.34, paring some of the losses it posted on Tuesday. Standard Chartered PLC was one of the biggest gainers in the pan-European index, adding 2.6%, after profits rose 12% for the first half of the year. In France, BNP Paribas SA gained 1.9%, while Credit Agricole SA added 1%. Société Générale SA climbed 0.9%, despite the worse-than-expected earnings it reported. The CAC 40 index added 0.5% to trade at 3,306.60. Engineering and construction firm Vinci SA was one of the worst performers in Paris, slipping 2.9%, as first-half profit dropped. Germany’s DAX 30 index lagged behind its European peers, inching 0.2% higher to 6,782.56 with the car makers among the biggest losers. Shares in BMW AG declined 3.2% after profits for the second half dropped 28%, partly in a response to higher costs. Daimler AG slipped 1.7%. In the U.K., Standard Chartered and HSBC Holdings PLC pulled the FTSE 100 higher, with the index climbing 0.4% to 5,657.76. HSBC shares gained 1.1%. Most miners also rose, after Chinese manufacturing data was seen by investors as somewhat encouraging, but talks that additional monetary stimulus will be needed continued. Anglo American PLC gained 1.2% and Antofagasta PLC added 2%. Metals were mixed.
Dow Jones Industrial Average
As we mentioned above the Dow lost some of its momentum and moved into negative territory on Tuesday. The session was rather quiet and the blue-chip index was moving down almost all day long. We finished the day around the lows, only slightly above the psychologically important 13,000 level. Today futures are pointing to a higher open ahead of the Federal Open Market Committee meeting, which is scheduled for later in the day. On the way down bears will probably encounter some support at 13,000 and, if they manage to push below it, the next challenge will be presented by the intermediate highs of early July around 12,940. Resistance in the index is provided by the triple top formation of March around 13,250. Oscillators are all trending higher with the relative strength index approaching overbought territory, standing at 62 and the stochastic already in overbought territory, standing at 80. The MACD is closing on the highs it touched in mid-June, but it still has some room to go.
Gold
Gold trended in a tight range in the early hours of yesterday’s session, trying to push above the resistance at 1630 level on couple of occasions, all of which failed. In the afternoon the precious metal slipped, touching lows of 1610. Towards the end of the trading day, however, the bullion managed to pare some of its losses to finish at 1613.26. Today gold’s somewhat rangy movement continues. We slipped to 1610 once again, but the bulls held their ground and pushed the precious metal back up to its current rate of 1614.82 dollars per troy ounce. The bullion also tried to push above the recently formed resistance at the 25-period moving average at 1618.80, but all these attempts proved to be futile. Support continues to stand at the psychologically important 1600 level. Oscillators are moving in mid-range with the relative strength index at 51 and the stochastic approaching oversold territory, currently standing at 27. The MACD retracted from the highs it touched in the beginning of the week and is currently trending closer and closer to the key 0 level.
USD/JPY
Yesterday the currency pair continued to hover around the 78.00 level, testing the strength of the support on couple of occasions. The bulls held their ground, but the bears grew increasingly stronger in the afternoon. Today we even traded below 78.00 several times, but once again the selling pressure was not enough to send the USD/JPY sustainably below the support. The U.S. dollar is currently changing hands at 78.13 yens, after touching highs of 78.20 earlier on. Support, as we already mentioned, stands at the psychologically important 78.00 level, while resistance is provided by the 25-period moving average around 78.23. Oscillators are moving in mid-range with the relative strength index at 46 and the stochastic at 35. The MACD is currently moving in a tight range, slightly below the key 0 level.
Disclaimer:
The information in this analysis is collected from different sources and should serve for informative purposes only. The author shall not be held responsible for the validity of the presented information. No part of this analysis recommends the purchase or sale of a currency pair or any other financial instrument.
