U.S equities finished the session in negative territory on Wednesday after the Federal Reserve decided not to use additional stimulus measures, but it declared its willingness to intervene the market if the economic situation took a turn to the worse. The U.S. central bank announced it will hold its interest rates at <0.25% through at least 2014 and it will continue Operation Twist until the end of the current year. The Dow Jones Industrial Average, S&P 500 and NASDAQ all finished the session lower. The Dow slipped 32.55 points, or 0.25%, to end at 12967.13. This is the index’s first close below 13,000 since last Thursday. The S&P 500 dipped 4 points, or 0.29%, to end at 1375.32, while the Nasdaq erased 19.31 points, or 0.66%, to finish at 2920.21. Travelers was the biggest gainer among blue-chip stocks, while Hewlett Packard sharply declined. Energy equities were the best-performing S&P sector, while industrials and utilities were the biggest losers. The CBOE Volatility Index, considered by many as the best indicator of fear in the market, ended slightly below 19. On the economic front, the data came in generally mixed. Automatic Data Processing said July non-farm employment increased by 163,000, but the Institute for Supply Management’s manufacturing index indicated that the sector continues to contract, coming at 49.8 for the month of July. At the same time, construction spending increased by 0.4% following a rise of 0.9% for the month of May. The Mortgage Bankers Association, meanwhile, announced that its index of mortgage application activity, which includes both refinancing and home purchase demand, gained 0.2% in the week, which ended on July 27. Meanwhile, crude oil inventories dropped 6.5 million barrels in the previous week. Analysts projected a much more modest decline of 0.7 million barrels.
Asian equities declined on Thursday as market participants grew increasingly pessimistic about the likelihood of the ECB undertaking additional stimulus measures at its meeting later today, after the U.S. Federal Reserve abstained from further boosting its balance sheet for now. The FTSE CNBC Asia 100 Index, which tracks the performance of markets across Asia, slipped 0.4%. Japan’s Nikkei share average rose as market participants bought battered stocks, while some local investors hoped that we will see more quantitative easing in the Eurozone. The Japanese benchmark gained 0.1% to close at 8,653.18, after encountering with some resistance around 8,687.93, where the 50% retracement of the index’s rally from June 4th to July 4th stands. The broader Topix index advanced 0.4% to 732.98. Seoul equities inched slightly lower ahead of the ECB’s rate decision meeting, scheduled for later in the day. The Korea Composite Stock Price Index (KOSPI) dipped 0.6% to finish at 1,869.40 points. Australian stocks advanced 0.2% to a mark a fresh new ten-week closing high, as most major mining companies and Woodside Petroleum rose. The benchmark S&P/ASX 200 index added 7 points to end the day at 4,269.5, which is its best close since May 14th. The blue-chip dipped 0.2% on Wednesday, putting an end to a four-day winning streak. New Zealand’s benchmark NZX 50 index climbed 0.95% to close at 3,564.1. Shanghai equities slipped for third time in the last four sessions, pulled lower by property companies after China Securities Journal announced there might be additional state restrictions on the market. The Shanghai Composite declined 0.6% to 2,111.2, paring more than half of the gains it posted on Wednesday and continuing to move close to a near 41-month low. The CSI300 Index of the biggest Shanghai and Shenzhen companies slipped 1%. Hong Kong equities are on their way to snap out of a five-day winning streak, as weakness in oil giant PetroChina weighed on the index, while defensive stocks gained. The benchmark Hang Seng Index slipped 0.7% to 19,678.1, inching closer and closer to the support level at its 200-day moving average, which is standing at 19,677.1. The China Enterprises Index of the largest Chinese companies in Hong Kong fell 1.1%. In India, the benchmark BSE Index erased 0.2%, while the 50-share NSE Index dipped 0.3%. In Southeast Asia, Singapore’s Straits Times Index moved 0.4% lower, while Malaysia’s benchmark KL Composite traded almost unchanged.
European stocks were almost unchanged on Thursday, paring most of the gains they posted earlier in the day after market participants remain cautious ahead of the ECB’s meeting, which is scheduled for later in the day. The FTSEurofirst 300 traded almost unchanged at 1,068.53 points, slipping from the highs of 1,071.86 points it touched earlier in the day. The Euro STOXX 50 dipped 0.2% to 2,327.86 points. The Stoxx Europe 600 index advanced 0.2% to 263.24 after adding 0.5% on Wednesday. The pan-European index finished higher in four out of the index’s last five trading days as hopes the European Central Bank will use some unconventional measures, such as a resumption of sovereign bond buying, prompted investors to buy risky assets. In Europe, banks were among the biggest gainers. France’s BNP Paribas SA added 2% after the behemoth announcing it completed 90% of its restructuring plan, but the second-quarter profit declined by 13%. The CAC 40 index advanced 0.1% to 3,325.26, propelled higher by oil group Total SA, which climbed 0.6% In the U.K., oil companies rose as oil moved higher. BP PLC added 1.1%, while Royal Dutch Shell PLC gained 0.7%. The FTSE 100 index advanced 0.3% to 5,731.81. Among notable companies in Germany, sportswear maker Adidas AG slipped 2.1%, even after the firm’s second-quarter sales were 15% higher. Deutsche Lufthansa AG was one of the biggest gainers, adding 3.2%, as profits for the second quarter beat market expectations. The DAX 30 index lost 0.1% to 6,750.36
As we mentioned above the Dow moved lower yesterday, finishing the session below 13,000 for the first time since last Thursday. The index traded as low as 12,951.12 at one point during the session before finishing slightly higher – at 12,971.06. Today we have a battery of economic data coming from all over the world, which will probably have a significant effect on the stocks. So far the futures are pointing to a higher open, but this could easily change as there are quite a few announcements, coming from Europe. Support in the Dow is provided by the 25-period moving average, which is currently standing at 12,872.87. Resistance, on the other hand, is provided by the triple top formation in late March around 13,250. Oscillators are in mid-range with the relative strength index at 56 and the stochastic at 66. The MACD is retracting from the highs it touched yesterday and it is currently issuing sell signals.
Gold trended lower for the better part of yesterday’s session after starting it slightly below the session highs. The precious metal touched lows of 1591.78 for the day, but after the bullion dangerously approached its 200-period moving average the bulls become active again and sent it higher. Gold broke the 1600 level once again towards the end of the session, this time on the way up, and finished around 1601.69. Today the bears tried to regain their strength in the early hours of the day, but they failed and currently the precious metal is trending higher, changing hands at 1604.25 dollars per troy ounce at this moment. The 50-period moving average is acting as a resistance, which we are testing right now, but gold will probably continue to move in a tight range ahead of the ECB meeting, scheduled for later in the day. Support in the bullion is provided by the psychologically important 1600 level, while resistance, as we mentioned, stands at the 50-period moving average. Oscillators are moving close to the lower bands of their respective ranges with the relative strength index at 43 and the stochastic at 30. The MACD is trending lower, approaching the key 0 level.
Yesterday the USD/JPY started the session close to the psychologically important 78.00 level and moved higher for the better part of the day. The currency pair managed to push above both its 25-period and its 50-period moving averages, finishing at 78.37 after touching highs of 78.54 earlier on. Today the bears are looking strong once again, pushing the yen lower. We are currently trying to penetrate the 25-period and the 50-period moving averages ahead of the ECB’s rate meeting later on Thursday. Support continues to stand at the 78.00 level, while resistance, on the other hand, is provided by the intermediate highs around 78.50. Oscillators are in mid-range with the relative strength index at 48 and the stochastic at 76. The MACD is moving in a tight range, currently standing slightly below the key 0 level.
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.