Asian equities finished the session into green territory on Tuesday as market participants continued to speculate that the ECB will use further stimulus measures to boost the economy and that China and the U.S. will support the European Central Bank’s efforts to overcome the region’s debt problems. Japan’s Nikkei share average advanced, adding to the gains it posted in the previous session in a response to the better-than-expected earnings, released by several Japanese companies. A trading glitch in the Tokyo Stock Exchange’s futures market took its toll on trading volumes, sending them lower, although traders said that the technical problem’s effect on the trading was minor as volumes were already depressed. The Japanese benchmark gained 0.9% to 8,803.31, pushing above its 25-day moving average at 9,841.83 and finishing the session very close to its 75-day moving average at 8,816.68. The blue-chip index added 2% yesterday, its largest advance in three months’ time. At the same time the broader Topix index rose 1.1% to 743.70. Trading volume on the Topix was rather thin, at 86% of its 90-day average. South Korean equities inched slightly higher as market participants preferred to stay on the sidelines after the index rose sharply in yesterday’s trading. Investors are also preparing for the important economic releases for the Chinese economy, which are scheduled for later in the week. The Korea Composite Stock Price Index (KOSPI) climbed 0.05% to end at 1,886.80 points, moving further up from the seven-week closing high it posted yesterday. Australian stocks gained 0.5%, posting a fresh new three-month high as industrial equipment company Bradken surged 11.2% after announcing a 49% jump in its full-year results. The Reserve Bank of Australia decided to keep its benchmark interest rates at their current level, which had almost no impact on the markets. The benchmark S&P/ASX 200 index added 19 points to 4,291.6, which is the index’s highest closing levels since May 14th. Yesterday the benchmark rose 1.2%. In New Zealand, the benchmark NZX 50 index gained 0.6% to 3,584.8. Shanghai equities posted their third consecutive month of advances, closing at their highest level in more than two weeks, as strength in the resources sector countered the weakness in insurance companies, which declined on China Life Insurance issuance of a profit warning. The Shanghai Composite added 0.1% to 2,157.6, which is the index’s highest close since July 20th. The CSI300 Index, which tracks the performance of the largest Shanghai and Shenzhen companies also rose 0.1%. Hong Kong stocks posted their highest level since May 10th after by Esprit Holdings rose 28% on the news that the company is appointing an executive from rival Inditex as its new CEO. The Hang Seng Index climbed 0.4% to 20,072.6. The China Enterprises Index of the biggest Chinese corporations in Hong Kong ended 0.4% higher – at 9,851.8. In India, bank, auto and property shares advanced after the country’s finance minister said that the interest rates are quite high, sparking talks among investors that the government might pressure the Reserve Bank of India into easing its monetary policy. The benchmark BSE Index advanced 1% on the news. In Southeast Asia, Singapore’s Straits Times Index slipped 0.1%, while Malaysia’s benchmark KL Composite erased 0.5%.
European equities inched slightly higher in a rather volatile session on Tuesday as Standard Chartered dropped more than 20% after becoming the latest bank to be involved in a scandal. The FTSEurofirst 300 added 1.08 points, or 0.1%, to 1086.87, after hitting a four-month high on Monday as investors were buying stocks in anticipation of a higher open of the U.S. markets. Spanish and Italian stocks both advanced by almost 1%, although they pared some of the gains they have posted earlier in the session as market participants refrained from buying stocks at the high levels they have reached. Italy’s benchmark index was up 0.7%, while its Spanish counterpart rose 0.9%. The blue-chip STOXX50, however, had troubles breaking above the key 2,400-level. Volumes remained low, at 37% of their 90-day average. Earnings of European companies were mixed. A survey by Thomson Reuters indicates that about 65% of Europe’s STOXX 600 companies had reported earnings so far, of which 51% had released results that was at least as good as the forecasted, while the remaining 49% missed economists’ projections. One of the worst performing sectors was banks as Standard Chartered dropped almost 25%. Brokers cut recommendations on the company as its reputation is likely to be hurt after New York’s top bank regulator said that it might strip the British bank from its financial license on alleged transactions with Iran. Standard Chartered has dropped around 29% or 450 pence since the beginning of the week. That is around 10.5 billion sterling worth of market capitalization.
U.S. equities moved into green territory for a third consecutive session, with the broad S&P and tech-heavy NASDAQ pushing above key technical levels. The Dow Jones Industrial Average advanced, pulled higher by Bank of America and JPMorgan. The blue-chip index has advanced almost 8% this year and it has less than 100 points to go before hitting a fresh new four-and-a-half-year high. The S&P 500 broke the psychologically important 1,400 level, while the NASDAQ traded above 3,000. The CBOE Volatility Index, considered by many as the best indicator of fear in the market, dropped below 16. Most S&P sectors moved into green territory with energy and financials posting the biggest gains, while defensive sectors such as utilities and telecoms declined. Sentiment among investors continued to be positive as Mario Draghi promised to preserve the integrity of the Eurozone at all costs and to use measures to lower the borrowing costs of Spain and Italy. In Europe, German industrial orders for June declined at a faster-than-expected pace, which was seen by market participants as another reason for a market intervention by the ECB. On the economic front, consumer credit data for June will be released later today with analysts projecting a $10 billion rise. Also, Fed Chairman Ben Bernanke is scheduled to deliver a speech on financial education. And finally, the government will auction $32 billion worth of three-year notes, with the results being announced at 13:00 Eastern Time.
Dow Jones Industrial Average
Yesterday the Dow moved higher in the early hours of the session, but the bulls lost their momentum in the afternoon and the benchmark declined. Despite the late-session losses we managed to finish into positive territory locking a modest 27 point gain. Today the blue-chip index is trending higher, hitting highs not seen since early May. The index is currently standing at 13,194.06 after touching highs of 13,204.24 earlier in the session. Support continues to stand at the psychologically important 13,000 level, while resistance is provided by the highs we touched in early May, around 13,330. Oscillators are trending higher with the relative strength index at 65 and the stochastic already in overbought territory, standing at 88. The MACD is off of the highs it reached earlier in the month, but it resumed its upward movement.
Gold
Gold posted very decent gains in yesterday’s trading, starting at the 25-period moving average around 1605 and moving higher for the better part of the day. The precious metal pushed above its 50-period moving average, which provided some support for the bullion in the late hours of the session when the bears regained some of their strength. Today we are moving in a relatively tight range. We hit highs of 1618.26 for the session, but later we pared almost all of the early gains and we are currently trading very close to the rates we started at. Major support levels continue to stand at the key 1600 level, while resistance is provided by the highs we touched at the end of July, around 1625. Oscillators are indicating that the precious metal is overbought in the short term with the stochastic even issuing sell signals, which are yet to be confirmed by other technical indicators. The relative strength index is standing at 57, while the MACD has just pushed above the key 0 level.
USD/JPY
The currency pair moved lower almost all session long on Monday, starting at 78.60 and pushing below both its 25-period and its 50-period moving averages in the afternoon. The USD/JPY even approached the psychologically important 78.00 level, trying to break below it once again. The bulls, however, proved to be quite strong, holding their ground despite bears’ attempts to send the yen higher against its U.S. counterpart. Today the USD/JPY is moving up once again, trading above its 25-period and its 50-period moving averages. We even pushed above 78.60, where resistance seemed to have formed in the first couple of trading days of the current month. The U.S. dollar is now changing hands at 78.66 yens, slightly below the highs of 78.73 of the session. Support in the USD/JPY is standing at the 25-period moving average around 78.36, while resistance is provided by the 200-period moving average at 78.97. Oscillators are moving higher with the relative strength index at 63 and the stochastic at 60. The MACD is moving in a tight range, currently standing slightly above 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.
