Asian equities finished into green territory for a third consecutive session as market participants are growing increasingly optimistic that central banks across the world will take concrete measures to address the slowing global growth. The FTSE CNBC Asia 100 Index, which tracks the performance of markets across Asia, finished almost unchanged. Japan’s Nikkei average advanced for a third day in a row as investors were pricing in additional stimulus measures by central banks, but the index pared some of its earlier gains after trading close to the psychologically significant 9,000 level ahead of Friday’s options expiration. The Japanese benchmark finished 0.9% higher at 8,881.16, pushing above its 75-day moving average. However, the index was not able to finish above its 200-day moving average of 8,955.47 after briefly trading above it in the morning. The last time the blue-chip index traded at the key 9,000 level was in early July. The broader Topix index climbed to 745.64 with trading volumes picking up and moving to fresh new two-month highs of 2.1 billion shares. Seoul equities advanced for a third consecutive day on the broad improvement in sentiment across investors and on anticipation of better-than-expected economic data from China. The Korea Composite Stock Price Index (KOSPI) added 0.9% to close at 1,903.23 points, retracting from the three-month high it touched earlier in the session, but still breaking above the psychologically significant 1,900 level. Australian stocks also posted their third consecutive day of advances, finishing the session at a fresh new three-month closing high. Australia’s benchmark S&P/ASX 200 index rose 21 points, or 0.5%, to close at 4,312.6, which is the index’s strongest level since May 8th. In New Zealand, the benchmark NZX 50 index closed almost unchanged, inching 3 points lower to 3,581.8. Shanghai equities locked their fourth successive day of gains, propelled higher by a 10% rise in Xiamen Tungsten as the company revealed its intentions to increase its rare earths production capacity. The Shanghai Composite finished the session with a gain of 0.2% at 2,161 points, which is the index’s highest level since July 20th. The CSI300 Index, which tracks the performance of the largest Shanghai and Shenzhen companies finished the day almost unchanged. Hong Kong stocks inched slightly lower on a relatively low volume, as market participants engaged in a profit taking activity ahead of the battery of Chinese economic data, which is scheduled to be released on Thursday. Retailer Esprit weighed on the index after the company pared some of the gains it posted in the previous session. The benchmark Hang Seng Index slipped 0.04% to 20,065.5. The China Enterprises Index, which tracks the performance of the largest Chinese companies in Hong Kong climbed 0.2% to 9,867.8. In India, stocks finished only slightly changed after they posted two consecutive days of gains on improving market sentiment. The benchmark BSE index finished flat at 17,602.12 points, while the 50-share NSE index inched 0.02% higher to 5,338.00 points. In Southeast Asia, Singapore’s Straits Times Index finished 0.6% lower, while Malaysia’s benchmark KL Composite added 0.3%.
European equities edged slightly lower on Wednesday, declining from the fresh new four-month highs, which they hit in the previous sessions as market participants grew somewhat pessimistic over the ability of the European Central Bank to resolve the debt problems in the region. European shares have posted very decent gains for the period after Thursday when the ECB president Mario Draghi announced his plans to fight the debt problems in the Eurozone. Since Mr. Draghi’s comments the FTSE 100 has climbed 6.2%, the DAX has risen 8.8% and the CAC has surged 12%. But today the FTSEurofirst 300 declined, erasing 0.3% to trade at 1,091.13 points after closing 0.8% higher at 1,094.19 points on Tuesday, which is the index’s highest closing level since March 19th. After Bank of England lowered its economic outlook for the British economy earlier today, markets participants grew increasingly optimistic that the central bank will announce further bond purchasing to boost the local economy before the current program expires in November. Standard Chartered moved higher on Wednesday, but since it was the bank’s ex-dividend day the gains were rather limited. The number of shares that changed hands in Standard Chartered was three and a half times more than the 90-day average, while volumes in the FTSEurofirst 300 stood at 35% of their 90-day daily average. Rio Tinto was another big gainer, adding 2.8% after the mining company announced that it would stick to its $16 billion spending plan for the year, even though weak commodities prices had an adverse effect on its first half profits.
U.S. equities pared some of the losses they posted earlier in the session, but market participants preferred to stay on the sidelines as stocks are trading around more than three-month highs with the S&P 500 pushing above 1400 on Tuesday. The Dow Jones Industrial Average moved into negative territory, weighed down by McDonald’s, after the index posted its third positive session yesterday. The S&P 500 and the NASDAQ also moved into the red. Yesterday, the S&P and the NASDAQ finished above 1,400 and 3,000, respectively, for the first time since early May. The CBOE Volatility Index, considered by many as the best indicator of fear in the market, traded around 16. Most S&P sectors declined with consumer discretionary and telecoms suffering the biggest losses, while materials inched slightly higher. On the economic front, productivity climbed 1.6% in the second quarter, as companies increased their output, but only slightly changed the hours, which employees were working. Analysts’ expectations consolidated around an increase in productivity by 1.3%. At the same time the government also announced that productivity climbed 0.7% last year, more than the initially estimated gain of 0.4%. U.S. equities rallied in the past three sessions on expectations that the ECB will intervene in the markets in order to lower the borrowing costs of such debt-laden economies such as Spain and Italy. Hewlett-Packard advanced, pulling the other Dow components higher after the tech company raised its third-quarter earnings forecast to $1 per share. Analysts were projecting that the company will earn between 94 cents and 97 cents per share. McDonald’s announced flat same-store sales in July after the company lost some ground in Europe. Analysts’ expectations consolidated around an advance of 2.3%. Among earnings, Disney posted better-than-expected results, but revenue somewhat disappointed and the shares moved lower. Crude oil inventories are scheduled to be released around 10:30 a.m. ET with economists expecting another decline after the number for the previous period was -6.5M.
Dow Jones Industrial Average
Yesterday the Dow moved higher once again, locking its third consecutive session of gains. The index started the day slightly above 13,100 and moved higher for the better part of the day. After touching 13,200 and trading above this level for a brief moment, the benchmark lost some of its momentum and slipped in the afternoon, finishing at 13,167. Today the Dow is trading slightly lower after rebounding from the lows of 13,114.78, which it touched earlier in the session. Support in the blue-chip index is provided by the psychologically important 13,000 level, while resistance stands at the highs of early May around 13,330. Oscillators are trending higher with the relative strength index currently standing at 61 and the stochastic already in overbought territory, standing at 88. The MACD is approaching the highs it reached in late July, but it is still not issuing any sell signals.
Gold
Gold moved into the red on Tuesday after touching highs of 1618.45 for the session. The precious metal even tested the support at the 50-period moving average, but didn’t manage to push below it as bulls proved to be strong. Today, however, the bullion broke below the 50-period moving average and moved further down, but the bulls regained their strength around the 25-period moving average and dominated the market in the afternoon. Gold shot up above its 50-period moving average once again, touching highs of 1616.42 for the day, before losing some of its momentum and declining to its current rate of 1614.11. Major support continues to be provided by the key 1600 level, while resistance stands around 1625 where the highs of late July are. Oscillators are trending higher with the relative strength index currently standing at 60 and the stochastic approaching the upper band of its range after having issued buy signals earlier in the day. The MACD is moving in a tight range slightly above the key 0 level.
USD/JPY
Yesterday the currency pair moved higher almost all day long, breaking above its 25-period and its 50-period moving averages. The USD/JPY touched highs of 78.74 for the session before losing some momentum towards the end of the day, finishing at 78.60. Today the yen is strengthening against its U.S. counterpart after the Japanese trading surplus for the month of June was larger than expected. We once again approached the aforementioned moving averages and even touched lows of 78.20 for the session, but the bears settled some of their positions in the afternoon, sending the USD/JPY off of the lows for the day. Support in the currency pair continues to stand at the psychologically important 78.00 level, while resistance is provided by the highs we touched at the end of last week, around 78.60. Oscillators are moving in mid-range with the relative strength index at 49 and the stochastic at 45. The MACD is moving in a tight range, 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.
