Asian equities finished the session into green territory on Thursday as investors grew increasingly optimistic that the central banks will have to use additional stimulus measures after the Chinese consumer inflation dropped to 1.8%, its lowest level since February 2010. At the same time Australia’s employment data surprised on the upside. The new figures are coming in a time when market participants are still talking about the plans of the European Central Bank to ease the debt crisis in the region. The FTSE CNBC Asia 100 Index, which tracks the performance of markets across Asia, advanced 0.9%. Shanghai equities ended at fresh new three-month closing highs after data indicated that China’s factory output dropped to its lowest level in over three years and investors started talking that China’s central bank will have to intervene in the markets soon in order to boost the local economy. The Shanghai Composite finished 0.6% higher, at 2,174.1, which is the index’s best close since July 19th. The CSI300 Index, which tracks the performance of the best Shanghai and Shenzhen companies, gained 0.9%, with liquor producers and property developers among the best performers. In Hong Kong, stocks posted a fresh new three-month high with the Hang Seng Index gaining 1% to 20,269.5, which is the index’s highest close since May 9th. The China Enterprises Index, which tracks the performance of the best Chinese companies in Hong Kong, added 1% to 9,962.2. Chinese property developers posted moderate gains after China’s State Council finished its property market investigations. The commissions, which the central government formed, announced that they are satisfied with the way all 16 provinces are enforcing the restrictions on the sector. Australian equities inched 0.1% lower, paring all the gains they posted earlier in the session after China’s factory output grew at its slowest pace in three years, and after several big companies reported earnings, which missed expectations. The Australian economy is heavily dependent on the Chinese demand, because China is Australia’s largest trade partner. The overall market was moving into positive territory in the first half of the session on the better-than-expected employment data and on the hopes of additional stimulus measures as the inflation figures for the Chinese economy remained low. The benchmark S&P/ASX 200 index slipped 4 points to 4,308.3. In New Zealand, the benchmark NZX 50 index gained 1.8 points to 3,583.6. Japan’s Nikkei share average advanced for the fourth consecutive session again on the hopes that the slowing Chinese economy will prompt the country’s central bank to use measures aimed at boosting its internal demand. The Japanese blue-chip index gained 1.1% to 8,978.60, moving above its 200-day moving average, which is standing at 8,956.20. The broader Topix climbed 0.8% to 751.84 on above average trading volumes. Bank of Japan decided to stick to its current monetary policy, avoiding additional measures to stimulate the economy. Some traders speculated that a further wave of easing would have propelled the Nikkei even higher after the index traded above the key 9,000 level earlier on. South Korean equities moved to a three-month closing high, pulled into positive territory on hopes of further monetary easing. The gains, however, were somewhat limited as South Korea’s central bank decided to keep its interest rate at their current level. The Korea Composite Stock Price Index (KOSPI) advanced 2% to end at 1,940.59 points, breaking above the closely monitored 120-day moving average. In India, the benchmark BSE Index inched 0.1% lower. In Southeast Asia, Malaysia’s benchmark KL Composite gained 0.4%, while in Singapore markets were closed for a public holiday.
The FTSEurofirst 300 moved into green territory, closing to the highs it touched yesterday, led by mining companies, which rose on hopes the China will have to use additional stimulus measures to boost its economy. The FTSEurofirst 300 added 1.26 points, or 0.1%, to 1,097.31, hovering around the four-month highs it touched on Wednesday. The benchmark rose by 0.2% yesterday, when it posted its fourth consecutive day of gains. Miners extended the rally they have embarked on in the previous session after data indicated annual consumer inflation in China dropped to a 30-month low last month, suggesting the country’s central bank might be forced to use additional stimulus measures in order to meet its growth target of 7.5%. The Euro STOXX 50, which is the Eurozone’s blue chip index, has advanced 12% since Mario Draghi delivered his speech on Thursday, but the benchmark is approaching strong resistance levels, which it might have trouble breaking above. Cyclical stocks, such as banks and commodity companies, moved higher as investors grew increasingly optimistic that we will see another wave of monetary stimulus very soon. Banks advanced as UK lender Standard Chartered continued moving higher as the company fought accusations or money laundering activities of Iranian accounts. Danish drugmaker Novo Nordisk rose 2.8% after second-quarter revenue surprised on the upside, while better-than-expected earnings from Nestle lifted the company 3.3% higher. Germany’s second biggest lender Commerzbank dropped 4.4% after the company announced it expects its profits to decline in the second quarter. Earnings as a whole remain mixed with data indicating that of the three-quarters of Europe’s STOXX 600 companies, which have posted results so far around 50% met or exceeded market expectations. Auto-related stocks were among the biggest decliners, with carmakers PSA Peugeot Citroen and Fiat posting the steepest losses as carmakers with domestic orientation are experiencing the bad economic conditions in the Eurozone, data from Markit indicates. Germany’s Porsche dropped 4.6% after a U.S. court rejected to dismiss a $1.4 billion lawsuit brought by hedge funds.
U.S. equities moved in a tight range on Thursday as market participants started to question the ECB’s ability to fight the debt crisis, but the losses were limited as the jobless claims came in better-than-expected and the trade deficit shrank to $42.9 billion. Investors also seem to have taken some time off as the Dow and the S&P 500 posted sharp gains in the beginning of the week. The Dow Jones Industrial Average moved around the flat line, after posting a modest gain in the previous trading session. The S&P 500 and the NASDAQ also hovered around their Wednesday closing levels. The CBOE Volatility Index, considered by many as the best indicator of fear in the market, traded above 15. Among the key S&P sectors, consumer staples slipped, while techs inched slightly higher. On the economic front, weekly jobless claims unexpectedly declined last week, sliding by 6,000 to a reading of 361,000. Economists expected the unemployment claims to rise to 370,000. The four-week moving average for new claims climbed 2,250 to 368,250. At the same time, trade deficit dropped to $42.9 billion in June, which is the country’s lowest reading in one-and-a-half years’ time as lower oil prices reduced imports. Analysts were expecting a much narrower decline to $47.5 billion. Wholesale inventories in June dropped at their fastest pace since September as the value of petroleum stocks declined, slipping 0.2% to $481.9 billion. Analysts expected an advance of 0.3%.
Dow Jones Industrial Average
Yesterday the Dow moved in a tight range, but it managed to clinch a small gain after trading as low as 13,114.78 earlier in the session. The index had some troubles pushing above the 13,200 level, trying to break above it on several occasions, all of which failed. The Dow finished at 13,173.70, posting a gain of less than 10 points. Today the benchmark continues to move higher, but the resistance at 13,200 is still curbing the bulls’ efforts. Support in the Dow is provided by the 25-period moving average, which is currently standing at 13,074.26, while resistance is standing at the highs we touched in early May, around 13,330. Oscillators are approaching the upper bands of their respective ranges with the relative strength index standing at 63 and the stochastic already in overbought territory, currently at 91. The MACD is trading well above the key 0 level, approaching the highs is touched in late July.
Gold
Gold pushed below its 50-period moving average in the early hours of yesterday’s session and sold off up until it approached its 25-period moving average when the bulls finally returned to the market and put an end to the bears’ efforts to push the bullion’s price even further down. In the afternoon the bears scattered and the bulls propelled the gold to highs of 1616.73, but the precious metal inched slightly lower towards the end of the session to close at 1612.51. Today we are moving in a tight range, touching highs of 1617.67 and lows of 1609.07. Currently the precious metal is changing hands at 1614.30, but the volatility remains rather subdued. Support in gold continues to stand at the psychologically important 1600 level, while resistance is provided by the highs we touched in late July, around 1625. Oscillators are in mid-range with the relative strength index at 57 and the stochastic at 66. The MACD is moving in a close range, slightly above the key 0 level.
USD/JPY
The USD/JPY continued to move in a tight range yesterday after retracting from the highs it touched on Tuesday. We moved both above and below the 25-period and the 50-period moving averages, touching lows of 78.20. Today the rangy movement in the yen continued in the early hours of the session, but later the bulls gained some strength and send the USD/JPY higher. The currency pair touched highs of 78.79 for the day, but it is now off of them, trading at 78.65. Support continues to stand at the psychologically important 78.00 level, while resistance is provided by the 200-period moving average around 78.91. Oscillators are moving in mid-range with the relative strength at 60 and the stochastic is standing at 63. 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
