Asian equities ended mostly into red territory on Friday, interrupting four days of advances, as China’s July trade surplus was much less than what analysts were expecting. China’s exports increased by only 1.0% in July on a year-over-year basis, much less than the 8.6% rise economists were projecting, while imports climbed 4.7%, against market expectations of 7.2%. The data had an adverse effect on commodities prices, on the stock markets and on the Australian dollar, which is heavily reliant on Chinese demand and resource prices. The FTSE CNBC Asia 100 Index, which tracks the performance of markets in Asia, slipped 0.8%. Shanghai equities closed their best week in two-and-a-half months’ time, inching slightly lower after Kweichow Moutai dropped 4.9% on weaker-than-expected profits for the first half of the year. The Shanghai Composite slipped 0.2% for the session, but still managed to lock gains of 1.7% for the week, closing at 2,168.8. The CSI300 Index, which tracks the performance of the best Shanghai and Shenzhen companies, slipped 0.5% for the session, but it still gained 2% for the week. Hong Kong stocks closed their best week in almost a month, but they pared some of the gains they posted in the previous sessions after Li & Fung, a supply chain manager, posted a record drop in its operating profit, which came in a fifth lower than what analysts were expecting. The Hang Seng Index declined 0.7% to 20,136.1 points on Friday, but advanced 2.4% for the week. The China Enterprises Index of the best Chinese companies in Hong Kong slid 0.6% to 9,905.2 points, but it still managed to clinch a very decent 2.5% gain for the week. Australian stocks dropped 0.7%, although Reserve Bank of Australia revised its growth expectations for 2012 on the upside, as investors were disappointed by Chinese trade data. Australia’s benchmark index still moved close to its highest level in three months as market participants are expecting local corporate earnings and further monetary stimulus from central banks across the world. The S&P/ASX 200 index, lost 31.0 points to 4,277.3. In New Zealand, the benchmark NZX 50 index slipped 0.2% to end at 3,577.8. Japan’s Nikkei share average dipped as market participants preferred to stay on the sidelines after the index posted its biggest weekly advance since February on growing expectations of further monetary stimuli. The Nikkei erased 1% to trade at 8,891.44 points, but still closed 4% higher for the week. The broader Topix slipped 0.7% to 746.79. Seoul stocks advanced for a fifth consecutive session on extended foreign buying, which was fueled by hopes of monetary easing. The Korea Composite Stock Price Index (KOSPI) added 0.3% to end at 1,946.4 points, moving steadily above its 120-day moving average and posting a gain of 5.3% on the week. In India, the benchmark BSE Index climbed 0.06%. In Southeast Asia, Singapore’s Straits Times Index closed almost unchanged and Malaysia’s benchmark KL Composite advanced 0.2%.
European equities declined on Friday, snapping out of a winning streak, which lasted five sessions as weaker-than-expected trade data were released by China and as Nestle lost ground on rising food prices. The FTSEurofirst 300 slipped 0.4% to 1,096.85 points, while the Euro STOXX 50 index dipped 0.7% to 2,420.84 points. The Eurofirst 300, however, is poised to log its 10th consecutive week of advances, which would be the index’s longest winning streak in seven years. The European benchmark rose 0.5% on Thursday, ending the session near its 2012 intraday high. Nestle was the biggest decliner among blue-chip stocks. Its 1.2% drop erased 0.43 points off of the index, as broker ESN/SNS Securities reduced the company’s rating from “accumulate” to “hold”. Germany’s benchmark DAX index slipped 0.5% as reinsurer Hannover Re plunged 3.4% after its second-quarter results disappointed market participants.
U.S. equities slipped on the open of today’s trading, after China released trade figures, which disappointed market participants and after investors preferred to stay on the sidelines as the S&P 500 have advanced for five consecutive sessions. The Dow Jones Industrial Average dipped at the open, pulled lower by Cisco and Alcoa, after interrupting a winning streak, which lasted four days, in the previous session. The S&P 500 pushed below 1,400, while the NASDAQ moved along the 3,000 level. The CBOE Volatility Index, considered by many as the best indicator of fear in the market, advanced above 15. All three major indices continue to be on track to end higher for the week. All key S&P sectors moved into red territory, with energy and materials among the biggest decliners. The S&P 500 finished above 1,400 for a third consecutive session yesterday, snapping out of a five-day rally as market participants are growing increasingly confident that the weaker-than-expected economic data will trigger a new wave of monetary stimulus soon. On the economic front, import prices dropped 0.6% in July, which is their fourth month of declines. Analysts’ expectations consolidated around an increase of 0.1%. The disappointing figures could provide additional incentive for the Federal Reserve to further ease its monetary policy. JCPenney plunged after the retailer announced earnings that were worse than expected and after it said that it won’t meet its guidance for 2012. Nvidia gained after the chipmaker released better-than-expected quarterly results and announced that its revenues for the current quarter will be higher than what analysts expect. At least 13 brokerages raised their price targets on the firm after the news was released. Also on the economic front, the Treasury department announces its monthly budget at 2pm Eastern Time.
Dow Jones Industrial Average
Yesterday, the Dow moved in a very tight range, touching highs of 13,200 for the session, where some resistance seems to be forming. The index declined to 13,123.51 in the afternoon before finishing at 13,173.70 for the day, slightly into negative territory. Today we are moving into the red, but we are off of the lows of 13.09296, which we touched earlier in the session. Currently the Dow is standing at 13,149.43 with the volatility continuing to be rather subdued. Support is provided by the psychologically significant 13,000 level, while resistance is standing at 13,200. Oscillators are moving in mid-range with the relative strength index at 57 and the stochastic at 63. The MACD is at the highs it reached in late July, issuing sell signals, which are yet to be confirmed by other technical indicators.
Gold
Gold moved in a close range yesterday, something it has been doing all week long. We moved lower in the early hours of the session, but in the afternoon we pared all the losses to move higher for the day. The bullion finished the session at 1616.27 after touching highs of 1618.30. Today the precious metal moved lower in the morning, pushing below its 25-period moving average, but the selling stopped after several failed attempts at breaking below the 50-period moving average. Around noon bulls returned to the market and sent the bullion sharply higher, crushing the resistance at the 25-period moving average. We even traded above the 1625 level we have been trying to break above for quite some time, but we were unable to hold on to our gains and the bullion is currently changing hands at 1622.04. Major support is standing at the psychologically important 1600 level, while resistance is provided by the highs of late July around 1625. Oscillators are moving in mid-range with the relative strength index at 63 and the stochastic at 55. The MACD continues to be rangy, currently standing slightly above the key 0 level.
USD/JPY
Yesterday, the USD/JPY repeated what it was doing almost all week long. We tried to break sustainably out of the current range, advancing in the morning part of the trading session, but declining in the afternoon. We managed to post a fresh new high for the week, however, touching 78.80. Today the yen regained some of its strength against the U.S. dollar with the USD/JPY pushing below both its 25-period and its 50-period moving averages. The currency pair is currently standing at 78.21, after hitting 78.12 earlier on. Support continues to stand at the psychologically important 78.00 level, while resistance is provided by the 200-period moving average around 78.87. Oscillators are trending lower with the relative strength index at 41 and the stochastic at 30. 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.
