Asian equities finished mixed on Thursday, as China, the second largest economy of the world, said that its trade outlook is worsening, while market participants saw the better-than-expected. The U.S. data as an indication that the Federal Reserve will abstain from further quantitative easing. The FTSE CNBC Asia 100 Index, which tracks the performance of markets across Asia, rose 0.6%. Japan’s Nikkei share average touched a fresh new six-week high, trading steadily above the key 9,000 level as the stronger-than-expected U.S. data put pressure on the yen, sending it lower against its U.S. counterpart, which in turn prompted traders to cover their short positions on exporting companies. Toyota Motor was among the biggest advancers, adding 3.2%, while other exporters such as industrial robot maker Fanuc and camera and printer group Canon gained on expectations of higher profits from foreign operations. The Japanese benchmark rose 1.9% to close at 9,092.76, pushing above its 200-day moving average and clearing the psychologically important 9,000 level to close at its highest level since July 4th, when the index finished at a fresh two-month top. The broader Topix gained 1.6% to close at 759.12, its highest closing since July 10th. South Korean stocks finished almost unchanged after trading in a tight range all session long as market participants resorted to some profit taking and chose to stay on the sidelines in expectations of news for further quantitative easing from central banks across the world. The Korea Composite Stock Price Index (KOSPI) inched 0.05% higher to end at 1,957.91 points, just slightly above the three-month closing high that the index posted on Tuesday. Australian equities gained 1.1% as better-than-expected earnings results from major companies bolstered investor confidence, propelling the local stocks to their best close in three months’ time. The benchmark S&P/ASX 200 index climbed 49 points to 4,330.2, rising 7% from its July lows. In New Zealand, the benchmark NZX 50 index slipped 0.4% to close at 3,616.2. On the economic front, manufacturing activity in New Zealand declined in July. Shanghai stocks dropped to a fresh two-week closing low, with alcohol producing companies posting the biggest declines as Tsingtao Brewery announced earnings for the first half, which disappointed investors. The Shanghai Composite inched 0.3% lower to close at 2,112.2, which is the index’s lowest rate since August 2nd. The CSI300 Index of the best Shanghai and Shenzhen companies slipped 0.5% to post its lowest close since January 9th. Hong Kong equities pared early advances to finish into red territory on Thursday after weaker-than-expected earnings of China Mobile sent the company 6% lower, while the stronger results of Tencent Holdings propelled the stock 7% higher. The Hang Seng Index slipped 0.5% to close at 19,963, penetrating the 20,000 level for the first time since August 6th. The China Enterprises Index of the best Chinese companies slipped 0.4% to 9,741.8. In India, the benchmark BSE Index slid 0.4%. In Southeast Asia, Singapore’s Straits Times Index ended almost unchanged, while Malaysia’s benchmark KL Composite moved 0.3% lower.
European equities moved in a close range on Thursday, consolidating the gains they posted since the speech of Mario Draghi in July. Market participants preferred to stay on the sidelines as they were hoping more stimulus measures will be announced by central banks soon. The FTSEurofirst 300 slipped 1.5 points, or 0.1%, to trade at 1,099.28, with trading volumes at 20% of their 90-day moving average. This week was one of the weakest in terms of volumes for European exchanges for the past six years. Wednesday was the seventh slowest session in terms of volume for EuroSTOXX 50 and the fourth for FTSEurofirst for the period after 2006. Bankia, Spain’s largest lender, which was recently nationalized, rose approximately 12% on strong turnover, pulling the rest if the banking sector higher and extending the 75% gains, which it had posted in the current month. The jump in the bank’s shares came in a response to speculations that the financial institution will receive a fresh cash inflow from Europe. The UK’s FTSE 100 index and France’s CAC 40 index are about to enter in a ‘golden cross’ formation, as their 50-day moving averages are several points away from crossing above their 200-day moving averages. The market technicians see the ‘golden cross’ formation as a bullish technical indicator. The anticipated cross formation, used as an entry signal by a number of algorithmic trading programs would follow a similar bullish indication on Germany’s DAX, which was triggered ten days ago. Stock advances and a weak earnings season took their toll on the pan-European STOXX 600 index, which is now trading at 10.14 times its projected earnings for the next twelve months, a level not seen since last year and within one standard deviation of its ten-year average. Miners were one of best performers among European sectors, paring some of the losses they posted in yesterday’s session.
U.S. equities gained after opening around the flat line on Thursday, as market participants took some time to assimilate the worse-than-expected economic data, which were announced earlier on. The Dow Jones Industrial Average advanced after opening almost unchanged, pulled higher by Cisco. Wal-Mart was the worst performer among all blue-chip companies. The S&P 500 and the NASDAQ also gained. The CBOE Volatility Index, considered by many as the best indicator of fear in the market, moved above 15. Among key S&P sectors, techs were among the biggest advancers, while telecoms declined. Facebook dropped to a fresh new all-time low as the company’s lockup period ended today. The company has erased more than 45% of its capitalization since it was first introduced in May. Other social-media stocks also moved lower, including Groupon and Zynga. On the economic front, Philly Fed manufacturing index posted its fourth consecutive negative reading. At the same time the weekly jobless claims climbed by 2,000 in the previous week to a seasonally adjusted 366,000, landing on analysts’ expectations. The four-week moving average for new unemployment claims plunged 5,500 to 363,750, which is its lowest reading since March and its second lowest reading since April 2008. Moreover, housing starts disappointed, dropping by 1.1% in July to a seasonally adjusted rate of 746,000 units, while gains for June were downward revised. Economists’ expectations consolidated around a reading of 757,000 units. Among earnings, Cisco soared after the tech giant announced quarterly results, which were better-than-expected, while, at the same time, it boosted its dividend by 75%.
Dow Jones Industrial Average
Yesterday, the Dow moved in a very tight range, touching lows of 13,169.78 and highs of 13,193.33. The index ended the session slightly below its 25-period moving average after trading around it for the better part of the day. Today we opened flat and moved higher, trying to finally break decisively above the resistance at 13,200. The benchmark is currently standing at 13,221.54, slightly off of the session highs. The blue-chip index has remained confined between 13,100 and 13,200 almost all month long, a fact that is seen by some technicians as a trend continuation indication. Support continues to be provided by the 13,100 level, while resistance seems to be forming around the upper band of the aforementioned range. Oscillators are moving in mid-range with the relative strength index at 61 and the stochastic at 69. The MACD is trending lower, issuing sell signals, which are yet to be confirmed by other technical indicators.
Gold
Gold finally broke off of the tight range, in which it has been moving in for quite some time. Yesterday the precious metal dropped below the key 1600 level in the morning hours of the session, but around 1590 the bulls returned to the market and sent the bullion back above 1600. We closed at 1603.84, slightly below the highs of 1606.30, which we touched earlier in the session. Today gold retested the support at the psychologically important 1600 level, but after failing to break below it, the precious metal shot sharply higher, pushing both above its 25-period and its 50-period moving averages. At one point gold was even trading at 1618.73, but later it pared some of its gains and declined to its current rate of 1615.50. Support in the bullion is standing at the 50-period moving average around 1611.02, while resistance is provided by the highs we touched earlier in August around 1625. Oscillators are trending higher with the relative strength index at 58 and the stochastic approaching the upper band of its range, currently standing at 77. The MACD is issuing buy signals, standing slightly below the key 0 level.
USD/JPY
Yesterday the USD/JPY started the session around the highs it had touched in the previous day, when it had tried to break decisively above the resistance at the 200-period moving average. On Wednesday, the rally in the currency pair gained momentum and propelled the USD/JPY above 79.00 for the first time since mid-July. The yen finished the session at 79.24, slightly below the lows of 79.28, which it touched earlier in the day. Today, the volatility continued to rise in the USDJPY and we had several drops and several shoots on the upside. Currently, the U.S. dollar is changing hands at 78.23, almost unchanged for the day, but it traded as high as 79.40 and as low as 79.07 earlier in the session. Support in the yen is provided by the psychologically significant 79.00 level, while resistance is standing at the highs that we touched in early July around 80.00. Oscillators are entering in overbought territory with the relative strength index at 73 and the stochastic at 85. The MACD is trending higher, approaching levels not seen since late June.
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.
