Asian equities moved into A green territory on Friday, after the German Chancellor Angela Merkel declared that she is firmly supporting the European Central Bank’s efforts to battle the debt crisis in the region. After the announcement was made market participants rushed to buy risky assets as sentiment drastically improved. The German Chancellor said that the ECB President Mario Draghi’s vows to take all necessary measures to handle the debt problems in the Eurozone are completely in line with the views of the European leaders. Merkel also defended the idea that European leaders should use all that is necessary to integrate fiscally the region, saying that time might be running short. The FTSE CNBC Asia 100 Index, which tracks the performance of markets across Asia, advanced 0.3%. Japan’s Nikkei share average touched a fresh new three-month closing high as sentiment among investors was boosted on Angela Merkel’s remarks. The Nikkei index gained 0.8% to close at 9,162.50, which is the index’s highest close since May 8th. The benchmark finished the session slightly below its 26-week moving average of 9,167.88. For the week the blue chip index has added 3%, after rising 3.9% last week, to post its best week in six months, as Merkel’s comments lifted the stocks higher. The broader Topix index gained 0.9% to close at 765.81, posting its highest closing in one month’s time, but the index is still 2.1% below the two-month high of 781.94, which it posted on July 4th. Seoul stocks moved into red territory on Friday, pulled lower by the sharp drop in Samsung Electronics as market participants resorted to profit taking activity. Samsung Electronics, South Korea’s biggest company declined 3.7%, posting its lowest close since August 7th. The Korea Composite Stock Price Index (KOSPI) ended 0.6% lower to 1,946.54 points after opening 0.3% higher in the morning. Australian equities climbed 0.9%, posting a seventh consecutive week of gains, as banks and resources companies pulled the rest of the market higher on improved sentiment among investors. The four biggest lending companies all finished into green territory with Australia and New Zealand Banking Group posting the biggest gain, rising almost 3%. The bank posted a 9% increase in its profits for the third quarter. Miners also climbed, pulled higher by stronger metal prices. Newcrest Mining, the world’s third largest gold miner, was among the best performers, adding 2.8% after the bullion posted its biggest gain in two weeks on Thursday. The benchmark S&P/ASX 200 index advanced 0.9% to close at 4,370.1, finishing the week at its highest level in three months. In New Zealand, the benchmark NZX 50 index rose 23.5 points, or 0.6%, to close at 3,639.7. Shanghai stocks posted their worst week in more than two months, but they still managed to clinch a small gain on Friday, pulled higher by resource companies, which gained on the rise in the price of metals. The Shanghai Composite advanced 0.1% for the day, but finished 2.5% lower for the week at 2,114.9, which is the benchmark’s worst weekly performance since the week that ended June 10th. The CSI300 Index of the best Shanghai and Shenzhen companies slipped 0.3% on Friday and 3.6% for the week, posting its lowest close since January 6th. Hong Kong stocks gained 0.8%, bouncing from a two-week low, propelled higher by strength in riskier sectors. The Hang Seng Index finished at 20,116.1, erasing 0.1% for the week, which is the index’s first weekly loss after three consecutive weeks of gains. The China Enterprises Index of the best Chinese companies in Hong Kong finished 0.9% higher, but it still dropped 0.7% for the week, closing at 9,831.1. China Mobile, the second company in terms of market capitalization in the Hang Seng index, declined 3.5% to finish at its lowest level since June 29th. The company dropped 5% on Thursday, which was its worst single day drop in one year’s time, coming after the company announced results that disappointed market participants. In India, the benchmark BSE Index added 0.1%. In Southeast Asia, Singapore’s Straits Times Index and Malaysia’s benchmark KL Composite both finished almost unchanged.
European benchmark index advanced to a fresh new 13-month high on Friday and is on track to post its best weekly winning streak in seven years’ time after the Eurozone leaders gave clear indications that they are willing to leave their differences aside in the interest of resolving the debt crisis in the region. However, advances for the day remained limited as market participant preferred to wait for the policymaking meetings, scheduled for next couple of weeks, before entering in large positions. Cyclical sectors were among the best performers, with autos, technology and banks gaining between 0.9% and 1.4%. The Euro STOXX 50 volatility index dropped more than 5% to post a fresh new one-month low after market participants ran to buy risky assets. Sentiment picked up after yesterday German Chancellor Angela Merkel announced that she is standing firmly behind European Central Bank President Mario Draghi’s statement that he will do whatever is necessary to fight the debt crisis in the Eurozone. Merkel also pressed her European partners to start talks of fiscal integration in the region. The FTSEurofirst 300 added 0.3% to 1,107.24 points after advancing to 1,109.69 earlier on, which is the index’s highest level since July 2011. The benchmark is on its track to post its eleventh consecutive week of gains, the index’s biggest streak since 2005. The Eurozone’s blue chip Euro STOXX 50 index climbed 0.4% to 2,466.93 points, extending the gains it had posted since Mario Draghi delivered his speech to 14%. The Eurozone’s banking index has risen around 30% for the same period. Spain’s IBEX and Italy’s FTSE MIB both rallied 1.7%. Technically speaking, the UK’s FTSE 100 index issued a bullish signal after the index entered in a ‘golden cross’ formation (its 50-day moving average pushed above the 200-day moving average). France’s CAC 40 is also very close to entering in the same formation.
U.S. equities moved around the flatline on Friday as market participants decided to stay on the sidelines after the huge gains stocks have posted recently, but several better-than-expected economic reports pulled the indices slightly higher. The Dow Jones Industrial Average moved higher, after posting decent gains in the previous session. Bank of America was the best performer among blue-chip companies, while Merck was the worst one. The S&P 500 and the NASDAQ had problems staying in positive territory. The CBOE Volatility Index, considered by many as the best indicator of fear in the market, traded near 14. Among the key S&P sectors, techs were the best performer, while health care declined. On the economic front, consumer sentiment moved slightly up, posting its highest level since May, hitting 73.6 in its August preliminary reading. Economists were projecting a much more modest reading of 72.4. Leading indicators rose 0.4% in July to 95.8 lifted by the drop in jobless claims and the increase in housing permits. Analysts were expecting an increase of 0.2%. Apple marked a fresh new all-time high, briefly moving above $644 after Jefferies lifted its price target on the company to $900 from $800 and retained the “buy” rating, saying that the current products of the tech giant are meeting with strong demand. Groupon slipped below $5 after Evercore Partners downgraded the daily-deal website’s stock to “underweight” from “equal weight,” Facebook traded close to fresh new lows after the social-media giant dropped by 6% yesterday, when the lockup period finally ended.
Dow Jones Industrial Average
Yesterday, the Dow moved higher, posting fresh new highs for the period after May onset. The benchmark touched rates of 13,269.71 before finishing the session slightly lower – at 13,245.70. Today, we continue moving higher, but the activity remains relatively low as a large portion of traders are on vacations. We still managed to touch fresh highs of 13,274.07 and we are currently trending closer and closer to the tops of early May. Support in the Dow is provided by the 25-period moving average, which is currently standing at 13,183.86. Resistance, on the other hand, is standing at the 13,300 level. Oscillators are moving higher with the relative strength index at 65 and the stochastic already in overbought territory, standing at 88. The MACD is off of the tops it reached earlier in the month, but it is still way above the key 0 level.
Gold
Gold shot sharply higher in the yesterday’s session after failing to break below the psychologically important 1600 level on several occasions. The bullion moved both above its 25-period and its 50-period moving averages to close at 1615.12, slightly off of the session highs of 1618.88. Today the volatility in the precious metal declined and it has been moving in a tight range all session long. The gold is currently changing hands at 1616.46 dollars per troy ounce after touching highs of 1620.32 and lows of 1611.65 for the day. Support in the precious metal is provided by the 50-period moving average, while resistance is standing at the highs we touched earlier in the month around 1625. Oscillators are mixed with the relative strength index at 58 and the stochastic in overbought territory, standing at 86. The MACD is slightly below the key 0 level, issuing buy signals.
USD/JPY
Yesterday, the USD/JPY continued to move higher after sentiment among investors improved. The currency pair started the session slightly above the key 79.00 level and finished it close to the session highs. The yen tried breaking the resistance at the 79.40 level on several occasions, all of which proved unsuccessful. Today we finally managed to break sustainably above 79.40, currently standing at 79.50 after touching tops of 79.58 for the day. Support in the USD/JPY is provided by the broken resistance at 79.40, while resistance stands at the early July highs around 80.00. Oscillators are already in overbought territory with the relative strength index at 77 and the stochastic at 91. The MACD is trending higher, posting fresh new highs for the period after 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.
