Asian stocks advanced on Monday with sentiment among investors picking up at the start of the new quarter as European leaders agreed last week to use the bailout funds to directly benefit the region’s troubled banks. The FTSE CNBC Asia 100 Index, which tracks the performance of markets across Asia, climbed 0.2% higher. Market volume was slimmer than usual as markets in Hong Kong were closed for a public holiday. Japan’s Nikkei average moved higher in the early hours of the trading session, marking a fresh new two-month intraday high, but in the afternoon the index pared all its gains to end almost flat after the initial surge. The benchmark dropped on concerns that the agreement among European leaders might not provide a sustainable solution to the Eurozone’s debt problems. The Japanese blue chip index finished the session at 9,003.48, just a touch lower, after jumping to a two-month high of 9,103.79 at one point during the session. The broader Topix also moved into the red, closing 0.1% lower at 769.34, after touching highs of 778.87 during the day. The Bank of Japan’s tankan report indicated the business mood of Japanese manufacturers improved in the April-June period for the first time after three quarters of declines, as rebuilding in the area worst affected by last year’s tsunami makes progress. Korean stocks pared their early session advances to finish the day just a whisker lower, pushed into the red by losses in index heavyweight Samsung Electronics. The Korea Composite Stock Price Index (KOSPI) dipped 0.1% to end at 1,851.65 points. Australian stocks rallied 0.9%, adding to the gains they posted in the last four sessions, helped by the agreement that the European leaders reached on Friday. The benchmark S&P/ASX 200 index rose 38.37 points to finish the day at 4,133. The blue chip index climbed 1.2% on Friday after the unexpected agreement among European leaders. New Zealand’s benchmark NZX 50 index put on 1.2% to end the day at 3,440.2. China’s main stock index, on the other hand, finished almost unchanged as investors bought property stocks, but shed their holdings in automobile companies. The benchmark Shanghai Composite closed at 2,226.1 points after it posted a loss of 6.2% in June, its biggest monthly decline in three successive periods, severely hit by data releases, indicating a worse-than-expected slowdown in the second largest economy of the world. Market participants focused their attention on large-cap stocks, while the CSI300 index, which tracks the performance of China’s largest companies, posted a slightly higher gain than the broader index, climbing 0.2%, mainly pulled higher by real estate assets. India’s benchmark BSE Index ended the day with a loss of 0.2%, while the NSE Index slipped 0.1% with the blue chip stocks trading in narrow range. In Southeast Asia, Singapore’s Straits Times Index rose 1.1% and Malaysia’s benchmark Kuala Lumpur Composite inched 0.1% higher.
European stocks moved to fresh new two-month highs on Monday, with investors rushing to participate in the rally, which was fuelled by expectations of more concrete measures follow the Friday’s agreement. Last week the EU summit unexpectedly provided some very precise solutions to the debt crisis, including allowing the Eurozone’s ESM bailout fund to directly pump fresh money into the region’s troubled banks. The FTSEurofirst 300 gained 0.7%, moving to 1,028.51 points, after hitting its highest level since the first half of May at 1,033.83 points earlier in the session. The index extended Friday’s 2.6% advance, which was its biggest single-day gain in seven months. In light of the new developments around the Eurozone, investment house Jefferies recommended opening long positions on the Euro STOXX 50 index and the same time it advised investors to sell the safe-haven German Bunds. The Eurozone blue chip index itself finished the session with a gain of 0.8% at 2,283.50, also marking a two-month high after a volatile morning. The Stoxx 600 Europe index was also among the advancers, moving 0.9% higher to 253.42, adding to the gains it posted on Friday. Banks were among the biggest advancers, with HSBC Holdings PLC rallying 1.5% in London, while BNP Paribas SA climbing 4% in Paris. Resource firms also posted decent gains, with BP PLC gaining 2.4%. Spain’s IBEX 35 index was practically unchanged at 7,102.70 in the first trading session for the second half of 2012. France’s CAC 40 index added 1.2% to 3,234.57, as oil major Total SA put on 1.6%, Societe General SA advanced 3.2% and Crédit Agricole soared 7.9%. London’s FTSE 100 stock index climbed 0.6% to 5,604.10. Barclays surged 4.1% as Marcus Agius stepped down from the chairman position in the wake of the bank paying a massive fine last week to settle charges it engaged in manipulation and false reporting of benchmark interest rates. Barclays posted a double-digit percentage loss last week.
U.S. stocks moved in a tight range at their open on Monday as investors looked for riskier assets in light of the Friday’s agreement, but were also concerned with the weakness of the Chinese economy. The Dow Jones Industrial Average moved both above and below the flat line, after posting its best June since 1997. The S&P 500 and the NASDAQ also engaged in a rangy movement around the flatline. The CBOE Volatility Index, considered by many analysts as the best indicator of fear in the market, traded above 17. Among the key S&P sectors, utilities and financials advanced, while materials were among the biggest losers. On the economic front, the Institute for Supply Management’s June manufacturing index is scheduled to be released at 10 am ET. Analysts’ expectations consolidate around a reading of 52.0, a decline as compared to the May number of 53.5. Investors are also eyeing the May construction spending, which is also due at 10 am ET.
The Dow posted some serious gains in the Friday session after the results from the EU summits were announced. The American blue chip started the last trading day of the previous quarter at the lows, close to the 50-period moving average and moved higher for the rest of the day, pushing above both its 25-period and its 200-period moving averages. The index finished last week at 12,876.59, very close to the highs for the period at 12,897.46. Today the Dow is moving slightly lower after trading for a brief moment above the 12,900 mark. Support is provided by the 25-period and the 50-period moving averages, which are standing slightly above 12,600. Resistance, on the other hand, is provided by the highs of last week at 12,900. The oscillators are all trending higher with the relative strength index close to the upper band of its range and the stochastic in overbought territory, issuing sell signals. The MACD has just moved above the key 0 level.
Gold also moved higher on Friday, starting the session slightly above the lows and trending higher all day long. The precious metal penetrated from below its 25-period, its 50-period and its 200-period moving averages to finish the week just below the highs of 1606.64. The precious metal was unable, however, to end the week above the key 1600 level after meeting with some serious resistance. Today the bullion moved into the red, paring some of the gains it posted on Friday in the early hours of the session, penetrating below its 200-period moving average for a brief moment. But in the afternoon gold regained its strength and moved above the 1600 level once again and is currently trading just off of the highs for the session. Support is provided by the 200-period moving average, while resistance stands at the highs of last week around 1606. Oscillators are trending higher with the relative strength index at 64 and the stochastic at 78, both moving towards the upper bands of their respective ranges. The MACD is slightly above the key 0 level.
The currency pair was also among the gainers on Friday, starting the session just above its 200-period moving average and moving higher for the better part of the day. The USD/JPY pushed above the 25-period moving average and its 50-period counterpart, touching a high of 80.00 for the day. During the last quarter of the day the yen pared some of its earlier gains and finished just off of its 50-period moving average. Today the USD/JPY shot higher in the morning, reaching the previous week’s highs at 80.00, but after that we moved into the red and we are currently trading close to the lows for the session at 79.31054. Support is provided by the 200-period moving average, while resistance stands at the highs of last week at 80.00. Oscillators are trending lower with the relative strength index at 42 and the stochastic at 28. The MACD remains largely unchanged, after issuing buy signals last week.
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.