Asian stocks opened higher on Thursday, but moved in a tight range for the rest of the day as investors were waiting for the European Central Bank’s decision, which was scheduled to be released later in the day. The FTSE CNBC Asia 100 Index, which tracks the performance of markets across Asia, finished almost unchanged. Japan’s Nikkei share average inched slightly lower as traders cashed the winnings they have made during the one-month rally, which took the benchmark to a two-month high, just a notch lower than the resistance at its 75-day moving average. The Japanese blue chip index declined 0.3% to 9,079.80 on thin volume, retracting from the highs it marked on Wednesday and losing momentum just ahead of its 75-day moving average of 9,158. The broader Topix fell 0.3% to 776.37 also on a relatively low volume, at just 75% of its 90-day average volume. South Korean stocks finished the session almost unchanged after a choppy session, with market participants staying on the sidelines, waiting for the European Central Bank announcements scheduled for later in the day. The Korea Composite Stock Price Index (KOSPI) inched 0.1% higher to end the day at 1,875.49 points. Australian stocks finished slightly lower, erasing 0.1%, again, on a very thin volume as traders preferred to stay away from risky assets at least until the ECB’s benchmark rate is announced. On the economic front, Australia’s trade deficit widened in May to A$285 million, but the markets were little changed after the announcement. The benchmark S&P/ASX 200 index declined 2.96 points to 4,169.2, after trading in a tight range for the better part of the day. New Zealand’s benchmark NZX 50 index added 1.08 points, or 0.03%, to end the session at 3,484.2. China’s main stock index ended into the red, posting a loss of 1.2%, weighed down by energy and material companies on worries of a further slowing of the second largest economy in the world. The benchmark Shanghai Composite finished at 2,201.4 points. Hong Kong stocks inched slightly higher in the second half of the trading day and ended at their highest level since May 15th, pulled into the green by gains in financial companies, although low volume suggested many traders are shying away from high-yielding assets. The Hang Seng Index ended 0.5% higher at 19,809.1. The China Enterprises Index of top locally listed mainland firms added 0.2%. Turnover on the Hong Kong exchange dropped to its second lowest level for the year, closely tracking the low trade volumes across Asia. The 30-share BSE index rallied 0.39% to 17,530.30 points, posting a fresh new high for the period after April 3rd. The broader 50-share NSE index added 0.5% to finish the session at 5,327.30 points. In Southeast Asia, Singapore’s Straits Times Index ended the day with a gain of 0.8%, while Malaysia’s benchmark KL Composite finished almost unchanged.
European stocks advanced in the first half of the trading session, but later they pared their earlier gains after the European Central Bank cut its main interest rate. The stocks have posted fresh new two-month highs in the morning. The European Central Bank cut its main interest rate to a record low of 0.75% and its deposit rate to zero to help put the Eurozone back on the growth track as the debt problems of some of the local economies threaten to push them back into recession. The cut of the interest rate on deposits to zero is aimed at encouraging banks to lend their funds in the open market to other banks overnight, where they will receive a higher interest rate, currently about 0.3%. The FTSEurofirst 300 index of leading local companies pared its earlier advances after the ECB announcement, but was still 0.36% higher at 1,049.43 points. The Stoxx Europe 600 index added 0.4% to 258.24. Yesterday the broad index closed slightly lower, snapping out of a three-day winning streak. European stocks were propelled higher after China surprised market participants by cutting its benchmark deposit rate by a quarter of a percent, and its lending rate by 31 basis points. At the same time, the Bank of England said it would keep its bank rate unchanged at 0.5% and expand its quantitative easing program by 50 billion pounds to 375 billion pounds. Both announcements were in line with market expectations. Shares of Volkswagen surged 6% after the auto manufacturer said Wednesday it would take over in August the portion of Porsche Automobil Holding SE that it doesn’t already own. Porsche shares also advanced, adding 1%. The German DAX 30 index was the biggest gainer among European exchanges, advancing 1%, but in the afternoon part of the session it retracted from the highs to trade with a 0.4% gains at 6,584.17. Chemical group Linde AG declined 1%, while autos were lifted higher by the Volkswagen news. Daimler AG added 0.8% and BMW AG rallied 1%. The FTSE 100 index climbed 0.4% to trade at 5,708.85. Miner Rio Tinto PLC climbed 2%, while Xstrata PLC shot up nearly 4% after saying it will seek to adjourn holder meetings to approve its merger with Glencore International PLC. Glencore added 2.6%. Spanish stocks remained under pressure, adding to the losses it posted on Wednesday as investors are speculating that the rescue funds for the country’s debt-laden banks could be delayed. The Spain IBEX 35 index dipped 0.6% to 7,124. The Spanish government sold €3 billion in three-, five- and ten-year bonds on Thursday, hitting the top of its target range. But the country also saw borrowing costs rise for the longer-dated notes. The yield on Spain’s ten-year government bonds rose 10 basis points to 6.46%. The French CAC 40 index was also down, posting a loss of 0.2% to trade at 3,262.06.
U.S. stocks extended their losses on Thursday as weaker-than-expected ISM non-manufacturing data were released, while a round of interest rate cuts were announced by major central banks around the world and unemployment claims surprised on the upside. The Dow Jones Industrial Average dropped, led lower by Bank of America and JPMorgan. The S&P 500 and the NASDAQ also posted losses. The CBOE Volatility Index, considered by many as the best indicator of fear in the market, traded above 17. All 10 S&P sectors were in the red, with energy and financials posting the biggest drops. On the economic front, employers added 176,000 jobs in June, according to the ADP National Employment Report, beating expectations for a gain of 105,000 positions. May’s figures were slightly revised on the upside to an increase of 136,000 jobs from the previously reported 133,000. In addition, weekly jobless claims declined 14,000 to a seasonally adjusted 374,000, according to the Labor Department, marking the biggest decline since April. Analysts’ expectations consolidated around a fall to 385,000. The four-week moving average for new claims declined 1,500 to 385,750. Both reports come ahead of the key government non-farm payroll report on Friday. Economists are expecting to see a gain of 90,000 in June following an increase of 69,000 in May. Also on the economic front, the Institute for Supply Management releases its June non-manufacturing index at 10:00 am ET. Analysts are projecting a read of 53.0, down from 53.7 in May. The stock market was closed on Wednesday for Independence Day and closed early on Tuesday. Volume is expected to remain thin throughout the week.
Yesterday the U.S. stock exchanges were closed for a public celebration and the day before the session lasted only till 13:00 local time. Today the American blue chip index opened flat and moved into negative territory as ISM non-manufacturing data come in worse than expected. The decline also came after major central banks across the world announced rate cuts. Even the battery of positive employment data was not able to lift the markets. The Dow is currently trading at 12,879.26, slightly off of the session lows of 12,853.63. Support is provided by the highs we touched in the second half of June around 12,860. Resistance, on the other hand, stands at the key 13,000 level. Oscillators are all trending higher with the relative strength index close to the upper band of its range, standing at 62, while the stochastic is already in overbought territory, standing at 95. The MACD is approaching the highs we reached around June 20th.
Gold had a choppy session as U.S. markets were closed for a public holiday yesterday . The precious metal traded in tight range, touching lows of 1612 and highs of 1620. Today the bullion made some swings out of yesterday’s tight range, going as high as 1624 and as low as 1598. Gold is currently standing at 1608 and is trending lower after penetrating below its 25-period moving average earlier in the session. Support is provided by the key from a psychological standpoint level of 1600 and the 200-period moving average at 1591. Resistance, on the other hand, stands at the highs of June 19th around 1630. Oscillators were in overbought territory in the last couple of trading days, but they are not anymore. They are all trending lower with the relative strength index at 55 and the stochastic at 59. The MACD marked fresh new highs for the period after June onset and is currently moving around those highs.
The currency pair also moved in tight range yesterday as investors preferred to stay on the sidelines ahead of today’s battery of economic data and ahead of the European Central Bank’s policy statement. The USDJPY traded below its 50-period moving average at one point during the session, but the bulls mobilized at that point and sent the yen back up. Today we are having a much more volatile session with the USDJPY trading above the key 80.00 mark earlier in the day. We also moved below the 50-period moving average once again, but the break proved to be unsustainable. Now the yen is changing hands at 79.9380 dollars, but it was trading above 80.00 just moments ago. Support is provided by the 200-period moving average at 79.3492, while resistance stands at the key 80.00 level. The stochastic was in overbought territory, but moved lower in the first part of today’s session. The relative strength index continues to move in mid-range and the MACD remains largely unchanged, very close to the key 0 level.
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.