Asian stocks ended the session into red territory following the losses their American and European counterparts posted yesterday. Investors grew increasingly skeptical about the state of the global economy despite the new stimulus steps that were taken by three major central banks yesterday. The focus today is on the U.S. jobs data, which is scheduled to be released later today. The U.S. jobs report will be indicative of the extent to which the Eurozone’s debt crisis is affecting the U.S. economy. It will also provide clues to the probability of the Federal Reserve intervening the market by additional stimulus measures. The FTSE CNBC Asia 100 Index, which tracks the performance of markets across Asia, declined 0.8%. Japan’s Nikkei average dropped as market participants preferred to stay away from risky assets, despite the fresh batch of loose monetary policy, provided by China, the U.K. and Europe. The benchmark Nikkei share average dipped 0.7% to finish the session at 9,020.75, further declining from the Wednesday’s two-month closing high of 9,104. The broader Topix erased 0.6% to end the day at 771.83. Seoul stocks dropped, pulled into negative territory by losses in heavyweight Samsung Electronics, but volume continued to be rather thin as traders preferred to stay on the sidelines ahead of today’s big news for the U.S. economy. The Korea Composite Stock Price Index (KOSPI) lost 0.9% to close at 1,858.2 points on Friday, finishing the week almost unchanged. Australian stocks were also among the decliners, shedding 0.3% ahead of the employment reports for the American economy. The benchmark S&P/ASX 200 index erased 11.4 points to finish the session at 4,157.8, but the turnover was rather low, just at 60 percent of its moving average. The index is ending the week with a solid gain of 1.5%., after hitting a fresh new seven-week high on Wednesday. New Zealand’s benchmark NZX 50 index dipped 5.5 points on Friday to close at 3,478.7. China’s main stock index advanced 1% with the property companies pulling the index higher as an unexpected cut in interest rates boosted expectations of an increase in the number of house sales. That jump in the prices of property shares was more than enough to offset the growing worries about the global economy. The benchmark Shanghai Composite ended the day at 2,223.6 points. Its gains for the week, though, are quite modest – at just 0.1%. The sub-property index added 3.5% on Friday. The Hang Seng Index inched slightly lower, losing 0.04%, but managed to finish with a gain of 1.9% on the week, helped by Tuesday’s 1.5% jump, which pushed the benchmark index to a seven-week high. The 30-share benchmark BSE Index declined 0.1%, while the broader 50-share NSE Index dipped 0.2%. In Southeast Asia, Singapore’s Straits Times Index finished 0.2% higher, while Malaysia’s benchmark KL Composite added 0.4%.
European stocks moved lower on Friday, starting rumors among investors that the five-week rally is probably running out of steam. Market participants are not convinced that the stimulus measures that were agreed upon will be enforced soon and that prompted them to stay away from riskier assets. Spanish banks were among the biggest decliners of Eurozone’s banking sector. The stocks moved 1.5% lower, as investors are seeing the funds, which were provided to Spain’s debt-laden banks as insufficient. While delivering his speech yesterday, ECB chairman Mario Draghi dismissed the prospect of buying more distressed sovereign bonds, or lending directly to the Eurozone’s bailout funds to help support banks and buy debt in the secondary market. The pan-European FTSEurofirst 300 index moved 0.2% lower at 1,042.52 points after declining 0.1% in the yesterday’s trading, although the index is still up 2.1% for the week. The Eurozone Euro STOXX 50 index also lost ground and dropped 0.5% to trade at 2,273.99 points, further extending the technical pullback it started yesterday after failing to close above resistance at its 200-day moving average. As investors were shedding their holdings in risky assets and were moving to safe havens it comes as no surprise that defensive shares were among the biggest gainers, with utilities, food and beverage and healthcare stocks posting gains between 0.3% and 0.4%. Disappointing June jobs growth in the U.S. triggered additional losses for European markets. The Labor Department said 80,000 jobs were created in the month, against expectations for a gain of 100,000. Down 0.3% ahead of the data, the Stoxx Europe 600 index extended that loss to a drop of 0.6%, trading at 255.43. The Spain IBEX 35 index, which was already under pressure as bond yields moved closer to the key 7% level, slumped 1.7% to 6,837.30. The French CAC 40 index dropped 0.7% to 3,206.16 and the FTSE 100 index erased 0.4% to 5,670.92. Oil and bank stocks were among the biggest losers. The German DAX 30 index dropped 0.8% to 6,480.26.
U.S. stocks plunged at the open on Friday, with the Dow declining around 100 points, after non-farm payrolls indicated that employers are still not hiring enough new employees. The biggest losers among the blue chip stocks were Caterpillar and Alcoa, with both companies extending the losses they posted in the previous session. The S&P 500 and the NASDAQ also opened into negative territory. The CBOE Volatility Index, considered by many as the best indicator of fear in the market, moved above 18. All 10 S&P sectors opened lower, with telecoms and energy companies posting the biggest losses. On the economic front, non-farm payrolls rose by only 80,000, according to the Labor Department, missing market expectations of an increase of around 90,000. At the same time the unemployment rate remained unchanged from the May reading of 8.2%, in line with what economists were predicting. With yet another month of weak employment data, the second quarter marks the weakest three-month period in two years, fueling optimism among market participants that the Federal Reserve will step in with additional monetary easing. Recent economic reports have shown just how weak the U.S. economy is rights now with the ISM manufacturing index indicating that the world’s largest economy is in a contraction for the first time since 2009. IMF Managing Director Christine Lagarde voiced concerns that we are currently in a slowdown, echoing concerns voiced by ECB President Mario Draghi who said the Eurozone economy would recover only gradually.
Dow Jones Industrial Average
Yesterday the Dow moved lower for the better part of the day, partially paring the gains it had posted earlier in the week. The index posted a fresh new high for the week at one point during the session, touching levels of 12,962.16. The blue chip, however, failed to adhere to these gains as bears took hold of the market and pushed the index lower once again. The session ended very close to the key level of 12,900, where the highs of the second half of June stand. Today, as we already mentioned above, the Dow dropped significantly after the disappointing employment numbers. The index is currently trading at 12,7548.24, only slightly off of the session lows. The blue chip has also moved below its 200-period moving average and is aiming at the next support level around 12,709, where both its 25-period and its 50-period moving averages stand. Resistance, on the other hand, is provided by the previous support level at the 200-period moving average. Oscillators are trending lower with the relative strength index at 50 and the stochastic just exiting overbought territory, standing at 78. The MACD has retracted from the highs it reached several days ago, but it is still way above the key 0 level.
Gold
Yesterday gold also lost ground, but not before retesting the highs it reached earlier in the week. The precious metal penetrated its 25-period moving average and finished the session below it after hitting lows of 1597.8 for the session. The bullion, however, managed to close above the key from a psychological standpoint level of 1600 as bulls activated late in the afternoon and provided some support. Today the precious metal yielded to the renewed pressure from the bears, which send it tumbling almost all day long. The announcement of the data for the labor market increased the volatility in the bullion, pushing it as high as 1608.96 at one point during the session, but the precious metal quickly retracted from the highs and is currently changing hands at 1590.71. Gold even touched lows of 1583.36 earlier in the day, but bounced back up. The bullion is below its 200-period and its 50-period moving average, which acted as a support for quite some time. Now we will likely see these indicators acting as a resistance on the way up. Support is provided by the highs we reached last week around 1585. Oscillators are all trending lower with the stochastic just entering oversold territory, currently standing at 20. The relative strength index is in mid-range, standing at 37, while the MACD is just a notch above the key 0 level.
USD/JPY
The currency pair moved lower in the early trading hours of yesterday and was even changing hands at rates below its 50-period moving average, but later on it managed to pare all its losses and to finish the session around the highs. The USDJPY even traded above the key resistance level of 80.00 for a while, but the bulls couldn’t hold the yen at these highs and they quickly gave the initiative to the bears, who pushed it to lower grounds. Today the USDJPY had a choppy first half of the session as investors were staying on the sidelines, waiting for the announcement of the employment data for the U.S. economy. After the figures were released traders rushed to safe haven currencies such as the yen, which send the USDJPY lower. The Japanese currency is currently changing hands at 79.6020, below its 25-period and its 50-period moving averages, but above the lows for the session of 79.4697. Support continues to stand at the 200-period moving average around 79.36, while resistance, on the other hand, is provided by the key, from a psychological standpoint, level of 80.00. Oscillators are trending lower with the relative strength index around 44 and the stochastic just above the lower band of its range, standing at 23. The MACD continues to move in very a tight range, just a whisker 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.
