Asian stocks finished lower on Monday as investors shed their holdings in risky assets and run to safe havens after U.S. employment data came in worse than expected on Friday and after low inflation in China renewed the worries about the slowing global economy. Market participants also remain skeptical that the European meeting, which is scheduled for later in the day, would bring any progress for the region’s banks. China’s consumer and producer prices were expected to ease in June, but even with these expectations in mind the figures disappointed, indicating that demand for goods in the second largest economy in the world is withering. The release of the numbers sparked talks among investors that we might see another wave of loose monetary measures, aimed at spurring growth in China. The FTSE CNBC Asia 100 Index, which tracks the performance of measures markets across Asia, declined 1.4%. Japan’s Nikkei share average was hit very hard, posting its biggest loss in over a month as surprisingly weak Japanese machinery orders prompted investors to cut their holdings of local stocks and run to safer, lower-yielding assets. The Nikkei plunged 1.4% to close at 8,896.88, posting its biggest drop since June 8th and extending its two-day losing streak. The broader Topix slipped 1.0% to finish the session at 763.93. Seoul stocks slid to a one-week low, pulled down by the abysmal jobs report on Friday. The Korea Composite Stock Price Index (KOSPI) dipped 1.2% to end at 1,836.13 points. Australian stocks ended 1% lower, pulled into the red by resources companies, which took some serious hits after the mineral sands miner Iluka Resources posted disappointing profits. The benchmark S&P/ASX 200 index erased 39.5 points to close at 4,118.3. New Zealand’s benchmark NZX 50 index inched slightly higher, finishing the session with a gain of 1.5 points to close at 3,480.2. China’s main stock index plunged 2.4%, marking a fresh new six-month low after the data for the producer’ and consumer’ price indexes came in worse than expected. The benchmark Shanghai Composite finished the day at 2,170.8 points, paring all the gains it had posted on Friday, when it was propelled higher by the cut in China’s official interest rate. The 2.4% decline was the biggest daily percentage drop in more than a month. The Hang Seng Index slipped 1.88% to close at 19,428.09. The China Enterprises Index, which tracks the performance of top mainland Chinese listings in Hong Kong, slid 2.4% to 9,447.24. Indian stocks were also among the losers, finishing 0.85% lower at 17,371.58 points. In Southeast Asia, Singapore’s Straits Times Index declined 1.7%, while Malaysia’s benchmark KL Composite finished almost unchanged for the day.
European stocks marked a fresh new one-week low on Monday, extending their three-day losing streak, as miners were severely hit by the bad economic data coming from all over the world and as one of the top German retailers offered fresh proof that Eurozone’s debt crisis is having a significant adverse effects on the companies operating in the region. Lower than expected figures for China’s inflation, along with weak data from Japan’s services and manufacturing sectors renewed talks among investors about the slowing global economy just after we received the disappointing U.S. employment figures on Friday. Market participants are hoping that all the weak data we are recently getting will prompt more stimulus actions from central banks across the world, such as a third round of quantitative easing from the U.S. Federal Reserve. For now, though, the U.S. central bank is not signaling that it will engage in such measures, while the European Central Bank last week said that it is not currently considering a new round of long-term refinancing operations (LTRO). The FTSEurofirst 300 was 0.4% lower at 1,029.82 points. As we are now entering the summer vacation season, the volumes continue to get thinner. Today’s morning part of the trading session can attest to that as it took an hour of jittery trading before the FTSEurofirst 300 was finally able to penetrate its 100-day moving average around the 1,034 mark and start moving into red territory. The Euro STOXX 50 moved 0.7% lower to 2,219.81 points, after it also traded in tight range in the morning, adding to a decline of 3.7% in the previous three sessions. Spain was one of the worst performing markets, with the IBEX dropping 1.8%, as investors continued wondering when the recently announced batch of rescue plans will finally be applied in practice. The yield on Spain’s benchmark ten-year government bond pushed above the 7% level again, extending the gains it made last week. The yield last traded up 12 basis points to 7.04%. Many economists believe that borrowing costs above the key 7% level can significantly hurt governments’ abilities to borrow money. A meeting of finance ministers is scheduled to be held in Brussels today, during which the measures to fight the sovereign debt crisis that were announced just over a week ago will be further discussed. The yield on Italy’s ten-year government bond also moved higher, adding 12 basis points to 6.15%
U.S. stocks opened into the red on Monday, adding to the significant losses they posted in the previous session when the bad employment data for the U.S. economy was released. The Dow Jones Industrial Average dropped at the opening, led lower by DuPont and ExxonMobil, after declining almost 1% in the Friday session. The S&P 500 and the NASDAQ also moved into negative territory. The CBOE Volatility Index, considered by many as the best gauge of fear in the market, moved above 18. On the economic front, consumer credit figures for May will be released at 3 pm ET. Alcoa is the first company to announce its earnings for the second quarter after the close of today’s session. Analysts are projecting that the aluminum giant will post a 5 cent per share profit for the past three months.
Dow Jones Industrial Average
On Friday the Dow posted a significant loss after the employment data for the U.S. economy was announced. The blue chip index opened with a gap and trended lower for the first half of the day, touching lows of 12,700 for the session. But after reaching both its 25-period and its 50-period moving averages, the index rebounded and moved higher for the rest of the day, finishing at 12,770.27, very close to its 200-period moving average. Today, as we mentioned above, the Dow is moving lower, extending the losses it posted on Friday. The blue chip is just off of the lows of the session, trading at 12,706.93. Support is provided by the 25-period and 50-period moving averages, which will probably be tested as the trading day progresses. Resistance, on the other hand, is formed by the 200-period moving average, which is standing at 12,764.03. Oscillators are trending lower with the relative strength index at 46 and the stochastic entering oversold territory, standing at 34. The MACD is issuing sell signals, retracting from the highs it reached last week and closing in on the key 0 level.
Gold
Gold suffered significant losses on Friday, starting the session at the highs and finishing it very close to the lows. We were standing just a notch below the 25-period moving average at the beginning of the session, but by the end of the day we have pushed through both the 50-period and the 200-period moving averages. We were trading as low as 1575.69 at one point during the session, but we managed to close slightly higher at 1582.52. Today gold is moving higher after losing some ground earlier in the day. The bullion is just off of the highs for the session, currently changing hands at 1587.74. Support is provided by the lows we touched on Friday, while resistance stands at the 200-period moving average around 1595. Oscillators are moving close to the lower bands of their respective ranges with the relative strength index at 43 and the stochastic at 21. The MACD has just penetrated below the key 0 level.
USD/JPY
The currency pair moved lower on Friday as investors shed their holdings in risky assets and put their money in lower-yielding ones such as the yen. The drop, however, was not that big as investors also put their money in dollars, a currency viewed by many as a safe haven. The Friday session was rather choppy at first as the USDJPY tried to break the key resistance level of 80.00, but failed. In the afternoon we moved lower, pushing below both the 25-period and the 50-period moving averages. Today we are moving in a tight range after rebounding from the 200-period moving average earlier on. Support stands around 79.40, while the closest resistance is formed by the 50-period moving average around 79.67. Oscillators are mixed with the relative strength index in mid-range around 46 and the stochastic moving around the lower band of its range standing at 32. The MACD continues to move in a very tight range, close to 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.
