Asian stocks finished into a negative territory on Thursday after South Korea’s central bank announced an unexpected rate cut, while the Australian employment suddenly dropped, fueling talks among market participants that the world economy is slowing. Investors chose to shed their holdings in risky assets after yesterday’s Fed minutes did not provide any clear signals about future monetary stimulus measures. The FTSE CNBC Asia 100 Index, which tracks the performance of markets across Asia, declined 2.1%. Japan’s Nikkei share average posted its biggest drop in more than a month on Thursday, declining below the significant support level at its 25-day moving average after the Bank of Japan announced only small adjustments to its monetary policy. The Japanese blue chip slipped 1.5% to 8,720.01, its biggest single day drop since June 8th. The decline extended the index’s losing streak to a sixth consecutive day, which is a new record for the period after early April. The broader Topix slid 1.3% to 747.49. The Bank of Japan gave up the 0.10% floor on its short-term bills purchase, which some analysts are projecting to lead to further decline in short-term rates, but the central bank chose to adhere to the current size of its balance sheet. South Korean stocks slipped to mark a fresh new five-week closing low as the country’s central bank announced an unexpected rate cut, sparking talks among investors that the global economy is slowing, which in turn pushed major Asian indexes lower as traders chose not to roll over their expiring options. The Korea Composite Stock Price Index (KOSPI) lost 2.2% to end the day at 1,785.39 points, penetrating below the key psychological level of 1,800 points. Australian stocks closed 0.7% lower, erasing the gains they posted earlier in the session as local employment unexpectedly declined in June, adding to worries about the weak global growth. The benchmark S&P/ASX 200 index slipped 28.5 points to finish at 4,068.0. The market marked a fresh new high of 4,108.7 earlier in the day. New Zealand’s benchmark NZX 50 advanced 0.6% to end at 3,501.4, pulled higher by a 2.2% gain in Telecom Corp of New Zealand, which rose on news that rival Telstra will sell its New Zealand operations. China’s main stock index was also among the advancers, rising 0.5%, adding to the gains it posted in the previous session, as investors hurried to buy coal stocks, which they perceived as undervalued. The benchmark Shanghai Composite ended the day at 2185.5 points, further pushing away from the six-month low it marked earlier in the week. Hong Kong stocks were hit hard as they posted their worst session in over a month, weighed down by significant losses in the Chinese banking and consumer companies. Investors were also pricing in the high probability that we will see the weakest GDP data in at least three years when the figures are announced on Friday. The Hang Seng Index slipped 2% to 19,025.1. The China Enterprises Index, which tracks the performance of the top Chinese listings in Hong Kong finished with a loss of 2.2% at 9,166.7. India’s benchmark BSE Index fell 1.5%, while the 50-share NSE Index declined 1.4%, pulled lower by software services exporters after Infosys cut its guidance for the fiscal year. In Southeast Asia, Singapore’s Straits Times Index and Malaysia’s benchmark KL Composite both finished lower, declining 0.6% and 0.2% respectively.
European stocks moved lower on Thursday following the sell-off in U.S. stocks, which started just after the minutes of the U.S. Federal Reserve’s June meeting were released. The Fed minutes indicated that the world’s largest economy will have to worsen before the central bank decides to extend its loose monetary policy. A few officials were advocating additional stimulus measures, but the majority refrained from further easing. The FTSEurofirst 300 declined 1.1% to 1,027.66 by Thursday mid-morning, but the volume was very thin, just at 29% of the 90-day daily average. The index pushed below its 100-day moving average, a significant support level that was breached earlier in the session. Consistent closes below that level at the end of April saw the index decline 9% as Eurozone debt and global growth worries intensified, although the 200-day moving average is on the rise, currently at 1,014. Basic resources was the biggest loser among all sectors, dropping 2.4%, as the copper price slipped after the Fed minutes were announced, and ahead of China GDP data, which are scheduled to be released on Friday. European technology stocks were also under pressure on Thursday, dropping 2.1%. The Stoxx Europe 600 index slid 1% to 253.12, after closing almost unchanged on Wednesday. The FTSE 100 index dipped 1.1% to 5,604.70. Banks were among the biggest losers as they remain the most sensitive stocks to the current sovereign debt crisis.
U.S. stocks opened into the red on Thursday, with the Dow threatening to finish lower for a sixth consecutive day as market participants shed their holdings of risky assets after it become clear that there won’t be more stimulus measures for now. Minutes from the June Federal Reserve meeting indicated that the central bank does not intend to provide a third wave of quantitative easing measures. All 10 sectors on the Standard & Poor’s 500 declined with the worst performers being energy, financials, materials and technology. Defensive stocks in consumer staples and utilities were among the smallest losers. A government report, indicating that weekly jobless claims last week dropped 26,000 to their lowest level in four years, did not provide much support for the markets. Market participants generally dismissed the report as an outlier due to seasonal distortions from the holiday-shortened week. Americans celebrated the Fourth of July but probably took less time off than normal to make the occasion. On the Dow, only four stocks opened on the positive side, led by Merck and Procter & Gamble.
Dow Jones Industrial Average
As we mentioned above the Dow is currently on its way to post a six consecutive session of losses. Yesterday the blue chip index opened flat and moved lower for the better part of the day. The benchmark dropped significantly after the Fed minutes were announced, touching lows of 12,533.02 for the session. The index, however, pared some of its losses towards the end of the day and finished around 12,600. Today the Dow is moving lower again as worries about the growth prospects of the global economy are mounting. The index touched lows of 12,500 for the day and is currently just a whisker above these lows at 12,504.51. Support in the index is provided by the lows we touched in the end of June around 12,465. Resistance, on the other hand, stands at the 200-period moving average at 12,741.24. Oscillators are trending lower with the relative strength index at 33 and the stochastic in oversold territory, standing at 12. The MACD has just penetrated the key 0 level from above, but is still not issuing any buy signals.
Gold
Gold tried to rebound from the lows it touched on Tuesday and in the morning the precious metal was trending higher. But, after it became clear that there won’t be further quantitative easing for now, the bullion lost ground and erased all the early session gains it had posted. Gold traded as low as 1566 at one point during the day before bulls took control and sent the precious metal back up to a closing of 1576. This upward movement, however, proved to be short-lived as today we are seeing another wave of selling pressure. Gold is currently changing hands at 1557.78 dollars per troy ounce after touching lows of 1554.65 earlier on. Support in the precious metal is provided by the lows we touched at the end of June around 1550. Resistance, on the other hand, stands at the intermediate highs we reached yesterday around 1580. Oscillators are all trending lower with the relative strength index very close to the lower band of its range, standing at 28. The stochastic is already in oversold territory, standing at 6. The MACD is moving in a tight range, slightly below the key 0 level.
USD/JPY
Yesterday, the currency pair started the day around its 200-period moving average, which it had tried to close below in the previous session. The USD/JPY moved lower in the early hours of the day, marking fresh new lows for the period after June 20th. The Japanese currency, however, received a significant boost around noon when the volatility suddenly picked. The USD/JPY marked a fresh new high, penetrating above both its 25-period and its 50-period moving averages. Towards the end of the session, however, the yen retracted from the highs, but still finished the day with a very decent gain. Today we saw another strong push on the upside in the currency pair and for a while we traded very close to the key 80.00 level, but that only lasted for a brief period of time. In the afternoon, we saw the currency pair plunge, penetrating its 200-period moving average once again. The dollar is currently changing hands at 79.24, just off of the session lows of 79.14. Oscillators are mixed with the relative strength index in mid-range, standing at 42, while the stochastic is in oversold territory – at 22. The MACD continues to move in a rather tight range, but it has now penetrated below 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.
