Asian stocks moved into green territory on Friday after China’s second-quarter gross domestic product data came in line with what analysts were expecting, spurring talks among investors that the slowdown in China might not hamper the global growth to a significant extent. China’s gross domestic product grew 7.6% in the April-June quarter on a year over year basis, the slowest rate since the January-March quarter of 2009, and in line with what most market participants were expecting. The last quarter is the sixth in a row of slower growth and compares with an annual growth of 8.1% in the first three months of 2012. The FTSE CNBC Asia 100 Index, which tracks the performance of markets across Asia, advanced 0.6%. China’s main stock index finished the session almost unchanged as the second-half figures for the Chinese economy came in line with expectations. Banking shares outperformed the rest of the stocks as market participants jumped to buy them, seeing them as significantly oversold. The benchmark Shanghai Composite finished the session at 2185.9 points. It dropped 1.7% this week amid growing concerns that the second largest economy in the world is going through a significant slowdown. Hong Kong stocks posted their worst week in two months, but managed to finish the day slightly higher on the news for the Chinese GDP. The Hang Seng Index gained 0.4% to finish the session at 19,092.6 points. The China Enterprises Index, which tracks the performance of top Chinese listings in Hong Kong, closed with a gain of 0.8% for the day, but the move to the upside comes after a 4.6% drop for the week. Australian stocks interrupted a six-day losing streak, advancing 0.4% after the country’s top trading partner – China – posted GDP results that were in line with expectations. The benchmark S&P/ASX 200 index added 14.2 points to end the day at 4,082.2, but the index was still down 1.4% for the week, snapping a two-week winning streak. New Zealand’s benchmark NZX 50 index was one of the few indexes to finish lower, slipping 6 points, or 0.2%, to 3,495.4 points. Japan’s Nikkei share average inched slightly higher, also putting an end to a six-day losing streak, which was index’s longest one since early April. The Japanese benchmark closed just a whisker higher, adding 0.1% to 8,724.12. The broader Topix ended the day 0.2% lower at 746.24. Seoul stocks were also among the gainers, snapping a five-day losing streak on the news coming from China. The Korea Composite Stock Price Index (KOSPI) climbed 1.5% to close at 1,812.89 points, pushing above the psychologically-key 1,800 point level once again. In India, the benchmark BSE Index and the 50-share NSE Index both finished the day with a loss of 0.2%. Finally, in Southeast Asia, Singapore’s Straits Times Index and Malaysia’s benchmark KL Composite both advanced, gaining 0.8% and 0.1%, respectively.
European stocks pared the losses they posted on Thursday in the first half of today’s session as China’s gross domestic product figures came in line with expectations, spurring some buying among investors, who were growing increasingly pessimistic in the past couple of days. Market participants, however, preferred to stay on the sidelines as the earnings season is upon us and investors are waiting for the profit announcements from major companies to set the tone for the quarter. The 7.6% growth that China announced was largely in line with what analysts were projecting, although investors claimed that recent declines in the mining sector were pricing in the fears of a reading below 7%. The FTSEurofirst 300 added 6.62 points or 0.7% to 1035.44 after slipping 1% on Thursday. Banks were among the biggest gainers, but their subindex pared much of the earlier gains it had posted after U.S. bank JPMorgan announced results that confirmed the substantial losses in derivatives instrument that traders were expecting. Of the 3% of the companies to have posted earnings in Europe so far 88% have either announced results that have beaten or at least have met market expectations. Analysts are projecting, however, the earnings to contract by around 9% for the March-June period. The Stoxx Europe 600 index advanced 0.7% to 254.61, snapping a two-day losing streak. On a weekly basis, the index is on a track to post a modest gain. BP PLC added 0.5% and BG Group PLC advanced 0.8%, setting the tone for the U.K. FTSE 100 index to gain 0.5%, trading at 5,638.53. Miners also helped pull the index up, with heavyweight BHP Billiton PLC rallying 1.7% and Rio Tinto jumping 1.5%. At the same time, yields on benchmark 10-year Italian government bonds gained 9 basis points to 5.99%. Italy’s FTSE MIB index slipped 0.3% to 13,543.00, as bank shares moved lower. Intesa Sanpaolo SpA dropped 1.7% and UniCredit SpA plunged 1.8%. Spain’s IBEX 35 index also moved into negative territory, falling 0.7% to 6,582.40. Bankinter SA shed 3.1% and Banco Santander SA declined 1.1%. In France, France Télécom rose 3.4% and media and telecom firm Vivendi SA advanced 2.2%, providing significant support for the French benchmark index CAC 40, which moved 0.4% to trade at 3,148.37. Germany’s Deutsche Telekom AG rallied 3.7% and was the biggest gainer among all German stocks, as Credit Suisse lifted its recommendation for the company from underperform to neutral. The DAX 30 index put on 0.9% to 6,478.27.
U.S. stocks opened into green territory on Friday, with the Dow trying to snap out of a losing streak that is lasting six days already. The Thomson Reuters/University of Michigan July preliminary consumer sentiment index dropped to 72, marking a fresh new low for the period after December of last year. Analysts’ expectations consolidated around a reading of 73.4, against 73.2 in the final June report. The Dow Jones Industrial Average moved into positive territory, led higher by JPMorgan and Bank of America. HP was the only stock to move lower in the blue-chip index. The S&P 500 and the NASDAQ also gained at the open. The CBOE Volatility Index, which is considered by many analysts as the best indicator of fear in the market, dropped below 17. All 10 S&P sectors advanced at the open, with financials and materials posting the biggest gains. JPMorgan Chase rallied after the financial giant posted earnings that beat Wall Street expectations, despite the $4.4 billion loss from the “London Whale” trading debacle. Other financials including Bank of America, Morgan Stanley and Goldman Sachs also moved higher, lifted by the JPMorgan’s results. Wells Fargo posted better than expected earnings on strong mortgage banking income as borrowers continued to refinance their homes at the current low rates. Also on the economic front, producer prices unexpectedly grew 0.1% in June despite the big declines in energy prices. Analysts were expecting the index to drop 0.5%. In Europe, Moody’s surprised markets by cutting Italy’s credit rating to two notches above junk status with a negative outlook, which added pressure to the Eurozone’s third-largest economy ahead of a 5.25 billion euro ($6.4 billion) bond sale.
Dow Jones Industrial Average
The Dow finished lower yesterday after making some swings both on the upside and on the downside. The index moved lower in the morning, marking lows of 12,494.16 for the session, but later on it pared all its losses to even trade in positive territory for a while. The blue chip, however, did not manage to hold on to its gains and closed at 12,571.88, posting a modest decline. Today, as we mentioned above, the Dow moved higher and the index is currently trading at 12,721.01 after touching highs of 12,735.50 for the session. We are now testing the resistance levels at the 200-period moving average, after shooting above the 50-period moving average earlier on. Support is provided by the lows we reached at the end of June around 12,500. Oscillators are moving in mid-range with the relative strength index at 54 and the stochastic at 39. The MACD is trending lower and has just crosses the key 0 level from above.
Gold
Gold moved lower in the morning part of yesterday’s session, marking a fresh new low of 1554 for the month. The precious metal, however, moved higher in the afternoon, partially paring the losses it had posted earlier on and traded flat for a short period of time. Today the bullion is exhibiting a strong bullish presence. We saw the precious metal simply sweeping the resistance levels at the 25-period moving average and at the 50-period moving average. We were also able to push above the intermediate highs we reached on July 10th. Now the precious metal is trying to break above its 200-period moving average, which is standing slightly below the key from a psychological standpoint level of 1600. Support is provided by the lows we reached yesterday – around 1560, while the next resistance to be tested if we manage to break sustainably above the 200-period moving average will be at the highs we reached in the beginning of the month – around 1620. Oscillators are all trending up with the relative strength index at 62 and the stochastic just entering overbought territory, currently standing at 88. The MACD is issuing buy signals, but they are yet to be confirmed by other technical indicators.
USD/JPY
The yen started yesterday’s session just slightly below the highs it had posted for the week. The currency pair then sharply dropped to push below its 25-period, its 50-period and its 200-period moving averages. After this sharp drop, the USDJPY traded in tight range for the rest of the day with the 200-period moving average now acting as a resistance. Today the currency pair moved lower for the better part of the session, but it is now trading well off the lows of 79.05 for the day. As we mentioned above, resistance in the USDJPY is standing at the 200-period moving average around 79.36, while support on the other hand is provided by the 79.20 level. Oscillators are mixed with the relative strength index in mid-range, at 41 and the stochastic close to the lower band of its range, at 18. The MACD continues to move sideways, slightly 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.
