Click here to receive new analysis by email
Decline in Chinese equity marketsDespite a decline in Chinese equity markets on their first day back after a short break, European markets managed to hold up fairly well yesterday, though they did close well off their highest levels of the day, with US markets off for their annual Labour day holiday. US markets are also set to return today where we could well get a counter reaction to last Friday’s post payroll declines. Part of this fairly positive reaction may have been down to the fact that according to the People’s Bank of China, recent interventions saw China’s currency reserves shrink by $93.9bn in August, their biggest fall ever, but still much less than expected, as it looks to smooth out currency fluctuations caused by its recent decision to shift the trading band on the yuan. This decision to weaken the yuan was undoubtedly prompted by the weakness seen in the July trade data which showed exports to Europe and Japan both showed sharp declines in excess of 12%. Given that since May last year the Yuan still remains up 15% against the euro as well as the Japanese yen even after Augusts currency adjustment, maybe this weakness in trade shouldn’t really have come as too much of a surprise. What it also means is that further yuan weakness in the coming months is much more likely, which could raise G20 tensions further in the coming months, despite the weekend’s cosy consensus, something that today’s August trade numbers looks likely to reinforce. In July imports declined 8.1% and exports declined 8.3%, and this morning’s August numbers weren’t expected to show much of an improvement and in that regard didn’t disappoint. August imports were expected to decline but a decline of 14.3% was way more than expected, and while exports did improve they still showed a decline of 6.1%. These disappointing numbers will do nothing to assuage concerns about the weakness of the Chinese economy, even allowing for the potential disruptions caused by the Tianjin warehouse blast. These weak numbers are certain to increase concerns about a continued disinflationary threat to global trade, something the Federal Reserve will have to be mindful of next week. Despite these numbers European markets are expected to open slightly higher this morning. In the UK the latest August BRC retail sales data had been expected to be disappointing due to the rather damp August weather, especially after the strong July number of 1.2% and sure enough despite expectations of a rise of 0.9%, we saw a decline of 1%, as the raft of disappointing Q3 data continued. EURUSD – currently finding support down near the 50 and 100 day MA’s at 1.1080, the risk of a move toward 1.0820 increases in a move below last week’s low. While above the 1.1080 level the risk remains for a return towards the 1.1400 level if it regains a foothold above the 200 day MA at 1.1280. GBPUSD – nine successive daily declines saw the pound drop back to the June lows at 1.5170 last week, where it has found a level of support. Yesterday’s rebound saw a bullish reversal which suggests a return to the 1.5340 level, and then on up to 1.5430. A move below 1.5170 argues for a test of the May lows at 1.5080. EURGBP – while below the 200 day MA despite a Friday rebound the risk remains for a move back towards the 0.7230 level while below 0.7380. Only above 0.7400 argues for a move towards the May highs at 0.7485. USDJPY – having peaked at 121.75 last week and back below the 200 day MA at 120.75 the US dollar looks vulnerable to a return to the 116.20 area seen a couple of weeks ago.
IMPORTANT NOTE AND DISCLAIMERS
Any opinion(s), news, research, analyses, prices, or other information contained on this website / document is provided as general market commentary and are from publicly available resources or otherwise obtained, and does not constitute investment advice nor does it seek to market, endorse, recommend or promote any investment or financial product. CMC Markets Singapore Pte Ltd. (Reg No./UEN: 200605050E) (“CMC Markets”) will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
Accuracy of Information
The content is subject to change at any time without notice, and is provided for the sole purpose of assisting traders to make independent investment decisions. CMC Markets has taken reasonable measures to ensure the accuracy of the information, however, does not guarantee its accuracy, and will not accept liability for any loss or damage. CMC offers no financial advisory services in any of the content or vouch for the veracity of any information.
The content of this publication is not intended for distribution, or use by, any person in any country where such distribution or use would be contrary to local law or regulation. None of the services or products referred to or mentioned are available to persons residing in any country where the provision of such services or investments would be contrary to local law or regulation. It is the responsibility of the reader to ascertain the terms of and comply with any local law or regulation to which they are subject.
CMC Markets may provide you with opportunities to link to, or otherwise use, sites and services offered through or by third-party(ies). Your use of these third-party services is subject to such terms as posted by these third-party(ies). We have no control over any third-party site or service and we are not responsible for any changes to any third-party service or for the contents thereof, including, without limitation, any links that may be contained in or accessible through such third-party service. These links are provided solely as a convenience to you You will need to make your own independent judgment regarding your interaction with these third-party sites or services. Our inclusion of advertisements for, or links to, a third-party site or service does not constitute an endorsement of any of the representations, products or services listed therein.
Each reader/recipient agrees and acknowledges that: (a) no express undertaking is given and none can be implied as to the accuracy or completeness of this document; (b) this document does not constitute in any way a solicitation nor incentive to sell or buy any Shares, Stock Options and Contracts For Difference (CFDs) and similar and assimilated products; (c) each reader/recipient of this document acknowledges and agrees to the fact that, by its very nature, any investment in Shares, Stock Options, CFDs and similar and assimilated products is characterised by a certain degree of uncertainty; that consequently, any investment of this nature involves risks for which the reader/recipient is solely responsible and liable. It is to be noted that past performance is not necessarily indicative of future results. In this respect, past performance of a financial product do not guarantee any and are not an indication as to future performance; (d) the use and interpretation of this document require financial skill and judgement. Any utilisation whatsoever by the reader/recipient, relating to this document, as well as any decision which the reader/recipient may take regarding a possible purchase or sale of Shares, Stock Options, CFDs and similar and assimilated products, are the sole responsibility and liability of the reader/recipient who acknowledges and agrees to this as a condition precedent to and prior to any access to this document; (e) as a result of the above, all legal liability directly or indirectly arising whatsoever.
Disclaimer: CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.