Market commentary: Asian markets, metals and the Euro

Volatility is poised to dominate the markets once again, as investors digest the latest Chinese negative economic data and the country’s equities largest daily drop in over 3 months.

Asian stocks opened in negative territory, trading lower throughout the entire session, dragged down by Chinese equities and Japan’s mixed economic data. The Shanghai Composite Index experienced a rather volatile session, losing as much as 3.2% throughout the overnight trading amid a selloff reaction to last Friday’s announcement regarding an official investigation into the country’s largest brokerage firms.

Day traders seem to have been the most likely drivers for the index rally toward the end of the overnight session, which steamed Chinese equities to pair all losses incurred during the day, to close 0.3% higher early this morning.

The main Hong Kong equity benchmark closed the day in negative territory, losing around three tens of a percentage, while the Australian S&P/ASX 200 shed 0.69%, closing the day at 5,166.50 points.

Japan was also in the eye of investors as the country released its industrial production data for October and its Retail Sales for the same month. While the latter came in better than expected, recording a 1.8% increase from the same month a year earlier, beating the market’s 0.9% projection; the industrial production indicator disappointed, posting a 1.4% expansion on a year-on-year basis, missing the 1.8% target estimated by analysts. The Japanese Nikkei 225 closed at 19,747.47 points, down 0.7% for the day.

In Europe, equities opened mixed and little changed, as most of the market participants seemed to sit on the side lines ahead of a pivotal ECB meeting scheduled for December 03rd. Although opening flat, both the German Dax and the French CAC-40 turned positive throughout the morning, adding 0.80% and 0.44% respectively at the time of writing, whilst the FTSE 100 was the only major European index still slightly in the red at the turning of mid-day session.

With both the European Central Bank and the Federal Reserve running up to their most anticipated policy meetings of the year, traders seems to bet on the two Central Banks’ policies to further diverge, as the US is ever closer to its first interest rate hike since before the financial crisis, and Europe is likely to further cut its deposit rate to boost monetary stimuluses.

Confirming this view is the downwards movement of the Euro, which is poised to record its biggest monthly decline against the Dollar since March 2015. In fact, the common currency lost an additional 0.25% today, bringing the decline since the beginning of November to 1.60%. On the contrary, the US Dollar continues to appreciate as investors are betting on the FED to finally pull the trigger on its first interest rate hike, and a new plunge in Chinese stocks prompted traders to buy into USD as a safe haven hedge against equity’s volatility.

This article was issued by Paolo Zonno, Trader/ Analyst at Calamatta Cuschieri. For more information visit, www.cc.com.mt. The information, view and opinions provided in this article is being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice. Calamatta Cuschieri & Co. Ltd has not verified and consequently neither warrants the accuracy nor the veracity of any information, views or opinions appearing on this website.