US markets continued their bearish run overnight as the DJIA extended losses after the average’s worst week since November 2011. Investors are eying the Fed decision due later today, where we could see more reduction to their QE, and more worries grow over the state of China’s economy.
We are seeing what happened Friday carry over to this week. There are fears over China mounting and to developing nation currencies, like Argentina. This is casting a dark cloud over the markets.
So far this morning we are seeing some stabilization in the Asian markets despite the sharp selloff of developing market currencies.
STOCKS
Overnight, the DJIA hovered between gains and losses most of the day. By close, the Dow had lost 41.23 points to finish at 15,837.88. The S&P 500 lost 8.73 points to close at 1,781.56 with technologies leading the losers and industrials outperforming. The Nasdaq Composite lost 44.56 points, 1.1 percent, to close at 4,083.61. Shares of Apple (NASDQ: AAPL) were higher as the company is set to release its Q4 earnings. Expectations are for them to beat estimates.
Again, today, we are focusing on the developing markets, especially in the Pacific Rim as they are in play.
The Jakarta Composite stabilized today after plummeting three percent yesterday. Philippine stocks are inching lower, down 0.4 percent and in Thailand, the SET Index is flat. The SET lost two percent yesterday. In India, we are focused on the Reserve Bank of India’s (RBI) rate decision due later today. We are expecting rates to remain unchanged but a more hawkish tone on inflation. Overnight, yesterday, the Nifty 50 lost over two percent.
Japan’s Nikkei is up 0.1 percent after hitting a two month low yesterday. Investors are breathing a sigh of relief on a weaker yen as the USD/JPY is around 102.69, off the seven week high neat 101.78. The Shanghai Composite on mainland China is up 0.22 percent after the Peoples bank of China (PBOC) injected funds into the economy in open market operations. Monday saw the Shanghai losing one percent. In Australia, the ASX 200 is down 0.9 percent as a business confidence survey hit a 2 ½ year high, sending the AUD higher. We are continuing to fall from yesterday’s one month low.
CURRENCIES
EUR/USD (1.3676) is trading in a tight range from support at 1.36 to resistance at 1.37. We need a break above 1.3750 to continue its rally. If 1.37 continues to hold, the bears will come out in force once again and we will see heavy selling pressure.
USD/JPY (102.705) held at 1.60/1.50 region and recovered. We are testing resistance at our current level. We need to stay at this level to indicate the resumption of the bull market. AUD/USD (0.8783) bounced from 0.8659 is back above key resistance now support at 0.87. We need to go above 0.90 for a rally or risk another drop to 0.8500. The bears could still come out in this market.
COMMODITIES
WTI Brent (107.00) has taken a sharp fall and is testing support at its current level. We see support also at 106, which if holds, can see us recover to 108/108.50. WTI Crude (95.88) failed at 97.19/20 and fell sharply. We are testing support at 95.80 now. A break below 95 targets 93 but if it holds we can consolidate for a bit towards 95.70. Gold (1256.80) has fallen from 1276.50 as we have seen demand weaken in Asia, especially from China. A fall below 1250, will resume the bearish trend for 1235. If this level holds we can recover back to 1275.
TODAY’S OUTLOOK
All eyes on the FOMC today. We are expecting the shave off another $10 billion a month in asset purchases while keeping the key rates stable.
The US will release data as well. At 8:30 EST durable goods, 9:00 EST Consumer confidence.