Fundamental Analysis

Hong Kong shares poised for third-straight gain

Hong Kong shares are set for a third-straight gain on Wednesday, led by beaten down growth-sensitive sectors on hopes that policymakers will soon address the euro zone crisis and declining global growth. Cathay Pacific Airways, SJM Holdings and Hong Kong Exchanges and Clearing Ltd (HKEx) are among the slew of companies expected to report first-half earnings later on Wednesday.

    On Tuesday, the Hang Seng Index <.HSI> edged up 0.4 percent to 20,072.6, its highest close since May 10. The index ended off the day's highs and held within a 150-point range, as it did on Monday.

Seoul shares seen holding ahead of China data

Seoul shares are expected to stick to a narrow range on Wednesday, retaining gains that propelled the main board to a seven-week high while investors look for additional market cues ahead of a slew of economic data from China.

There isn't enough momentum at the moment to establish a convincing foothold in 1,900 point territory... we'll likely see some more rotation into cheap, beaten-down shares rather than any aggressive risk-taking," said Daewoo Securities in a note to its clients.  Hopes that the European Central Bank and U.S. Federal Reserve would soon embark on fresh easing measures have provided steady support for risky assets in recent sessions.

 
 A raft of data from China starting Thursday -- including inflation, industrial output, and retail sales -- is expected to show the world's second-largest economy is stabilizing after a sluggish first half of the year. South Korea's central bank is expected to keep interest rates steady at a policy meeting on Thursday after a surprise cut in July, although it is likely to lower rates at least once more this year if the economy continues to show weakness.

Nikkei set to rise for 3rd day on more policy hopes

Japan's Nikkei average is expected to rise for a third day in a row on Wednesday, powered by exporters as expectations that the U.S. Federal Reserve and European Central Bank will provide more stimulus boost risk \appetite.The "risk-on" mode among investors, prompted by comments from a top Fed official, strengthened the dollar and the euro against the yen, giving a further fillip to Japanese exporters.
   

 Boston Fed Bank President Eric Rosengren said on Tuesday that the Fed should launch another bond-buying programme of whatever size and duration is necessary to get the economy back on its feet, signalling support from some U.S. policymakers for aggressive steps to boost the flagging economy.  "In a word, today's outlook: strong," said Kenichi Hirano, operating officer at Tachibana Securities.
    

"Exporter shares will likely be bought back as the dollar and euro have stabilised."the yen, which has firmed in recent months to make the country's exports more expensive, last traded at at 78.636 yen to the dollar and 97.430 to the euro. The Nikkei <.N225> was likely to trade between 8,800 and 8,900, strategists said, after rallying 2.9 percent in the previous two sessions. Nikkei futures in Chicago <0#NIY:> closed at 8,880 on Tuesday, up 0.9 percent from the Osaka <JNIc1> close of 8,800.

Gold flat, volume low; investors wonder about central banks

Gold was nearly flat on Tuesday, with volume much lighter than average for a second consecutive day as investors were uncertain about whether central banks would act to stimulate sputtering economies. The metal traded in a tight range of less than $10 an ounce, swinging between slight gains and losses, as higher U.S. equities, crude oil and the euro failed to attract much buying or selling of the precious metal.

Volume in U.S. gold futures hovered near a fresh 2012 low. Traders said last week's mixed U.S. nonfarm payrolls report fed uncertainty about whether the Federal Reserve will come through with more gold-friendly monetary stimulus, or whether the central bank would refrain from action, which could spur selling. Bullion largely ignored comments from Boston Fed Bank President Eric Rosengren that the Fed should launch another bond buying program of whatever size and duration is necessary to get the economy back on its feet.
Spot gold <XAU=> inched down 15 cents at $1,610.24 an ounce by 2:46 p.m. EDT (1846 GMT). U.S. COMEX gold futures <GCZ2> for December delivery settled down $3.40 an ounce at $1,612.80, with volume at below 80,000 lots, about half of its 30-day average at about 170,000 lots, preliminary Reuters showed.

Euro flat vs dollar after two-day advance

The euro traded little changed against the dollar on Tuesday, taking a breather after a two-day rally sparked by expectations of further action by the European Central Bank to lower borrowing costs for Spain and Italy.
The Australian dollar rose to its highest in more than four months against the greenback after the country's central bank kept interest rates unchanged at 3.5 percent and dropped few hints about easing soon.

Rising expectations that the ECB could step in as early as next month to reduce crippling high Spanish and Italian borrowing costs by buying their bonds have sparked a global rally in risky assets since Friday. The euro was little changed at $1.2399 <EUR=>, pulling away from a one-month high of $1.2443 set on Monday. Traders reported talk of resistance at $1.2450.

Intraday bias in the euro remains on the upside, with the next target at around $1.2764, the 50 percent retracement of the move from the $1.3486 high hit in late February to $1.2040, the more-than-two-year low struck on July 24. Markets were initially disappointed last week when the ECB failed to take immediate action to stabilize bond markets. But traders took ECB chief Mario Draghi's warning not to bet against the euro seriously and as a result the euro has gained momentum.

Last week, the ECB indicated any intervention in sovereign bond markets would not come before September and such a move would come only if governments first applied for assistance from the rescue funds.

S&P hits 1,400 as ECB-inspired rally persists

U.S. stocks rose for a third straight day on Tuesday, pushing the S&P above 1,400 for the first time since early May, on growing optimism the European Central Bank would act soon to contain the euro zone's debt crisis.

Trading was light, which could distort the level of optimism investors truly have that Europe will follow through with adequate measures. ECB President Mario Draghi boosted hopes last week when he spoke of restoring calm to the euro zone's troubled bond markets.   

Since then, good news from Greece and declines in borrowing costs for Spain and Italy from peaks above 7 percent have kept sentiment positive. The relative calm allowed the S&P to break through the psychologically important 1,400 level after trying unsuccessfully the past couple of sessions. Summer holidays have added to light trading volume, which has contributed to volatility. Equities cut their gains just before the close on Tuesday, mirroring Monday's late-day action.

About 6.39 billion shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, below last year's daily average of 7.84 billion. The real tests for markets may come in September. The ECB is expected to face decisions about controlling the euro zone debt crisis and the Federal Reserve could take stimulus actions to aid the flagging U.S. economic recovery.

The Dow Jones industrial average <.DJI> rose 51.09 points, or 0.39 percent, at 13,168.60. The Standard & Poor's 500 Index <.SPX> was up 7.12 points, or 0.51 percent, at 1,401.35. The Nasdaq Composite Index <.IXIC> was up 25.95 points, or 0.87 percent, at 3,015.86.

Oil at Two-Month High as Equities Gain, Dollar Declines

Oil rose to the highest level in more than two months, advancing with equities on optimism that economic growth will accelerate and as tension increased in the Middle East. Futures climbed 1.6 percent as the Standard & Poor’s 500 Index (SPX) reached a three-month high, led by commodity and industrial shares, on speculation that central banks will boost efforts to lift growth. Rebels in Syria said Prime Minister Riad Hijab defected in the highest-ranking departure since an uprising began last year.

Crude oil for September delivery increased $1.47 to $93.67 on the New York Mercantile Exchange, the highest settlement since May 15. Prices are up 6.4 percent this month. Prices were little changed from the settlement after the industry-funded American Petroleum Institute reported oil inventories dropped 5.35 million barrels last week to 364.3 million. The September contract was up $1.38 at $93.58 at 4:34 p.m. in electronic trading.

Brent oil for September settlement climbed $2.45, or 2.2 percent, to end the session at $112 on the London-based ICE Futures Europe exchange. It was the highest close since May 15. The European benchmark’s premium to West Texas Intermediate, the grade traded in New York, rose to $18.33 from $17.35 yesterday.