EQUITIES
Shares in Asia-Pacific declined on Thursday trade. The broader Hang Seng index in Hong Kong led losses with more than 2% drop, marking its eighth consecutive session in the red. The mainland Chinese stocks, the Shanghai composite slipped 0.57%, the Nikkei 225 in Japan dropped 0.68% and the South Korea’s KOSPI shed 0.70%. The Singapore’s Straits Times index declined 0.55%, and the S&P BSE Sensex in India fell 0.14%.
Over in Australia, the S&P/ASX 200 bucked the overall trend, to advance about 0.1%.
Overnight on Wall Street, the Dow Jones Industrial Average rose 0.3%, to 34,681.79, the S&P 500 gained 0.34%, to 4,358.13 and the Nasdaq Composite added 0.01%, to 14,665.06.
OIL
Oil was weak for a third day amid anxiety about a rise in supply after talks among producers collapsed this week. The Brent now traded at $73.45 per barrel, and U.S. crude futures traded at $72.12 per barrel.
Overnight, the Brent closed at $73.43, while WTI ended at $73.20 per barrel.
CURRENCIES
U.S. Treasuries maintained gains on Thursday, holding down yields, after minutes from the Fed’s latest meeting largely confirmed market expectations. Yields on the U.S. 10-year notes fell to 1.315% and were on track for a seventh straight session of declines.
The dollar remained firm, to trade near its highest in three months versus major peers. The dollar held its ground at 92.737, little changed from Wednesday, when it touched 92.844 for the first time since April 5.
GOLD
Gold slipped on Thursday, weighed down by a stronger dollar. The spot gold declined to $1,797.50 an ounce and fell to $1,796.60 per ounce for gold futures. Previously closed at $1,803.40 and $1,802.10, respectively.
Elsewhere, silver was 0.65% lower at $25.96 per ounce, palladium fell slightly to $2,834.00, and platinum shed 0.90% to $1,072.20.
ECONOMIC OUTLOOK
Asian stocks mostly declined on Thursday, as Chinese tech stocks in Hong Kong came under pressure after regulatory fears resurfaced. The rising virus cases added to a broad risk-averse mood, pressuring oil prices and lending support to bonds and the dollar.
Beijing recently announced a stepping up in oversight on Chinese listings in the U.S., many of whom are tech companies. On Wednesday, China fined internet companies including Didi, Tencent Holdings Ltd and Alibaba Group Holding Ltd for failing to get approval for earlier merger and acquisition deals.
The dollar climbed after minutes of the Fed’s June policy meeting confirmed the world's biggest central bank is moving toward tapering its asset purchases as soon as this year. According to the minutes of the U.S. central bank's June policy meeting, Fed officials felt substantial further progress on the economic recovery "was generally seen as not having yet been met," but agreed they should be poised to act if inflation or other risks materialized.
The minutes reflected a divided Fed wrestling with new inflation risks but still relatively high unemployment. After its meeting and statement last month, investors began to anticipate the Fed would move more quickly to tighten than previously expected.
In oil market, API figures cited that the U.S. crude stocks fell by 8 million barrels for the week ended July 2, larger compared to an estimate of a 4 million barrel. Official government inventory data is due later today, pushed back a day following the U.S. Fourth of July holiday.
Investors also likely continued to monitor the COVID-19 situation regionally. The Japanese government is set to declare another COVID-19 state of emergency in Tokyo until Aug. 22. Meanwhile, South Korea reported the highest daily cases since the pandemic hit the country. Australia’s New South Wales state also announced Wednesday a week-long extension of Sydney’s lockdown.
Ahead on Thursday traders are awaiting the announcement of results of the European Central Bank's strategy review where it is likely to tweak the definition of its inflation target. Central banks in Malaysia, Poland and Peru also meet to set rates.
TECHNICAL OUTLOOK
[USDJPY]
Important Levels to Watch for Today:
- Resistance line of 110.942 and 111.110.
- Support line of 110.398 and 110.230.
Commentary/ Reason:
The dollar traded slightly lower at 110.507 yen, as the pair was weighed down by a slide in U.S. Treasury yields.
The benchmark 10-year Treasury note dipping to 1.2960 overnight for the first time since mid-February.
The yen rallied on safe-haven demand after the Nikkei Stock Index fell to a 2-week low. Meanwhile Bloomberg report that the BoJ would likely consider raising its inflation forecast when it updates its quarterly economic outlook next week due to recent gains in energy prices.
However, the currency was under pressure after the country is set to declare a state of emergency for Tokyo that will run through its hosting of the Olympics to try to contain a new wave of coronavirus infections. The move is the latest blow to the troubled Olympics, already once delayed because of the pandemic and plagued by a series of setbacks, including massive budget overruns.
The USD/JPY pair has limited bullish potential in the near- term. Technical indicators bounced from oversold readings but lost strength within negative levels. Selling will likely resume on a break below 110.32, a support level.
