Financial market research and analysis

It was another day of sell-off in Asian stock markets. Disappointing corporate earnings from Japanese firms kept the appetite limited in Tokyo; even yesterday’s Mitsubishi deal was not enough to flourish investors’ enthusiasm. Nikkei and Topix lost 1.41% and 1.56%, as Hang Seng and Shanghai’s Composite cheapened by 1.38% and 0.31% into the weekly closing bell. Gold gained 0.85%.

The overnight trading session saw the US dollar strengthening against the majority of its G10 counterparts. The FX market gave little attention to yet very interesting comments from FOMC Chair Janet Yellen. Yellen said that the Federal Reserve (Fed) ‘won’t completely rule out the negative rates’. The least we can say is that the Fed’s rate policy path is turning into a muddy alley given that this latest statement from the Chairwoman is in perfect disharmony with the Fed’s dot plot suggesting the possibility of two rate hikes before the end of the year. The US 10-year yields fell by 0.59%.

The pound failed to build on gains after the Bank of England (BoE) surprisingly decided to leave the Brexit-related moves aside while readjusting its macroeconomic forecasts in the Quarterly Inflation Report. Cable is presently challenging the 1.44 support, if broken should easily pave the way south to the 100-hour moving average (1.43);  the EURGBP is struggling at around the 200-hour moving average (0.7875).

In Brazil, the Senate backed President Dilma Rousseff's impeachment trial. While the very much desired outcome could trigger another day of hope rally in Brazilian assets and the real, some investors could be expected to take profit and shift sideways as Rousseff's impeachment will unfortunately not solve any of the fundamental problems the country is facing at the moment. Later sees the release of US retail sales, a key component for growth in the US economy. Given the quarterly results of some US retailer of late, we could be setting up for a miss on the consensus number here.  Eurozone GDP was a slight miss. German GDP managed to beat slightly, coming in at 0.7% versus 0.6% expected. As it stands, the Eurozone is actually doing better than the USA.