24 Aug 2015
China stocks bloodbath leads broad Asia sell-off, Risk-off to dominate
FXStreet (Mumbai) - Chinese equities battering extended on Monday, triggering renewed sell-off and thus worsening risk sentiment across Asia. The demand for safe-haven assets such as gold, JPY , treasuries were on the rise while risk currencies such as the Aussie was hammered to fresh cycle lows.
Key headlines in Asia
China stocks bleed, SSEC collapses 8.5% - worst since Asian crisis
China's pension fund allowed to invest in stock market
Oil hitting 6-half year lows sub $40bbl
Dominating themes in Asia - centered on JPY, AUD, NZD
Broad based sell-off extended in a rather volatile Asia, with Chinese equities rout exacerbating the pain along with plummeting oil prices (WTI sub $ 40).
Flight to safety remained the key theme in Asia as traders resorted to safe-havens amid the global turmoil led by China. Chinese stocks accelerated the rout and registered biggest drop since Asian financial mainly triggered by a strong injection of short-term liquidity into the interbank market that many read as a substitute for deeper easing crisis. While many traders also believed that disappointment over the lack of a liquidity move by the central bank over the weekend triggered a fresh selloff.
As a result, safety assets such as the yen emerged the biggest beneficiary from the ongoing risk-off market profile. USD/JPY dropped to fresh monthly lows at 120.73 in mid-Asia and now wavers above 121 handle. While gold remains largely subdued below $ 1160 despite tumbling global equities.
The Antipodean currencies suffered the most from the China-led sell-off, with the Aussie registering fresh cycle lows at 0.7201. The Kiwi remains heavy; tracking its OZ neighbor, while RBNZ Spencer’s latest comments that rate-hikes are off table for some time also added to the losses in the NZD.
On the Asian equities space, the Hong Kong's benchmark Hang Seng index is losing -4.73% at 21349 while mainland China's benchmark Shanghai Composite keeps falling and trades -8.45% at 3211. Among other Asian indices, the Japanese benchmark Nikkei 225 is losing -4% at 18637 While the benchmark Australian S&P/ASX 200 index plunges -3.50% at 5034 weighed down by a lack of risk sentiment. Korea's benchmark Kospi index now trades -2.43% at 1,830 points in Seoul.
Heading into Europe - centered on EUR, GBP
Nothing of much relevance today in the session ahead as the macro calendar remains absolutely dry with markets now shifting attention towards German Ifo due for release tomorrow.
While a host of key US data release including the durable goods orders followed by prelim Q2 GDP print to be closely watched in the week ahead.
EUR/USD Technicals
Valeria Bednarik, Chief Analyst at FX Street explained, “Despite the EUR is bullish, buying at current levels seems quite risky, as the pair has added around 380 practically with no corrections in between. A downward corrective movement is likely for this Monday, and it can extend down to 1.1245, the 38.2% retracement of the latest bullish run, without actually affecting the trend. Additional advances beyond 1.1405 on the other hand, should see the pair extending up to 1.1435, June 18th daily high.”
Key headlines in Asia
China stocks bleed, SSEC collapses 8.5% - worst since Asian crisis
China's pension fund allowed to invest in stock market
Oil hitting 6-half year lows sub $40bbl
Dominating themes in Asia - centered on JPY, AUD, NZD
Broad based sell-off extended in a rather volatile Asia, with Chinese equities rout exacerbating the pain along with plummeting oil prices (WTI sub $ 40).
Flight to safety remained the key theme in Asia as traders resorted to safe-havens amid the global turmoil led by China. Chinese stocks accelerated the rout and registered biggest drop since Asian financial mainly triggered by a strong injection of short-term liquidity into the interbank market that many read as a substitute for deeper easing crisis. While many traders also believed that disappointment over the lack of a liquidity move by the central bank over the weekend triggered a fresh selloff.
As a result, safety assets such as the yen emerged the biggest beneficiary from the ongoing risk-off market profile. USD/JPY dropped to fresh monthly lows at 120.73 in mid-Asia and now wavers above 121 handle. While gold remains largely subdued below $ 1160 despite tumbling global equities.
The Antipodean currencies suffered the most from the China-led sell-off, with the Aussie registering fresh cycle lows at 0.7201. The Kiwi remains heavy; tracking its OZ neighbor, while RBNZ Spencer’s latest comments that rate-hikes are off table for some time also added to the losses in the NZD.
On the Asian equities space, the Hong Kong's benchmark Hang Seng index is losing -4.73% at 21349 while mainland China's benchmark Shanghai Composite keeps falling and trades -8.45% at 3211. Among other Asian indices, the Japanese benchmark Nikkei 225 is losing -4% at 18637 While the benchmark Australian S&P/ASX 200 index plunges -3.50% at 5034 weighed down by a lack of risk sentiment. Korea's benchmark Kospi index now trades -2.43% at 1,830 points in Seoul.
Heading into Europe - centered on EUR, GBP
Nothing of much relevance today in the session ahead as the macro calendar remains absolutely dry with markets now shifting attention towards German Ifo due for release tomorrow.
While a host of key US data release including the durable goods orders followed by prelim Q2 GDP print to be closely watched in the week ahead.
EUR/USD Technicals
Valeria Bednarik, Chief Analyst at FX Street explained, “Despite the EUR is bullish, buying at current levels seems quite risky, as the pair has added around 380 practically with no corrections in between. A downward corrective movement is likely for this Monday, and it can extend down to 1.1245, the 38.2% retracement of the latest bullish run, without actually affecting the trend. Additional advances beyond 1.1405 on the other hand, should see the pair extending up to 1.1435, June 18th daily high.”