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Most Asian Stocks Up, Brexit Latest May Extend FTSE 100 Gains Next

Most Asian Stocks Up, Brexit Latest May Extend FTSE 100 Gains Next

2018-11-01 05:00:00
Daniel Dubrovsky, Analyst
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Asia Pacific Market Wrap – Shanghai Composite, Australian Dollar, Brexit Hopes, FTSE 100

  • Most Asia Pacific benchmark stock indexes rose after gains on Wall Street, especially in China
  • Stimulus hopes bolstered Shanghai Composite. Australian Dollar rallied on that and trade data
  • More Brexit progress helped GBP/USD, FTSE 100 may extend gains as regional bourses open

We released our 4Q forecasts for equities in the DailyFX Trading Guides page

Most Asia Pacific benchmark stock indexes began November on an upbeat, echoing relief gains seen on Wall Street following a very shaky October. Some of the most pronounced performance were seen in China where the Shanghai Composite rallied over one percent as it headed for a third day of gains. Confirming this would mean its best winning streak in over two months.

Investors may have been attracted by plans from China’s government to provide a stimulus package after economic growth slowed to almost a decade low. Elsewhere, South Korea’s KOSPI fared rather well with gains reaching about 0.65%. Meanwhile Australia’s ASX 200 was only little changed as we approached Thursday’s close. Japan’s Nikkei 225 fell about 0.54%, weighed down by communication services and health care.

Looking at FX, not surprisingly the pro-risk Australian Dollar was up across the board on Chinese stimulus hopes. It has Australia’s key trading relationship with the world’s second largest economy to thank. Furthermore, better-than-expected local trade data showed that exports to China remained robust. We also saw impressive performance in the relatively high-yielding New Zealand Dollar in ‘risk on’ trade.

Together, this boded ill for the US Dollar as demand for a safe haven waned. In addition, the anti-risk Japanese yen suffered as well. The British Pound on the other hand outperformed thanks to a report from the Times that UK Prime Minister Theresa May secured a deal with the EU on financial services. This added fuel to Sterling’s upside momentum which was already ignited by positive Brexit news during the US trading session.

As European markets come online, this may allow regional traders to absorb the recent positive Brexit updates, perhaps sending the FTSE 100 higher. S&P 500 futures are also pointing cautiously higher, hinting that the upbeat mood in financial markets may continue. In such a case, AUD/USD still faces a key resistance barrier which if cleared, may open the door to test the descending February trend line.

FTSE 100 Technical Analysis

The FTSE 100 has pushed above a near-term descending resistance line after positive RSI divergence warned that downside momentum was ebbing. It has set itself up to test a horizontal barrier between 7,248 – 7,266 which has in the past acted as both support and resistance. Clearing that would eventually have the index testing a descending trend line from August. A turnaround has support eyed at 6,928 before exposing the March 26th low around 6,866.

FTSE 100 Daily Chart

Most Asian Stocks Up, Brexit Latest May Extend FTSE 100 Gains Next

Chart created in TradingView

Forecast:

Japanese Yen Fundamental Outlook

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--- Written by Daniel Dubrovsky, Junior Currency Analyst for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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