Global stocks collapse after US-North Korea talks end without a deal
Global stocks declined today as traders started to worry about global growth. This came after China, Japan and Switzerland released data that missed analysts’ consensus. China’s manufacturing PMI contracted to 49.2 in February. This was the third month of straight declines. Investors were expecting a PMI of 49.5. The non-manufacturing PMI decreased to 54.3, which was lower than the consensus estimates of 54.5. In Japan, the industrial production for January declined by -3.7%, which was lower than the expected -2.4% while retail sales rose by 0.6%, which was lower than the expected 1.4%. In Brazil, the economy expanded by 1.1% in the fourth quarter, which was lower than the expected 1.3%. The decline in stocks came after Washington failed to re a deal with North Korea. The US said that NoKo wanted sanctions relief without offering any concessions.
The Swiss Franc rose sharply against the USD after data from SECO showed a slight improvement in the Q4 economy. In the quarter, the economy expanded by 0.2%, which was worse than the expected 0.4% but still better than the third quarter contraction of -0.3%. On a YoY basis, the economy expanded by 1.4%, which was lower than the expected 1.7%. The reason for the growth in the quarter was an improvement in the manufacturing and watch-making industry.
The euro rose sharply against the USD as the EU released mixed economic data. In Germany, the import price index rose at an annualized rate of 0.8%, which was lower than the expected 1.3% and the December’s 1.6%. On a MoM basis, import prices contracted by -0.2%, which was lower than the expected 0.3%. In Germany, the CPI for CPI was at 1.6%, which was higher than the expected 1.5%. In France, consumer prices were relatively unchanged while in Spain, the harmonized CPI rose by 1.1%, which was higher than the expected 1.0%. In Italy too, the consumer prices were little moved while in Portugal, the economy expanded by 1.7%.
In the United States, the Labor department released the GDP numbers for the fourth quarter. The numbers showed that the economy expanded by 2.6%, which was in line with expectations. This was the first preliminary data because in January the government was in a shutdown. The GDP price index for the quarter improved by 2.0%, which was higher than the expected 1.7%. The initial and continuing jobless claims of 225K and 1,805K were below the expectations.
The USD/CHF declined sharply from parity to a low of 0.9930. On the four-hour chart, the pair is below the 56-day and 21-day EMA while the RSI has declined to a low of 30. This price is deeply along the lower line of the Bollinger Bands. The Parabolic SAR shows that the price could continue moving downwards. If it does, it will likely test the important support level of 0.9900.
The XAU/USD pair rose to an intraday high of 1327. This was the highest level since yesterday. In the past week, the pair has declined from a high of 1346. This happened after North Korea rejected demands for denuclearization. The XAU/USD pair is trading at 1324, which is slightly higher than the 21-day EMA. It is also along the 50% Fibonacci Retracement level. The RSI has moved to a high of 57. The pair could resume the downward trend.
The EUR/USD pair rose sharply today to a high of 1.1418. This was a continuation of an upward trend that started on February 15 when the pair was at 1.1230. The current level is along the upper line of the Bollinger Bands. The 14-day RSI has moved to a high of 70 while the momentum indicator remains above the 100 level. The pair will likely continue the upward momentum although this could change.