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Disastrous exports data does not bode well for the Korean economy
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US brokerage stocks plummet as Charles Schwab (SCHW.US) ramps up price war
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US carriers slump as WTO green lights-tariffs on Airbus’ planes
In spite of global stock market indices swinging up and down over the past months, the Korean stock market indices have been in continuous decline for 2 years. Unfortunately, the latest data from the country gives bears even more reasons to pull the trigger.
Korean exports data for September showed fourth double-digit decline (on annual terms) in a row. Moreover, price growth turned negative hinting at potential demand struggles. Source: Macrobond, XTB Research
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Open account Try demo Download mobile app Download mobile appKorean exports continue to decline and exert pressure on domestic stocks
South Korea is treated as a bellwether for the global trade and its data is often an omen for the global trends. Unfortunately, figures released earlier this week do not paint a bright picture. September was the fourth month in a row when South Korean exports experienced double-digit annual decline. To make things worse, inflation data seems to complement this picture as negative price growth dynamics on YoY basis in September hint that demand struggles. Note that South Korea is an export-driven economy and its exports declined during each month of the third quarter. Having said that, GDP may be set to decline in the third quarter on QoQ basis, just as it was the case in the first quarter of 2019. Such a development could put an additional pressure on already battered South Korean stock market.
South Korean index (KOSP200) has been trading within a downward trend since the final quarter of 2017. The index failed to break above the resistance zone ranging 272-276 pts and the downward sloping trendline in the previous week and moved significantly lower since. In turn, KOSP200 pulled back into the range of a long-term consolidation that limited price moves in between Q4 2011 and Q1 2017. The closest support zone to watch ranges above the 260 pts handle. Bearish setup would be invalidated once the price breaks above the end-June peak at 280 pts. Source: xStation5
US brokerage stocks sink as price war intensifies
Charles Schwab (SCHW.US) opened a new chapter in a price war fought between major brokerage houses. The US company announced on Tuesday that it will remove commissions for online trading in the US stocks and ETFs. Share price plummeted almost 10% in response to news as investors were frightened such a move will cause a margin squeeze. However, rivals of Charles Schwab saw their shares drop even more as they have to decide whether to follow suit and remove commissions or risk client departure. For example, E*Trade Financial Corp (ETFC.US) plunged more than 16% on Wednesday.
Share price of Charles Schwab (SCHW.US) sank after the company announced removal of online trading fees. The company is trading over 11% lower against last week’s close. Following the sell-off the stock found itself just slightly above the support zone marked ranging $36.00-36.50. Breaking below this zone would painting fresh 3-year lows. Charles Schwab along with other US brokerage houses may remain under pressure for some time as investors will be assessing the impact of the move on margins. Source: xStation5
US carriers slump as WTO green-lights tariffs on Airbus’ planes
Long-awaited WTO ruling on illegal government aid to Airbus (AIR.FR) was released yesterday. As expected the United States were authorized to impose tariffs on $7.5 billion of EU goods. However, there is a group of US stocks that does not like this ruling - airlines. United States announced they will impose 10% tariff on airplanes manufactured by the EU planemaker and this could have grave consequences for the US carriers. Why? US airlines ordered Airbus’ planes worth billions of dollars and wait for them to be filled. Following imposition of a new tariff, their orders instantaneously became 10% more expensive. Stocks that saw their share price plummet on the news include American Airlines (AAL.US), United Airlines Holdings (UAL.US) and Delta Airlines (DAL.US).
United Airlines Holdings (UAL.US) slumped on Wednesday as fear of increased tariff-related costs scared investors. The stock pulled back from the vicinity of an upper limit of the consolidation range and plunged around 5% yesterday. Price finished yesterday’s trading at the upward sloping trendline and a break below it could see the decline accelerate. In such a scenario, traders will focus on the support zone ranging above the $77 handle, that served as a lower limit of the trading range. Source: xStation5
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