Dow Jones Slumps 200 Points amid Risk Aversion

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Dow Jones Slumps 200 Points amid Risk Aversion

US indexes had performed badly yesterday, with the Dow being the one who was hurt the most. The price slumped more than 200 points, top tick to bottom tick, as the tensions between the US and North Korea continue to be at high points. Binary options activity had been extremely intense yesterday as the move progressed on the downside.

Latest comments from both US and North Korea officials had fueled the risk aversion as the situation seems that it will escalate further in the near future.

Technical pattern suggests further continuation might follow

Looking at our chart below, the downside move started on September 1 st , after the release of the US NFP and Unemployment figure, which came below market expectations. The market then gapped lower since over the weekend news regarding a successful test of a hydrogen bomb by North Korea had been released. A consolidation structure followed after the gap, confirming that the buyers were not eager to fill it and regain terrain.

Following the consolidation period, we see an impulsive bearish leg down, which took place yesterday, which account for more than 200 points. Interestingly though, after yesterday slump we see again a consolidation structure building up, so a usual impulsive vs. corrective move structure, which could signal additional selling might follow.
If the political tensions will escalate further we expect the price to resume the downside and break below the bottom of the current consolidation. Binary options could be placed in case a breakout occurs, so there is a lot of profit potential on the table.

The US equity market is in a very bad technical position and current downside risks might trigger a stronger wave of selling as the prices are still located around all-time highs.
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Asian stocks follow Wall Street lower on trade war jitters

BEIJING (AP) — Asian stock markets followed Wall Street lower Tuesday amid anxiety the U.S.-Chinese trade war will hurt already slowing global economic growth.

Benchmarks in Shanghai, Tokyo, Hong Kong and Sydney all retreated.

Investor anxiety has been fed by President Donald Trump’s threat of new U.S. tariff hikes on Chinese goods, protests in Hong Kong and weaker-than-expected data from India, Argentina and Singapore.

“The global economy is perched precariously, hoping for a positive inflection, but braced for a stumble,” said Vishnu Varathan of Mizuho Bank in a report.

The Shanghai Composite Index lost 0.5% to 2,801.33, and Tokyo’s Nikkei 225 tumbled 1.2% to 20,433.65. Hong Kong’s Hang Seng fell 1.2% to 25,524.86.

Seoul’s Kospi lost 0.7% to 1,928.80, while Sydney’s S&P-ASX 200 was 0.3% lower at 6,579.70. Markets in Taiwan, New Zealand and Southeast Asia also retreated.

Investors were rattled by a Chinese government statement Monday saying mostly nonviolent protests in Hong Kong were “beginning to show the sprouts of terrorism” and were an “existential threat” to the population.

Hong Kong’s airport, one of the world’s busiest, canceled all flights Monday evening after thousands of pro-democracy protesters crowded into its main terminal.

Beijing’s use of the term terrorism “triggered a wave of risk aversion across global markets,” said Stephen Innes of VM Markets in a report.

On Wall Street, the benchmark Standard & Poor’s 500 had its biggest decline in a week while the Dow Jones Industrial Average lost nearly 400 points.

Selling was widespread. Technology companies and banks accounted for a big share of the decline.

Investors sought safety in U.S. government bonds, sending their yields tumbling. The price for gold, another traditional safe-haven asset, closed higher.

The S&P 500 lost 1.2% to 2,883.09. The Dow fell 1.5%, or 389.73 points, to 25,897.71.

The Nasdaq composite dropped 1.2% to 7,863.41.

Trump has promised 10% tariffs on some $300 billion in Chinese imports that haven’t already been hit with tariffs of 25%. The new tariff would go into effect Sept. 1 and more directly affect U.S. consumers.

Last week, Trump said he’d be “fine” if the U.S. and China don’t go ahead with a meeting next month, dampening investors’ hopes for a resolution.

ENERGY: Benchmark U.S. crude lost 13 cents to $54.80 per barrel in electronic trading on the New York Mercantile Exchange. The contract gained 43 cents on Monday to close at $54.93. Brent crude, used to price international oils, declined 19 cents to $58.38 per barrel in London. It added 4 cents the previous session to $58.57.

CURRENCY: The dollar gained to 105.57 yen from Monday’s 105.30 yen. The euro declined to $1.1188 from $1.1214.

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