DOW JONES, HANG SENG, ASX 200 INDEX OUTLOOK:
- Dow Jones, S&P 500 and Nasdaq 100 fell -0.94%, -0.76% and -0.53% respectively
- Widened lockdown measures in Germany, France and Italy dampened recovery outlook, sending crude oil prices down more than 6%
- Asia-Pacific stocks look set to follow a sour US lead lower while demand for safety is surging
Viral Resurgence, Powell & Yellen Testimony, USD, Crude Oil, Asia-Pacific at Open:
Concerns surrounding Europe’s stalled vaccine progress and renewed round of lockdown measures introduced in Germany, France and Italy sent Wall Street equities broadly lower. The region’s recovery prospects are dampened by a potential third wave, weighing on risk sentiment. Meanwhile, Brazil reported over 3,000 Covid deaths for the first time and the country’s daily new cases surged to a record high of 49k. Investors are looking for safe-havens to shelter, sending the DXY US Dollar index and Treasury prices higher. Growth concerns and souring sentiment put Asia-Pacific markets at risk of another pullback following Tuesday’s losses.
Fed Chair Jerome Powell and Treasury Secretary Janet Yellen testified before the House Financial Services Committee, reassuring markets that accommodative monetary policies are here to stay and that inflation risks are manageable. “We might see some upward pressure on prices. Our best view is that the effect on inflation will be neither particularly large nor persistent,” Mr Powell said when addressing the potential impact of the $1.9 trillion stimulus package on inflation. Yellen defended President Biden’s stimulus plans, hinting that the spending will be partially funded through corporate tax hikes.
Daily New Covid-19 Cases in Germany
Source: JHU CSSE Covid-19 Data
The energy and oil & gas sectors might be particularly vulnerable to a pullback in Asia-Pacific as crude oil prices tumbled more than 6% after Germany announced an intensified coronavirus lockdown going into Easter. Chancellor Angela Merkel warned that new mutations raised the prospect for a potentially deadly “third wave” as Europe struggled in its vaccine campaign. This came after a few countries halted the use of AstraZeneca’s Covid vaccine due to concerns about potential side effects.
Meanwhile, haven demand fueled a rally in the DXY US Dollar index, which climbed to a two-week high of 92.40 and exerted downward pressure on commodity prices. The commodity-linked Australian and Canadian Dollar as well as the Norwegian Krone suffered big losses overnight and may continue to slide against the Greenback.
WTI Crude Oil – Daily Chart
Chart by TradingView
Australia’s ASX 200 index exhibited resilience against external headwinds, opening modestly higher. Real estate (+0.92%), consumer staples (+0.59%) and communication services (+0.46%) were among the best performers, whereas energy (-1.50%) and materials (-0.67%) trialed behind.
Hong Kong’s Hang Seng Index looks set to open lower after falling 1.34% on Tuesday. The index suffered a significant selloff since February as mainland stock markets retreated broadly. The recent rise in longer-term Treasury yields also encouraged profit-taking activity in the technology sector. The stock connections saw HK$ 4.4 billion net outflow via the southbound trade, suggesting that mainland investors were pulling their capital away from the HK stock market.
Looking ahead, the UK core inflation rate headline the economic docket alongside US durable goods orders and Markit manufacturing PMI readings. Besides, a slew of Markit manufacturing and service PMI readings from European countries will also be watched for clues about the region’s recovery momentum. Find out more from theDailyFX calendar.
Looking back to Tuesday’s close, 8 out of 9 Dow Jones sectors ended lower, with 73.3% of the index’s constituents closing in the red. Materials (-4.35%), industrials (-2.55%) and financials (-1.74%) were among the worst performers, whereas defensive-linked consumer staples (+0.90%) registered a small gain.
Dow Jones Sector Performance 23-03-2021
Source: Bloomberg, DailyFX
( 13:03 GMT )
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Dow Jones Index Technical Analysis
The Dow Jones index reverted back to the “Ascending Channel” after briefly breaching it. The 20-day SMA line may serve as an immediate support, breaking it may lead to a deeper pullback towards 31,916- the 76.4% Fibonacci extension. The overall trend remains bullish-biased, as suggested by the upward-sloped moving averages.
Dow Jones Index – Daily Chart
Chart by TradingView
Hang Seng Index Technical Analysis:
The Hang Seng Index is trending lower within a “Descending Channel”, underscoring a predominate bearish trend in the near term. The index is testing the 100-day SMA line for support, breaking which would likely intensify near-term selling pressure and expose the next support level of 27,930. The MACD indicator is trending lower beneath the neutral midpoint, suggesting that near-term momentum remains downward-biased.
Hang Seng Index – Daily Chart
ASX 200 Index Technical Analysis:
The ASX 200 index bounced off the floor of the “Ascending Channel” and surged above the 50-day SMA line of 6,730 – an immediate resistance. The index appears to have entered a range-bound condition between 6,660 and 6,860 since early March, waiting for fresh catalyst for a clearer direction. The MACD indicator is trending below the neutral midpoint, showing that downward momentum is prevailing.
ASX 200 Index – Daily Chart
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— Written by Margaret Yang, Strategist for DailyFX.com
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