Nasdaq 100 in Cautious Mood as Yields Climb, Hang Seng Index May Rise

[ArvinIG]

 

NASDAQ 100,HANG SENG INDEX, ASX 200 INDEX OUTLOOK:

• Dow Jones, S&P 500 and Nasdaq 100 closed -0.56%, +0.08%, and +0.75% respectively on Friday
• US 10-year Treasury yields reached 2-year high, weighing on the technology sector
• Asia-Pacific markets look set to open modestly higher. US markets will reopen after a holiday

Nasdaq 100, Hang Seng Index, Treasury Yield, BOJ, Asia-Pacific at the Open:

US markets will resume trading on Tuesday after a break. Investors will continue to monitor banks’ earnings for clues about rising costs and higher net interest margin down the road. Last week, JPMorgan and Citigroup announced disappointing results as they both highlighted cost ‘headwinds’ and moderating Wall Street Revenue. Today, GoldmanSachs will release its Q4 earnings.

The rate of 10-year US treasuries climbed to a fresh two-year higher of 1.81%, exerting downward pressure on equities as bonds offer an alternative to risk assets. Treasury yields are viewed as risk-free benchmark, which will affect rates on bonds and other assets. Higher yields translate into rising borrowing costs for leveraged corporates and individuals, potentially squeezing their profit margin. This renders the Nasdaq 100 index more susceptible to selling compared to the Dow Jones, as many tech companies are highly leveraged and do not generate positive cash flow.

US 10-Year Treasury Yield

Chart created with TradingView

Asia-Pacific markets look set to trade higher following a positive lead from European markets. A string of upbeat data from Japan and China boosted sentiment on Monday, underscoring resilience of the world’s second- and third- largest economy against the headwind of the Omicron variant. China’s central bank, the PBOC, cut the borrowing cost of 1-year MLF by 10 bps, exceeding market expectations.

Futures in Japan, mainland China, Australia, Hong Kong, Taiwan, Singapore, Thailand and Indonesia are in the green, whereas those in South Korea, Malaysia and India are in the red.

Looking ahead, the BoJ interest rate decision dominates the economic docket alongside UK jobs report and German ZEW economic sentiment index. Find out more from theDailyFX economic calendar.

Hong Kong’s Hang Seng Index (HSI) fell 0.68% on Monday, with technology shares leading the decline. Hong Kong stocks have largely lagged behind global peers throughout 2021. Many investors are eyeing them for bargain hunting, including mainland investors. Exchange data showed that HKD 1.46 billion have flowed into the Hong Kong market on Monday via stock connections, marking a ninth consecutive session of net inflow (chart below).

Southbound Flow vs. Hang Seng Index

Source: Bloomberg, DailyFX

Nasdaq 100 IndexTechnical Analysis

The Nasdaq 100 index risks breaching below a key support level of 15,550 – the lower bound of the range-bound zone it traded over the last few months. Failing to hold above this level would bring the next support level of 15,310 and then 14,800 into focus. The MACD indicator is trending lower, suggesting that downward momentum may be prevailing.

Nasdaq 100 Index– Daily Chart

Chart created with TradingView

Hang Seng Index Technical Analysis

The Hang Seng Index (HSI) is attempting to breach a “Falling Wedge” pattern from the upside, as highlighted in the chart below. A successful attempt may signal a bullish trend reversal and open the door for further gains. Prices have pulled back to the upper trendline looking for immediate support. The MACD indicator is trending higher below the neutral midpoint, suggesting that bullish momentum may be building.

Hang Seng Index – Daily Chart

Chart created with TradingView

ASX 200 Index Technical Analysis:

The ASX 200 index pulled back to a range-bound zone between 7,200 to 7,500 after a ‘false breakout’ last week. The floor and ceiling of the range may be viewed as immediate support and resistance levels respectively. The overall trend remains bullish-biased, as prices formed consecutive higher highs and higher lows over the past three months. A meaningful breach above 7,500 may intensify buying pressure and expose the next resistance level of 7,760.

ASX 200 Index – Daily Chart

Chart created with TradingView

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

DISCLOSURES

Margaret Yang, Strategist, DailyFX
18 January 2022