Nasdaq 100 Muted Amid Geopolitical and Growth Risks, APAC to Open Mixed

[ArvinIG]

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

• Dow Jones, S&P 500 and Nasdaq 100 closed -0.49%, -0.38%, and +0.10% respectively
• Rising geopolitical tensions and concerns about a faster pace of Fed tightening weighed on sentiment
• Asia-Pacific markets look set to open mixed. Crude oil prices climbed to fresh 7-year highs

Nasdaq 100, Hang Seng Index, Crude Oil, Inflation, Asia-Pacific at the Open:

US markets ended broadly lower on Monday, but technology shares bucked the trend and finished mildly higher. Tesla (+1.83%), Nvidia (+1.33%) and Amazon (+1.22%) were among the best performers in the Nasdaq 100 index. Investors mulled heightened geopolitical tensions between Russia and Iran after US National Security Adviser Jake Sullivan said on Friday that an imminent invasion is possible. Crude oil prices surged to fresh 7-year highs as traders worried about supply disruption between Russia and the European Union if the situation deteriorate further.

Rising crude oil prices spurred inflation concerns and may urge the Fed to tighten monetary policy at an accelerated pace. Fed bank of St. Louis President James Bullard said on Monday that the central bank needs to “front-load” rate hikes to restore its credibility and contain inflation. “We’ve been surprised to the upside on inflation. There is a lot of inflation”, he said during a TV interview.

Recently, Fed officials have become more hawkish-biased after a much stronger-than-expected nonfarm payrolls report and inflation readings in January, which underscored a tight labor market and rising wage pressures. This may urge the central bank to consider a 50bps rate hike in March and even a move in between scheduled policy reviews. The prospect of a faster pace of rate hikes may continue to weigh on equity prices, especially the rate-sensitive technology and real estate sectors.

Top 10 Stocks Daily Performance in The Nasdaq 100

Source: Bloomberg, DailyFX

The PBOC is expected to roll over its medium-term loans maturing this week, but a second consecutive rate cut is unlikely, according to a Reuters poll. The central bank will likely issue 200 billion yuan of medium-term lending facility (MLF) loans on Tuesday, matching the amount maturing on Friday. Last month, the PBOC surprised market by cutting the rate on one-year MLF by 10bps to 2.85% from 2.95%, showing its easing stance.

Asia-Pacific markets look set to open on the back foot following a tepid US session. Futures in Japan, Australia, mainland China, Hong Kong, South Korea, Taiwan, Singapore, Thailand and Indonesia are in the red, whereas those in Malaysia and India are in the green.

Looking ahead, UK jobs report dominates the economic docket alongside Euro area GDP growth rate. Find out more from theDailyFX economic calendar.

Hong Kong’s Hang Seng Index (HSI) fell for a second day as investors mulled rising domestic Covid-19 cases and stricter social distancing measures. Economists foresee Hong Kong’s retail sales growth to drop to 0% in 2022 from 8.1% in 2021. Meanwhile, unemployment rate may rise to 4.9%.Exchange data showed that HKD 2.47 billion have fled from Hong Kong on Monday via stock connections, marking a 3rd consecutive session of net outflow (chart below). This suggests that mainland investors have turned bearish on Hong Kong stocks in the near term, rendering them vulnerable to a technical pullback.

Southbound Flow vs. Hang Seng Index

Source: Bloomberg, DailyFX

Nasdaq 100 IndexTechnical Analysis

The Nasdaq 100 index is trending lower within a “Descending Channel” as highlighted on the chart below. An immediate support level can be found at around 14,180 – the 61.8% Fibonacci extension. Failing to hold above this level would bring the next support level of 13,740 into focus. The MACD indicator is about to form a bearish crossover beneath the neutral midpoint, suggesting that the overall momentum remains weak.

Nasdaq 100 Index– Daily Chart

Chart created with TradingView

Hang Seng Index Technical Analysis:

The Hang Seng Index (HSI) breached above a “Falling Wedge” pattern from the upside. Prices have reversed lower to test the upper trendline for support, holding above which may pave the way for further upside potential. An immediate resistance level can be found at around 24,900 – the 127.2% Fibonacci extension. Breaching above this level may expose the next resistance level of 25,600. The MACD indicator is trending higher above the neutral midpoint, underscoring bullish momentum.

Hang Seng Index – Daily Chart

Chart created with TradingView

ASX 200 Index Technical Analysis:

The ASX 200 index returned to the range-bound zone between 7,200 and 7,500, riding a strong technical upswing. Prices have pulled back to the floor of the range looking for immediate support. The MACD indicator formed a bullish crossover beneath the neutral midpoint, suggesting that a technical rebound is underway.

ASX 200 Index – Daily Chart

Chart created with TradingView

To contact Margaret, use the Comments section below or @margaretyjy on Twitter

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

DISCLOSURES

Margaret Yang, Strategist for DailyFX.com
15 February 2022