Jump to content

Dow Jones, Nasdaq, Treasury yields, Hang Seng, China lockdowns – Asia Pacific indices briefing

Recommended Posts

Dow Jones, S&P 500 and Nasdaq 100 fall as Treasury yields keep rising; Nasdaq/Dow ratio sits near one-month low amid more hawkish Fed and Chinese lockdown woes weighing on energy stocks and the Hang Seng.

Source: Bloomberg

Monday’s wall street trading session recap

Market sentiment was reeling on Wall Street at the end of Monday’s session. Dow Jones, S&P 500 and Nasdaq 100 futures declined 1.14%, 1.66% and 2.28% respectively. This is as the VIX volatility index, also known as the market’s preferred ‘fear gauge’, soared 15% to close at its highest in almost one month. Risk aversion continued in the aftermath of an increasingly hawkish Federal Reserve.

There were no sectors within the S&P 500 that closed in the green. The three worst-performing ones were energy (-3.11%), information technology (-2.60%) and health care (-1.97%). Losses in energy stocks followed weakness in WTI crude oil prices, where the futures contract fell 2.65%. Concerns over China’s worst Covid-induced lockdown on record is dampening demand from a key consumer of oil.

The ten-year Treasury yield gained 2.9% as the Nasdaq/Dow ratio sank to the lowest in almost one month. Chicago Fed President Charles Evans spoke today, noting that the central bank ‘has to be on top of prices and reposition ourselves’. At this rate, a 50-basis point hike seems very likely at the next meeting in May, with quantitative tightening just around the corner as well.

Dow Jones technical analysis

On the four-hour chart, Dow Jones futures appear to be carving out a bearish Head and Shoulders chart formation. After forming the right shoulder, prices are testing the neckline around 34263. Confirming a breakout under the latter may open the door to reversing the near-term uptrend seen during the second half of March. Otherwise, pushing above 34820 opens the door to revisiting 35281.

Dow Jones four-hour chart

Source: TradingView

Tuesday’s Asia pacific trading session

With that in mind, the rather pessimistic day on Wall Street risks being a precursor to follow-through during Tuesday’s Asia-Pacific session. The economic docket is also fairly light, placing the focus on sentiment. Hong Kong’s Hang Seng Index remains an interesting one to watch given lockdowns in China. According to Bloomberg, China approved the first batch of new video game licenses since July overnight.

That has brought hopes of a turnaround in the government’s views on crackdowns that have been weighing on local indices since February 2021. Unfortunately, this is coming at a time when China’s economy is slowing and global monetary tightening is permeating throughout financial markets. The latter could still weigh on the Hang Seng, especially the tech index (HST).

Hang Seng technical analysis

Hang Seng Index futures appear to have broken under a Rising Wedge chart formation. This could hint at extending losses back towards the March low at 18134. Immediate support is the 23.6% Fibonacci extension at 20992 before the 38.2% level comes into focus at 19954. Overturning the Rising Wedge may see prices retest the current April high at 22670.

Hang Seng Index futures four-hour chart

Source: TradingView

This information has been prepared by DailyFX, the partner site of IG offering leading forex news and analysis. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

Daniel Dubrovsky | Currency Analyst, DailyFX, San Francisco
12 April 2022

Link to comment

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • Posts

    • Sainsburys full year earnings and Unilever’s first quarter trading update both say the same thing, UK consumers are in for higher prices. The war in Ukraine, supply chain issues and the effects of ongoing Covid all to blame.      
    • US Dollar (DXY) Daily Price and Analysis US Q1 GDP may stall the greenback’s advance. A 20-year high nears for the US dollar. The multi-month US dollar rally continues with the greenback printing a fresh high today ahead of the first look at US Q1 GDP at 12.30 GMT. The US dollar basket (DXY) has been boosted by renewed weakness in the Euro and the Japanese Yen, as investors move from lower-yielding to higher-yielding currencies, while safe-haven flows continue to benefit the greenback. The US growth release later in the session is expected to show a sharp slowdown from the robust Q4 figure of 6.9%. The markets are currently pricing in growth of just 1% for the first three months of this year, with the slowdown mainly due to a reduction in inventory accrual over the quarter. This release is unlikely to move the greenback, unless there is a large miss or beat, as the Fed believe that 2022 US growth will be robust enough to let them tighten monetary policy sharply without damaging the economy. The latest US Core PCE data – the Fed’s preferred inflation reading – is released on Friday and this may have more effect on the US dollar than today’s GDP data. For all market moving economic data and events, see the DailyFX Calendar. The ongoing US dollar rally has been aided by weakness across a range of G7 currencies including the Euro, the Japanese Yen, and the British Pound. The Euro continues to battle with lowly growth expectations, exacerbated by energy concerns, the British Pound is mired by weak economic data, while the Japanese Yen is in freefall as the BoJ continues with its ultra-loose monetary policy.   The US dollar continues to press higher and looks set to break above 103.96, the March 2020 high. Above here the US dollar would be back at levels last seen nearly two decades ago. The March resistance will likely hold in the short-term, especially with month-end portfolio rebalancing at the end of the week, but US dollar strength is set to continue in the months ahead. USDOLLAR (DXY) WEEKLY PRICE CHART – APRIL 28, 2022 {{THE_FUNDAMENTALS_OF_BREAKOUT_TRADING}} What is your view on the US Dollar – bullish or bearish?   Apr 28, 2022 | DailyFX Nick Cawley, Strategist
    • While Tesla has nothing directly to do with Elon Musk buying Twitter - TSLA stock closed down 12% on news that Musk may have to sell stock and use other holdings to stand against the loan to finalise the purchase of the social media giant.        
  • Create New...