NASDAQ 100, HANG SENG, ASX 200 INDEX OUTLOOK:
- Dow Jones, S&P 500 and Nasdaq 100 closed +0.06%, -0.67% and -1.85% respectively
- Janet Yellen’s interest rate comments sparked fresh tapering fears, boosting the US Dollar
- Futures in Australia and Hong Kong are positioned for losses following a sour Wall Street lead
Tech Pullback, Janet Yellen, USD, Asia-Pacific at Open:
Nasdaq 100 index fell 1.85% on Tuesday as profit-taking ramped up on fresh tapering fears. US Treasury Secretary Janet Yellen said interest rates may have to rise moderately to keep the economy from overheating. Her words echoed comments from Dallas Fed president Robert Kaplan at the end of last week, who said it’s time to start debating a reduction in bond purchases amid signs of excessive risk-taking.
Although Fed Chair Jerome Powell reiterated that current monetary policy is appropriate and inflation pressure may be transitory, a slew of robust economic data ignited tapering speculations recently. The central bank may need to consider withdrawing its asset purchasing program sooner to prevent asset bubbles and inflation overheat. Yellen and Kaplan’s comments strengthened tapering speculations, fueling another wave of sectoral rotation from growth into value stocks. Mrs. Yellen later clarified that she was not forecasting interest rate hikes. Technology sector is probably more vulnerable against the headwind, due to lofty valuations and sensitivity to interest rate changes.
Top 10 Stocks by Market Cap in the Nasdaq 100
Source: Bloomberg, DailyFX
Asia-Pacific markets are facing a challenging day ahead, with futures across Australia, Hong Kong, Taiwan, Singapore, India and Thailand are pointing to a lower start. Stock exchanges in China, Japan and South Korea are shut for public holidays. The viral resurgence in India and its neighboring countries remains a major concern for Asia-Pacific investors. This may post a major growth and reopening risk to the South and Southeast Asia region.
The Hang Seng Index (HSI) looks set to open down more than 1% on Wednesday morning, futures market shows. Trading volume on the HKEX shrunk considerably this week due to a lack of participants from mainland China. Technology companies including Alibaba, Tencent, Meituan and Xiaomi seem to be the most susceptible to a selloff following a sour US lead.
Australia’s ASX 200 index opened marginally higher, led by materials (+0.38%), energy (+0.06%) and financials (+0.01%) sectors. Information technology (-1.19%) and consumer discretionary (-0.21%) lagged behind. Sentiment was lifted by a robust jobs report from New Zealand, as the unemployment rate fell to 4.7% in the first quarter. Both the New Zealand and Australian Dollars rebounded moderately against the US Dollar after the data release.
On the macro side, a string of Eurozone composite PMI print headlines the economic docket alongside US ADP employment changes and EIA crude inventory report. Find out more from theDailyFX calendar.
Nasdaq 100 Index Technical Analysis
The Nasdaq 100 index broke below an immediate support level of 13,715 (the 100% Fibonacci extension) with strong bearish momentum. A large bearish candlestick formed on Tuesday suggests that selling pressure is prevailing and a deeper pullback may follow on. A key support level can be found at 13,300 – the 61.8% Fibonacci extension. The MACD indicator formed a bearish crossover and trended lower, suggesting that downward momentum is dominating.
Nasdaq 100 Index – Daily Chart
Hang Seng Index Technical Analysis:
The Hang Seng Index (HSI) breached below the “Ascending Triangle” as highlighted on the chart below, suggesting that the index may have resumed its downward trajectory. An immediate support level can be found at 28,334 – the 23.6% Fibonacci retracement. Breaking this level may open the door for further losses with an eye on 27,480 – the previous low. The MACD indicator formed a bearish crossover and trended below the neutral midpoint, suggesting that downward momentum is prevailing.
Hang Seng Index – Daily Chart
ASX 200 Index Technical Analysis:
The ASX 200 index is challenging an immediate resistance level at 7,071 (the 100% Fibonacci extension) for a third attempt. Breaching this level may expose the next key resistance of 7,260 – the 127.2% Fibonacci extension. A pullback from here may lead to a test of the ceiling of the “Ascending Channel” that it broke previously. The MACD indicator formed a bearish crossover and trended lower, suggesting that bullish momentum is fading.
ASX 200 Index – Daily Chart
— Written by Margaret Yang, Strategist for DailyFX.com
To contact Margaret, use the Comments section below or @margaretyjy on Twitter