DOW JONES, HANG SENG, ASX 200 INDEX OUTLOOK:
- Dow Jones, S&P 500 and Nasdaq 100 indexes closed +0.52%, +0.88% and +1.78% respectively
- Nonfarm payrolls data came below expectations, while robust wage growth hints at inflationary pressures. The unemployment rate dropped to a pandemic low.
- A pullback in the US Dollar and Treasury yields sent gold prices higher
NFP, Yields, Gold, Pandemic, China Trade Balance, Asia-Pacific Week-Ahead:
Wall Street equities closed broadly higher on Friday as a slight miss in May’s nonfarm payrolls data cooled fears about the Fed tapering stimulus. Some 599k jobs were added last month, compared to a 650k baseline forecast. Yet wage growth climbed 2% YoY versus a 1.6% forecast, reflecting rising prices. The unemployment rate fell to 5.8% from 6.1% in the prior month, hitting a pandemic-era low.
The overall jobs report is decent, showing a robust recovery in the labor market, yet not “too good” to stoke tapering fears. As a result, both the DXY US Dollar index and 10-year Treasury yields pulled back on Friday, underpinning stocks and bullion prices.
The rate-sensitive technology sector was leading the rebound, with Nasdaq 100 index surging 1.78%. Goldprices rebounded 1.02% to $ 1,890 and WTI crude oil prices extended higher to $ 69.61. Risk-on sentiment appears to be prevailing, setting a positive tone for Asia-Pacific markets.
US Nonfarm Payrolls
Source: Bloomberg, DailyFX
APAC bourses look set to kick off the week on the front foot. Futures in Japan, mainland China, Australia, Hong Kong, Taiwan, Singapore and India are trading higher, whereas those in South Korea, Malaysia and Thailand are in the red.
Investors will eye today’s release of Chinese balance of trade data for clues about the health of the world’s second-largest economy. Growth in exports and imports is expected at 32.1% and 51.5% YoY respectively, partly due to a low-base effect. Chinese data tends to have a significant impact on the Australian and New Zealand Dollars due to their close trade relationship.
New Covid-19 outbreaks in China’s Guangdong province may weigh on the Hang Seng Index (HSI) after local authorities tightened controls on Sunday. The province has detected more than 100 cases since the outbreak started on May 21st and the trend shows no signs of abating. Residents in the area were urged to take Covid-19 tests and were encouraged to stay within the province. Guangdong is one of the most developed provinces in China, and thus tightened Covid-related restrictions may result in a broader adverse economic impact.
New Covid-19 Case in Guangdong, China
Looking back to Friday’s close, 7 out of 9 Dow Jones sectors ended higher, with 76.7% of the index’s constituents closing in the green. Information technology (+1.83%) and energy (+0.80%) outperformed, while materials (-0.34%) and healthcare (-0.12%) trailed behind.
Dow Jones Sector Performance 04-06-2021
Source: Bloomberg, DailyFX
Dow Jones Index Technical Analysis
The Dow Jones index may be challenging the 200% Fibonacci extension level (34,920) for a second attempt at breaking higher. Prices remain within an “Ascending Channel” formed since early November, the ceiling and the floor of which serve as key support and resistance levels respectively. The MACD indicator formed a bullish crossover, suggesting that upward momentum may be building.
Dow Jones Index – Daily Chart
Hang Seng Index Technical Analysis:
The Hang Seng Index (HSI) formed a “Double Bottom” chart pattern on the daily chart and may be positioned for further price gains (chart below). The index failed to breach the neckline (29,350) last week however, and has since entered a technical correction. 29,350 remains a key resistance level in the near term, as it coincides with the 50% Fibonacci retracement.
Hang Seng Index – Daily Chart
ASX 200 Index Technical Analysis:
The ASX 200 index reached an all-time high on Friday after breaching above a key resistance level of 7,194 – the 127.2% Fibonacci extension. Prices have since opened the door for further upside potential with an eye on 7,340 – the 161.8% extension. The MACD indicator formed a bullish crossover and trended higher, suggesting that upward momentum is prevailing.
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