DOW JONES, HANG SENG, ASX 200, ASIA-PACIFIC MARKET OUTLOOK:
- Dow Jones index edged higher while the Nasdaq Composite retreated from record highs
- Weaker-than-expected US inflation data led the US Dollar lower, buoying commodity prices
- Asia-Pacific markets are heading into quieter trading sessions due to Chinese New Year Holiday
Inflation, US Dollar, Platinum, CNY Holiday, Asia-Pacific Stocks Outlook
Wall Street stocks hovered near record highs as Democrats moved closer to pass the US$ 1.9 trillion stimulus package without Republican support. Fed Chair Jerome Powell addressed the need for accommodative monetary policy in a speech last night, underscoring that the US job market is far from full recovery. His dovish stance and weaker inflation data led the US Dollar lower. The Dow Jones Industrial Average index finished 0.20% higher on reflation hopes, while the Nasdaq Composite retreated by 0.25%.
Asia-Pacific equities are probably heading into a quieter trading day as mainland bourses are closed for the Chinese New Year holiday and the Hong Kong Stock Exchange is trading for half of a typical day. Futures across Japan, Hong Kong, Singapore, India are pointing to a lower start, whereas those in Australia, South Korea, Malaysia, Thailand are edging higher.
Australia’s ASX 200 index opened slightly lower and quickly bounced back. Materials (+1.47%), communication services (+1.04%) and energy (+0.80%) are leading, whereas information technology (-1.40%) and consumer discretionary (-0.88%) sectors are lagging.
The US Dollar Index (DXY) declined for a third day after the release of weaker-than-expected US inflation data. US core CPI, which excludes volatile food and fuel costs, came in at 1.4% YoY in January. This is slightly below the baseline forecast of 1.5% and also marked a decline from December’s reading of 1.6%. The headline CPI reading advanced 0.3% MoM due to higher fuel prices, in line with expectations. But, the year-on-year print still fell short of market expectations. Tepid inflation rates reflected the lingering impact of the pandemic, and may refrain the Federal Reserve from considering tapering any time soon.
Weaker inflation readings also led the US Treasury yield curve to flatten slightly, with the 5-, 10- and 20-year yields declining by 2.3bps, 3.3bps and 3.5bps to 0.451%, 1.123% and 1.733% respectively. Lower yields, alongside a weaker US Dollar, may continue to support commodity prices. Platinum, a precious metal that can be used as a catalyst in fuel cells for electric vehicles, soared to a six-year high of US$ 1,251.
Chart by TradingView
Sector-wise, 6 out of 9 Dow Jones sectors climbed on Wednesday, with 60.0% of the index’s constituents closing in the green. Materials (+1.89%), energy (+1.72%) and healthcare (+0.74%) were among the best performing sectors, while industrials (-0.31%) and information technology trailed behind.
Dow Jones Sector Performance 10-02-2021
Source: Bloomberg, DailyFX
S&P 500 Index Technical Analysis:
Technically, the S&P 500 index resumed its upward trajectory after returning to the “Ascending Channel” last week. Prices continued to move higher within the upper Bollinger band, pointing to further upside potential. An immediate resistance level can be found at 3,950, where upper Bollinger band and the ceiling intercept. An immediate support level can be found at 3,893 (100% Fibonacci extension).
S&P 500 Index – Daily Chart
Hang Seng Index Technical Analysis:
The Hang Seng Index rebounded from the 50% Fibonacci retracement level (28,060) and has since resumed its upward trajectory. The index is attempting to challenge a key resistance level of 30,140 (previous high), breaking above this level may open the door further upside potential. A failed attempt to break above the resistance level however, may result in a formation of “Double Top” pattern and a correction is likely to follow.
Hang Seng Index – Daily Chart
ASX 200 Index Technical Analysis:
The ASX 200 index broke the ceiling of a “Range-Bound” zone at 6,810 last week with strong upward momentum. 6,810 has now became a key support level, holding above which may pave way for further upside potential with an eye on 6,900. The overall trend remains bullish-biased as suggested by the upward-sloped SMAs and widening Bollinger band width.
ASX 200 Index – Daily Chart