Nasdaq 100, Hang Seng, ASX 200 INDEX OUTLOOK:
- Dow Jones, S&P 500 and Nasdaq 100 closed +0.06%, +0.47%, and +1.05% respectively
- 10-year Treasury yield dropped to 1.43% while VIX fell to 16.11, boosting the technology sector
- US headline CPI hit a 13-year high of 5.0% in May, but investors remained calm and interpreted it as a sign of economic strength
US Inflation, Tech Rally, Yields, VIX, Jobless Claims, Asia-Pacific at Open:
Wall Street stocks rallied on Thursday despite stronger-than-expected US inflation data. The headline CPI came in at 5.0% YoY, compared to a forecast of 4.7%. The core rate hit 3.8% YoY – the highest level seen since 1992 as rising demand, supply strain and a low-base effect pushed price levels higher.
Market participants perhaps viewed the readings as a sign of economic strength, and anticipate it to be ‘transitory’, in-line with what the Fed has been predicting. The 10-year Treasury yield fell over 4% to 1.43% to a three-month low, reflecting that inflation expectations are cooling. Longer-dated Treasury yields have fallen more than 15 bps this week. (chart below)
Source: Bloomberg, DailyFX
Sentiment was further boosted by a decent jobless claims report, with 376k unemployment claims filed last week – the lowest since the pandemic. The pace of job creating appears to have accelerated over the past three months, according to the recent API and nonfarm payrolls reports. Looking ahead, UK GDP data and the University of Michigan consumer sentiment index dominate the economic docket. Find out more from the DailyFX calendar.
The VIX volatility index fell 10% overnight to 16.11 – a fresh pandemic low. While this points to market confidence, it may also hint at a sense of complacency. Therefore, next week’s Federal Reserve Open Market Committee (FOMC) meeting is a key risk event to be watched for clues about the central bank’s assessment to inflation and economic growth, as well as when might be an appropriate time to start scaling back asset purchasing.
VIX Volatility Index
Looking back at Thursday’s close, ASML Holdings, PayPal, Amazon and Tesla were among the best performing major tech stocks. Sector wise, healthcare (+1.69%), real estate (+0.95%) and information technology (+0.75%) led the gains, whereas financials (-1.12%) and materials (-0.56%) trailed behind.
Nasdaq 100 Top 10 Stocks Daily Performance – 06-10-2021
Source: Bloomberg, DailyFX
Asia-Pacific markets look set to open on the front foot, with futures in Australia, mainland China, Hong Kong, Taiwan, Singapore and Thailand trading in the green. Those in Japan, Malaysia and India are slightly lower however.
Hong Kong’s Hang Seng Index (HSI) is consolidating at around 28,700 this week after President Joe Biden’s banned investment in a widened list of 59 Chinese firms alleged to ties to defense or surveillance technology sectors. The stock connections registered net outflow from Hong Kong for 3 out of the last 4 trading sessions, reflecting a tepid demand from mainland investors. For the time being, the index may continue to range bound and wait for fresh catalysts.
Australia’s ASX 200 index closed at all-time high of 7,302 on Thursday, propelled by recovery optimism and a dovish central bank. The index looks set to carry this momentum forward and aim higher highs.
Nasdaq 100 Index Technical Analysis
The Nasdaq 100 index is aiming to challenge all-time highs at around 14,040, which is also near to the 200% Fibonacci extension level. The index completed a bullish “Double Bottom” chart pattern and extended higher, underscoring strong upward momentum. The MACD indicator crossed above the neutral midpoint and trended higher, suggesting that upward momentum is building.
Nasdaq 100 Index – Daily Chart
Hang Seng Index Technical Analysis:
The Hang Seng Index (HSI) failed to breach the “neckline” of the “Double Bottom” chart pattern formed since early March and retreated to the 50-day SMA line looking for near-term support. An immediate resistance level remains to be 29,350 – the 50% Fibonacci retracement. Breaching below a near-term support of 28,730 may open the door for further losses with an eye on 28,300 – the 78.6% Fibonacci retracement.
Hang Seng Index – Daily Chart
ASX 200 Index Technical Analysis:
The ASX 200 index is range bound near the 7,290 area, waiting for fresh catalyst to attempt another breakout. An immediate resistance level can be found at 7,340 – the 161.8% extension, whereas an immediate support can be found at around 7,194. The MACD indicator formed a bullish crossover and trended higher, underscoring upward momentum.
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