S&P 500, HANG SENG INDEX, ASX 200 INDEX OUTLOOK:
- Dow Jones, S&P 500 and Nasdaq 100 closed -1.08%, -1.07%, and –0.97% respectively
- The FOMC meeting minutes indicated a willingness to start reducing asset purchases before this year
- Asia-Pacific markets look set to open mixed, with investors waiting for AU employment reports
S&P 500, FOMC Minutes, USD, Southbound, Asia-Pacific at the Open:
Wall Street stocks closed broadly lower on Wednesday after the release of the July FOMC minutes, which pointed to a possible start of the Fed tapering stimulus by the end of this year. The minutes also noted that some Fed members preferred to wait until early 2022 to start tapering. The central bank wanted to be clear that the reduction of bond purchases was not a precursor to an imminent rate hike. As a result, Treasury yields saw a muted response and closed largely flat.
The DXY US Dollar index closed at 93.14 – the highest level seen since April 2021. Gold prices exhibited resilience despite a hawkish-tilted tone in the FOMC minutes and a strengthening USD. Elevated geopolitical tensions in Afghanistan and the recent soft economic data may have provided gold prices some decent support. The market appears to have priced in a possible scenario of tapering by the end of this year, and the Jackson Hole symposium may reaffirm this prospect.
DXY US Dollar Index
Looking ahead, Australia’s employment report dominates the economic docket alongside US initial jobless claims data. Find out more from theDailyFX economic calendar.
Asia-Pacific markets look set to open mixed on Thursday. Futures in Japan, Australia, Taiwan, Singapore and India are in the red, whereas those in mainland China, Hong Kong, South Korea, Malaysia and Thailand are in the green.
The Hang Seng Index (HSI) climbed 0.47% on Wednesday, rebounding from a 3-week low. Investors continued to assess the impact of Beijing’s regulatory clampdowns on the stock market, while looking for bargain hunting opportunities. The stock connections registered HK$436 million of net Southbound inflows on Wednesday, reversing a four-day outflow. This suggests that mainland buyers are returning for bargain hunting after recent selloff.
Hang Seng Index vs. Southbound Daily Net Flow
Source: Bloomberg, DailyFX
Looking back to Wednesday’s close, 10 out of 11 S&P 500 sectors ended lower, with 89.3% of the index’s constituents closing in the red. Energy (-2.4%), healthcare (-1.46%) and information technology (-1.39%) were among the worst performers, whereas consumer discretionary (+0.15%) closed mildly higher.
S&P 500 Sector Performance 18-08-2021
Source: Bloomberg, DailyFX
S&P 500 IndexTechnical Analysis
The S&P 500 index is trending higher within an “Ascending Channel” formed since November, as highlighted in the chart below. The next key resistance level can be found at 4,650 – the 161.8% Fibonacci extension. The overall trend remains bullish-biased as suggested by the SMA lines. The MACD indicator formed a lower high recently however, hinting at downward momentum.
S&P 500 Index– Daily Chart
Hang Seng Index Technical Analysis:
The Hang Seng Index (HSI) breached below the floor of an “Ascending Channel”, as highlighted in the chart below, hinting at further losses. The near-term trend remains bearish-biased, as suggested by the downward-sloped SMA lines. The MACD indicator remains below the neutral midpoint, underscoring bearish momentum.
Hang Seng Index – Daily Chart
ASX 200 Index Technical Analysis:
The ASX 200 index pulled back sharply to test an immediate support level at 7,500 – the previous resistance. The overall trend remains bullish-biased, as suggested by the consecutive higher highs and higher lows formed over the past few months. The MACD indicator formed a bearish crossover after hitting trendline resistance, suggesting that selling pressure may be 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