Dow Jones Pulls Back While Nasdaq Surges, Hang Seng May Rise

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DOW JONES, HANG SENG INDEX, ASX 200 INDEX OUTLOOK:

  • Dow Jones, S&P 500 and Nasdaq 100 indexes closed -0.16%, +0.43% and +1.12% respectively
  • Cyclical sectors retreated while tech stocks rallied on Monday, cheering the Fed’s patient stance on rate hikes
  • The China NBS manufacturing PMI disappoints. APAC markets are positioned to trade higher

Jackson Hole, Tech Rally, USD, Crude Oil, Asia-Pacific at Open:

Wall Street equities extended higher into record territory as market participants welcomed a dovish-biased message from Fed Chair Jerome Powell in his speech at the Jackson Hole symposium last week. Powell said that the central bank is likely to start tapering its $120 billion per month bond purchasing program by this year, largely in line with market expectations. He also emphasized that interest rate hikes will not immediately follow after tapering was over. That said, the ultra-low interest rate environment is here to stay, benefiting the tech sector that is arguably the most sensitive to changes in rates.

Markets responded positively, with the S&P 500 and Nasdaq 100 climbing 0.43% and 1.12% respectively on Monday. The Dow Jones Industrial Average lost 0.16% however as the cyclically-oriented sectors pulled back. The DXY US Dollar indexconsolidated alongside Treasury yields, alleviating pressure on risk assets. This suggests that investors are well prepared for tapering, and Powell’s speech soothed market fears and boosted confidence.

Meanwhile, the Chinese NBS manufacturing PMI reading dipped to 50.1 in August, falling short of the baseline forecast of 50.2. This also marked the lowest reading since February 2020, when the Covid-19 outbreak first kicked in. A softer-than-expected expansion in the manufacturing sector underscored mounting downward momentum in the world’s second-largest economy. This may weigh on trading sentiment over Asia-Pacific markets today.

NBS China Manufacturing PMI – Past 12 Months

Dow Jones Pulls Back While Nasdaq Surges, Hang Seng May Rise

Source: Bloomberg, DailyFX

Asia-Pacific markets are positioned for a mixed start to the day. Futures in Japan, mainland China, South Korea, Taiwan, Singapore and India are in the red, whereas those in Australia, Hong Kong, Malaysia, Thailand are in the green.

Looking ahead, Eurozone core inflation rate leads the economic docket alongside US CB consumer confidence. Meanwhile, traders are also waiting for Friday’s US non-farm payrolls number for clues about the Fed’s next policy move. Find out more from the DailyFX calendar.

Hong Kong’s Hang Seng Index (HSI) climbed 0.52% on Monday as investors took the recent selloff as an opportunity to accumulate more. The stock connections registered HK$ 4.17 billion of net Southbound outflows, marking a total 4-day loss of HK$ 11.56 billion. It suggests that mainland investors remain bearish on Hong Kong stocks amid intensified regulatory crackdown on private sectors. The overall trend remains bearish-biased for the Hang Seng Index.

Hang Seng Index vs. Southbound Flows

Dow Jones Pulls Back While Nasdaq Surges, Hang Seng May Rise

Source: Bloomberg, DailyFX

Looking back to Monday’s close, 4 out of 9 Dow Jones sectors ended higher, with 50% of the index’s constituents closing in the green. Consumer staples (+0.63%), consumer discretionary (+0.45%) and information technology (+0.42%) were among the best performers, whereas materials (-2.14%) and financials (-1.72%) trailed behind.

Dow Jones Sector Performance 30-08-2021

Dow Jones Pulls Back While Nasdaq Surges, Hang Seng May Rise

Source: Bloomberg, DailyFX

Dow Jones Index Technical Analysis

The Dow Jones index breached above a key resistance level at 34,920, thus opening the door to further gains towards 37,500 – the 261.8% Fibonacci extension. Prices remain in an “Ascending Channel”, as highlighted on the chart below, suggesting that the overall trend remains tilted to the upside. Bearish MACD divergence suggests that upward momentum may be weakening however.

Dow Jones Index Daily Chart

Dow Jones Pulls Back While Nasdaq Surges, Hang Seng May Rise

Hang Seng Index Technical Analysis:

The Hang Seng Index formed an “Ascending Triangle”, trending lower over the past few months. An immediate support level can be found at 24,850, followed by 23,125 – the previous low seen in Sep 2020. Breaching an immediate resistance at 26,200 may open the door for further gains. The MACD indicator formed a higher low recently, suggesting that bullish momentum may be building

Hang Seng Index – Daily Chart

Dow Jones Pulls Back While Nasdaq Surges, Hang Seng May Rise

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

Dow Jones Pulls Back While Nasdaq Surges, Hang Seng May Rise

— Written by Margaret Yang, Strategist for DailyFX.com

To contact Margaret, use the Comments section below or @margaretyjy on Twitter

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