S&P 500 INDEX, CRUDE OIL, STRAITS TIMES INDEX OUTLOOK:
- The S&P 500 index registered its biggest selloff seen in two weeks, as virus cases climbed
- Crude oil prices plunged over 5%, as virus resurgence dampened energy demand outlook
- Singapore’s Straits Times Index set to open sharply lower, testing a key support at 2,600
APAC, S&P 500 Index Outlook:
The futures market points to a sharp decline across Asia-Pacific equities, following a heavy selloff in the Wall Street session overnight. In the FX market, the growth-geared Australian and New Zealand Dollars as well as the oil-linked Norwegian Krone were among the worst performing in G10 currencies. This suggests clear ‘risk off’ sentiment at the open.
The S&P 500 index fell 2.58%, registering its biggest loss seen in two weeks. All sectors ended lower, with energy (-5.54%), industrials (-3.51%), financials (-3.51%) and materials (-2.59%) among the worst performing sectors (chart below).
The resurgence of Covid-19 cases in the US, EU and parts of the emerging world led to mounting concerns over the economic recovery, as a second viral wave might derail governments’ re-opening plans, or even lead to a setback. As a result, energy demand might get hurt first, which was clearly shown in sectoral performance last night. Tourism & leisure, aviation, brick & mortal retail, luxury goods, automobile are among the more vulnerable sectors amid a global pandemic.
Tonight’s US weekly jobless claims data will be closely watched by traders for clues of a potential impact on the labor market. Economists foresee a 1.3 million increase in claims, extending a 12th consecutive weekly decline (chart below).
Shanghai and Hong Kong stock markets are shut for Tuen Ng Festival on Thursday. Trading in the Shanghai stock market will resume on next Monday.
| Sector | % change | % Up |
|---|---|---|
| S&P 500 All sectors | -2.58% | 3.40% |
| Utilities | -0.94% | 14.20% |
| Consumer staples | -1.61% | 6.10% |
| Consumer discretionary | -1.98% | 6.60% |
| Information Technology | -2.29% | 2.80% |
| Communication services | -2.45% | 7.70% |
| Healthcare | -2.66% | 1.60% |
| Real estate | -2.66% | 3.20% |
| Materials | -2.59% | 0% |
| Financials | -3.51% | 0% |
| Industrials | -3.51% | 1.40% |
| Energy | -5.54% | 0% |
Source: Bloomberg, DailyFX
Source: DailyFX
S&P 500 Index –Technical Analysis
The S&P 500 Index remains in an ascending channel formed since early April. However, its upward momentum seems to have weakened recently, perhaps due to macro headwinds. 3,200 remains a key resistance level, which the index failed to break above two weeks back. Immediate support could be found near its 50-day SMA at 3,000. Breaking down below the lower bound of the ascending channel will likely lead to a deeper correction towards 2,900 – the 100% Fibonacci extension.
S&P 500 Index – Daily Chart
Crude Oil:
A second viral wave might weaken the outlook for energy demand and derail oil prices’ recovery. Market participants may be attempting to price in that possibility preemptively. This is reflected in a 5% drop in crude oil prices overnight.
Technically, Brent crude oil price has hit the upper ceiling of the ‘gap’ formed in early March. This gap remains a strong resistance zone to penetrate through. Immediate support level could be found at 20-day SMA, which is at US$ 38.20. MACD suggests more downward pressure in the near term.
| Change in | Longs | Shorts | OI |
| Daily | 1% | -4% | -1% |
| Weekly | 25% | -26% | -1% |
Straits Times Index:
The Straits Times Index is set to open sharply lower to test a key support level at 2,600, according to the futures market. Singapore stocks are vulnerable to overseas headwinds, rendering them fragile when the US stock market falls.
Domestically, the election news didn’t lead to much volatility in the stock market.Traders are trying to price in the prospect of an election outcome with 'no surprise', which is likely to bring political stability to Singapore.
Technically, the index has found a strong support at 2,600, where its 50- and 100-day SMAs cross. Breaking below 2,600 will open room for more downside towards 2,500.
-- Written by Margaret Yang, Strategist for DailyFX.com
To contact Margaret, use the Comments section below or @margaretyjy on Twitter
