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Hang Seng Index, US Equity Futures at Risk as Covid-19 Cases Surge

Hang Seng Index, US Equity Futures at Risk as Covid-19 Cases Surge

2020-06-29 02:00:00
Margaret Yang,
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HANG SENG INDEX, DOW JONES, GOLD PRICE OUTLOOK:

  • Hong Kong stocks may open lower after an aggressive selloff in US markets last week
  • Dow Jones index futures extend losses as surging virus cases sour risk appetite
  • Gold price climbs to seven-year high of $1,774, buoyed by rising demand for safety

APAC, Hang Seng Index Outlook:

Asian stock markets are expressing a ‘risk-off’ tilt as surging coronavirus cases around the world dampen market mood. Over the weekend, the global Covid-19 death toll exceeded half a million, and infections in the US surpassed 10 million. The numbers suggest that the worst is perhaps not behind us yet, and that the road to recovery is likely to be peppered with economic potholes.

The Hang Seng Index is set to open at around 24,400, according to futures markets. Mainland A share market is open today after a two-day break for the Tung Ng Festival. The Shanghai Composite stock market benchmark may feel the gravity as it moves closer to key resistance at 3,000. Investors pricing in a notable change in risk appetite may be reflected in mainland indices opening sharply lower.

In currency markets, theUS dollar is gaining the most traction among its G10 peers at the expense of the growth-linked Australian and New Zealand Dollars. Emerging market FX may also take a hit while the Greenback experiences a surge in capital flows in an environment where haven-linked assets carry a premium.

In the US market, all S&P 500 sectors fell on Friday, with communication services (-3.09%), financials (-2.51%), energy (-1.79%), consumer discretionary (-1.69%) and real estates (-1.19%) among the worst performers. Defensive healthcare (-0.71%), utilities (-0.83%) and materials (-0.9%) fell relatively less (chart below).

Hang Seng Index, US Equity Futures at Risk as Covid-19 Cases Surge

Source: Bloomberg, DailyFX

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Hang Seng Index –Technical Analysis

The Hang Seng index failed to break out above 25,000 – a key resistance level – for a third time last week. The Asian benchmark is consolidating between 24,000-25,000 and may remain so in the days to come. A U-turn in sentiment across global equity markets could push the Hang Seng lower, and this risk-off dynamic may subsequently echo into Wall Street.

A break below support at 24,000 may open room for more downside towards 23,000.

Hang Seng Index - Daily Chart

Hang Seng Index, US Equity Futures at Risk as Covid-19 Cases Surge

Dow Jones Index –Technical Analysis:

Price action in the Dow Jones index has been showing a pattern of lower highs and has consequently fallen into an descending channel (chart below). 20-Day SMA and the MACD are both sloped downwards, suggesting more potential downside in the days to come. Immediate support level may be found at 25,130 (the 100% Fibonacci extension), and then 24,060 (76.4% Fibonacci extension).

Gold MIXED
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of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 4% 2% 3%
Weekly 7% 8% 8%
What does it mean for price action?
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Dow Jones Index Futures – Daily Chart

Hang Seng Index, US Equity Futures at Risk as Covid-19 Cases Surge

Dow Jones chart created using TradingView

Gold Prices Outlook:

Gold prices have recently broken out above a key level at $1,750, and have since edged higher. Global growth uncertainties resulting from the coronavirus and concerns about the economic recovery is dampening risk appetite and boosting demand for safety. Consequently, investors may look at precious metals as a defensive choice compared to stocks and bonds.

Gold Prices – Daily Chart

Hang Seng Index, US Equity Futures at Risk as Covid-19 Cases Surge

--- Written by Margaret Yang, Strategist for DailyFX.com

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

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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