NASDAQ 100, HANG SENG INDEX OUTLOOK:
- US stocks were in ‘risk-on’ mode on election day, with odds biased to a “Blue Wave”
- Nasdaq 100 index futures edged slightly lower at Asia-Pacific open, the US Dollar fell alongside VIX
- Hang Seng Index (HSI) face key chart resistance at 25,000. Ant’s IPO was halted due to regulatory concerns
Nasdaq 100 Index and Asia-Pacific stocks Outlook:
All three major US indices closed higher for a second day leading to the US election, with the result coming out in the next few hours. The “risk on” mood faded quickly as futures whipsawed at Asia-Pacific open as early voting unfolded however. The haven-linked US Dollar edged higher, while the VIX volatility index surged.
In a nutshell, here is a scenario analysis done by DailyFX Head APAC Strategist Ilya Spivak:
A. Clean Biden win: moderate risk-on (more stimulus, less trade war) but shallow follow through because this has been priced in to some extent
B. Clean Trump win: medium risk-off (less stimulus, more trade war), significant volatility to reprice away from baseline forecasts
C. Contested election: severe risk-off (uncertainty, panic, liquidation)
The last few weeks’ selling may have created an opportunity for investors to buy on the dips, especially when many are anticipating a “Blue Wave” election outcome. If the Democrats take both the Senate and House in a clean Biden win scenario, they may push through a larger fiscal stimulus plan to revitalize growth amid a second wave of pandemic shock. This may lead to a weaker US Dollar, and potentially a stronger job market and consumer sentiment.
On the flip side, a “Trump-win” outcome, which is not widely anticipated, may lead to rapid unwinding activity and potentially volatile market reactions. Safe-haven assets like the US Dollar, Japanese Yen and Treasuries will be particularly eyed to hedge against tail risk. The CME has increased the circuit breaker limit from 5% to 7% today in anticipation of a potential spike in market volatility.
The US has registered 93,581 new coronavirus cases on November 2nd, marking the second highest daily count behind October 30th. Pandemic risk remains one of the top factors hindering the economic recovery, and thus more fiscal and monetary stimulus measures may be needed. This outlook may weigh on the Euro and the US Dollar, but buoy precious metals and risk assets in the medium term.
Asia-Pacific stocks look set to trade broadly higheron Wednesday, but may be susceptible to heightened volatility as the election results unfolds in the next few hours.
The Ant Financial IPO was pushed back in both Shanghai and Hong Kong last night, two days before the planned listing day due to regulatory concerns. This may weigh on tech sentiment, but the unfolding of liquidity locked in by this IPO may cushion the impact on the broader market. Alibaba’s share price fell more than 8% in New York last night.
On the macro front, Caixin China Service PMI, US balance of trade and EIA crude oil inventory reports are among the top events besides the US election. Find out more on our economic calendar.
Technically, the Nasdaq 100 index entered a consolidative period in mid-October and has found a strong support level at 11,050 – the 76.4% Fibonacci retracement. An immediate resistance level can be found at 11,470 – the 50% Fibonacci retracement.
Nasdaq 100 Index – Daily Chart
Hang Seng Index Outlook:
Technically, the Hang Seng Index (HSI) attempted to challenge a key resistance level at 25,000, which is a previous high. Breaking this resistance will likely open the room for more upside towards 25,500 – a key resistance. The overall trend appeared bullish biased, as the index formed higher-highs in the past few weeks. A failure to break 25,000 will likely result in the formation of a “Double Top” pattern, which may be perceived as a bearish indicator.
Hang Seng Index – Daily Chart
--- Written by Margaret Yang, Strategist for DailyFX.com
To contact Margaret, use the Comments section below or @margaretyjy on Twitter
