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Nikkei 225 May Lead APAC Stocks Lower, Virus Cases Overshadow Vaccine Hopes

Nikkei 225 May Lead APAC Stocks Lower, Virus Cases Overshadow Vaccine Hopes

Margaret Yang, CFA, Strategist

NIKKEI 225, ASX 200, STRAITS TIMES INDEX OUTLOOK:

  • Dow Jones and S&P 500 fell over 1% after NYC shut schools, Nasdaq lost 0.8%
  • Pfizer’s Covid vaccine reached a critical safety milestone, with a 95% effective rate in final trials
  • Nikkei 225 and ASX 200 indexes retraced from recent highs; Straits Times Index (STI) may fall
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Pandemic, Pfizer Vaccine, Asia-Pacific at Open:

All three major US indices closed broadly lower as rising coronavirus cases across the country threatened further lockdowns. New York City decided to shut schools as the Covid infection rates surpassed a critical threshold. The 7-day average for new cases in the US hit 150,000, while the total death toll reached 250,000. The worrisome picture overshadowed positive news from Pfizer, which said its vaccine has reached a safety milestone with a 95% effective rate in a final clinical trial. The company is preparing to seek emergency-use authorization from regulators, paving way for an initial use as early as December.

Sector-wise, all eleven S&P 500 sectors ended lower, with about 80% of the index’s constituents closing in the red. Energy (-2.88%) , utilities (-1.93%) and healthcare (-1.76%) were among the worst performers.

S&P 500 Average Sector Performance 18-11-2020

Nikkei 225 May Lead APAC Stocks Lower, Virus Cases Overshadow Vaccine Hopes

Source: Bloomberg, DailyFX

Asia-Pacific markets look set to follow a bearish US lead, with equity futures pointing to a lower start in Japan, Australia, South Korea, India and Singapore.

On a separate note, crude oil prices were underpinned by a smaller-than-expected increase in US inventories, according to data released by the US Energy Information Administration (EIA) overnight. US crude stockpiles rose by 0.768 million barrels in the week ending November 13th, compared to a 1.65 million forecast. WTI is trading at around US$ 41.80, attempting to challenge a key resistance level at US$ 42.00.

On the macro front, ECB President Lagarde will give a speech at 08:00 GMT today, which will be closely watched by currency traders. US initial jobless claims and existing home sale figures are also among the top events later. Find out more on the DailyFX economic calendar.

Straits Times Index Outlook:

The Singaporean stock market saw a significant institutional money inflow in early November, with S$299 million and S$564 million pumping into local stocks during the first two weeks respectively (chart below). Fund managers’ top picks include banks, aviation, food & beverages and real estate stocks. This reflects a pickup in risk appetite from institutional investors, who might have started a new round of bargain hunting after months’ of net selling. A string of positive vaccine news also lifted investor confidence.

Nikkei 225 May Lead APAC Stocks Lower, Virus Cases Overshadow Vaccine Hopes

Source: SGX

Technically, the STI appeared to be temporarily overbought, and thus may be vulnerable to a technical pullback below a key resistance level at 2,800. The overall trend remains bullish-biased, albeit a short-term correction is possible. An immediate support level can be found at 2,703 – the 23.6% Fibonacci retracement.

Straits Times Index Daily Chart

Nikkei 225 May Lead APAC Stocks Lower, Virus Cases Overshadow Vaccine Hopes

Nikkei 225 Index Technical Analysis:

Technically, the Nikkei 225 index broke above the “Ascending Wedge” that it formed since early June, propelled by strong upward momentum. The index hit a multi-year high of 26,200 before entering into a brief consolidation. The Bollinger Band width has widened significantly, suggesting strong upward momentum. An immediate support level can be found at 25,470 – the 23.6% Fibonacci retracement.

Nikkei 225 IndexDaily Chart

Nikkei 225 May Lead APAC Stocks Lower, Virus Cases Overshadow Vaccine Hopes

ASX 200 Index Technical Analysis:

Technically, the ASX 200 index looks set to recede after hitting an eight-month high of 6,550. The overall trend remains bullish-biased, albeit a technical correction is possible. Holding above a key support level at 6,500 may pave way for further upside potential with an eye on 6,600. An immediate support level can be found at 6,400.

ASX 200 Index – Daily Chart

Nikkei 225 May Lead APAC Stocks Lower, Virus Cases Overshadow Vaccine Hopes

--- 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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