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Dow Jones Rises on Stimulus Hopes, Chinese Firms Face US Delisting Threat

Dow Jones Rises on Stimulus Hopes, Chinese Firms Face US Delisting Threat

Margaret Yang, CFA, Strategist

DOW JONES, HANG SENG, ASIA-PACIFIC MARKET OUTLOOK:

  • Dow Jones, S&P 500 and Nasdaq indexes closed +0.20%, +0.18% and -0.05% respectively
  • A US$ 908 billion bipartisan stimulus plan serves as the basis for new round of negotiations
  • The House approved a legislation on US-listed Chinese firms, threatening their listings
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US Stimulus Plan, Legislation on Chinese Firms, OPEC+ Meeting:

Asia-Pacific stocks look set to open in a cautiously optimistic tone after Wall Street equities finished the session with small gains. US stocks erased earlier losses after House and Senate leaders agreed to support a US$ 908 billionbipartisan stimulus plan as the basis for a new round of negotiations. This reignited hopes for a relief package to help individuals and small businesses to weather through the pandemic. The UK will allow the use of Pfizer’s coronavirus vaccine next week, marking the first western country to license a vaccine to fight against Covid-19. Reignited stimulus hopes and a vaccine rollout boosted risk appetite.

The House has approved the Holding Foreign Companies Accountability Act – a legislation that may threaten the listings of Chinse firms on the US exchanges. The bill is now pending of President Trump’s signing. The legislation bill requires companies to allow US inspectors to review their financial audits, as well as to disclose whether they are under government control. Failing to comply with the requirements may prevent foreign companies from trading in the US.

Many Chinese tech giants such as Alibaba, Tencent, Baidu, JD.Com were listed in the US rather than mainland exchanges. Some of them have sought secondary listings in Hong Kong recently in view of escalating US-China tensions and scrutinizing form US regulators. A potential reigniting of tensions between the world’s two largest economies over tech disputes may dent sentiment.

Crude oil prices rebounded ahead of an OPEC+ meeting, in which the major oil producers are expected to agree on a gradual tapering of production cuts early next year. The Energy Information Administration (EIA) reported a 0.679-million-barrel drawdown in US crude inventories for the week ending November 27th, versus a 4.15 million barrel hike released by API a day before. Higher oil prices fueled a rally in energy stocks, which were among the best performers on Wednesday.

Sector-wise, trading was pretty mixed on Wednesday, with 73.3% of the index’s constituents ending higher. Energy (+2.77%), communication services (+2.36%) and industrials (+1.91%) were among the best performers, whereas information technology (-1.98%), consumer discretionary (-1.69%) and materials (-0.62%) were lagging behind.

Dow Jones Sector Performance 03-12-2020

Dow Jones Rises on Stimulus Hopes, Chinese Firms Face US Delisting Threat

Source: Bloomberg, DailyFX

Technically, the Dow Jones index appears to be ranging between 22,920 to 30,000 over the past few weeks (chart below). The overall trend remains bullish biased, as suggested by its ascending 20-, 50- and 100-Day Simple Moving Average (SMA) lines. Upward momentum is fading, however, as its Bollinger Band width narrows. A decisive break above 30,000 resistance may open the door for further upside potential, whereas a pullback may lead to a test of the 20-Day SMA and then 29,220 – the 61.8% Fibonacci extension.

Dow Jones IndexDaily Chart

Dow Jones Rises on Stimulus Hopes, Chinese Firms Face US Delisting Threat

Hang Seng Index Outlook:

The Hang Seng Index (HSI) looks set to open flat today. The index has entered a technical correction after pulling back from a recent high of 27,000. An immediate support level can be found at 26,500 – the 20-Day SMA. The overall trend remains bullish-biased, as suggested by the upward-sloped Simple Moving Averages (SMAs). The MACD indicator has likely diverged with price movement recently, however, suggesting a short-term pullback is possible.

Hang Seng Index Daily Chart

Dow Jones Rises on Stimulus Hopes, Chinese Firms Face US Delisting Threat

ASX 200 Index Outlook:

The ASX 200 index entered a brief correction last week as the RSI indicator retraced from overbought territory. Narrowing Bollinger Band width suggests that range trading may continue before the index could attempt higher highs. The overall trend remains bullish-biased. An immediate resistance can be found at 6,720 – the 50.0% Fibonacci extension.

ASX 200 Index Daily Chart

Dow Jones Rises on Stimulus Hopes, Chinese Firms Face US Delisting Threat

--- 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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