DOW JONES, HANG SENG, NIKKEI 225, ASIA-PACIFIC MARKET OUTLOOK:
- Dow Jones futures edged lower after registering a small loss on Monday
- Reflation trade appears to have taken a pause as markets anticipate new fiscal stimulus to come in mid-March
- The Hang Seng Index surged 2.4% and scrapped the 30,000 mark, reaching a fresh 20-month high
Fiscal stimulus, Earnings, Southbound flow to HK, Asia-Pacific Stocks Outlook:
US markets were mixed overnight with healthcare (+0.76%), consumer staples (+0.74%) and information technology (+0.55%) sectors outperforming. The Dow Jones Industrial Average underperformed the S&P 500 and Nasdaq 100 indices, reflecting a cooling appetite for reflation trades as investors returned to tech and staples seeking for certainty. Senate Majority leader Chuck Schumer said that he is aiming to pass the new fiscal stimulus plan by mid-March, which may have disappointed investors who had anticipated a shorter timeline.
US earnings continued to fare well, with 71 out of 86, or 82% S&P 500 companies delivering positive surprises so far this season. Looking ahead, Johnson & Johnson, UBS, 3M, Hyndai, GE, American Express, Microsoft, AMD are among the key companies to reveal results today (table at the end). Read more on my earnings outlook report.
Dow Jones Sector Performance 26-01-2021
Source: Bloomberg, DailyFX
The DXY US Dollar index rebounded to 90.30 to test the 50-Day Simple Moving Average (SMA) line, which may serve as an immediate resistance level. The US 10-year Treasury yield fell to 1.03% from 1.08% a day ago, reflecting rising demand for safety and lowered reflation expectations. This may set a sour tone for Asia-Pacific equities after a strong trading session on Monday.
The Hang Seng Index (HSI) surged 2.4% on Monday and closed above the 30,000 mark for the first time since May 2019. The rally was led by technology companies including Tencent (+10.9%), Meituan (+5.2%) and Alibaba (+2.95%) as southbound inflow from mainland investors ramped up.
Hang Seng Top 10 Stocks Performance 26-01-2021
Source: Bloomberg, DailyFX
The HSI registered a whopping 13.8% year-to-date gain, propelled by substantial amount of southbound inflow via the Hong Kong-Shanghai and Hong Kong-Shenzhen stock connections. Some HK$ 19.25 billion of net southbound inflow were observed on Monday, more than doubled from HK$ 9.36 billion seen on last Friday. Total southbound flows contributed to around 30% HKEX's daily turnover recently.
Hang Seng Index vs. Daily Southbound Net Flow – 12 Months
Source: Bloomberg, DailyFX
Dow Jones Index Technical Analysis:
Technically, the Dow Jones index extended its upward trajectory within an “Ascending Channel” as highlighted in the chart below. The bull trend is well-supported by its 20-Day Simple Moving Average (SMA), which serves as an immediate support level. A breaking down of the 20-Day SMA may signal a short-term trend reversal. Support and resistance levels can be found at 30,430 (50-Day SMA) and 31,460 (upper Bollinger Band) respectively.
Dow Jones Index – Daily Chart
Hang Seng Index Technical Analysis:
The Hang Seng index is riding a strong trend with an attempt to breach the 127.2% Fibonacci extension level at 29,870. Breaching this level may open the door for further upside potential with an eye on 30,930 – the 161.8% Fibonacci extension. The MACD indicator has shown sign of weakness however, which may suggest that the index is temporarily overbought and due for a correction.
Hang Seng Index – Daily Chart
Nikkei 225 Index Technical Analysis:
The Nikkei 225 index hit the 100% Fibonacci extension level of 28,770 and has retraced slightly since. The overall trend remains bullish as highlighted in the two “Ascending Channels” below. A bearish MACD crossover reflects faltering bullish momentum and may hint at short-term pressure. Immediate support and resistance levels can be found at 27,980 (76.4% Fibonacci extension) and 28,770 (100% Fibonacci extension) respectively.
Nikkei 225 Index – Daily Chart
S&P 500 Earnings Calendar 22-26th January 2021
Name | Date | Actual | Estimate | Surprise |
---|---|---|---|---|
New Oriental Education & Techn | 22/1/2021 | 0.43 | 0.341 | 26.10 |
Regions Financial Corp | 22/1/2021 | 0.61 | 0.419 | 45.60 |
Schlumberger NV | 22/1/2021 | 0.22 | 0.175 | 25.70 |
Huntington Bancshares Inc/OH | 22/1/2021 | 0.27 | 0.293 | (7.80) |
Ally Financial Inc | 22/1/2021 | 1.60 | 1.066 | 50.10 |
Kansas City Southern | 22/1/2021 | 1.89 | 1.925 | (1.80) |
Reliance Industries Ltd | 22/1/2021 | 20.33 | 18.176 | 11.90 |
Nidec Corp | 25/1/2021 | 59.50 | 54.863 | 8.50 |
Koninklijke Philips NV | 25/1/2021 | 1.98 | 1.983 | (0.20) |
Kimberly-Clark Corp | 25/1/2021 | 1.69 | 1.616 | 4.60 |
Johnson & Johnson | 26/1/2021 | 1.825 | ||
Novartis AG | 26/1/2021 | 5.798 | ||
DR Horton Inc | 26/1/2021 | 1.707 | ||
UBS Group AG | 26/1/2021 | 1.49 | ||
3M Co | 26/1/2021 | 2.154 | ||
Raytheon Technologies Corp | 26/1/2021 | 0.695 | ||
Freeport-McMoRan Inc | 26/1/2021 | 0.371 | ||
Alaska Air Group Inc | 26/1/2021 | (2.894) | ||
PACCAR Inc | 26/1/2021 | 1.206 | ||
NextEra Energy Inc | 26/1/2021 | 0.397 | ||
NextEra Energy Partners LP | 26/1/2021 | 0.532 | ||
Rockwell Automation Inc | 26/1/2021 | 1.891 | ||
Prologis Inc | 26/1/2021 | 0.923 | ||
Lockheed Martin Corp | 26/1/2021 | 6.416 | ||
Archer-Daniels-Midland Co | 26/1/2021 | 1.077 | ||
Hyundai Motor Co | 26/1/2021 | 7,352.462 | ||
General Electric Co | 26/1/2021 | 0.092 | ||
Xerox Holdings Corp | 26/1/2021 | 0.628 | ||
American Express Co | 26/1/2021 | 1.287 | ||
Verizon Communications Inc | 26/1/2021 | 1.168 | ||
Invesco Ltd | 26/1/2021 | 0.568 | ||
Advanced Micro Devices Inc | 26/1/2021 | 0.468 | ||
Maxim Integrated Products Inc | 26/1/2021 | 0.677 | ||
Varian Medical Systems Inc | 26/1/2021 | 1.03 | ||
W R Berkley Corp | 26/1/2021 | 0.784 | ||
CH Robinson Worldwide Inc | 26/1/2021 | 0.968 | ||
F5 Networks Inc | 26/1/2021 | 2.442 | ||
LVMH Moet Hennessy Louis Vuitt | 26/1/2021 | 8.009 | ||
Microsoft Corp | 26/1/2021 | 1.635 | ||
Starbucks Corp | 26/1/2021 | 0.554 | ||
Boston Properties Inc | 26/1/2021 | 1.587 | ||
Texas Instruments Inc | 26/1/2021 | 1.332 | ||
Capital One Financial Corp | 26/1/2021 | 2.94 |
--- Written by Margaret Yang, Strategist for DailyFX.com
To contact Margaret, use the Comments section below or @margaretyjy on Twitter