Dow Jones Retreats amid Tech and Oil Rout, Will the Hang Seng and ASX 200 Fall?
DOW JONES, HANG SENG, ASX 200 INDEX OUTLOOK:
- Dow Jones, S&P 500 and Nasdaq 100 fell -0.46%, -1.48% and -3.13% respectively
- Surging 10-year yield catalysed another round of profit-taking in the tech sector
- Crude oil prices tumbled nearly 8% as a slowdown in vaccination programs and resurging viral cases in Europe dented the energy demand outlook
A plunge in technology sector pulled the Dow Jones Index from its record high on Thursday, setting a negative tone for Asia-Pacific markets at open. The 10-year US Treasury yield surged 4.4% to a fresh 13-month high of 1.714% after the Federal Reserve revised up GDP and core PCE inflation forecasts from the FOMC meeting a day ago without addressing rising longer-term rates. This probably sparked a new round of profit-taking activity in the technology sector, which tends to offer relatively thin dividend yields and is of higher valuation.
Besides, sentiment appeared to be further dented by concerns surrounding a slowdown in vaccine progress and rising Covid-19 cases in parts of Europe. France’s prime minister announced that several regions of the country will go under new lockdowns starting today. Germany, Italy and France have halted the use of AstraZeneca’s vaccine due to concerns about possible side effects earlier this week. The UK will have to slow its vaccine rollout next month due to a temporary shortage in supply. Daily Covid-19 vaccine doses administered per 100 person in Europe fell to 0.08 on March 17th, trailing below the world average of 0.11 and far behind the US (chart below).
Source: Our World in Data
WTI crude oil prices tumbled more than 7% as the viral resurgence in Europe raised the prospects for further travel restrictions and thus lowered demand for energy. The US Dollar index (DXY) edged higher to 91.83, reflecting a surge in demand for safety as sentiment turned sour. A stronger US dollar alongside rising longer-dated yields may exert downward pressure over Asia-Pacific equities. Futures across Japan, Australia, Hong Kong, Taiwan, Singapore, India and Indonesia are pointing to open in the red.
WTI Crude Oil - Daily Chart
Chart by TradingView
Australia’s ASX 200 index opened down nearly 1 percent, with all 11 sectors trading lower. Energy (-2.38%) and information technology (-1.67%) were among the hardest hit. Hong Kong’s Hang Seng Index looks set to retreat from Thursday’s gains, with big tech names such as Tencent, Alibaba and Meituan most vulnerable to selling. Video-streaming company Bilibili kicks off a secondary public offering in Hong Kong, expecting to raise HK$ 24.7 billion.
Looking ahead, the BOJ interest rate decision will be closely eyed by forex and equity traders. The central bank was reported to be considering widening the movement range around its 10-year bond yield target to 25bps from 20 bps. Find out more from theDailyFX calendar.
Looking back to Thursday’s close, 6 out of 9 Dow Jones sectors ended lower, with 66.7% of the index’s constituents closing in the red. Energy (-3.62%), materials (-1.95%) and information technology (-1.75%) were among the worst performers, whereas healthcare (+1.16%) and financials (+0.30%) registered small gains.
Dow Jones Sector Performance 18-03-2021
Source: Bloomberg, DailyFX
Dow Jones Index Technical Analysis
The Dow Jones index pulled back to the 100% Fibonacci extension level (32,863) looking for near-term support. The RSI indicator has retreated from the overbought threshold of 70.0, suggesting that buying power is depleting. The ceiling of the “Ascending Channel” - as highlighted in the chart - may serve as an immediate support level, breaching which may lead to a deeper pullback with an eye on the 20-day SMA line. The overall trend remains bullish-biased, as suggested by the upward-sloped moving averages.
Dow Jones Index – Daily Chart
Chart by TradingView
Hang Seng Index Technical Analysis:
The Hang Seng Index breached the ceiling of the “Descending Channel” and the 20-day SMA with an attempt to reverse the near-term bearish trend. The price is likely to face a mild pullback and test the immediate support level of 29,100, where the 20-Day SMA line lies. A daily close above 29,100 may intensify buying pressure and carve a path for price to challenge the 38.2% Fibonacci extension level at 29,500. The MACD indicator is about to form a bullish crossover, suggesting that near-term momentum has turned upwards.
Hang Seng Index – Daily Chart
ASX 200 Index Technical Analysis:
The ASX 200 index is on the verge of breaking the “Ascending Channel” formed since mid-November. Breaking this level would likely intensify near-term selling pressure and open the floor for further losses with an eye on 6,600 for support. The MACD indicator is trending lower beneath the neutral midpoint, suggesting that near-term momentum remains weak.
ASX 200 Index – Daily Chart
--- 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.