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S&P 500, Hang Seng, ASX 200 Outlook: Market Remains Vigilant as 10-Year Yield Crosses 1.7%

S&P 500, Hang Seng, ASX 200 Outlook: Market Remains Vigilant as 10-Year Yield Crosses 1.7%

Margaret Yang, CFA, Former Strategist



  • US equity index futures edged lower after a mixed close on Friday, setting a sour tone for APAC
  • 10-year Treasury yield surged above 1.70% as the Fed let the exemption of capital rule expire
  • The Turkish Lira plunged over 16% after the removal of its home country’s central bank governor
  • US durable goods order, Markit manufacturing PMI and core PCE data are in focus this week
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US Data, Yields, Lira, Asia-Pacific Stocks Weekly Outlook:

Markets shrugged off an eventful week prior as the Fed, BoE and BOJ delivered their interest rate decisions and monetary policy guidance. The 10-year Treasury yield continued its upward trajectory as the Fed signaled no intention to carry out Yield Curve Control (YCC) for the time being and will let the exemption of the capital rule expire at the end of March. The latter would likely reduce bank demand for government bonds as Treasuries and reserves will be included when calculating the minimum 5% capital requirement for their total assets.

Besides, the impending US$ 1.9 trillion fiscal stimulus will require the issuance of more government bonds to fund the bill, increasing the supply of Treasuries and pulling yields upward. As such, longer-term borrowing costs may continue to climb and exert downward pressure on risk assets.

Sentiment is further dented by the plunge of the Turkish Lira, which fell more than 16% against the US Dollar after the surprise removal of its central bank governor Naci Agbal. This move came two days after the central bank raised interest rates and was thought to be a blow to investor confidence. The haven-linked USD, JPY and CHF were among the best performing G10 currencies this morning, pointing to a ‘risk off’ environment for equities.

US 10-year Treasury Yield Climbs to a 13-Month High

Chart by TradingView

Asia-Pacific equities kicked off the week with a cautious tone after a mixed close on Wall Street Friday. Besides rising yields, other factors clouding the outlook include ongoing concerns regarding the US-China relationship after last week’s tense high-level talks in Laska, a slowdown of Europe’s vaccine rollout and volatility surrounding the Lira.

Australia’s ASX 200 indexedged slightly higher as selling in Australian government bond eased on Monday. Consumer discretionary (+1.27%), energy (+1.16%) and utilities (+0.52%) were among the outperformers, whereas real estate (-1.03%), financials (-0.74%) and materials (-0.62%) trailed.

Hong Kong’s Hang Seng Index (HSI) is poised for modest gains on Monday after suffering a heavy selloff last Friday. The index entered a consolidative period alongside mainland’s Shanghai Composite since February 18th. Recent selloff in the US technology sector appeared to have spillover effects on HK market as well, with Tencent, Alibaba, Xiaomi and Meituan joining the month-long decline. Investors will continue to monitor the longer-term yields and their ramifications for the stock markets.

On the macrofront, US durable goods orders and Markit manufacturing PMI data on Tuesday will paint a clearer picture of underlying demand and manufacturing momentum respectively. German Ifo business climate data, US core PCE price index and the University of Michigan consumer confidence metrics will also be closely eyed. Core PCE inflation is expected to stay unchanged from the prior month at 1.5%, but a large deviation from this expectation may boost forex market volatility. For more economic updates, please click the DailyFX calendar.

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S&P 500 Index Technical Analysis:

The S&P 500 index has likely resumed its upward trajectory after briefly dipping below the “Ascending Channel” in early March. The index appears to have entered another technical correction, as suggested by thebearish MACD crossover. An immediate resistance level can be found at 3,995 (127.2% Fibonacci extension) whereas an immediate support level can be found at 3,893 (100% Fibonacci extension). A daily close below 3,893 would likely intensify selling pressure and expose the next support level of 3,800 (76.4% Fibonacci extension).

S&P 500 IndexDaily Chart

ASX 200 Index Technical Analysis:

The ASX 200 index broke below a key support level of 6,730, where the 161.8% Fibonacci extension and the 100-day SMA line intercept. 6,730 has now become an immediate resistance level. The index has also come to the floor of the “Ascending Channel”, breaking which may open the door for further losses with an eye on 6,580. The MACD indicator is trending below the neutral midpoint, showing that downward momentum is prevailing.

ASX 200 Index Daily Chart

Hang Seng Index Technical Analysis:

The Hang Seng Index hit a strong resistance level at 31,044 (76.4% Fibonacci retracement level) in mid-February and has since entered a consolidative period. Prices appear to be trending lower within a “Descending Channel” recently as highlighted in the chart below, with consecutive lower highs forming. The MACD is about to form a bullish crossover beneath the neutral midpoint, suggesting that selling pressure is depleting and the trend may reverse higher.

Hang Seng Index Daily Chart

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--- Written by Margaret Yang, Strategist for

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.