Dow Jones May Lead Hang Seng, ASX 200 Higher as the Fed Lifts Bank Dividend Restrictions
DOW JONES, HANG SENG, ASX 200 INDEX OUTLOOK:
- Dow Jones and S&P 500 climbed +0.62%, +0.52% and while Nasdaq 100 fell -0.14%
- The DXY US Dollar index climbed to a three-month high as GDP, unemployment claims data beat
- The Hang Seng and ASX 200 indices are poised to gain amid improved sentiment
Wall Street equities halted a two-day loss and rebounded mildly on Thursday, setting a positive tone for Asia-Pacific markets at open. Reflation optimism buoyed the performance of materials, industrials and financials stocks, as president Joe Biden doubled his target for administering Covid-19 vaccines. Banking shares were boosted by the Fed’s decision to allow lenders that pass the next stress test to raise dividends after June. The act showed further strength in the financial system as the policymakers are becoming more confident about a post-Covid recovery.
The DXY US Dollar index rallied to a fresh three-month high after the release of an upbeat Q4 US GDP data. The economy expanded 4.3% MoM during the fourth quarter, beating an initial estimate of 4.1%. Meanwhile, the weekly jobless claims figure came lower-than-expected, with 684k people filling for unemployment benefits, compared to a 730k forecast (chart below). The recent trend showed continuous improvement in labor market conditions, which appeared to have shrugged off February’s extreme cold weather and a second viral wave in winter.
The 10-year Treasury yield climbed 2.5bps to 1.635% after a tepid 7-year note auction on Thursday, ceasing a three-day decline. The selloff in bonds appeared to have eased after Fed Chair Jerome Powell and Treasury Secretary Janet Yellen reiterated that inflation risks are manageable and rise in prices might be transitory in Congressional testimonies this week. Still, investors will closely monitor the movement of longer-dated yields for clues about markets’ take on inflation and future interest rate path.
Source: Bloomberg, DailyFX
Asia-Pacific markets look set to trade higher on Friday, with futures across Japan, Australia, Hong Kong, South Korea, Singapore and India rising before the bell. Australia’s ASX 200 index climbed 0.6% in early hours, with all 9 out of 11 sectors trading higher. Communication services (+0.94%), energy (+0.69%) and financials (+0.62%) were leading, whereas information technology (-0.45%) and health care (-0.22%) underperformed.
Hong Kong’s Hang Seng Index fell 3.76% so far this week, marking one of the worst-performing indices in Asia. Hong Kong stocks were hammered by US regulator’s latest move towards delisting some Chinese firms. The city’s temporary suspension of BioNtech Covid-19 vaccines further dampened investor confidence about its recovery from the pandemic.
Looking ahead, the German Ifo business climate index headlines the economic docket alongside US core PCE price index and the University of Michigan consumer sentiment data. Find out more from the DailyFX calendar.
Looking back to Thursday’s close, 8 out of 9 Dow Jones sectors ended higher, with 76.7% of the index’s constituents closing in the green. Materials (+1.93%), industrials (+1.74%) and financials (+1.46%) were among the best performers, whereas information technology (-0.35%) lagged behind.
Dow Jones Sector Performance 25-03-2021
Source: Bloomberg, DailyFX
Dow Jones Index Technical Analysis
The Dow Jones index reverted back to the “Ascending Channel” after briefly breaching it. The 20-day SMA line may serve as an immediate support, breaking it may lead to a deeper pullback towards 31,916- the 76.4% Fibonacci extension. The overall trend remains bullish-biased, as suggested by the upward-sloped moving averages.
Dow Jones Index – Daily Chart
Hang Seng Index Technical Analysis:
The Hang Seng Index remains in a “Descending Channel” with downward momentum prevailing. The floor of the channel may serve as an immediate support, breaking which may open the door for further losses with an eye on 27,000. The index has broken the 20-, 50- and 100-day SMA lines and may lead to the formation of a “Death Cross” on the daily chart. The MACD indicator is trending lower beneath the neutral midpoint, suggesting that near-term momentum remains bearish.
Hang Seng Index – Daily Chart
ASX 200 Index Technical Analysis:
The ASX 200 index bounced off the floor of the “Ascending Channel” and surged above the 50-day SMA line of 6,730 – an immediate resistance. The index appears to have entered a range-bound condition between 6,660 and 6,860 since early March, waiting for fresh catalyst for a clearer direction. The MACD indicator is trending below the neutral midpoint, showing that downward momentum is prevailing.
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.