NASDAQ 100, HANG SENG, ASX 200 INDEX OUTLOOK:
- Big earnings in focus this week: Coca-Cola, IBM, Johnson & Johnson, P&G, Netflix, Intel
- Bitcoin tumbled on possible money laundry investigation and Xinjiang power outage
- The Hang Seng and ASX 200 indexes may climb following a positive US lead
Earnings, Bitcoin, ECB Interest Rate Decision, Asia-Pacific Week-Ahead:
Wall Street equities extended higher on Friday, with the Dow Jones, S&P 500 and Nasdaq 100 indexes all hitting fresh records. Strong macro data and robust bank earnings boosted investor confidence. So far in the earnings season, more than 80% of S&P 500 companies have beaten analysts’ earnings forecasts.
According to data compiled by FactSet, the blended earnings growth rate for the first quarter is 30.2%, higher than the previous forecast of 24.6%. Positive earnings surprise reported by financial companies – JPMorgan, Goldman Sachs, Citigroup, Bank of America and Wells Fargo – were the main contributors to the improvement in overall earnings last week.
Looking ahead, 84 S&P 500 companies, or 17% of the index’s constituents are releasing Q1 results this week. Those include big tech companies such as IBM, Netflix and Intel, although majority of the FAANG companies will report earnings in the week after.
Looking at future quarters, analysts project double-digit earnings growth for the remaining three quarters of 2021, with a peak expected in Q2 at 54.6%. These above-average growth rates are attributed to both a faster pace of economic recovery and a low-base effect. Higher earnings are likely to lower price-to-earnings (PE) ratios for the three major indices, creating room for them to drive deeper into record territory.
US Q1 Earnings Highlights
Source: Bloomberg, DailyFX
Asia-Pacific markets look set to kick off the week in a positive mood. Futures across Japan, mainland China, Australia, Hong Kong, Taiwan, Singapore, Malaysia and Thailand are in the green. Australia’s ASX 200 index opened 0.14% higher, led by utilities (+0.65%), industrials (+0.10%) and consumer discretionary (+0.11%), while energy (-0.06%) and information technology (-0.12%) trailed behind. Hong Kong’s Hang Seng Index (HSI) looks set to reclaim the 29,000 mark at the open.
US equity futures fell slightly however, after cryptocurrencies tumbled over the weekend due to a power outage in China’s Xinjiang province and a Twitter message that US Treasury may charge several financial institutions for money laundering using cryptocurrencies. Bitcoin- the largest and most popular cryptocurrency – tumbled as much as 17%, or $11,055 over the weekend before paring some losses.
Bitcoin – Daily Chart
Last week’s strong US inflation and retail sales growth figures underscored growth momentum in the world’s largest consumer market. Chinese retail sales growth also smashed market expectations and pointed to a brighter economic outlook. In the US, nearly 40% of the population has received at least one does of Covid-19 vaccines as the campaign rolled out smoothly. The uneven distribution of vaccines among developing countries however, may cast a shadow over the global recovery and broader reopening.
Looking ahead, Thursday’s ECB interest rate decision dominates the economic docket alongside a slew of Markit manufacturing PMI readings from Europe and the US. The ECB is expected to keep its policy rate and asset-purchasing programs unchanged. ECB President Christine Lagarde is likely sound dovish at the press conference, having emphasized last Wednesday that monetary and fiscal stimulus cannot be taken away until economy makes a full recovery. Meanwhile, oil traders will eye Wednesday’s API crude inventory data for clues about the supply and demand relationship. Find out more from the DailyFX calendar.
Looking back to Friday’s close, 9 out of 11 S&P 500 sectors ended higher, with 70.9% of the index’s constituents closing in the green. Materials (+1.18%), utilities (+0.81%) and consumer discretionary (+0.78%) were among the best performers, while energy (-0.90%) and information technology (-0.03%) lagged behind.
S&P 500 Sector Performance 16-04-2021
Source: Bloomberg, DailyFX
Nasdaq 100 Index Technical Analysis
The Nasdaq 100 index has likely formed an inverse “Head and Shoulders” pattern, which may serve as a strong bullish reversal indicator. The index surpassed its previous high of 13,900, opening the door for further upside potential towards 14,360 – a level that the “Head and Shoulders” pattern implies. The MACD indicator trending higher, suggesting that upward momentum is prevailing.
Nasdaq 100 Index – Daily Chart
Hang Seng Index Technical Analysis:
The Hang Seng Index (HSI) has likely formed a “Head and Shoulders” chart pattern too, but in this case it serves as a bearish trend-reversing indicator. There could be more downside room if the pattern completes. An immediate resistance level can be found at the 50-day SMA line (29,033), whereas an immediate support level can be found at 28,863 – the 38.2% Fibonacci retracement. The MACD indicator is trending higher beneath the neutral midpoint, suggesting that bullish momentum is building.
Hang Seng Index – Daily Chart
ASX 200 Index Technical Analysis:
The ASX 200 index breached above the ceiling of the “Ascending Channel” and moved forward to test a key resistance at 7,070 – the 100% Fibonacci extension. Upward momentum appears to be gaining momentum as suggested by rising MACD trendlines. A firm breakout above 7,070 would likely open the door for further upside potential with an eye on 7,260 – the 217.2% Fibonacci extension.
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
