Dow Jones Rebound May Lift APAC Stocks, Alibaba Earnings Miss
DOW JONES, NIKKEI 225, ASX 200 INDEX OUTLOOK:
- Dow Jones, S&P 500 and Nasdaq 100 indexes closed +0.80%, +0.82% and +0.65% respectively
- The S&P 500 hit an all-time high amid earnings optimism and hopes for an US infrastructure bill
- Alibaba posted lower profits for Q2, share price plunged 3% during HK trade
Dow Jones, Alibaba, Tencent, Asia-Pacific Midday Trade:
Wall Street stocks rebounded broadly on Tuesday, with the S&P 500 index hitting an all-time high. Sentiment was buoyed by robust US corporate earnings. Nearly 89% of blue chip companies have beaten forecasts so far, marking the best reporting season in over a decade. Meanwhile, the US Senate is trying to pass a $1 trillion bipartisan infrastructure investment bill by this week, which would revitalize America’s roads, bridges and mass-transit systems over the next five years.
Asia-Pacific markets are trading broadly higher following a positive lead, with Hong Kong and mainland Chinese stocks leading the gains. The Hang Seng Index climbed more than 1% after Tencent – the index’s largest component – rebounded over 3% from deep losses yesterday. China’s state media criticized online gaming as the “spiritual opium” for teenagers on Tuesday, spurring a new wave of concerns about a wider crackdown on the tech sector and causing a 6% decline in Tencent’s share price. Investors appear to be taking this as an opportunity to buy the dips however, as Tencent has dropped almost 40% from this year’s high.
Alibaba – China’s leading e-commerce service provider- reported a 5% YoY decline in net profits for the second quarter. This is largely due to higher spending to develop its order-fulfillment services. Expenditures on various businesses surged 169% YoY during the quarter, squeezing profit margins. Alibaba’s share price erased some losses after dropping over 3% at open, suggesting that investors remain positive about its longer-term outlook.
Tencent (700 HK)
Looking back to Tuesday’s close, 8 out of 9 Dow Jones sectors ended higher, with 83.3% of the index’s constituents closing in the green. Materials (+1.65%), healthcare (+1.44%) and industrials (+1.26%) were among the best performers, whereas communication services (-1.12%) trailed behind.
Dow Jones Sector Performance 03-08-2021
Source: Bloomberg, DailyFX
Dow Jones Index Technical Analysis
The Dow Jones index is challenging an immediate resistance level at 34,920 – the 200% Fibonacci extension. A successful attempt would likely intensify near-term buying pressure and open the door for further upside potential. A failed try however, may form a “Triple Top” chart patten that is bearish in nature. Bearish MACD divergence suggests that upward momentum may be weakening.
Dow Jones Index – Daily Chart
Nikkei 225 Index Technical Analysis:
The Nikkei 225 index remains in a “Descending Channel” formed since February. The floor and ceiling of the channel may be viewed as immediate support and resistance levels respectively. The overall trend remains bearish-biased as suggested by the downward-sloped SMA lines. The MACD indicator is trending below the neutral line, suggesting that upward momentum may be weak.
Nikkei 225 Index – Daily Chart
ASX 200 Index Technical Analysis:
The ASX 200 index is challenging a key resistance level at 7,500 – the 200% Fibonacci extension. The overall trend remains bullish-biased, as suggested by the consecutive higher highs and higher lows formed over the past few months. The MACD indicator formed a bullish crossover and trended higher, suggesting that upward momentum is gaining traction.
ASX 200 Index – Daily Chart
--- Written by Margaret Yang, Strategist for DailyFX.com
To contact Margaret, use the Comments section below or @margaretyjy on Twitte
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.