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Dow Jones Rebound May Lift APAC Stocks, Alibaba Earnings Miss

Dow Jones Rebound May Lift APAC Stocks, Alibaba Earnings Miss

Margaret Yang, CFA, Former Strategist

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
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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

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--- 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.

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