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Dow Jones Rebounds on Eased Ukraine Tensions, APAC Stocks May Advance

Dow Jones Rebounds on Eased Ukraine Tensions, APAC Stocks May Advance

Margaret Yang, CFA, Strategist

DOW JONES, NIKKEI 225 INDEX, CRUDE OIL, ASX 200 INDEX OUTLOOK:

  • Dow Jones, S&P 500 and Nasdaq 100 indexes closed +1.22%, +1.58% and +2.47% respectively
  • Risk assets rebounded sharply as Russia-Ukraine standoff showed signs of easing
  • Asia-Pacific equities look set to open higher, with investors eyeing China inflation andUS retail sales figures

Dow Jones, Ukraine, Crude Oil, Inflation, Asia-Pacific at Open:

The Dow Jones Industrial Average rebounded on Tuesday as investors shrugged off Russia-Ukraine tensions after Moscow said that some of its troops were returning to their bases. This came after the US warned about an imminent invasion at the end of last week, which resulted in a broad pullback in risk assets. The De-escalation of the Ukraine crisis boosted investor confidence and sent stocks higher overnight, setting a positive tone for Asia-Pacific markets at open. The technology sector (1.90%) outperformed, whereas the energy sector (-1.76%) trailed behind as crude oil prices fell.

Safe-havens, such as the US Dollar, Treasuries and gold declined overnight, showing cooled appetite for anti-risk assets. They still remain in focus as President Joe Biden said the US has yet to verify Moscow’s claim and an invasion remains possible.

Amid a relatively quiet event calendar this week, investors will scrutinize Wednesday’s release of Chinese inflation and US retail sales figures. China CPI and PPI are expected to moderate further to 1.0% and 9.5%, from 1.5% and 10.3% respectively in December. Both readings have fallen from their recent peaks, allowing the PBOC to ease monetary policy to cushion a slowing economy. The central bank injected 300 billion Yuan of liquidity via the issuing of 1-year MLF notes while keeping the interest rate unchanged at 2.85%on Tuesday.

US retail sales growth is expected to hit 2% MoM in January, compared to a decline of 1.9% in December. A stronger-than-expected print may boost investor confidence and strengthen the case for Fed tightening, whereas a weaker figure may lead to the opposite.

Crude oil prices fell 2.8% overnight as eased Ukraine tensions alleviated concerns about potential supply disruption between Russia and the European Union. Energy was the worst-performing sector in the Dow Jones overnight. Oil prices pulled back from 7-year highs but still remain in a strong upward trajectory, underpinned by demand optimism and supply constraints.

Crude Oil Price - Daily

Dow Jones Rebounds on Eased Ukraine Tensions, APAC Stocks May Advance

Chart created with TradingView

Asia-Pacific markets look set to open higher. Futures in Japan, mainland China, Hong Kong, Australia, Taiwan, Singapore, India, Thailand and Indonesia are in the green. Those in South Korea and Malaysia are in the red.

Looking back to Tuesday’s close, 8 out of 9 Dow Jones sectors ended higher, with 86.7% of the index’s constituents closing in the green. Communication services (+1.94%), information technology (+1.90%) and industrials (+1.77%) were among the best performers, whereas energy (-1.76%) lagged behind.

Dow Jones Sector Performance 16-02-2021

Dow Jones Rebounds on Eased Ukraine Tensions, APAC Stocks May Advance

Source: Bloomberg, DailyFX

Dow Jones Index Technical Analysis

The Dow Jones Industrial Average rebounded from a key support level of 33,830 after the completion of a bearish “Butterfly” chart pattern. Prices have since developed a “Double Top” pattern that indicates a potential bearish trend reversal. An immediate support level can be found at 34,500 – the 78.6% Fibonacci retracement, breaching which may bring 33,830 in sight. The MACD indicator is about to form a bearish crossover beneath the neutral midpoint, suggesting that momentum remains weak.

Dow JonesIndex – Daily Chart

Dow Jones Rebounds on Eased Ukraine Tensions, APAC Stocks May Advance

Chart created with TradingView

Nikkei 225 Technical Analysis:

The Nikkei 225 index breached below a “Symmetrical Triangle” pattern and thus opened the door for further downside potential. Prices have rebounded last week, but the overall trend remains bearish-biased. The lower trendline of the “Symmetrical Triangle” has now become immediate resistance. The MACD indicator is trending lower, underscoring bearish momentum.

Nikkei 225Index – Daily Chart

Dow Jones Rebounds on Eased Ukraine Tensions, APAC Stocks May Advance

Chart created with TradingView

ASX 200 Index Technical Analysis:

The ASX 200 index returned to the range-bound zone between 7,200 and 7,500, riding a strong technical upswing. Prices have pulled back to the floor of the range looking for immediate support. The MACD indicator formed a bullish crossover beneath the neutral midpoint, suggesting that a technical rebound is underway.

ASX 200 Index – Daily Chart

Dow Jones Rebounds on Eased Ukraine Tensions, APAC Stocks May Advance

Chart created with TradingView

--- 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.

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