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Nasdaq 100 Tumbles on Lingering Ukraine Risks, APAC May Follow Lower

Nasdaq 100 Tumbles on Lingering Ukraine Risks, APAC May Follow Lower

Margaret Yang, CFA, Strategist

S&P 500, Hang Seng Index, ASX 200 INDEX OUTLOOK:

  • Dow Jones, S&P 500 and Nasdaq 100 indexes closed -1.78%, -2.12% and -2.96% respectively
  • The US ramped up warnings about a possible Russian attack on Ukraine, resulting in a broad selloff in risk assets and flee to safe havens
  • Asia-Pacific markets look set to open lower as investors assess geopolitical risks and rising bets on Fed rate hikes

Ukraine Crisis, James Bullard, Jobless Claims, Asia-Pacific at Open:

Wall Street equities tumbled on Thursday as investors weighed on rising geopolitical tensions in Eastern Europe after the US ramped up warnings about a possible Russian attack on Ukraine, even though Moscow repeatedly denied that. US Secretary of State Antony Blinken said on Thursday that Russia is preparing to invade Ukraine in the “coming days”, possibly under false pretenses.

Meanwhile, St. Louis President James Bullard cautioned that “we’ve been in a generation that this (inflation) could get out of control”, inferring that the Fed should be more aggressive in tightening monetary policy. Previously, he has suggested that the Fed should bring up rates by 100 bps before 1st July in his interview with CNBC. His hawkish comments add further pressure on risk assets, particularly the rate-sensitive tech sector.

Stocks already pulled back during Thursday’s APAC mid-day trading session after Russian-backed separatists claimed that Ukrainian forces have violated ceasefire rules. The news came from Russian state news agency RIA Novosti. Risk sentiment turned sour immediately, with AUD/JPY plunging while crude oil and gold prices leaping. This reflects how fragile market sentiment is against the backdrop of lingering geopolitical tensions in Eastern Europe. Crude oil, gold, Treasuries and equity indices appear to be more sensitive to the Ukraine crisis.

The Nasdaq 100 index led the decline, as the rate-sensitive and comparatively rather expensive tech sector is more vulnerable to interest rate hikes and geopolitical risks. Yields on 10-year US Treasuries pulled back below the 2% mark on surging heaven demand. Gold prices rallied to $1,900 – a seven-month high. Crude oil prices rose slightly, as the ongoing Iran nuclear talks revitalized hopes for the return of Iranian oil to ease supply constraints.

Meanwhile, weekly initial US jobless claims data came in at 248k, compared to a 219k estimate. The number of people filing for unemployment claims has rebounded slightly last week, but remains substantially lower than the pandemic levels. This underscored a tight market condition amid a gradual exit from Omicron-related restrictions.

Initial US Jobless Claims

Nasdaq 100 Tumbles on Lingering Ukraine Risks, APAC May Follow Lower

Source: Bloomberg, DailyFX

Asia-Pacific markets look set to open lower on Friday following a sour lead on Wall Street.Futures in Japan, Hong Kong, Australia, South Korea, Taiwan, Singapore, Malaysia, India and Indonesia are in the red, whereas those in mainland China and Thailand are in the green.

Hong Kong is planning to conduct mass testing of Covid-19 to its entire citizens to curb the rapid spread of Omicron cases in the city. Local media said the citywide testing will begin in early March and will last for three weeks. The stock market reacted mutely however, reflecting that mass testing alone may not be sufficient to reignite hopes for border reopening. A record 4,285 cases were added on Wednesday, putting pressure on the city’s healthcare system.

Looking back to Thursday’s close, 9 out of 11 S&P 500 sectors ended lower, with 85.5% of the index’s constituents closing in the red. Information technology (-3.01%), communication services (-2.96%) and consumer discretionary (-2.55%) were among the worst performers, whereas defensive-oriented consumer staples (+0.91%) and utilities (+0.13%) outperformed.

S&P 500 Sector Performance 17-02-2021

Nasdaq 100 Tumbles on Lingering Ukraine Risks, APAC May Follow Lower

Source: Bloomberg, DailyFX

Nasdaq 100 Technical Analysis

The Nasdaq 100 index is trending lower within a “Descending Channel” as highlighted on the chart below. Prices formed consecutive lower highs and lows over the past few weeks, underscoring a downward trajectory. An immediate support level can be found at 14,160 – the 127.2% Fibonacci extension. The MACD indicator is flattening beneath the neutral midpoint, suggesting that the overall momentum remains weak.

Nasdaq 100 Index– Daily Chart

Nasdaq 100 Tumbles on Lingering Ukraine Risks, APAC May Follow Lower

Chart created with TradingView

Hang Seng Index Technical Analysis:

The Hang Seng Index (HSI) breached above a “Falling Wedge” pattern from the upside. Prices have since reversed higher and formed a “Ascending Channel” as highlighted on the chart below, hinting that prices may have bottomed out after a prolonged consolidation. An immediate resistance level can be found at around 24,900 – the 127.2% Fibonacci extension. Breaching above this level may expose the next resistance level of 25,600. The MACD indicator is trending higher above the neutral midpoint, underscoring bullish momentum.

Hang Seng Index – Daily Chart

Nasdaq 100 Tumbles on Lingering Ukraine Risks, APAC May Follow Lower

Chart created with TradingView

ASX 200 Index Technical Analysis:

The ASX 200 index has rebounded sharply over the last two weeks, challenging an immediate resistance level of 7,290 – the 61.8% Fibonacci retracement. Breaching above this level may intensify near-term buying pressure and expose the next resistance level of 7,435. A pullback from here may lead to a test of 7,190 for support. The MACD indicator is trending higher beneath the neutral midpoint, suggesting that a technical rebound is underway.

ASX 200 Index – Daily Chart

Nasdaq 100 Tumbles on Lingering Ukraine Risks, APAC May Follow Lower

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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