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Nasdaq 100 Rebounds as Powell Backs Quarter-Point Hikes, APAC Stocks May Rise

Nasdaq 100 Rebounds as Powell Backs Quarter-Point Hikes, APAC Stocks May Rise

Margaret Yang, CFA, Strategist

NASDAQ 100, NIKKEI 225 INDEX, ASX 200 INDEX OUTLOOK:

  • Dow Jones, S&P 500 and Nasdaq 100 indexes closed +1.79%, +1.86% and +1.70% respectively
  • Fed Chair Jerome Powell backed a quarter-point rate hike in March, making the fight against inflation his priority over the risks from the Ukraine war
  • Asia-Pacific equities look set to open higher despite of surging crude oil prices and lingering geopolitical risks

Nasdaq 100, Powell, Ukraine War, Crude Oil, Asia-Pacific at Open:

The Nasdaq 100 index finished higher on Wednesday as Jerome Powell painted a clearer picture about the Fed’s tightening trajectory, removing some policy uncertainty. He acknowledged that the “implications [of the war in Ukraine] for the US economy are highly uncertain”, a quarter-point rate hike is still what’s on the menu at the FOMC meeting later this month. This suggests that the central bank believes the US economy is strong enough to withstand the negative impacts brought about by the Ukraine crisis, including rising commodity prices.

Powell highlighted that the labor market is “extremely tight” and inflation has risen well above the Fed’s long-term target of 2%. This suggests that he will make fighting against inflation his priority over the risks from the Ukraine war. Haven demand ebbed overnight, with gold and Treasuries falling from their recent highs. Capital may be flowing back to risk assets for bargain-hunting opportunities after a severe selloff over the last few days. Still, geopolitical uncertainties may cap the extent of the rally until progress is made between Russia and Ukraine in negotiating a ceasefire agreement.

With conflicts between Russia and the Western powers intensifying over Ukraine, crude oil prices soared to above $110 bbl, the levels not seen since August 2013. Oil traders are concerns about increasing supply constraints as a result of economic sanctions imposed on Russia and supply chain disruptions in Eastern Europe. The question is how much of risk premium has been priced in, and whether prices will pull back once Russia-Ukraine tensions de-escalate.

Brent Crude Oil - Daily

Nasdaq 100 Rebounds as Powell Backs Quarter-Point Hikes, APAC Stocks May Rise

Chart created with TradingView

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

Australia’s ASX 200 index extended higher for a sixth day as the Ukraine crisis boosted commodity prices. Energy (+2.78%) and materials (+2.12%) led the gain on Thursday morning as crude oil and metal prices soared overnight. BHP (3.19%) and Rio Tinto (+3.30%) were among the best performing blue chips.

Looking ahead, investors will be eyeing the second day of Fed Chair Jerome Powell’s congressional testimony and ISM Non-Manufacturing PMI data for clues about the health of the US economy. Find out more from the DailyFX calendar.

Looking back to Wednesday’s close, all 11 S&P 500 sectors ended higher, with 92.1% of the index’s constituents closing in the green. Financials (+2.55%), materials (+2.24%) and energy (+2.22%) were among the best performers.

S&P 500 Sector Performance 03-03-2021

Nasdaq 100 Rebounds as Powell Backs Quarter-Point Hikes, APAC Stocks May Rise

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. A successful breach above the ceiling of the channel may signal a bullish trend reversal. An immediate support level can be found at 13,110 – the 200% Fibonacci extension. The MACD indicator has formed a bullish crossover, suggesting that buying pressure may be building.

Nasdaq 100Index – Daily Chart

Nasdaq 100 Rebounds as Powell Backs Quarter-Point Hikes, APAC Stocks May Rise

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 rebounded near a key support level of 25,770, but the overall trend remains bearish-biased. The MACD indicator is trending lower beneath the neutral midpoint, suggesting that near-term momentum remains weak.

Nasdaq 100 Rebounds as Powell Backs Quarter-Point Hikes, APAC Stocks May Rise

Chart created with TradingView

ASX 200 Index Technical Analysis:

The ASX 200 index formed a “Double Top” chart pattern and has since entered a technical correction. An immediate support level can be found at 6,960 – the 23.6% Fibonacci retracement. Breaching below this level may intensify near-term selling pressure and expose the next support level of 6,758. A key resistance level can be found at 7,290 – the 61.8% Fibonacci retracement and the high of the “Double Top” chart pattern.

ASX 200 Index – Daily Chart

Nasdaq 100 Rebounds as Powell Backs Quarter-Point Hikes, APAC Stocks May Rise

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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