DOW JONES, HANG SENG INDEX OUTLOOK:
- Dow Jones futures may lead Asia-Pacific stocks higher, the US Dollar fell
- China 3Q GDP, industrial production, retail sales figures are in focus
- Hang Seng Index (HSI) looks set to open mildly higher, facing a minor resistance at 24,400
Dow Jones Index Outlook:
A string of key Chinese data may set the tone for Asia-Pacific equities, as well as risk-linked Australian and New Zealand Dollars. Economists foresee Chinese economic growth accelerated to 5.2% YoY in Q3 from 3.2% in Q2. September’s industrial production and retail sales data will also be closely watched for clues into China’s supply- and demand-side recovery from the pandemic. Retail sales are forecasted to expand at 1.8% YoY, while industrial production rises 5.8% YoY. For both, that would be their fastest pace in 9 months.
Dow Jones futures climbed 0.36% during early Asia trading hours, in anticipation of better Chinese data and speeches from Fed Chair Powell and ECB President Lagarde later today. US corporate earnings continued to show strong momentum, which may shelter stock markets against election and stimulus risks.
China GDP Growth YoY – Forecast
On the macro side, this week’s key market events include:
- October 19th(Monday):
- RBA meeting minutes
- Chinese data: Q3 GDP growth rate, industrial production, retail sales
- Fed chair Jerome Powell speech, ECB president Christine Lagarde speech
- October 20th (Tuesday): Chinese house price index, US housing starts
- October 21st (Wednesday):
- UK inflation, ECB president Christine Lagarde speech, Canada inflation
- EIA Cushing crude oil stocks change
- October 22th (Thursday):
- Germany consumer confidence,
- US initial jobless claims, existing home sales
- October 23th (Friday):
- New Zealand inflation, Japan inflation
- Markit manufacturing PMIs from Germany, the UK, the EU and the US
The US corporate earnings have fared well so far. More than 80% of S&P 500 companies, which have released their earnings so far, have beaten analysts’ forecasts. On Friday, five out of seven companies released better-than-expected earnings (table below). International Business Machine (IBM) will unfold results on Monday, followed by Procter & Gamble and Netflix on Tuesday.
Sector-wise, only 3 out of 9 Dow Jones sectors closed in the green, with only one third of the index’s constituents ending higher. Industrials (+1.29%), healthcare (+0.21%) and consumer staples (+0.01%) were among the better performers, whereas energy (-0.84%) and financials (-0.23%) were lagging.
Dow Jones Index Sector Performance 16-10-2020
Source: Bloomberg, DailyFX
Technically, the Dow appeared to have entered into a consolidative period after coming off a six-week high. It has tested an immediate support level at 28,390 – the 23.6% Fibonacci retracement (chart below) and has since rebounded. Breaking below this support may open room for more downside potential towards 28,040 – the 38.2% Fibonacci retracement.
The overall trend appears bullish-biased, as upward-sloped 20- and 50-Day Simple Moving Average (SMA) lines suggest. The MACD indicator, however, is likely to form a ‘bearish cross’ over, suggesting that upward momentum might be fading.
Dow Jones Index – Daily Chart
Hang Seng Index Outlook:
Hong Kong stocks may ride the tailwind of higher US futures and Chinese data on Monday. A falling US Dollar may point to another ‘risk on’ session for trading, especially among financial and technology shares. CCB (+5.7%), ICBC (+4.25%), HSBC (+0.84%), Bank of China (+3.2%), Tencent (+0.91%), Xiaomi (+3.12%) and Alibaba (+3.23%) were among the biggest contributor to the index’s gains on Friday.
Technically, the HSI has also likely entered a brief consolidation, with an immediate support level found at 24,065 – the 38.2% Fibonacci Retracement (chart below). The MACD indicator has also pointed to a weakening momentum recently. Immediate resistance levels can be found at 24,400 (50-Day SMA) and 24,700 (100-Day SMA) respectively.
Hang Seng Index – Daily Chart
— Written by Margaret Yang, Strategist for DailyFX.com
To contact Margaret, use the Comments section below or @margaretyjy on Twitter