HANG SENG, ASX 200, NASDAQ 100 INDEX OUTLOOK:
- Dow Jones scrapped 30,000 resistance, setting an upbeat tone for Asia-Pacific stocks at open
- Vaccines and prospects for a smooth transition in the White House were among the key drivers
- US durable goods orders, GDP growth rate, core PCE inflation and EIA crude inventories to be eyed
Vaccine-Rally, Dow Clears 30,000, Asia-Pacific at Open:
A vaccine-led rally looks set to continue on the Wall Street, with Dow Jones, S&P 500 and Nasdaq indexes rising 1.54%, 1.62% and 1.31% respectively on Tuesday. The Dow Jones stood above 30,000 points for the first time, sending heatwaves across risk assets. Catalyzed by recent vaccine news, WTI crude oil prices surged over 3% and broke a key resistance level of US$ 43.80. Energy was the best performing sector among S&P 500 stocks overnight.
Recent developments of several Covid-19 vaccines raised hopes for a faster pace of relaxation of social distancing measures and travel restrictions around the globe. Markets appeared to have looked pass current headwinds into future recovery stories, fueling a sectoral rotation in favor of cyclical industries – energy, materials, financials, aviation and industrials. Stock prices of these traditional industries are still far from reaching their pre-Covid levels, suggesting that the vaccine-rally may have further room to go.
The kickoff of presidential transition in the White House cleared most of the post-election uncertainties that markets tend to dislike. President-elect Joe Biden has nominated former Fed Chair Janet Yellen as his new Treasury Secretary, a position in which she may play a key role in influencing US fiscal and tax policies to foster economic recovery and tackle inequality issues. Yellen’s 4-year experience as the Fed Chair during 2014-2018 may empower her with the knowledge to cooperate with Jerome Powell in setting fiscal and monetary packages.
Asia-Pacific markets are positioned to open broadly higher following strong US leads, with the exception of mainland Chinese stocks. Index futures across Japan, Australia, Hong Kong, South Korea, Singapore and India are pointing to a higher start on Wednesday. Similar to the US stocks, cyclical sectors may outperform in the region, boosted by strong crude oil prices and hopes for a vaccine-led economic recovery.
Sector-wise, 10 out of 11 S&P 500 sectors ended in the green, with 80.2% of the index’s constituents closing higher. Energy (+5.16%) was once again the best performing sector, followed by financials (+3.53%) and materials (+2.50%). Real estate (-0.02%), healthcare (+0.28%) and consumer staples (+0.68%) were lagging behind.
S&P 500 Index Sector Performance 24-11-2020
Source: Bloomberg, DailyFX
As the US markets will be shut for the Thanksgiving holiday on Thursday, several key data will be released on Wednesday. Those include US durable goods order, 3Q GDP growth, core PCE price index, initial jobless claims and EIA crude inventories. Currency traders may eye PCE inflation data for clues about continuous rising price levels and how it may impact the Fed’s monetary decisions. Find out more on the DailyFX economic calendar.
US CorePCE Price Index YoY (%) – Forecast
Source: Bloomberg, DailyFX
Nasdaq 100Technical Analysis:
The Nasdaq 100 index looks set to challenge a key resistance zone between 12,200-12,320 (highlighted in chart below). Breaking this zone may open the door for upside potential, whereas another pullback from here may point to further consolidations. Immediate support levels can be found at 11,920 (20-Day Simple Moving Average), followed by 11,700 (50-Day SMA).
Nasdaq 100 Index – Daily Chart
Hang Seng Index Technical Analysis:
The Hang Seng Index (HSI)appears have entered a period of consolidation since November 9th, when prices hit a 4-month high. Prices regained strength this week and may attempt to challenge a key resistance level at 26,840 – the 161.8% Fibonacci extension. The overall trend remains bullish-biased. Breaking the 26,840 resistance may open the room for more upside potential with an eye on 27,520 – the 200% Fibonacci extension. An immediate support level can be found at around 26,240 – the 20-Day SMA line.
Hang Seng Index – Daily Chart
ASX 200 Index Technical Analysis:
The ASX 200 index is riding a strong upward trend after breaking a key resistance level of 6,530 on November 18th. The overall trend remains bullish-biased, as the 20-Day SMA is leading the 50-Day SMA higher. The RSI indicator has entered overbought territory, suggesting that prices have been technically overbought and may be vulnerable to a short-term pullback.
ASX 200 Index – Daily Chart
— Written by Margaret Yang, Strategist for DailyFX.com
To contact Margaret, use the Comments section below or @margaretyjy on Twitter