Jobless Claims, Stimulus in Focus

DOW JONES, NIKKEI 225, ASX 200 INDEX OUTLOOK:

Nikkei 225 and ASX 200 retreated after strong two-day gains, setting a cautious tone for APAC stocks
Democrats may push through President Biden’s US$ 1.9 billion stimulus without Republican support
Treasury yield curve steepened on reflation expectations; The ADP jobs report added 174k jobs

Recommended by Margaret Yang, CFA

Get Your Free Equities Forecast

Yield curve, Biden’s Stimulus Package, Jobless Claims, BoE, Asia-Pacific at Open:

Asia-Pacific markets are poised for a cautious start on Thursday, with the Nikkei 225 and ASX 200 indices retracing from recent highs after an uninspiring session from Wall Street. The Dow Jones and S&P 500 indices closed up 0.12% and 0.10% respectively while the Nasdaq lost 0.02%. Oil prices advanced to their highest level in 12 months, backed by stimulus hopes, the vaccine rollout and OPEC+’s commitments to rein in production. Energy (2.18%) and materials (1.36%) were the best performing sectors, while healthcare (-0.66%) and communication services (-0.10%) trailed.

Market participants are waiting for another round of US fiscal stimulus to foster a faster pace of recovery via providing support to households, small businesses and the vaccine rollout. The Democrats are working towards approving President Joe Biden’s US$ 1.9 trillion bill without Republican support. The Democrat-led Senate started a reconciliation process, which would allow them to pass the stimulus package with a simple majority and avoid a filibuster that requires at least 10 Republican votes to support the bill.

Renewed stimulus hopes led longer-dated US Treasury yields to climb as expectations for future demand, output and inflation rose. The 10-, 20- and 30-year Treasury yields advanced 12.1, 15.2 and 15.2 bps from a week ago to 1.139%, 1.733% and 1.927% respectively. The longer-dated rates climbed while near-dated ones dropped, leading the yield curve to steepen further. Higher yields may exert downward pressure over riskier assets and precious metal prices as they become less appealing when higher Treasury rates are taken into consideration.

Source: Bloomberg, DailyFX

Australia’s ASX 200 index opened lower, dragged by utilities (-2.02%), real estate (-0.97%) and health care (-0.69%) sectors, while energy (+0.78%) and communication services (+0.56%) outperformed. Japan’s Nikkei 225 retreated slightly after registering a three-day gain of 3.2% as investors awaited fresh catalysts to support stock market’s rally.

On the macro front, a higher-than-expected US ADP jobs report may paint a brighter outlook for Friday’s nonfarm payrolls data, which is forecasted to be 50k. The ADP report saw 174k private jobs added in January 2020, much higher than the baseline forecast of a 49k decline. Investors are also eyeing tonight’s US weekly jobless claims for clues about the health of the labor market. Weekly unemployment claims have fallen from the peak observed in the week ending January 9th, as the rollout of Covid vaccines helped to bring down new infections and expedited economic normalization.

The BoE is expected to keep interest rates unchanged in a policy meeting today, as the rapid vaccine rollout and an expected follow-on economic recovery may nor warrant further cuts into the negative territory. Find out more from DailyFX calendar.

Source: Bloomberg, DailyFX

Looking back to Wednesday’s close, 6 out of 9 Dow Jones sectors ended higher, with 43.3% of the index’s constituents closing in the green. Energy (+2.18%), materials (+1.36%) and industrials (+0.63%) were among the best performers, whereas healthcare (-0.66%) and communication services (-0.10%) were trailing.

Dow Jones Sector Performance 03-02-2021

Source: Bloomberg, DailyFX

Starts in:

Live now:

Feb 04

( 09:02 GMT )

Learn about trading global equities

Becoming a Better Trader in Current Markets

Join now

Webinar has ended

Dow Jones Index Technical Analysis

The Dow Jones indexbroke below the “Ascending Channel” last week and entered a consolidative period. Its price has likely found some support at 29,650 and since rebounded. The lower bound of the “Ascending Channel” (30,780) now becomes an immediate resistance, where the 20-Day Simple Moving average (SMA) line intercepts. Breaking above this level may hint at further gains with an eye on 31,280 – the previous high. The MACD indicator is about to form a bullish crossover, suggesting that near-term momentum has turned bullish.

Dow Jones Index – Daily Chart

Nikkei 225 Index Technical Analysis:

The Nikkei 225 index has returned to a range between 28,260 and 28,740 after briefly dipping below it last week. A rapid rebound in prices may signal a return to the upward trajectory with an eye on 28,740 (61.8% Fibonacci extension). The overall trend remains bullish-biased, as suggested by the upward-sloped moving average lines. A pullback from here may lead to a test of 28,448 (20-Day SMA) and then 28,260.

Nikkei 225 Index – Daily Chart

ASX 200 Index Technical Analysis:

The ASX 200 index hit the ceiling of the “Ascending Channel” at 6,810 and has since retraced, suggesting that it remains a critical resistance in the near future. A deeper pullback from here may lead to a test of the 20-Day SMA (6,733) for support, while the overall trend remains bullish-biased.

ASX 200 Index – Daily Chart