NASDAQ 100, NIKKEI 225, HANG SENG INDEX OUTLOOK:
- Dow Jones, S&P 500 and Nasdaq 100 closed +0.00%, -0.74%, and -1.92% respectively
- Technology shares fell as investors weighed the impact of Fed rate hikes amid rising stagflation fears
- The Hang Seng Index looks set to extend Monday’s 5% losses as China tech ADRs plunged overnight
Nasdaq 100, Nikkei 225, Hang Seng Index, Inflation, Asia-Pacific at the Open:
Wall Street equities closed lower on Monday, with the Nasdaq 100 index ending nearly 2% lower. The more diverse S&P 500 index registered a smaller loss. Market sentiment was weighed by an imminent Fed rate hike at this week’s FOMC meeting and the prospects for stagflation – an undesirable outcome of slow economic growth and high inflation. Prices of crude oil, natural gas, grain and metals have surged over recent weeks, adding inflationary pressure around the globe. This may rein in consumer spending and squeeze corporates’ profit margin by adding wage pressure and raw material prices.
Markets now indicate about seven quarter-point Fed rate hikes this year, pushing the Fed target rate to 1.75%-2.00% by the end of 2022. Meanwhile, US inflation is expected to surge beyond 7.9% in the months to come as the outbreak of the Ukraine war propelled a wide range of commodity prices.
Stocks in Hong Kong face another challenging session as Chinese tech ADRs suffered heavy losses overnight on US exchanges. The Hang Seng Index already tumbled 4.97% on Monday, and the Hang Seng Tech Index plunged 11%. Regulatory concerns and surging Covid-19 cases in mainland were among the biggest weighing factors. Yet they may not be able to fully explain a rout in this magnitude.
China reported 1,437 new Covid cases on Monday and put the southern city of Shenzhen under a 7-day lockdown. Shenzhen has a population of 17 million and is the most important technology hub in the Greater Bay Area. This may result in significant economic impact as it will hit output in industries such as tech and machinery, which feed into global supply chains. Many other Chinese cities are implementing stricter social distancing and partial lockdowns to tame the rapid spread of the Omicron variant. Against this backdrop, mainland Chinese and Hong Kong stocks may be stuck trying to navigate the storm this week.
Hang Seng Tech Index – Daily
Chart created with TradingView
Asia-Pacific markets look set to open lower amid cautious sentiment. Futures in mainland China, Hong Kong, Australia, South Korea, Taiwan, Singapore and India are in the red, whereas those in Japan, Malaysia and Thailand are in the green.
Looking ahead, the UK jobs report dominates the economic docket alongside US PPI (MoM) data. Find out more from theDailyFX economic calendar.
Looking back to Monday’s close, 7 out of 11 S&P 500 sectors ended lower, with 56.4% of the index’s constituents closing in the red. Energy (-2.93%), information technology (-1.90%) and communication services (-1.81%) were among the worst performers, whereas financials (+1.23%) and healthcare (+0.68%) outperformed.
S&P 500 Sector Performance 14-03-2022
Source: Bloomberg, DailyFX
Nasdaq 100 IndexTechnical 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 13,110 – the 200% Fibonacci extension. Breaching this level may intensify near-term selling pressure and expose the next support level of 12,230.
Nasdaq 100 Index– Daily Chart
Chart created with TradingView
Nikkei 225 Index Technical Analysis:
The Nikkei 225 index breached below a “Symmetrical Triangle” pattern and thus opened the door for further downside potential. Prices rebounded sharply from an immediate support level of 24,725 – the 161.8% Fibonacci extension. The overall trend remains bearish-biased however, as prices formed consecutive lower highs and lower lows. An immediate resistance level can be found at 25,812 – the 127.2% Fibonacci extension.
Nikkei 225 Index – Daily Chart
Chart created with TradingView
ASX 200 Index Technical Analysis:
The ASX 200 index is attempting to breach above the trendline resistance as shown on the chart below. A successful attempt may open the door for further upside potential with an eye on 7190, and then 7290. A reversal lower may intensify near-term selling pressure and bring an immediate support level of 6960 into focus. The MACD indicator is trending higher beneath the neutral midpoint, suggesting that bullish momentum may be building.
ASX 200 Index – Daily Chart
Chart created with TradingView
— Written by Margaret Yang, Strategist for DailyFX.com
To contact Margaret, use the Comments section below or @margaretyjy on Twitter
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