NASDAQ 100, HANG SENG INDEX, ASX 200 INDEX OUTLOOK:
- Nasdaq 100 closed at all time high, lifted by Apple, ASML, Facebook and PayPal
- Cyclical-linked materials, financials, industrials and energy sectors underperformed
- Australian, mainland China and Hong Kong stocks resume trading amid favorable sentiment
Nasdaq 100, RBA Minutes, Reverse Repo, Asia-Pacific at Open:
Wall Street stocks were mixed on Monday with the technology sector outperforming. The Nasdaq 100 index rallied 0.92% to an all-time high of 14,128, lifted by large-cap stocks such as Apple (+2.46%), Facebook (+1.66%) and Amazon (+1.11%). This may be attributed to earnings optimism and receding concerns about the Fed tapering stimulus as June’s FOMC meeting is approaching.
The cyclical-oriented materials, financials, industrials and energy sectors pulled back however, casting a shadow over these industries during the APAC session. Investors will keep an eye on the RBA meeting minutes today for further insights into the central bank’s recent decisions. The RBA is expected to alter its quantitative easing program in July’s meeting as economic conditions improve.
Source: Bloomberg, DailyFX
It is worth noting that demand for the Fed’s reverse repo facility surged to a record of $584 billion on Monday, reflecting swelling liquidity conditions at financial institutions (chart below). A reverse repo happens when a central bank sells securities and raises cash from the markets in order to provide stability in lending flows. It usually happens when there is too much liquidity (cash) and demand for interest-bearing securities rises.
This hints that liquidity conditions are probably ample enough to withstand a gradual withdrawal of the Fed’s asset purchase program. This observation also strengthens the case for a 2023 interest rate hike if liquidity remains ample. To stock investors, this may be good news as excessive liquidity is generally positive for risk assets such as equities.
Demand for Fed’s Reverse Repo Facility Hit a Record of 584 billion
Source: Bloomberg, DailyFX
Asia-Pacific markets look set to trade higher today. Futures in Japan, Australia, Hong Kong, South Korea, Singapore and Malaysia are in the green. Mainland China and Hong Kong markets are reopening after the Dragon Boat Festival holiday. Sentiment may be tilted to the upside following a positive lead from Wall Street.
Hong Kong’s Hang Seng Index (HSI) underperformed regional peers recently after President Joe Biden banned investment in a widened list of 59 Chinese companies with alleged ties with defense or surveillance technology sectors. Alibaba ADR climbed 1.09% during the US session, trading at 1.3% premium over its Hong Kong listing. Similarly, Tencent’s ADR is trading at 0.39% premium over its Hong Kong counterpart. This may offer investors an opportunity to narrow the gap.
Australia’s ASX 200 index opened 0.4% and extended its record-scraping rally. 9 out of 11 ASX 200 sectors traded higher, with utilities (+0.77%), information technology (+0.72%) and healthcare (+0.62%) outperforming.
Looking ahead, the RBA meeting minutes and Germany inflation data dominate the economic docket alongside US retail sales figures. Find out more from DailyFX economic calendar.
Nasdaq 100 IndexTechnical Analysis
The Nasdaq 100 index breached a key resistance level of 14,013 and closed at an all-time high on Monday. Breaching this level would likely intensify near-term buying pressure and open the door for further gains. The previous resistance has now become an immediate support. The MACD indicator is trending higher, suggesting that upward momentum is prevailing.
Nasdaq 100 Index– Daily Chart
Hang Seng Index Technical Analysis:
The Hang Seng Index failed to breach the neckline of the “Double Bottom” pattern and has since entered a technical pullback. Prices may continue to range bound between 28,300 and 29,350 waiting for fresh catalyst. The MACD indicator is flattening, suggesting that momentum may be tilted to the downside.
Hang Seng Index – Daily Chart
Chart by TradingView
ASX 200 Index Technical Analysis:
The ASX 200 index extended its rally towards fresh records. The index is challenging an immediate resistance level at 7,340 – the 161.8% Fibonacci extension. A successful breach above this level may open the door for further upside potential with an eye on 7,500 – the 200% Fibonacci extension. A failed attempt however, may result in a pullback towards 7,194. The MACD oscillator trended higher, suggesting that upward momentum is dominating.
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