ASX 200, Nikkei 225 Open Larger as Nasdaq 100 Leads a Defensive Play

NASDAQ 100, NIKKEI 225, ASX 200 INDEX OUTLOOK:

• ASX 200, Nikkei 225 indexes opened mildly increased amid a comparatively quiet pre-holiday buying and selling
• US Home and Senate have handed a large spending invoice of US$ 2.three trillion, according to expectations
• Falling industrial steel and crude oil costs flag the chance of softer demand as pandemic wave hits

Combined US Session, Falling Metallic Costs, Stronger USD, Asia-Pacific at Open:

A defensive session led by the tech sector could set a blended tone for Asia-Pacific markets on Wednesday, with the ASX 200 and Nikkei 225 index opening mildly increased amid a comparatively quiet vacation week. It’s price noting that the passing of a US stimulus package deal didn’t encourage optimistic reactions amongst threat property, because the expectations have largely been priced in over the previous few weeks. Falling industrial metals and crude oil costs, alongside a rebound within the US Greenback, recommend that general sentiment stays weak and there appears to be near-term demand for security.

Issues over a new sort of coronavirus pressure, which is reportedly 70% extra transmissible than the unique, has weighed on the prospects for international financial restoration. The potential for wider unfold could threaten additional lockdown measures and journey bans between the UK and Europe in a time when either side are attempting to finalize a post-Brexit commerce settlement. Greater than 40 nations have banned UK arrivals due to the brand new virus pressure and additional restrictions are probably if the scenario worsens.

Tech outperformed cyclical sectors on Wall Avenue and this theme is more likely to play out throughout Asia-Pacific markets as properly. Buyers weighed stricter lockdown measures earlier than the gradual rollout of vaccines helps to carry down the variety of infections. The Dow Jones and S&P 500 fell 0.67% and 0.21% respectively whereas the tech-led Nasdaq 100 gained 0.51%.

The rising US Greenback threatens inventory markets’ astonishing rally, because the DXY US Greenback index has exhibited a powerful detrimental correlation with the S&P 500 index over the previous 12 months. Greater than 40% of the S&P 500 corporations’ income comes from abroad markets, which infers {that a} stronger USD will translate into decrease abroad earnings as a result of foreign exchange modifications. Similar for the rising markets, that are delicate to the power of the US Greenback because it tends to affect capital flows.

For now, nevertheless, latest strengthening within the US Greenback seems extra like a technical rebound pushed by demand for security. Revenue-taking exercise following the passing of the US stimulus package deal has most likely performed a component too.

DXY US Greenback Index

On the macro entrance, US current dwelling gross sales figures got here in at 6.69 million, or -2.5% MoM. This marks the primary MoM decline noticed since Might 2020 because of hovering home costs and constrains in provide. The US economic system expanded at annualized charge of 33.4% QoQ within the third quarter, barely increased than baseline forecast of 33.1%. Immediately, the US Core PCE worth index, sturdy items orders and Michigan shopper sentiment index are among the many prime occasions to observe for. Learn extra on DailyFX calendar.

US Present House Gross sales MoM (November)

Supply: Bloomberg, DailyFX

Sector-wise, 9 out of 11 S&P 500 sectors ended decrease, with 65.5% of the index’s constituents closing within the purple on Tuesday. Vitality (-1.74%), communication companies (-0.99%) and financials (-0.96%) had been among the many laggards, whereas data expertise (+0.86%) and actual property (+0.61%) outperformed.

S&P 500 Sector Efficiency 22-12-2020

Supply: Bloomberg, DailyFX

Nasdaq 100 Index Technical Evaluation

The Nasdaq 100 index is trending up throughout the “Ascending Channel” shaped since early November, forming increased highs. The general pattern stays bullish-biased, as urged by upward-sloped 20-, 50- and 100-Day Easy Transferring Common (SMA) traces. Its upward momentum, nevertheless, seems to be faltering because the MACD indicator tendencies decrease after the formation of a “Demise Cross” in early December. Instant help and resistance ranges might be discovered at 12,530 and 12,790 respectively.

Nasdaq 100 Index – Day by day Chart

Nikkei 225 Index Technical Evaluation:

The Nikkei 225 index has been buying and selling in a “range-bound” situation since early December as highlighted in purple colour beneath. Instant help and resistance ranges might be discovered at 26,350 and 27,000 respectively. Breaking this help could open the door for additional losses with a watch on 26,000 for help.

Nikkei 225 Index – Day by day Chart

ASX 200 Index Technical Evaluation:

The ASX 200 index has probably damaged the “Ascending Channel” this week (chart beneath) and the general momentum has turned bearish as urged by the MACD indicator. A direct help stage might be discovered at 6,570 – the decrease Bollinger Band. Worth has pierced beneath the center Bollinger Band (additionally the 20-Day SMA), suggesting that near-term pattern has probably turned bearish.

ASX 200 Index – Day by day Chart

— Written by Margaret Yang, Strategist for DailyFX.com

To contact Margaret, use the Feedback part beneath or @margaretyjy on Twitter