Dow Jones Falls on Rising Yields, ASX 200, Nikkei 225 Tumble

DOW JONES, NIKKEI 225, ASX 200 INDEX OUTLOOK:

• Dow Jones, S&P 500 and Nasdaq 100 tumbled -1.75%, -2.45% and -3.56% respectively
• 10-12 months Treasury yield jumped 14bps to 1.525% after a poor seven-year Treasury public sale
• Rising yields might weigh on Asia-Pacific equities amid souring sentiment, tech rout

Yields Surge, VIX Leap, Jobless Claims, Asia-Pacific at Open:

Wall Road equities had a massacre session on Thursday as Treasury yields jumped, with all 11 S&P 500 sectors ending decrease. Greater than 90% of the shares closed within the purple, reflecting deep concern from buyers within the face of a quickly climbing longer-duration yields after a poorly-received Treasury public sale. The 7-, 10- and 20-year Treasury yields superior 26, 22 and 26 bps from per week in the past to 1.199%, 1.525% and a pair of.191% respectively.

Rising bond yields not solely provide a substitute for dividend yield, however additionally they scale back shares’ intrinsic worth when their future money flows are discounted at a better required charge of return. It additionally means corporates are bearing increased debt servicing. Subsequently, higher yields might exert downward stress over equities as they develop into much less interesting when increased charges are considered.

Supply: Bloomberg, DailyFX

The VIX volatility index spiked 35% to 28.9 because the US inventory market tumbled. The tech-heavy Nasdaq 100 index was the worst-performing main US indices, falling 3.56% and breaking down the trend-defining 50-day Easy Transferring Common (SMA) line. Stretched valuations rendered the tech sector susceptible to profit-taking exercise. Prospects of a quicker tempo of financial opening-up with vaccine progress might encourage buyers to look into reflation trades and rotate out from the tech sector.

Supply: Bloomberg, DailyFX

Asia-Pacific markets look set to retrace broadly, with futures throughout Japan, China, Australia, Hong Kong, Taiwan and Singapore pointing to open sharply decrease. Australia’s ASX 200 index opened down by -1.89%, dragged by info know-how (-6.06%), shopper discretionary (-2.88%) and communication companies (-2.12%) sector. All 11 ASX 200 sectors have been buying and selling decrease. Japan’s Nikkei 225 misplaced 3% in early buying and selling hours and broke decisively under a key psychological stage of 30,000.

On the macro entrance, knowledge continued to assist a brighter restoration outlook and should provide inventory markets some form of cushion. The newest US weekly jobless claims determine got here in at 730okay, higher than the baseline forecast of 838okay and decrease. The earlier week’s studying was revised all the way down to 841okay from 861okay, reflecting an enhancing image of labor market sentiment. The US sturdy items order surged 3.4% MoM, far beating consensus of a 1.1% progress. Sturdy items order consult with new orders positioned with producers for supply of exhausting items which meant to final at the very least three years, and thus is often considered as an excellent indicator of the energy of the economic system.

Trying forward, US core PCE worth index and Michigan shopper sentiment knowledge headline the financial docket alongside Japanese housing begins. Discover out extra from DailyFX calendar.

Supply: Bloomberg, DailyFX

Trying again to Thursday’s shut, all 9 Dow Jones sectors ended decrease, with 90.0% of the index’s constituents closing within the purple. Supplies (-3.67%), communication companies (-2.91%) and data know-how (-2.73%) have been among the many hardest hit.

Dow Jones Sector Efficiency 03-02-2021

Supply: Bloomberg, DailyFX

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Dow Jones Index Technical Evaluation

The Dow Jones indexretraced to the 61.8% Fibonacci extension stage (31,300) for assist, breaking which might most likely intensify near-term promoting stress and convey 50-day SMA line (31,015) into focus. The general pattern stays bullish-biased as costs stay inside the confines of an ‘Ascending Channel”. A day by day shut under the ground of the channel might sign a near-term pattern reversal nevertheless. The MACD indicator is about to kind a bearish crossover, suggesting that near-term momentum has turned bearish.

Dow Jones Index – Each day Chart

Nikkei 225 Index Technical Evaluation:

The Nikkei 225 index didn’t breach the 161.8% Fibonacci extension stage (30,455) and has since entered a technical correction. A right away assist stage will be discovered at round 29,380, the place the 20-day SMA and the 127.2% Fibonacci extension intercept. A day by day shut under this stage would most likely intensify near-term promoting stress and convey the subsequent key assist stage of 28,800 in to focus. The MACD indicator has fashioned a bearish crossover, suggesting that near-term momentum is tilted to the draw back.

Nikkei 225 Index – Each day Chart

Chart by TradingView

ASX 200 Index Technical Evaluation:

The ASX 200 index broke down the ground of the “Ascending Channel” and traded decrease, pointing to a possible bearish reversal. The 50-day SMA line (6,644) might function an instantaneous assist, breaking down which can open the door to additional draw back potential.

ASX 200 Index – Each day Chart

— Written by Margaret Yang, Strategist for DailyFX.com

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