S&P 500, ASX 200, ASIA-PACIFIC MARKET OUTLOOK:Rising US Treasury yields could exert downward strain on shares, EM currencies
S&P 500, ASX 200, ASIA-PACIFIC MARKET OUTLOOK:
- Rising US Treasury yields could exert downward strain on shares, EM currencies and metals
- Main US fairness indices closed at all-time highs regardless of a weaker nonfarm payrolls report
- The ASX 200 index opened decrease, dragged by falling metallic costs
Really helpful by Margaret Yang, CFA
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Nonfarm payrolls, Pandemic, Yields, Asia-Pacific Shares Weekly Outlook:
Asia-Pacific markets kicked off the week with a combined tone after main US indices completed at document highs final week. The affect of rising US Treasury yields rippled throughout the monetary markets, main the US Greenback to strengthen. A possible reversal of the Greenback’s downward trajectory could threaten a pullback in shares, commodities, EM currencies and danger belongings generally. Moreover, quickly climbing Covid-19 infections and the follow-on pressure on the healthcare system raises the danger of additional lockdowns forward earlier than the rollout of vaccines begins to convey materials modifications to the image.
US nonfarm payrolls knowledge got here in at -140ok, far under an already conservatively-adjusted forecast of a 71ok improve and marked the primary detrimental print since April 2020. Weaker nonfarm and personal payrolls numbers pointed to a deteriorating labor market as pandemic wave hit the service sector onerous.
Markets appeared to have taken dangerous information as ‘good’ once more, hoping that worsening job market situation could result in extra stimulus and bar the Federal Reserve from shifting away from the present accommodative stance. Nonetheless, this couldn’t masks an extended path for restoration because the probability of a ‘double dip’ appears to be rising. The US registered a document 300,594 day by day Covid-19 infections on Friday, similtaneously US fairness indices hit recent document highs. It is a unusual scenario that is probably not sustainable as overstretched valuations diverge farther from the truth. Learn extra on my basic report on the S&P 500 index right here.
US Nonfarm Payrolls – Dec 2020
Chart by IG
It’s value noting that the US Treasury yields, particularly the longer-dated ones, are rising quickly. This displays a rising inflation outlook and should lead the US Greenback to strengthen, which is able to possible weigh on commodity and rising market currencies earlier than inventory markets get what it actually means. Rising Treasury yields – perceived risk-free charges of return – permit authorities bonds to turn out to be barely extra engaging to buyers and improve the chance value for holding non-yieding belongings corresponding to gold and silver.
US Treasury Yield Curve – 1 Week change
Supply: Bloomberg, DailyFX
The ASX 200 index opened barely decrease on Monday, dragged by the knowledge know-how (-1.17%), supplies (-0.53%) and actual property (-0.32%) sectors. Base metals costs together with copper, nickel and iron ore are plunging after gold costs plummeted final week, exerting downward strain on Australia’s metallic and materials sectors in addition to the commodity-linked Australian Greenback.
Trying again to Friday,7 out of 11 S&P 500 sectors ended larger, however solely 29.5% of the index’s constituents closed within the inexperienced. Utilities (+0.61%), shopper discretionary (+0.56%) and actual property (+0.52%) have been among the many greatest performers, whereas cyclical-linked supplies (-0.58%), financials (-0.14%) have been lagging behind.
S&P 500 Index Sector Efficiency 8–01-2020
Supply: Bloomberg, DailyFX
Trying forward, merchants are dealing with a comparatively quiet week when it comes to macroeconomic knowledge. China commerce stability figures can be launched on Thursday alongside US President-elect Biden’s stimulus bundle plan. US company earnings season will kick off with releases from JP Morgan, Citi and Wells Fargo. Friday’s US retail gross sales, shopper sentiment and UK GDP knowledge can be carefully watched too. Discover out extra on DailyFX calendar:
Really helpful by Margaret Yang, CFA
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S&P 500 Index Technical Evaluation:
Technically, the S&P 500 index prolonged its upward trajectory inside an “Ascending Channel” as highlighted within the chart under. The bull development is well-supported by its 20-Day Easy Shifting Common (SMA) line albeit the higher ceiling of the channel could function a direct resistance. Help and resistance ranges may be discovered at 3,804 (76.4% Fibonacci extension) and three,893 (100% Fibonacci extension) respectively.
S&P 500 Index – Day by day Chart
ASX 200 Index Technical Evaluation:
The ASX 200 index pulled again barely from the higher Bollinger Band and should enter a light technical correction. Speedy assist and resistance ranges may be discovered at 6,630 (the 161.8% Fibonacci extension) and 6,810 (the 100% Fibonacci extension) respectively. A extra possible consequence is a range-bound buying and selling situation as upward momentum seems to be faltering, instructed by MACD divergence and a comparatively slim Bollinger Band width.
ASX 200 Index – Day by day Chart
— Written by Margaret Yang, Strategist for DailyFX.com
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