Robust PMI Knowledge Buoys Markets

DOW JONES, HANG SENG, ASX 200 INDEX OUTLOOK:

• Dow Jones, S&P 500 and Nasdaq 100 indexes closed +0.36%, -0.08% and -0.61% respectively
• US Markit manufacturing PMI studying got here in at 61.5, beating a baseline forecast of 60.2
• US core PCE worth index dominates the financial docket this week as inflation considerations weigh on market sentiment

US Markit PMIs, Inflation, Bitcoin, HSI Rebalancing, Asia-Pacific Week-Forward:

The Dow Jones index closed modestly greater on Friday as buyers applauded upbeat US manufacturing and repair PMI readings, which boosted reflation optimism. The Nasdaq 100 index misplaced 0.6% nonetheless as buyers rotated out of development and into worth within the face of robust financial readings.

The flash Markit US Composite PMI Index got here in at 68.1, a giant leap ahead from April’s studying of 63.5. This additionally marks a document excessive for the gauge, pointing to a full-blown restoration within the US economic system. It’s price noting that the service PMI gauge soared to 70.1 in Might, up from 64.7 a month in the past because the reopening of non-essential companies boosted demand for companies.

The report highlighted that “the speed of growth was unprecedented” and “items producers and repair suppliers alike famous robust … exercise development halfway by way of the second quarter”. The Composite PMI gauge reveals a traditionally robust correlation with US GDP development, hinting that the economic system could also be increasing at an accelerated tempo (chart beneath).

Companies are involved about rising price burdens attributable to uncooked materials shortages, wage will increase and efforts to stockpile. The ensuing greater output costs might ultimately be handed by way of to finish shoppers, boosting inflation within the months forward.

Throughout the Atlantic, the Euro space additionally registered stronger-than-expected PMI readings, with growth within the service sector quickening in early Might. This painted a rosy image of financial restoration as vaccine rollouts helped to heal the pandemic’s affect.

Trying forward, the RBNZ rate of interest choice leads the financial docket alongside US GDP and corePCE information this week. Discover out extra from the DailyFX calendar.

HIS Markit Composite PMI and US GDP

Supply: Buying and selling Economics

Asia-Pacific markets look set to kick off the week in a blended temper. Futures in Japan, South Korea, Singapore and Thailand are modestly greater, whereas these in Australia, Hong Kong, Taiwan, Malaysia and India are within the purple. Lingering inflationary stress and viral considerations might proceed to dampen sentiment in danger property throughout the Asia Pacific area.

Bitcoin led the decline in cryptocurrencies over the weekend, falling 7.6% to round $ 34,600 on Monday morning. This got here after Chinese language and US authorities tightened regulation and tax compliance on digital tokens final week. The Treasury Division introduced on Might 20th that it’s going to require any switch in cryptocurrencies over $10,000 to be reported to the IRS to keep away from tax evasion and include criminal activity. The value of Bitcoin has fallen virtually 50% from its all-time excessive seen in mid-April. Debate surrounding Foremost Road adoption and regulatory headwinds might proceed to drive volatility.

The Grasp Seng Index (HSI) will add Three new constituents to its basket beginning on June 7th. These are electrical car producer BYD, photo voltaic panel glass producer Xinyi Photo voltaic and property administration agency Nation Backyard Companies. The index is transferring in the direction of increasing its present holdings of 55 to 80 by mid-2022. The rebalance will deliver down the weighting of Tencent, AIA and HSBC to eight% from 10% as a brand new cap rule is utilized. The burden of AlibabaGroup will enhance from 5% to 7.3%.

Trying again to Friday’s shut, 6 out of 9 Dow Jones sectors ended greater, with 56.7% of the index’s constituents closing within the inexperienced. Industrials (+1.21%), financials (+1.19%) and supplies (+0.84%) had been among the many greatest performers, whereas info expertise (-0.32%) trailed behind.

Dow Jones Sector Efficiency 21-05-2021

Supply: Bloomberg, DailyFX

Dow Jones Index Technical Evaluation

The Dow Jones index hit the 200% Fibonacci extension degree (34,920) and has since pulled again barely. Costs stay inside an “Ascending Channel” fashioned since early November, the ceiling and the ground of which function key assist and resistance ranges respectively. Bearish MACD divergence suggests {that a} technical correction could also be underway.

Dow Jones Index – Day by day Chart

Grasp Seng Index Technical Evaluation:

The Grasp Seng Index (HSI) breached beneath an “Ascending Channel” and has since entered a consolidative interval during the last two weeks (chart beneath). The index is difficult the 50-day SMA line for an try to reverse its downward trajectory. A profitable try might open the door for upside potential with a watch on 28,910 (the 61.8% Fibonacci retracement). The MACD indicator is about to kind a bullish crossover beneath the impartial midpoint, suggesting that bullish momentum could also be constructing.

Grasp Seng Index – Day by day Chart

ASX 200 Index Technical Evaluation:

The ASX 200 index pulled again from document highs after a failed try to breach the 261.8% Fibonacci extension degree at 7,126. Costs have additionally breached beneath a “Rising Wedge”, hinting at additional draw back potential with a watch on 6,920 (the 50-day SMA) for assist. The MACD indicator fashioned a bearish crossover and trended decrease, suggesting that upward momentum could also be fading.

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