S&P 500 Could Lead Cling Seng and ASX 200 Decrease as Fed Offers Hawkish Sign

S&P 500, HANG SENG, ASX 200 INDEX OUTLOOK:

• Dow Jones, S&P 500 and Nasdaq 100 closed -0.77%, -0.54%, and -0.34% respectively
• The Fed signalled 2 charge hikes by the top of 2023 within the dot plot and began a dialogue about tapering QE in the course of the June FOMC assembly
• Greater than 80% of the S&P 500 constituents ended decrease, setting a bitter tone for the APAC markets

FOMC, Dot Plot, Oil, Gold, US Greenback, Yields, Asia-Pacific at Open:

Wall Avenue shares pulled again broadly after the FOMC assembly, whereas the US Greenback and Treasury yields surged. The Fed gave hawkish-biased alerts in the course of the June assembly, revising up financial projections and hinting at a sooner tempo of charge hikes within the dot plot. The newest projection confirmed that 13 out of 18 Fed officers voted for hikes earlier than the top of 2023, in comparison with 7 within the March assembly (chart under). The forecasted medium Federal Funds Fee is 0.6% by the top of 2023, implying 2 charge hikes throughout that yr. In the meantime, the Fed officers have began a dialogue about scaling again bond purchases, however any actions should be months away.

Encouragingly, the Fed painted a rosy image on the financial restoration. The committee foresees a 7.0% GDP progress charge for this yr, in comparison with a 6.5% forecast in March. Inflation is predicted to select up at a sooner tempo, with PCE and core PCE anticipated to hit 3.4% and three.0% respectively this yr, in comparison with 2.4% and a pair of.2% within the March projection. A brighter financial outlook might underpin inventory market efficiency and restrict the extent of a pullback.

The DXY US Greenback index surged practically 1% in a single day to a two-month excessive of 91.42, weighing on commodity costs and rising market belongings. Gold costs tumbled 2.55% to a one-month low of $1,818, and crude oil costs retreated from the current peak. This may occasionally forged a shadow over commodity-linked currencies such because the Canadian and Australian {Dollars}, in addition to the Norwegian Krone.

Financial projections of Federal Reserve Board Members – June 2021

Federal Reserve Dot Plot – June 16th 2021

Supply: Federalreserve.gov

Asia-Pacific markets look set to open broadly decrease. Futures in mainland China, Australia, Hong Kong, Taiwan, Malaysia, India and Thailand are within the pink, whereas these in Japan, South Korea and Singapore are barely greater.

Hong Kong’s Cling Seng Index (HSI) seems to be set to drag again additional and take a look at a key help stage of 28,300. A strengthening US Greenback implies that inventory costs of Chinese language companies listed in Hong Kong might fall as a result of they’re denominated in HKD – a forex that’s pegged to the US Greenback – while the underlying belongings are denominated in Chinese language Yuan. A tightening prospect of the Fed’s financial coverage can also weigh on sentiment, particularly for the expertise, actual property and aviation sectors.

Trying forward, Australian jobs information leads the financial docket alongside Euro Space core inflation and US preliminary weekly jobless claims information. Discover out extra from DailyFX financial calendar.

Trying again to Wednesday’s shut, 10 out of 11 S&P 500 sectors ended decrease, with 80.2% of the index’s constituents closing within the pink. Utilities (-1.49%), client staples (-1.24%) and supplies (-1.17%) have been among the many worst performers, whereas client discretionary (+0.16%) was the one sector closed within the inexperienced.

S&P 500 Sector Efficiency 16-10-2021

Supply: Bloomberg, DailyFX

S&P 500 IndexTechnical Evaluation

The S&P 500 index is extending greater inside an “Ascending Channel” shaped since November. The general bullish development stays intact, however costs could also be dealing with some strain at round 4,290 – the 127.2% Fibonacci extension. Bearish MACD divergence hints that upward momentum could also be fading because the index reveals reluctancy to maneuver decisively greater. A pullback might result in a take a look at of the 20- and 50-day SMA traces for rapid helps.

S&P 500 Index– Day by day Chart

Cling Seng Index Technical Evaluation:

The Cling Seng Index did not breach the neckline of the “Double Backside” sample and has since entered a technical pullback. Costs might proceed to vary certain between 28,300 and 29,350 ready for recent catalyst. Breaching under 28,300 might result in additional losses with an eye fixed on 27,600 for help. The MACD indicator is trending decrease, suggesting that momentum could also be tilted to the draw back.

Cling Seng Index – Day by day Chart

ASX 200 Index Technical Evaluation:

The ASX 200 index breached above a key resistance stage of seven,340 and closed at a recent file on Wednesday. Costs shaped consecutive greater highs and better lows, marking a basic uptrend. The RSI oscillator has reached the overbought threshold of 70, hinting that the index could also be briefly overbought and will entice revenue taking. The MACD indicator shaped a bullish crossover and trended greater, suggesting that upward momentum is dominating.

ASX 200 Index – Day by day Chart

— Written by Margaret Yang, Strategist for DailyFX.com

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