S&P 500 Retreats as Traders Mull Tapering, Hold Seng and ASX 200 Might Fall

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

• Dow Jones, S&P 500 and Nasdaq 100 closed -0.21%, -0.11%, and +0.03% respectively
• Dallas and Atlanta Fed Presidents each signalled that tapering stimulus might come prior to anticipated, in response to Bloomberg
• Greater than 60% of the S&P 500 constituents ended decrease, setting a bitter tone for the APAC markets

Tapering debate, Yields, Markit Manufacturing PMI, Oil, Asia-Pacific at Open:

Wall Avenue shares pulled again barely as traders mulled tapering considerations after each Dallas Fed President Robert Kaplan and Atlanta Fed President Raphael Bostic gave hawkish-biased alerts. Kaplan mentioned that the financial system will seemingly meet the central financial institution’s threshold for tapering asset purchases sooner than folks had anticipated. An upbeat Markit manufacturing PMI studying strengthened this view, with the gauge exhibiting manufacturing exercise increasing on the quickest tempo since 2007 (chart under). Bostic mentioned the central financial institution may determine to cut back bond purchases within the subsequent few month, echoing St. Louis Fed President James Bullard’s hawkish-biased feedback final Friday.

Markit US Manufacturing PMI – on the Highest Since 2007

Supply: Bloomberg, DailyFX

Consequently, 2-year Treasury yields closed at a 14-month excessive of 0.262% on Wednesday, reflecting that traders are pricing in earlier charge hikes and tapering Fed stimulus. Wanting again into the earlier financial cycle, a speedy climb in 2-year charges was adopted by the Fed’s choice to finish QE and lift rates of interest. Ought to the financial system proceed to blossom, the front-end yields might have extra room to climb. This will likely weigh on fairness valuations as a result of their future cashflows are discounting again at increased required charge of returns. Extremely leveraged aviation, actual property and a few expertise companies could also be extra susceptible to the headwind.

US 2-Yr Treasury Yield – Month-to-month Chart

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

Hong Kong’s Hold Seng Index (HSI) seems set check a right away resistance degree of 28,920 right this moment. A failed try to breach this degree might pave the best way for additional consolidation. The US authorities is planning to ban photo voltaic merchandise made within the Xinjiang province, which can escalate geopolitical tensions between the world’s two largest economies. Tightening prospect of the Fed’s financial coverage might also weigh on sentiment, particularly for the expertise, actual property and aviation sectors.

Wanting forward, the BoE rate of interest choice leads the financial docket alongside US sturdy items orders and preliminary weekly jobless claims knowledge. Discover out extra from DailyFX financial calendar.

Wanting again to Wednesday’s shut, Eight out of 11 S&P 500 sectors ended decrease, with 60.2% of the index’s constituents closing within the crimson. Utilities (-1.05%), supplies (-0.62%) and client staples (-0.57%) have been among the many worst performers, whereas client discretionary (+0.63%) and financials (+0.27%) outperformed.

S&P 500 Sector Efficiency 23-10-2021

Supply: Bloomberg, DailyFX

S&P 500 IndexTechnical Evaluation

The S&P 500 index is extending increased inside an “Ascending Channel” fashioned since November. The general bullish development stays intact, however costs could also be going through 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 exhibits reluctancy to maneuver decisively increased. A pullback might result in a check of the 20- and 50-day SMA traces for instant helps.

S&P 500 Index– Every day Chart

Hold Seng Index Technical Evaluation:

The Hold 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 a watch on 27,600 for assist. The MACD indicator is trending decrease, suggesting that momentum could also be tilted to the draw back.

Hold Seng Index – Every day Chart

ASX 200 Index Technical Evaluation:

The ASX 200 index pulled again from the 161.8% Fibonacci extension degree of seven,340 and may even see additional value weak point. The MACD indicator fashioned a bearish crossover and trended decrease, suggesting near-term momentum could also be tilted to the draw back. The 20-day SMA line might function a right away assist, beaching which can open the door for additional losses with a watch on the 127.2% Fibonacci degree for assist.

ASX 200 Index – Every day Chart

— Written by Margaret Yang, Strategist for DailyFX.com

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