Asian Open: Sentiment remains fragile as Omicron spreads

Asian Indices:

• Australia’s ASX 200 index closed at 7,429.30 on Friday
• Japan's Nikkei 225 index closed at 28,455.60 on Friday
• Hong Kong's Hang Seng index closed at 23,954.91 on Friday
• China'sA50 Index closed at 15,969.88 on Friday

US Friday close:

• The Dow Jones fell -532.16 points (-1.48%) to close at 35,365.44
• The S&P 500 rose 95.08 points (2.08%) to close at 4,686.75
• The Nasdaq 100 rose 479.503 points (3.03%) to close at 16,325.66

Equity markets are not exactly following the usual path of Santa’s rally as we’d hoped. Omicron continues to spread like the plague, with reports surfacing that Boris Johnson is considering full lockdown in the UK over Christmas and Dr Fauci yesterday warning that ‘raging’ Omicron will strain US hospitals. US equity markets fell for a second day on Friday following the hawkish comments from the Fed’s Waller and Omicron concerns, with the Dow Jones leading the declines with a -1.5% fall. The S&P 500 fell -1% and the Nasdaq was off by -0.4%.

Hang Seng clings to key support

With sentiment lower it also paints a bleak picture for Asian indices and brings the Hang Seng into focus as it clings to a key support level. HSI has been in a downtrend since the February 2020 high, back when the pandemic was just beginning to gain momentum across Asia. It trades within a bearish channel and a recent pullback met resistance around the November low and monthly pivot before momentum turned and forced prices back to the September low, a break beneath which brings the May 2020 low into focus near the monthly S1 pivot point.

Hawkish comments from Waller sent the dollar higher on Friday

The US dollar was the strongest major on Friday thanks for hawkish comments from Waller. He bluntly said that the “whole point” of accelerating the pace of tapering was to accommodate a hike in March. The dollar traded higher against all major peers with commodity FX baring the brunt and seeing NZD and CAD falling around -1% whilst AUD fell -0.8%.

Several engulfing candles appeared across major FX pairs on Friday. USD/CAD closed to a YTD high and NZD/USD closed to a YTD low. The US dollar index rebounded from 95.85 support and closed above its 10 and 20-day eMA’s. Its bullish triangle may have failed yet its bullish trend on the daily chart remains very much intact.

Bearish hammer on gold

Gold’s bullish rally took the yellow metals above 1810 on Friday for this first time this month, yet momentum turned to see gold close back beneath 1800 and the monthly pivot point. At this stage we suspect it is part of a minor correction / pause over a reversal so are now looking for a low volatility retracement within Thursday’s range and to identify a corrective low. Silver also stumbled on Friday and closed beneath 22.60 resistance after a false break above it on Friday.

ASX 200 Market Internals

The ASX 200 is trying to hold above 7300 and is touch and go as to whether it can succeed. Like elsewhere, Omicron cases are on the rise in Australia and Queensland reintroduced masks, although as of yet no restrictions have been implemented which is a supporting feature to the ASX. Should that change of course it piles on the pressure.

ASX 200: 7304 (0.11%), 19 December 2021

• Materials (1.2%) was the strongest sector and Information Technology (-3.88%) was the weakest
• 6 out of the 11 sectors closed higher
• 6 out of the 11 sectors outperformed the index
• 95 (47.50%) stocks advanced, 99 (49.50%) stocks declined
• 57.5% of stocks closed above their 200-day average
• 41% of stocks closed above their 50-day average
• 48% of stocks closed above their 20-day average

Outperformers:

• + 5.59% - Northern Star Resources Ltd (NST.AX)
• + 5.55% - Iress Ltd (IRE.AX)
• + 5.53% - Champion Iron Ltd (CIA.AX)

Underperformers:

• -8.51% - Domain Holdings Australia Ltd (DHG.AX)
• -7.63% - Afterpay Ltd (APT.AX)
• -7.25% - Life360 Inc (360.AX)

Up Next (Times in AEST)

We have a quiet calendar today so expect Omicron headlines to dictate sentiment for traders.

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