Asian Open: Powell on track for a 2nd term, Hawkish Comments Spook equities

Asian Futures:

• Australia's ASX 200 futures are down -12 points (-0.16%), the cash market is currently estimated to open at 7,341.10
• Japan's Nikkei 225 futures are down -110 points (-0.37%), the cash market is currently estimated to open at 29,664.11
• Hong Kong's Hang Seng futures are down -152 points (-0.61%), the cash market is currently estimated to open at 24,799.34
• China's A50 Index futures are down -34 points (-0.22%), the cash market is currently estimated to open at 15,617.37

UK and Europe:

• UK's FTSE 100 index rose 31.89 points (0.44%) to close at 7,255.46
• Europe's Euro STOXX 50 index fell -17.78 points (-0.41%) to close at 4,338.69
• Germany's DAX index fell -44.28 points (-0.27%) to close at 16,115.69
• France's CAC 40 index fell -7.29 points (-0.1%) to close at 7,105.00

Monday US Close:

• The Dow Jones Industrial rose 17.27 points (0.05%) to close at 35,619.25
• The S&P 500 index fell -15.02 points (-0.32%) to close at 4,682.94
• The Nasdaq 100 index fell -192.365 points (-1.16%) to close at 16,380.98

 

Powell on track for a second term

Joe Biden finally got around to the Fed Chair nomination thingamajig, and confirmed that he will nominate Jerome Powell to serve as the Federal Reserve Chair for a second term. Lael Brainard, who was also a contender for the position, has been nominated to serve as vice chair. Unless we have any hiccups at the Senate vote, they are both expected to be confirmed.

Yet during comments made after the announcement, Biden acknowledged “that high inflation takes a toll on families” and that the Fed would use all of the tools at their disposal to “prevent higher inflation from becoming entrenched”. That doesn’t sound like the dovish Powell Wall Street was positioned.

Wall Street reverses course in final hours of trade

After a strong start, which saw yields rise and the S&P 500 hit a record high, US equities reversed course to trade lower on the day.  The Nasdaq 100 hit an intraday record high its rally petered out just below trend resistance and closed with a bearish engulfing day. And the S&P 500 also printed a bearish engulfing / outside day to mark a false breakout. And that could weigh on the ASX 200 today.

Dollar rally resumes

The US dollar index closed to its highest level since July 2020 with the greenback rising against all G10 currencies. AUD/USD hit a 7-week low and NZD/USD closed below 70c ahead of tomorrow’s RNBZ meeting. AUD/NZD rose to a 3-day high after forming a potential higher low above 1.030 support.

ASX 200 struggles at 7400

The ASX 200 has struggled to regain any noteworthy bullish interest since its triple-top around 7480, and prices have since broken below trend support. A bearish engulfing candle formed on the daily chart yesterday, after its 2-day pullback failed to make a dent on 4700 resistance so we retain our bearish bias over the near-term whilst 7400 caps as resistance. Initial target is the lows around 7312, a break of which assumes trend continuation.

 

• Materials (0.44%) was the strongest sector and Information Technology (-2.11%) was the weakest
• 3 out of the 11 sectors closed higher
• 7 out of the 11 sectors closed lower
• 8 out of the 11 sectors outperformed the index
• 60 (30.00%) stocks advanced, 130 (65.00%) stocks declined
• 63% of stocks closed above their 200-day average
• 54.5% of stocks closed above their 50-day average
• 47.5% of stocks closed above their 20-day average

 

Outperformers:

• + 7.98%-Nickel Mines Ltd(NIC.AX)
• + 5.08%-Pilbara Minerals Ltd(PLS.AX)
• + 4.72%-Orocobre Ltd(ORE.AX)

 

Underperformers:

• -7.14%-Flight Centre Travel Group Ltd(FLT.AX)
• -6.02%-Corporate Travel Management Ltd(CTD.AX)
• -5.13%-Unibail-Rodamco-Westfield SE(URW.AX)

 

Global flash PMI’s litter the calendar

Markit Economics release their preliminary (or ‘flash’) PMI reports across parts of Asia, Europe and the US. And, according to Markit’s preview report, two things to watch out for this month are how the service sector is holding up, given the rise in Covid trends across the Eurozone and UK, and whether growth momentum can be sustained in US, Japan and Australia. At 09:00 we have Australian PMI, with Germany at 19:30, Eurozone at 20:00, IL at 20:30 and US at 01:45.

There’s a gold run (to $1800)

What began as a gentle pullback last week has now gathered bearish momentum, with gold falling over 2% during its worst session in 3-months and gunning for $1800. Hawkish comments from Fed members appears to have been the catalyst, with Powell’s acknowledgement that “high inflation take a toll on families”. Heading into today’s session $1800 seems a likely place for traders to book profits and cause a bounce, although momentum likely furthers new lows beyond this.

Metals in general were lower, with silver now trading around -5% from its highs and palladium down -12% in just three days.

Up Next (Times in AEDT)

 

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