Nikkei 225 Breaks 22,700 Resistance, Hang Seng Wobbles on US Sanctions

NIKKEI 225 INDEX, HANG SENG INDEX, STRAITS TIMES INDEX OUTLOOK:

• Nikkei 225 index follows US higher, breaking an immediate resistance at 22,700
• Hang Seng index may struggle to hold gains, struggling with US sanctions
• Straits Times Index rebounds 1% to 2,659, led by real estate and banks

Nikkei 225 Index Outlook:

Positive spillovers from the US session overnight send Japan’s Nikkei 225 Index higher, rising 1.5% to 22,900 in mid-day trade. Upbeat earnings from JP Morgan as well as strong US CPI readings boosted investor confidence. Bank of Japan (BOJ) Governor Haruhiko Kuroda will hold a press conference today after the BOJ policy meeting, in which he is likely to reiterate the central bank’s easing stance. The BOJ kept policy interest rates unchanged today at -0.1%.

News flow is not stock market-friendly though, as President Donald Trump signed a deal to cease Hong Kong’s special status with the US and sanction Chinese officials. Beijing has reciprocally responded to put sanctions on US officials. Escalating US-China tension will probably weigh on Asia-Pacific equities, on top of rising virus concerns.

All eleven Nikkei 225 sectors are up today, led by industrials (+2.8%), real estate (+2.68%), materials (+2.37%) and energy (+2.05%) – see chart below.

Source: Bloomberg, DailyFX

Nikkei 225 Index –Technical Analysis

The index has broken above immediate resistance at 28,700, trading higher at 22,900 – the highest level seen in more than a month (chart below). Immediate support and resistance levels can be found at 22,430 (20-Day Simple Moving Average) and 23,280 (previous high), respectively.

Nikkei 225 Index – Daily Chart

Hang Seng Index Outlook:

Hong Kong’s Hang Seng Index (HSI) stock market benchmark is struggling to hold gains as sentiment is undermined by US sanctions. The Shanghai Composite erased earlier gains and traded at -1.3%, dragging the HSI lower. Tencent (700 HK) is doing the heavy-lifting today, rising 2.38%.

Technically, the Hang Seng Index is consolidating at around 25,460, with immediate support and resistance levels found at 25,000 and 26,000 respectively.

Hang Seng Index – Daily Chart

Straits Times Index Outlook:

Singapore’s Straits Times Index (STI) stock market benchmark rebounded 1% alongside the rest of Asia, following an upbeat US trading session. Real estate and banks were among the best performers. Singapore’s stock market has long been underperforming the US and rest of Asia this year, and retail investors are probably eyeing bargain hunting opportunities. The lack of substantial trading volume, however, suggests that institutional capital is not returning to the Singapore market yet.

Technically, the STI is consolidating at above 2,600 and has yet to find a clear direction. Immediate support and resistance can be found at 2,628 (20-Day Simple Moving Average) and 2,690 (previous high), respectively.

Straits Times Index – Daily Chart

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— Written by Margaret Yang, Strategist for DailyFX.com

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