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S&P 500 Futures Lift Nikkei 225, Regulatory Risks Hit Chinese Stocks

S&P 500, NIKKEI 225, ASX 200 WEEKLY OUTLOOK:

  • Dow Jones, S&P 500 and Nasdaq 100 indexes closed -0.42%, -0.54% and -0.59% respectively on Friday
  • China’s securities regulator called for talks after US Securities and Exchange Commission (SEC) halted Chinese IPOs
  • RBA, BOE interest rate decisions are in focus this weekalongside US nonfarm payrolls data

Earnings, SEC Halt Chinese IPOs, NFP, Asia-Pacific Week-Ahead:

The S&P 500 index retreated from all-time highs on Friday as investors worried that earnings growth for big tech firms has peaked during the March-June quarter. Intel, Apple, Netflix and Amazon have warned investors about slower growth rates or lower margins in the second half of this year, pulling their stock prices lower after results were released. The pandemic winners are seeing their growth rates normalizing as economic reopening drives pent-up demand for outdoor activities. There is also a world-wide chip shortage. Against this backdrop, the major US indices may face some pressure when they attempt to penetrate further into record-setting territory.

Minneapolis Fed President Neel Kashkari said Sunday that the Delta variant of the Covid-19 virus could keep some Americans from looking for a job, potentially harming the labor market recovery. This puts Friday’s nonfarm payrolls report under the spotlight, where a 900k rise is expected (chart below). A big miss may strengthen the Fed’s dovish stance and weaken the US Dollar, buoying risk assets.

In China, the rapid spread of a highly-contagious viral strain is casting a shadow over the country’s stellar performance during the pandemic. China on Sunday reported 75 new coronavirus cases in more than 20 cities on Sunday, with the majorities linked to the Nanjing airport cluster. Millions of people are undergoing Covid tests and travel restrictions were imposed on the affected areas.

US Nonfarm Payrolls Forecast – 12 Months

S&P 500 Futures Lift Nikkei 225, Regulatory Risks Hit Chinese Stocks

Source: Bloomberg, DailyFX

APAC markets look set to kick off the week with a mixed tone after US Securities and Exchange Commission (SEC) halted the initial public offerings (IPOs) of Chinese companies. China’s securities regulator is seeking to start talks with the SEC to find a suitable solution. Futures were higher in Japan, Australia, South Korea, Taiwan, Singapore and India. Those in mainland China, Hong Kong, Malaysia and Thailand are trailing however.

For the week ahead, the RBA and BoE interest rate decisions dominate the economic docket alongside US nonfarm payrolls. Find out more from theDailyFX calendar.

Looking back to Friday’s close, 7 out of 11 S&P 500 sectors ended lower, with 58% of the index’s constituents closing in the red. Consumer discretionary (-2.78%), energy (-1.76%) and utilities (-0.87%) were among the worst performers, whereas materials (+0.40%) and real estate (+0.32%) outperformed.

S&P 500 Sector Performance 30-07-2021

S&P 500 Futures Lift Nikkei 225, Regulatory Risks Hit Chinese Stocks

Source: Bloomberg, DailyFX

S&P 500 Index Technical Analysis

The S&P 500 index breached above a key resistance level at 4,290 and trended upward, carving a path for prices to attempt higher highs. The overall bullish trend remains intact as suggested by the “Ascending Channel”. The next resistance level can be found at 4,650 – the 161.8% Fibonacci extension. A pullback may lead to a test of the 20- and 50-day SMA lines for immediate support.

S&P 500 Index Daily Chart

S&P 500 Futures Lift Nikkei 225, Regulatory Risks Hit Chinese Stocks

Hang Seng Index Technical Analysis:

The Hang Seng Index broke a “Descending Triangle” pattern, entering a deep pullback. An immediate support level can be found at 24,850 – the 78.6% Fibonacci retracement. The overall trend remains bearish-biased as suggested by the downward-sloped SMA lines. The MACD indicator is trending lower below the neutral midpoint, suggesting that bearish momentum may be dominating.

Hang Seng IndexDaily Chart

S&P 500 Futures Lift Nikkei 225, Regulatory Risks Hit Chinese Stocks

ASX 200 Index Technical Analysis:

The ASX 200 index breached the ceiling of a range-bound zone, opening the door for further upside potential with an eye on 7,500. The overall trend remains bullish-biased, as suggested by the consecutive higher highs and higher lows formed over the past few months. The MACD indicator formed a bullish crossover and trended higher, suggesting that upward momentum is gaining traction.

ASX 200 IndexDaily Chart

S&P 500 Futures Lift Nikkei 225, Regulatory Risks Hit Chinese Stocks

— Written by Margaret Yang, Strategist for DailyFX.com

To contact Margaret, use the Comments section below or @margaretyjy on Twitter

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