Nasdaq 100 Shrugs Off Inflation Concerns, Hang Seng Breaches Key Resistance

S&P 500, Hang Seng Index, ASX 200 INDEX OUTLOOK:

Dow Jones, S&P 500 and Nasdaq 100 closed +0.11%, +0.28%, and +0.38% respectively
US inflation hit a four-decade high of 7.0% in December, largely in line with expectations
Asia-Pacific markets look set to open higher. Hong Kong stocks may continue to lead the gains

Nasdaq 100, Hang Seng Tech, US Inflation, China Inflation, Asia-Pacific at the Open:

Wall Street stocks closed mildly higher on Wednesday, as the closely watched US inflation data didn’t deliver much of a surprise. In the prior day, Federal Reserve Chair Jerome Powell assured market participants that the central bank will tighten policy to contain inflation without hurting the economy. This clear guidance removed policy uncertainties and allowed investors to focus more on the upcoming earnings season.

The DXY US Dollar index plummeted 0.62% overnight, falling to a two-month low of 95.00. This may be attributed to unwinding activities as investors have previously priced-in at least three rate hikes this year. As the roadmap of tightening gets clear, some traders may look for an exit and profit taking opportunities. A soft US Dollar is generally positive to stocks, commodities and Emerging Market assets.

Top 10 Stocks by Market Cap in the Nasdaq 100

Source: Bloomberg, DailyFX

Hong Kong stocks may continue to rise on Thursday, led by the technology sector. Hong Kong’s Hang Seng Index surged 2.8% and the technology benchmark Hang Seng Tech Index soared nearly 4.99% on Wednesday, suggesting that investors may be buying the dips in anticipation of more monetary and stimulus support. The stock connections registered HK$ 5.29 billion of net Southbound inflows on Wednesday, marking the highest level since October 2021. Wealth effect may encourage more buyers to return to the market after months of selling.

Another catalyst on Wednesday was the release of lower-than-expected inflation figures. December’s CPI and PPI came in at 1.5% and 10.3% respectively, falling from November’s readings of 2.3% and 12.9%. This will make it easier for the PBOC to loose monetary policy in 2022 to boost growth as the country fought hard to maintain its zero-Covid policy.

The Japanese government has extended strict border controls until the end of February amid a rapid increase in Covid-19 cases due to the Omicron variant. This has weighed on market sentiment, especially the tourism and travel sectors. The Nikkei 225 index remains in a consolidative mood waiting for fresh catalysts for a breakout.

China Inflation – Dec 2021

Source: Bloomberg, DailyFX

Looking ahead, several Federal Reserve official speeches dominate the economic docket alongside US initial weekly jobless claims. Find out more from theDailyFX economic calendar.

Asia-Pacific markets look set to open broadly higher on Thursday. Futures in mainland China, Australia, Hong Kong, South Korea, Taiwan, Singapore, Malaysia, India and Thailand are in the green, whereas those in Japan are in the red.

Looking back to Wednesday’s close, 10 out of 11 S&P 500 sectors ended higher, with 57.6% of the index’s constituents closing in the green. Materials (+0.95%), consumer discretionary (+0.63%) and information technology (+0.44%) were among the best performers, whereas healthcare (-0.26%) and financials (+0.04%) trailed behind.

S&P 500 Sector Performance 12-01-2022

Source: Bloomberg, DailyFX

Nasdaq 100 Index Technical Analysis

The Nasdaq 100 index rebounded from a key support level of 15,550 – the lower bound of the range-bound zone it traded over the last few months. An immediate resistance level can be found at 16,650 – the 200% Fibonacci extension. The moving average lines are flattening, pointing to a lack of clear direction. The MACD indicator is trending lower, suggesting that downward momentum may be prevailing.

Nasdaq 100Index – Daily Chart

Chart created with TradingView

Hang Seng Index Technical Analysis:

The Hang Seng Index (HSI) was trading within a “Falling Wedge” pattern for the past few months, as highlighted in the chart below. Prices are challenging the upper trendline of the wedge for a breakout. A successful attempt may signal a bullish trend reversal and open the door for further gains.The MACD indicator is trending higher below the neutral midpoint, suggesting that bullish momentum may be building.

Hang Seng Index – Daily Chart

Chart created with TradingView

ASX 200 Index Technical Analysis:

The ASX 200 index pulled back to a range-bound zone between 7,200 to 7,500 after a ‘false breakout’ last week. The floor and ceiling of the range may be viewed as immediate support and resistance levels respectively. A meaningful breach above 7,500 may intensify buying pressure and expose the next resistance level of 7,760.

ASX 200 Index – Daily Chart