S&P 500, NIKKEI 225, ASX 200 INDEX OUTLOOK:
US Inflation, Meme Stocks, ECB, Bitcoin, Asia-Pacific at Open:
Wall Street stocks pulled back slightly ahead of the release of the US inflation data – a figure that is closely eyed by traders for clues about rising price levels and its ramifications for the Fed tapering debate. Trading was tilted to the defensive side overnight, with healthcare (+1.00%), utilities (+0.85%) and real estate (+0.16%) sectors outperforming. This may set a cautious tone for Asia-Pacific markets at open.
Small-cap stocks retreated from a two-and-half month high as the Russell 200 index dropped 0.71%. The so-called meme stock rally seemed to be taking a pause as retail enthusiasm faded and profit-taking activity kicked in. AMC entertainment fell 10.37% on Wednesday, marking a 32% decline from its recent peak of $72.62.
Bitcoin rebounded nearly 12% over the past 24 hours and is trading at above $37k this morning. Some market participants see strong support at around $30k, whereas others forecasted prices to drop further to the 20k area. The digital token was hammered by a wave of headwinds including Elon Musk’s hint to “break up” with it and increasing calls for regulation.
US CPI YoY – Forecast
Source: Bloomberg, DailyFX
A successful auction session sent Treasury notes higher and yields lower, cooling fears about persisting inflation pressures. The DXY US Dollar index traded steadily at 90.14, waiting today’s ECB press conference and US inflation data to set the tone for future directions. Besides, US initial weekly jobless claims and China’s new yuan loans will also be closely watched. Find out more from DailyFX economic calendar.
Asia-Pacific markets opened on the front foot, with stocks in Japan and Australia trading slightly higher at open. Japan’s Nikkei 225 index traded 0.20% higher, lifted by reopening optimism as the pace of the country’s vaccination drive picked up. Japan’s producer price index (PPI) came in at 4.9% YoY in May, higher than a baseline forecast of 4.5%. This echoed the Chinese PPI released yesterday, which surged to a 13-year high of 9.0% in May. Rising PPI readings signals building price pressures and may translate into higher CPI in the months to come. Persisting price pressures may urge central banks to scale back stimulus efforts to maintain price stability.
Looking back to Wednesday’s close, 7 out of 11 S&P 500 sectors ended lower, with 66.3% of the index’s constituents closing in the red. Financials (-1.06%), industrials (-1.03%) and materials (-0.76%) underperformed, whereas healthcare (+1.00%) ended higher.
S&P 500 Sector Performance 06-10-2021
Source: Bloomberg, DailyFX
S&P 500 IndexTechnical Analysis
The S&P 500 index is extending higher within an “Ascending Channel” formed since November. The overall bullish trend remains intact, but prices may be facing some pressure at around 4,290 – the 127.2% Fibonacci extension. Bearish MACD divergence hints that upward momentum may be fading as the index shows reluctancy to move decisively higher. A pullback may lead to a test of the 20- and 50-day SMA lines for immediate supports.
S&P 500 Index– Daily Chart
Nikkei 225 Index Technical Analysis:
The Nikkei 225 index is attempting to breach the ceiling of the “Descending Channel” formed since early March. A successful try may open the door for further gains, whereas a failed one may result in another pullback. The ceiling coincide with the 100-day SMA line, and thus may serve as a strong resistance.
The MACD indicator is flattening after forming a bullish crossover, suggesting that bullish momentum is fading.
Nikkei 225 Index – Daily Chart
ASX 200 Index Technical Analysis:
The ASX 200 index is range bound near the 7,290 area, waiting for fresh catalyst to attempt another breakout. An immediate resistance level can be found at 7,340 – the 161.8% extension, whereas an immediate support can be found at around 7,194. The MACD indicator formed a bullish crossover and trended higher, underscoring upward momentum.
ASX 200 Index – Daily Chart
— Written by Margaret Yang, Strategist for DailyFX.com
To contact Margaret, use the Comments section below or @margaretyjy on Twitter