Asian Open: Are ink prices too high for the Fed’s printer?
Matt Simpson December 1, 2021 9:15 AM
Jerome Powell jolted global markets by conceding that inflation is not actually transitory, and that the Fed will discuss a faster pace of tapering.
- Australia's ASX 200 futures are down -35 points (-0.48%), the cash market is currently estimated to open at 7,221.00
- Japan's Nikkei 225 futures are up 210 points (0.76%), the cash market is currently estimated to open at 28,031.76
- Hong Kong's Hang Seng futures are down -27 points (-0.12%), the cash market is currently estimated to open at 23,448.26
- China's A50 Index futures are down -28 points (-0.18%), the cash market is currently estimated to open at 15,331.61
UK and Europe:
- UK's FTSE 100 index fell -50.5 points (-0.71%) to close at 7,059.45
- Europe's Euro STOXX 50 index fell -46.45 points (-1.13%) to close at 4,063.06
- Germany's DAX index fell -180.73 points (-1.18%) to close at 15,100.13
- France's CAC 40 index fell -55.09 points (-0.81%) to close at 6,721.16
Tuesday US Close:
- The Dow Jones Industrial fell 652.22 points (-1.86%) to close at 34,483.72
- The S&P 500 index fell -88.27 points (-1.9%) to close at 4,567.00
- The Nasdaq 100 index fell -263.316 points (-1.61%) to close at 16,135.92
Equities broadly lower as investors grapple with conflicting drivers
It was a sea of red for equities overnight as investors grappled with conflicting drivers. On one hand we have the Fed fighting high inflation, on the other we have the Omicron variant threatening the recovery. This is not a happy tightening cycle, so to speak.
All major US indices fell over 1.5% with the Russell 2000 leading the declines. The Dow Jones is below 5k but holding above its 200-day SMA, the S%P 500 hit a one-month low (with E-mini futures printing a bearish outside candle) and the Nasdaq 100 printed a bearish outside day.
CHF and JPY strongest currencies amid risk-off trade
With inflation (and potentially Omicron) likely here to stay, the usual suspects sucked in their safe-haven inflows although it was the Swiss franc which led the pack by a small margin. Commodity currencies CAD and AUD were the weakest although the New Zealand dollar managed to close flat, indicating the post-RBNZ selling may be exhausted.
USD/JPY is below 113 yet manged to recover above the 112.72 low ahead of the close, and historical resistance levels around the Feb and March 2020 highs makes shorts unappealing from a reward to risk perspective. USD/CHF fell for a third day and probed its 200-day eMA, and we se its potential to move closer to 0.9100 if prices can hold below 0.9200 / monthly pivot.
EUR/AUD closed back above its 200-day eMA after a 1-day hiatus below it. The daily chart has now seen two higher highs and higher lows to suggest a bullish trend is underway and it has resected the monthly pivot as support.
If we switch to the four-hour chart a 2-bar bullish reversal (piecing pattern) has formed at the monthly S1 which hints at a swing low. If prices can hold above 1.5853 then our bias is for a move to 1.6000 / weekly R1 pivot.
Gold breaks key support
We discussed the potential head and shoulders top on gold yesterday. Due to its second bounce from support the pattern is no longer textbook, but we did see a high-volume break of 1777 support to suggest its next leg lower is now underway.
Oil prices continued to fall with WTI stopping just shy of $65 in line with our bias. Whilst the Moderna CEO triggered the initial selloff yesterday it was the prospects of ‘non-transitory’ inflation which also added to the selling pressure. We see the potential for this to move lower so remain bearish beneath the 67.40 low.
AU GDP, China PMI and ISM data scheduled for today
Today in Asia we have Australian GDP at 11:30 AEDT, which is expected to have contracted by 2.7% q/q due to prolonged lockdowns in Q3 for Victoria and New South Wales. At 12:45 Markit Economics release manufacturing PMI for China so it will be interesting to see if it tracks the official government data higher. They also release PMI data for Germany at 19:55 and Eurozone at 20:00, the US at 01:45 tomorrow and of course the ISM manufacturing is scheduled for 02:00.
Bearish pinbar on ASX 200
It looked set for a close above 7300 until vaccination concerns dented sentiment, for it to close back near the open with a bearish pinbar. Whilst we expect prices to remain under pressure it is effectively stuck around the midway point of the 50 and 00-day eMA, so have a neutral view overall and would prefer to keep ay trades short and sweet (in terms of time).
ASX 200: 7256 (0.22%), 30 November 2021
- Telecomm Services (1.84%) was the strongest sector and Utilities (-1.17%) was the weakest
- 7 out of the 11 sectors closed higher
- 6 out of the 11 sectors outperformed the index
- 127 (63.50%) stocks advanced, 62 (31.00%) stocks declined
- 57% of stocks closed above their 200-day average
- 40.5% of stocks closed above their 50-day average
- 30.5% of stocks closed above their 20-day average
- + 12.62%-Collins Foods Ltd (CKF.AX)
- + 8.57%-Credit Corp Group Ltd (CCP.AX)
- + 7.92%-Orocobre Ltd (ORE.AX)
- -4.26%-St Barbara Ltd (SBM.AX)
- -4.09%-Perseus Mining Ltd (PRU.AX)
- -3.91%-Cochlear Ltd (COH.AX)
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