Asian Open: Upbeat Earnings Extends Rally, AUD/NZD Probes Support

US indices continued to recover from their recent sell-off as investors placed more emphasis on stronger than expected earnings over the rise of the Delta variant.

Charts (1)


Asian Futures:

  • Australia's ASX 200 futures are down 0 points (0%), the cash market is currently estimated to open at 7,308.70
  • Japan's Nikkei 225 futures are up 350 points (1.27%), the cash market is currently estimated to open at 27,898.00
  • Hong Kong's Hang Seng futures are up 187 points (0.69%), the cash market is currently estimated to open at 27,411.58

UK and Europe:

  • UK's FTSE 100 index rose 117.15 points (1.7%) to close at 6,998.28
  • Europe's Euro STOXX 50 index rose 70.34 points (1.78%) to close at 4,026.68
  • Germany's DAX index rose 206.23 points (1.36%) to close at 15,422.50
  • France's CAC 40 index rose 117.63 points (1.85%) to close at 6,464.48

Wednesday US Close:

  • The Dow Jones Industrial rose 286.01 points (0.83%) to close at 34,798.00
  • The S&P 500 index rose 35.63 points (0.83%) to close at 4,358.69
  • The Nasdaq 100 index rose 114.422 points (0.78%) to close at 14,842.63


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Indices:

Weeks after agreeing on a $1.2 trillion infrastructure bill, Republican senators blocked Wednesday’s debate with a 50-50 split down party lines as ‘several outstanding issues’ were still required to be resolved to get the required 60 votes to pass the bill. A top Republican believes they should be resolved by next week. We’ll see…

Strong earnings helped Wall Street rise for a second day and mostly recovered Friday’s sell-off. Once again it was small caps which outperformed, with Russell 2000 growth stocks rising 1.93% compared to the Russell 2000’s 1.9%. Economically sensitive markets such as copper miners, semiconductors and transportation stocks outperformed the broader market indices. MSICs all world index was up 0.83%.

The Nasdaq 100 rose 0.78% as part of its second bullish session, and closed above its 10-day eMA for the first session in four. The Nasdaq banking stocks rose 1.81%, FAANG stocks were up 0.62% and biotech rose 0.6%.

The S&P 500 rose 0.83% with 8 of its 11 sectors in the green, led by energy and financials. Chipotle Mexican Grill (CMG) was the top performer, rising 11.5% following upbeat sales records and price target and JP Morgan raised their price target to 1850.

The ASX 200 rallied to the top third of its 7200 – 7400 range yesterday, as weaker retail sales and extended lockdowns fanned growth concerns and effectively confirmed RBA’s dovish stance. 7300 could be a pivotal level this session but, ideally, we’re looking for it to hold as support and maybe even retest the highs around 7400.


ASX 200: Market Internals


ASX 200: 7308.7 (0.78%), 21 July 2021

  • Healthcare (1.09%) was the strongest sector and Industrials (-0.65%) was the weakest
  • 9 out of the 11 sectors closed higher
  • 5 out of the 11 sectors outperformed the index
  • 130 (65.00%) stocks advanced, 63 (31.50%) stocks declined
  • 66% of stocks closed above their 200-day average
  • 53% of stocks closed above their 50-day average
  • 43.5% of stocks closed above their 20-day average

Outperformers:

  • + 5.50%   -  Pilbara Minerals Ltd  (PLS.AX) 
  • + 4.47%   -  CIMIC Group Ltd  (CIM.AX) 
  • + 4.02%   -  Pointsbet Holdings Ltd  (PBH.AX) 

Underperformers:

  • -5.04%   -  Altium Ltd  (ALU.AX) 
  • -3.86%   -  Hub24 Ltd  (HUB.AX) 
  • -3.20%   -  Beach Energy Ltd  (BPT.AX) 


Forex:

Forex markets reversed their usual patterns of late, with commodity currencies (NZD, NZD) leading the recovery whilst JPY and USD were the weakest.

The dollar was broadly lower as traders shook off last week’s sell-off. The US dollar index (DXY) printed a bearish outside day, which allowed EUR/USD to print a bullish engulfing candle ahead of today’s ECB meeting. Given the ‘bullish wedge’ nature of price action on the daily chart (which is evolving above the March low) we suspect an upside bounce is on the cards at some stage. Whether the ECB meeting will be the trigger remains to be seen. Markets are expecting a dovish outcome, so if this falls short of expectations (not as dovish as prices in) then it leaves room for a counter-trend bounce – against the consensus.

CAD/JPY and NZD/JPY were the strongest pairs, rising 1.3% and 1.2% respectively. Despite the dollar’s weakness, USD/JPY rallied for a second day as US yields rose with equity markets.

AUD/USD also scraped a bullish outside day but, given the magnitude of selling of late, it had to happen at some point. USD/NOK fell -1.4% after twice failing to close above 0.9000, helped by stronger oil prices.


During bouts of risk on, the New Zealand Dollar has the edge over the Australian dollar, thanks to RBNZ being far more hawkish than RBA. So should equities and yields continue to rally then perhaps AUD/NZD can break lower.

We can see it is trending lower on the daily chart and after a two-day pullback from 1.0540 support a bearish engulfing candle has formed and closed just above key support.

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Commodities:

Oil prices climbed despite an unexpected rise in US oil inventories, instead taking the lead from Wall Street’s risk-on tone. WTI rose to a two-day high during its most bullish session in three months and closed just beneath 70.76 resistance. Brent closed fractionally above 72.13 resistance.

Gold was lower on improved sentiment briefly traded below 1800 before settling around 1803. The daily chart remains directionless so is not a market to become too attached to until momentum shows its hand.

After an extended move to the downside, silver has begun its retracement with a bullish engulfing candle. From here we are seeking for signs of weakness below the 25.53 – 25.75 resistance zone.

Up Next (Times in AEST)

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