DOW JONES, HANG SENG, ASX 200 INDEX OUTLOOK:
- Dow Jones, S&P 500 and Nasdaq 100 indexes closed -0.75%, -0.86% and -0.60% respectively
- US government bonds yields continued to fall, suggesting that reflation optimism may be faltering
- Asia-Pacific markets are positioned to follow a negative lead, with most futures trading in the red
Yields, Delta Variant, Jobless Claims, Asia-Pacific at Open:
Wall Street equities pulled back from their record highs as the emerging Delta variant of the Covid-19 virus casted a shadow over the outlook of global recovery. All Dow Jones sectors ended lower, with financial, materials and consumer discretionary sectors leading the decline. 10-year Treasury yields fell to 1.294% – the lowest level seen since February. This suggests that market’s view on reflation and long-term inflation may be weakening. Rising demand for safety may have also attributed to the rise in Treasury note prices, sending yields lower.
Japan’s government announced on Thursday that it plans a new virus state of emergency stretching through the Olympics, which will kick off on July 23rd. This marks the latest government measures to contain the spread of the highly contagious strain.
Meanwhile, weekly initial jobless claims data fell slightly short of expectations. Some 373k unemployment claims were filed last week, compared to a 350k estimate. The previous week’s figure was revised up to 371k from 364k. A slower-than-expected recovery in the labor market may serve to soothe tapering fears as Fed officials monitor both inflation and employment figures to set monetary policy.
US 10-Year Treasury Yield
Asia-Pacific markets look set to end the week on the back foot. Futures in Japan, mainland China, Australia, South Korea, Taiwan, Malaysia, India and Thailand are in the red, whereas those in Hong Kong and Singapore are slightly higher.
Hong Kong’s Hang Seng Index (HSI) tumbled 2.89% on Thursday, putting it on the verge of wiping out the entire year-to-date gains. Sentiment deteriorated after Chinese regulators announced new antitrust rules on Thursday following ordering app stores to remove Didi Chuxing earlier this week. An abrupt tightening in regulatory curbs on the country’s large tech firms hurt investor confidence, leading to a sharp fall in the stocks such as Tencent (-3.7%), Alibaba (-4.1%), Meituan (-6.4%) and JD.COM (-3.6%). Near-term outlook may remain bearish-biased as selling pressure doesn’t appear to have depleted.
Looking back to Thursday’s close, all 9 Dow Jones sectors ended lower, with 86.7% of the index’s constituents closing in the red. Financials (-2.19%), materials (-1.35%) and consumer discretionary (-0.87%) were among the worst performers.
Dow Jones Sector Performance 08-07-2021
Source: Bloomberg, DailyFX
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