Tech stocks scrutiny
A mixed commencement is in sight for the Asia region taking after Wall Street on Monday with some signs of stabilization seen, though the sustainability of this remains to be seen.
Pressure for FANG stocks
US markets broadly steadied in the overnight session as seen with the mixed performance, though the decline in the technology sector may be a worrying trend.
While the eventual outcome remains uncertain, the intention to investigate the technology industry over competition concerns had sparked jitters across the markets. This had seen to the NYSE FANG+ index sliding 3.5% in the overnight session while the likes of the IT and communication services sectors had slipped 1.76% and 2.79% respectively on the S&P 500 index. For precisely the same reasons investors believe these are the growth leaders of their trade, the US authorities are now concerned that too much control may have been accorded to them and the risk of their leadership position being blunted had caused the knee jerk reaction. Google, Apple, Facebook and Amazon among the FANGs had been listed to be within the probe, ones to watch. The immediate reaction had notably dragged prices for the likes of the technology sector ETF (XLK ETF) past its 200-day moving average, keeping this downtrend going and posing a risk for the broad index.
The picture had also been little changed with the short-lived crude oil rally, continued trade tensions and the manufacturing performance paring according to the US ISM manufacturing reading for May. These remains the reasons for markets to keep cautious in the short-term for any further pullbacks within the equity space.
Source: IG Charts
Asia open
The steadying of US markets nevertheless provides the Asia region with some relief going into the Tuesday session. The question, however, would be whether this can sustain on an intraday basis given the lack of positive signs to shore up further support as told above.
Notably the local Singapore market look set to waver at the start of the Tuesday session post the first reading of the manufacturing sector contraction since August 2016 according to the latest PMI release. The figure at 49.9 slipped from 50.3 previously with components such as new orders, new exports, factory output, inventory and employment ones to weigh. While this falls in line with the broad market slowdown, the US-China trade issue had likely undermined the confidence seeing the impact on some of the external driven components above. Look to a pullback for the market towards the 3090 support and with caution on any further pullbacks from here.
For the day ahead, look also to the RBA meeting where a cut is expected by the market, alongside a barrage of data releases.
Source: IG Charts
Yesterday: S&P 500 -0.27%; DJIA +0.02%; DAX +0.56%; FTSE +0.32%
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