Asia Day Ahead: Nikkei falters, HSI on watch
The weaker performance in growth sectors may put a drag on the Nikkei, just as intervention talks on the Japanese yen were revived with the outsized move in the USD/JPY.
Asia Open
The Asian session looks set for a downbeat start, with Nikkei -1.55%, ASX +0.23% and KOSPI -0.92%.
The downside surprises in US consumer price index (CPI) data last night seemed to match the “good data” that the US Federal Reserve (Fed) was looking for, which further anchored the case for a September rate cut. Market rate expectations are now looking at a 85% probability for a 25 basis point (bp) cut in September, up from the 70% prior to the data release.
Amid the fuelling of dovish rate bets, US Treasury yields and the US dollar have reacted to the downside as expected, but the surprise may come from the unwinding in US tech overnight. It does seem more like a rotation from the outperformers to the laggards, rather than a risk-off move, with other sectors in the green and the Russell 2000 index seeing a 3.8% upmove. The VIX is fairly muted at +0.5% as well. All Magnificent Seven stocks were down by at least 2%, notably with Nvidia 5.6% in the red and Tesla down 8.4%. One to watch for any further divergence ahead to validate a growth-value rotation trend.
The weaker performance in growth sectors may put a drag on the Nikkei, just as intervention talks on the Japanese yen were revived with the outsized move in the USD/JPY in the aftermath of the US CPI data. You can refer to the IG Forex (FX) Watch for analysis on the USD/JPY. If the shift to value is intact, Chinese equities may potentially see some support, coupled with more curbs on short-selling activities lately, which offer room for prevailing bearish sentiments to unwind.
Hang Seng Index (HSI): More conviction still needed that buyers are taking control
The HSI has retraced as much as 12% from its May 2024 high, trading within a near-term downward channel over the past months. Its daily relative strength index (RSI) is back to retest the key 50 level once more, where buyers thus far has failed to find a decisive upward break above the mid-line on four previous occasions since June. Any break above the mid-line may be on watch to offer a signal of buyers taking greater control.
Further upside may also mark a break of the near-term upper channel trendline resistance. On the downside, a support confluence may be found at the 17,200 level, where an upward trendline support stands alongside the lower channel trendline support.
IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.
The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.
No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk. Please see important Research Disclaimer.
Please also note that the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.
Seize a share opportunity today
Go long or short on thousands of international stocks.
- Increase your market exposure with leverage
- Get spreads from just 0.1% on major global shares
- Trade CFDs straight into order books with direct market access
Live prices on most popular markets
- Forex
- Shares
- Indices
See more forex live prices
See more shares live prices
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.
See more indices live prices
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.
