Asia market update: Oil prices at fresh four-month low, ASX 200 retracing from cloud resistance

Market Recap

Major US indices remain stuck in their subdued tone in the lead-up to the weekend break, failing to react much to lower Treasury yields brought on by a series of downside surprises in US economic data. If anything, data on Thursday further highlighted the economic risks as a trade-off to tight monetary policies, with US initial jobless claims rising more than expected for the fourth consecutive week while industrial production contracted at its sharpest pace month-on-month since December 2022.

The softer data may be in line with what policymakers hope to see, serving as validation for dovish expectations lately as rate expectations continue to price for an end to the Federal Reserve’s (Fed) hiking cycle and the first rate cut in May 2024. The US dollar consolidates further after its 1.5% sell-off on Tuesday – a more resilient showing given the dip in Treasury yields but the near-term downward trend remains.

On the other hand, rising economic risks have not been well-received by Brent crude prices, which fell close to 4% overnight to its lowest level since July this year. A retest of its 200-day moving average (MA) was met with a bearish rejection recently, with a head-and-shoulder formation breakdown in early-November this year potentially leaving the pattern completion at the US$72.00 level on watch. A bearish crossover remains presented on its weekly moving average convergence/divergence (MACD), while its weekly relative strength index (RSI) continues to drag further below the 50 level as signs of sellers in control for now.

Asia Open

Asian stocks look set to mirror Wall Street with muted moves, with Nikkei +0.05%, ASX -0.21% and KOSPI -0.56% at the time of writing. Softer Treasury yields and a significant dip in oil prices have not worked the way it should, in terms of supporting gains across the region. Chinese equities remain in a weary state, with the Nasdaq Golden Dragon China Index down more than 3% overnight, following a 1.4% earlier decline in the Hang Seng Index (HSI).

Alibaba failed to lift sentiments with its 2Q 2023 results, plunging 9.1% as investors shun at the news that the company was scrapping plans to spin out its cloud computing division as a result of US chip export restrictions. Aside, China’s house prices also contracted for the fourth straight month, which seem to reflect the limited policy success thus far in driving recovery for its property sector, with weak housing demand likely to persist.

The ASX 200 struggled to see any pick-up in today’s session, as a retest of its Ichimoku cloud on the daily chart was met with some resistance lately with a formation of a daily bearish pin bar on Wednesday. A break above a previous downward trendline resistance may still be supportive of a near-term upward trend, but the upper edge of the daily cloud resistance at the 7,100 level will have to be overcome to provide some conviction for the bulls.

Thursday: DJIA -0.13%; S&P 500 +0.12%; Nasdaq +0.07%, DAX +0.24%, FTSE -1.01%