Hang Seng Index sinks to new lows while the Fed maintains hawkishness

The Hang Seng index hit its lowest level in 13 years today, but it had a brief reprieve when unidentified sources said that China would definitely/maybe consider changes to Covid-19 quarantine requirements when entering the country.

The rumour was enough to lift some risk assets and see the US dollar go a bit lower before reversing and going back to where it was prior to the headline.

A speech yesterday by Hong Kong’s relatively new chief John Lee did little to implore offshore confidence in the metropolis as a place to do business.

The Fed’s James Bullard indicated that 75 basis points at their November meeting appeared likely and that a similar hike at the December conclave is on the cards.

Meanwhile, his fellow board member, Charles Evans was hawkish but to a lesser degree when he said that the Fed was well placed for various scenarios.

US President Joe Biden said that energy producing companies should refrain from paying dividends or buying back their own shares. Instead, he said that they should focus on increasing production.

The WTI futures contract is near US$ 87 bbl while the Brent contract is a touch above US$ 93 bbl at the time of going to print.

Treasury yields have added a few basis points in the Asian session on top of large gains in North American trade. USD/JPY continues to press toward 150.

The Bank of Japan re-committed to buying an unlimited amount of 10-year Japanese Government bonds (JGB) in order to keep the yield at or below 0.25%.

Overnight, UK Prime Minister Liz Truss tried to sound the trumpet and coral her Conservatives into some kind of order, but it appears that her messaging is somewhat rusty as rumours circulate about her tenure.

Sterling continues to flirt with a move under 1.1200 in the aftermath yesterday’s red hot 10.1% y/y inflation read to the end of September.

Australian jobs data was a slight miss and the Aussie dollar was lower in the aftermath, dragging the Kiwi down with it.

Looking ahead, the US will get data on jobless claims and home sales.

The full economic calendar can be viewed here.

Hang Seng Index technical analysis

The Hang Seng index pierced below last week’s low today as it stretched below a descending trend line support. The next level of support could be at the 161.8% Fibonacci Extension level at 15414.

On the topside, resistance could be at the recent peak of 17059 or the break points in the 18040 – 18200 area.

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