Asian Open Equities Extend Losses as Fed moves Closer to Tapering

Asian Futures:

• Australia's ASX 200 futures are down -49 points (-0.66%), the cash market is currently estimated to open at 7,453.10
• Japan's Nikkei 225 futures are down -200 points (-0.72%), the cash market is currently estimated to open at 27,385.91
• Hong Kong's Hang Seng futures are up 43 points (0.17%), the cash market is currently estimated to open at 25,910.01

UK and Europe:

• UK's FTSE 100 index fell -11.79 points (-0.16%) to close at 7,169.32
• Europe's  Euro STOXX 50 index fell -6.98 points (-0.17%) to close at 4,189.42
• Germany's DAX index rose 44.02 points (0.28%) to close at 15,965.97
• France's CAC 40 index fell -49.73 points (-0.73%) to close at 6,770.11

Tuesday US Close:

• The Dow Jones Industrial fell -108 points (-3.8259%) to close at 34,960.69
• The S&P 500 index fell -47.81 points (-1.08%) to close at 4,400.27
• The Nasdaq 100 index fell -144.903 points (-0.97%) to close at 14,857.92

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Equity selloff accelerates on the ‘T’ word

The Fed minutes revealed that most members were on board for tapering this year, yet divisions remain over the labour market recovery. You can read Matt Weller’s FOMC minutes review here, but on the surface it seems they’re dragging it out to unveil their plans at the Jackson Hole symposium in two weeks.

Equities were broadly lower with most of their losses materialising at the last hour of trade. Whilst US retail sales and consumer confidence may have had some investors erring on the side of caution, the taper word was enough to prompt more aggressive profit taking just off record highs and as earnings season wound down.

All major US benchmarks fell around -1% and closed below their 20-day eMA. 10 of the S&P’s sectors were in the red, led by energy and tech stocks. The Nasdaq biotech fell -1.3% and value stocks were also weak performers on the S&P 500 and Russell 2000.

The ASX 200 has fallen for 3 consecutive sessions, bearish momentum is waning and yesterday’s Doji closed above the 20-day eMA and monthly R1 pivot. However, futures markets point to a weak open around 7448 support, so how prices react around this support level early on could be key for how the day plays out. Should bears remain in control then 7400 is the next line of defence for bulls.

ASX 200 Market Internals:

ASX 200: 7502.1 (-0.12%), 18 August 2021

• Real Estate (1.8%) was the strongest sector and Materials (-2.97%) was the weakest
• 7 out of the 11 sectors closed higher
• 128 (64.00%) stocks advanced, 60 (30.00%) stocks declined
• 68% of stocks closed above their 200-day average
• 100% of stocks closed above their 50-day average
• 100% of stocks closed above their 20-day average

Outperformers:

• + 15.66%   -  Pro Medicus Ltd  (PME.AX) 
• + 7.13%   -  Domino's Pizza Enterprises Ltd  (DMP.AX) 
• + 6.13%   -  Domain Holdings Australia Ltd  (DHG.AX) 

Underperformers:

• -7.07%   -  BHP Group Ltd  (BHP.AX) 
• -5.84%   -  Sims Ltd  (SGM.AX) 
• -4.82%   -  Bapcor Ltd  (BAP.AX) 

Forex: Delta weighs on NZD, AU employment up next

The New Zealand dollar retained its place as the weakest major currency after daily new cases rose to 10, and RBNZ held rates against market consensus. Over the near-term, higher cases likely means a lower NZD but, should new cases begin to fall the Kiwi dollar likely makes an attractive long for bulls as RBNZ did give a ‘hawkish pause’ yesterday.

The Canadian dollar also traded lower despite hotter than expected inflation, which rose 3.7% YoY in July which is its fourth month above the upper bound of BOC’s 2-3% target range. Lower oil prices proved to be the main drag on CAD pairs.

The US dollar index (DXY) nudged its way toa 4-month high yet closed with an indecision candle. Technically we expect 93.43 to be a tough nut to crack initially, so the dollar strength may just abate and allow gold to break higher and lift EUR and AUD from its lows.

EUR/JPY performed a countertrend bounce in line with our near-term bias yesterday, stopping just shy of 1.29 before rolling over to form a bearish engulfing candle on the four-hour chart. GBP/AUD reach our 1.9000 target.

AUD/USD fell to its lowest point since November although there is a technical argument for a pause in trend; both the monthly S1 and weekly S3 pivots are sat right on the 0.7220 low. Keep an eye on AU employment up later today though as it likely to be the deciding factor as to which side the support level the Aussie closes on today.

Australia releases employment data for July at 11:30 AEST. Given the RBA said they were “ready to act” if required in their August minutes, it leaves the Australian dollar vulnerable to bearish eyes should the data disappoint more than already expected. Due to the states of Victoria and New South Wales remaining in extended lockdowns, unemployment is expected to rise for the first month in 8 (to 5% from 4.9%) and -42.5k jobs are expected to have been shed.

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Commodities:

Commodities fell for a fourth day to a 6-day low, according the CRB commodity basket.

Oil prices were lower for a fifth day as demand concerns lingered as covid cases continued to rise whilst fresh supply hits the markets. WTI was down -1.96% to a 3-month low and fell throughout most of the US session.

Gold stood up to do dollar strength yet traded sideways for a 2^nd session, just off its 7-day highs and below its 200-day eMA and 1800. Something has to give at some point and should dollar strength wane then we could find it helps gold break higher.

Up Next (Times in AEST)

You can view all the scheduled events for today using our economic calendar, and keep up to date with the latest market news and analysis here.

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