Asian Open: Equities rally and oil plunges on hopes of fresh supply

Wednesday US cash market close:

• The Dow Jones Industrial rose 653.61 points (2%) to close at 33,286.25
• The S&P 500 index rose 107.18 points (2.51%) to close at 34,058.75
• The Nasdaq 100 index rose 474.594 points (3.58%) to close at 13,742.20

Asian futures:

• Australia's ASX 200 futures are up 27 points (0.38%), the cash market is currently estimated to open at 7,080.00
• Japan's Nikkei 225 futures are up 650 points (2.63%), the cash market is currently estimated to open at 25,367.53
• Hong Kong's Hang Seng futures are up 344 points (1.68%), the cash market is currently estimated to open at 20,971.71
• China's A50 Index futures are up 166 points (1.23%), the cash market is currently estimated to open at 13,810.96

The UAE said they are in support of boosting oil supply in the wake of disruptions caused by the Ukraine crisis, which promptly sent oil and energy markets in general much lower. And with that came relief as fears of stagflation, caused by higher energy prices, receded. Equity markets were broadly higher overnight across the US and Europe, with the DAX rising 7.9% by the close and now sitting back above its 200-week eMA. The STOXX 50 rose 7.4% and the CAC 7.1%. Gains on Wall Street were more modest in comparison, with the Nasdaq rallying 3.5%, whilst the S&P and Dow Jones rose 2.2% and 2.7% respectively.

ASX 200:

The ASX 200 was one of the select few to post gains in Asia yesterday, which appeared to pave the way for Wall Street to follow suit. Just under 80% of its stocks advanced and technology stocks led all sectors higher. And the rally on Wall Street overnight means the conditions are ripe for tech stocks to perform well again today. But we really cannot say the same for energy stocks following the drubbing of oil prices overnight.

Yesterday’s bullish engulfing day held above 6960 and closed above 7,000 with apparent ease. Intraday support today sits around 7030 and 7000, with 7100/08, 7134 and 7150 making viable upside targets.

ASX 200: 7053 (1.04%), 10 March 2022

157 (78.50%) stocks advanced, 32 (16.00%) stocks declined

Outperformers:

• +10.1% - Paladin Energy Ltd (PDN.AX)
• + 8.28% - Novonix Ltd (NVX.AX) 
• +7.17% - Allkem Ltd (AKE.AX)

Underperformers:

• -4.75% - Nickel Mines Ltd (NIC.AX) 
• -4.15% - Zimplats Holdings Ltd (ZIM.AX) 
• -3.26% - Boral Ltd (BLD.AX)

WTI plunged as much as 22% overnight

Murphy’s law is all around us, and markets are no exception. No sooner than we saw an influx of ‘oil is headed for $200’ headlines, WTI rolled over to close around -12% lower. But it could have been worse, as the session low was around -22% which had in on track for a technical bear market in a single day. Nice one Murphy.

Gold flew too close to the sun

Gold lost its shine on hopes of diplomatic talks between Ukraine and Russia, and the receded fears of stagflation (due to lower oil prices). It handed back all of Tuesday’s gains and is close to wiping off the week’s advance, after trading just $5 from its record high. It’s also back below $2000 to add insult to injury. We suspect it will continue to track oil prices, in that its direction will now be twitchy and non-committal after seemingly having it all - then losing it at the end. The easier trade today could well be long indices, as they’ll hopefully respond to Wall Street’s positive lead.

The dollar lost its appeal

Correlations remain strong across asset classes, so the fall in oil and gold was accompanied with a weaker US dollar. The dollar index has fallen back to the June 2020 high during its worst session since the pandemic, although EUR/USD rose over 1.5% during its best session in over 5-years. AUD/USD is back above 73c and its 200-day eMA, and the risk-on vibe overnight could bode well for the Aussie in general today.

Potential bull flag on AUD/JPY

On March 3^rd we flagged the bullish breakout from a triangle on AUD/JPY. It didn’t quite reach the 86 target with the week’s high at 85.50, but it did retrace for two days ahead of yesterday’s bullish range expansion. Support has been found at the 83.84 high on the daily chart, and a potential bull flag is forming on the hourly chart.

A swing low has formed at 84.60 and prices are holding above the monthly R1 pivot point, so hopefully we’ll see a clean break higher without closing beneath that support zone. But the hourly trend appears strong overall, so our bias remains bullish above 84.50. Bulls could consider a break above the cycle high around 85 and initially target the highs around 85.50 / weekly R1 pivot.

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