Market Recap

The US equity markets continue to push higher overnight on earnings optimism, with results from Tesla joining the likes of Netflix to drive outperformance in the growth sectors once more. Corporate earnings have provided a mixed picture overall, with some resilience in current earnings but this was met with companies’ cautious outlook in hiring and spending. An uptick in jobless claims yesterday, along with a slump in the Philadelphia Fed Manufacturing Index, also point towards further moderation in economic activities, but markets have been shrugging off these growth worries for now.

With the Nasdaq experiencing a greater drawdown compared to the other major US indices since the start of the year, a recovery from extreme pessimism could be playing out, while further fall in US Treasury yields provided the go-ahead for these rate-sensitive stocks. After-market, the rally was being challenged by the underperformance of Snap’s top and bottom-line, which dragged other social media players down as well. Facebook is down 5% after-market, Pinterest is down 6%, while Alphabet and Twitter are down between 2-3%. That will pose a test for risk sentiments to end the week, potentially with some profit-taking heading into the weekend.

For the Nasdaq 100, a break above an ascending triangle pattern will leave the 12,900 level on watch, where a confluence of Fibonacci levels stands in place. Heading into next week, several risk factors could likely drive a more cautious take from the markets as we look towards the upcoming Federal Open Market Committee (FOMC) meeting and the release of the advance estimate for US second-quarter gross domestic product (GDP).

Asia Open

Asian stocks look set for a mixed open, with Nikkei +0.28%, ASX -0.06% and KOSPI -0.38% at the time of writing. Despite the risk-on mood carried from Wall Street, the results from Snap post-market has put a pause on risk sentiments as market watchers digest the prospects of the ad spending market ahead. Other than that, positive guidance has surfaced from some global manufacturers in the region that the semiconductor chip shortage could be easing, while eyes are also on the impact from China’s tech regulatory risks as DiDi Global worked to have its app restored.

Economic data on the calendar includes Japan’s inflation rate, which provided not much of a surprise with the absence of any out-of-hand surge in pricing pressures. This will continue to be supportive of the Bank of Japan (BoJ)’s accommodative policies, which saw no signs of any shift from its status quo yesterday. A series of manufacturing and services flash Purchasing Managers' Index (PMI) will also be released today. Further moderation in economic activities is expected to be reflected, with some close watch on the European region as their PMI data hangs just inches away from the 50-line, which is the divide between an economic expansion and a contraction.

For the STI, a break above a downward channel suggests an ongoing upward bias as the index delivered a new higher high. The upcoming SGX fund flow data may be on watch to gauge the extent of net inflows by institutional investors, considering that net institutional outflows have been largely playing out since the start of the year. Near-term resistance to overcome may be at the 3,200 level next.

On the watchlist: EUR/USD on watch after higher-than-expected 50 bp hike from ECB

The European Central Bank (ECB) has raised interest rate by a more-than-expected 50 basis-point (bp) and while there was a knee-jerk reaction to the upside on the news, the EUR/USD eventually fall within some indecision as gains were aggressively pared back thereafter. This comes as a softer forward guidance was laid out for further rate increases to be made meeting-by-meeting, while the terminal rate held unchanged. The central bank also introduced a bond protection plan, called the Transmission Protection Instrument (TPI), which is designed to cap borrowing costs across the region. The EUR/USD continues to trade within a descending channel pattern, pushing higher lately on a weaker US dollar and a reversion from technical oversold conditions. The 1.037 level remains on watch as near-term resistance to overcome, where the upper channel trendline stands in place.

Thursday: DJIA +0.51%; S&P 500 +0.99%; Nasdaq +1.36%, DAX -0.27%, FTSE +0.09%