S&P 500 Steady After FOMC Meeting Minutes, APAC Stocks Open Mixed

[ArvinIG]

S&P 500, NIKKEI 225 INDEX, ASX 200 INDEX OUTLOOK:

• Dow Jones, S&P 500 and Nasdaq 100 indexes closed -0.16%, +0.09% and -0.12% respectively
• January’s FOMC minutes delivered few surprises on the Fed’s tightening roadmap
• Asia-Pacific equities look set to open mixed. Crude oil prices pulled back on hopes for Iran nuclear talks

S&P 500, FOMC Minutes, Crude Oil, Asia-Pacific at Open:

The S&P 500 index ended Wednesday’s trading with a small gain as investors shrugged off Russia-Ukraine tensions after Moscow said that some troops were withdrawn from the border. President Vladimir Putin said that the country is seeking a diplomatic solution to resolve disputes with Ukraine, alleviating concerns about an imminent military conflict.

In the near term, geopolitical risks remain in focus as the political skies are far from clear. President Joe Biden warned that the US has not verify Moscow’s claims and an invasion is still possible, leaving risk assets vulnerable to a pullback should the situation in Eastern Europe re-escalate.

January’s FOMC meeting minutes shows that the central bank is preparing to raise interest rates and reduce the size of its bond portfolio soon. Fed officials also noted that “recent inflation readings had continued to significantly exceed the Committee’s longer-run goal and elevated inflation was persisting longer than they had anticipated”. This may pave the way for a faster pace of tightening, especially after January’s CPI readings exceeded market expectations.

The Committee agreed that “it would soon be appropriate to raise the target range for the federal funds rate in light of elevated inflation pressure and the strong labor market”, hinting that a liftoff in March is on the table. Overally, the minutes didn’t deliver much of a surprise, and the tone seems to be more dovish-biased than the market had anticipated. Against this backdrop, equity market reacted mutely while the US Dollar extended lower, setting a mixed tone for APAC markets at open.

Crude oil prices pulled back for a second day from their 7-year highs as tensions surrounding the Ukraine border cooled. Meanwhile, ongoing talks between Iran and world powers to revive the 2015 nuclear agreement reignited hopes for more crude oil supply from the Middle Eastern country, weighing on prices.

WTI Crude Oil - Daily

Chart created with TradingView

Asia-Pacific stock markets look set to open mixed on Thursday. Futures in Japan, mainland China, Australia, South Korea, India, Thailand and Indonesia are in the green. Those in Hong Kong, Taiwan and Singapore are in the red.

Australian jobs data beat market expectations on the upside, with 12.9k jobs added in January. But the amount is not substantial enough to alter the outlook for interest rate hikes. The Australian Dollar is little changed after the release of jobs data and the ASX 200 index is trading higher at open.

Looking ahead, investors will be eyeing US initial jobless claims data for clues about the health of the labor market. Find out more from the DailyFX calendar.

Looking back to Wednesday’s close, 7 out of 9 S&P 500 sectors ended higher, with 59.8% of the index’s constituents closing in the green. Energy (+0.76%), materials (+0.65%) and industrials (+0.52%) were among the best performers, whereas communication services (-0.20%) and information technology (-0.17%) trailed behind.

S&P 500 Sector Performance 16-02-2021

Source: Bloomberg, DailyFX

S&P 500 Index Technical Analysis

The S&P 500 index may have entered a meaningful correction after breaching below an “Ascending Channel” as highlighted on the chart below. Prices have likely formed a “Double Top” chart pattern, which is commonly viewed as a bearish trend-reversal indicator. Immediate support level can be found at around 4,300 – the previous low. The MACD indicator is trending higher beneath the neutral midpoint, suggesting that a technical rebound maybe underway but the overall momentum remains weak.

S&P 500Index – Daily Chart

Chart created with TradingView

Nikkei 225 Technical Analysis:

The Nikkei 225 index breached below a “Symmetrical Triangle” pattern and thus opened the door for further downside potential. Prices are attempting for a rebound over the last two weeks, forming a higher high and a higher low. The lower trendline of the “Symmetrical Triangle” has now become immediate resistance. The MACD indicator is trending higher, suggesting that bullish momentum may be building.

Chart created with TradingView

ASX 200 Index Technical Analysis:

The ASX 200 index returned to the range-bound zone between 7,200 and 7,500, riding a strong technical upswing. Prices have pulled back to the floor of the range looking for immediate support. The MACD indicator formed a bullish crossover beneath the neutral midpoint, suggesting that a technical rebound is underway.

ASX 200 Index – Daily Chart

Chart created with TradingView

To contact Margaret, use the Comments section below or @margaretyjy on Twitter

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES
Margaret Yang, Strategist for DailyFX.com
17 February 2022