Asian Open Equities On The Ropes Following Bullards Comments

Asian Futures:

• Australia's ASX 200 futures are down -42 points (-0.57%), the cash market is currently estimated to open at 7,326.90
• Japan's Nikkei 225 futures are down -510 points (-1.76%), the cash market is currently estimated to open at 28,454.08
• Hong Kong's Hang Seng futures are down -236 points (-0.82%), the cash market is currently estimated to open at 28,565.27

UK and Europe:

• UK's FTSE 100 index fell -135.96 points (-1.9%) to close at 7,017.47
• Europe's  Euro STOXX 50  index fell -74.77 points (-1.8%) to close at 4,083.37
• Germany's DAX  index fell -279.63 points (-1.78%) to close at 15,448.04
• France's CAC 40 index fell -97.1 points (-1.46%) to close at 6,569.16

Friday US Close:

• The Dow Jones Industrial fell -533.32 points (-1.58%) to close at 33,290.08
• The S&P 500 index fell -55.41 points (-1.32%) to close at 4,166.45
• The Nasdaq 100 index fell -114.224 points (-0.81%) to close at 14,049.59

 

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Indices:

It was a sea of red for equity markets on Friday after St Louis Fed President James Bullard said that the Fed tightening was a “natural response” to improving economic conditions, and that the Fed had already started discussions on tapering. Whilst equity markets held up relatively well following Wednesday’s hawkish FOMC meeting, Bullard’s comments made sure that equity traders got the memo that the credit-fuelled gravy train may soon hit a bump or two.

The S&P 500 fell -1.3% taking its weekly losses to -1.9%, the Nasdaq fell from its record high to close down -0.8% and the Dow Jones fell -1.6% to close the week -1.345% lower. Global copper minders ETF (COPX) escaped with a -0.6% decline on Friday but over the course of the week shed 13.6%.  Semiconductor equities fell –2.4% on Friday and the Nasdaq banking sector was down -3.4% by the close. The S&P 500 energy sector was also hit with a -2.9% loss on Friday (and the worst performing sector) despite higher oil prices during a broad risk-off environment.

The ASX200 is currently expected to open below 7335 today, which has proven to be a pivotal level over recent sessions acting as both support and resistance. This places 7300 – 7302 as s key support level after the open, a break below of which exposes the low around 7266 0 7275.

 

ASX 200 Market Internals:

ASX 200: 7368.9 (0.13%), 17 June 2021

• Information Technology (3.53%) was the strongest sector and Materials (-1.1%) was the weakest
• 6 out of the 11 sectors outperformed the index
• 129 (64.50%) stocks advanced, 66 (33.00%) stocks declined
• 75.5% of stocks closed above their 200-day average
• 70% of stocks closed above their 50-day average
• 74% of stocks closed above their 20-day average

Outperformers:

• + 9.8%   -  Zip Co Ltd  (Z1P.AX) 
• + 7.9%   -  Mesoblast Ltd  (MSB.AX) 
• + 7.4%   -  Pointsbet Holdings Ltd  (PBH.AX) 

Underperformers:

• -3.55%   -  Santos Ltd  (STO.AX) 
• -2.95%   -  Newcrest Mining Ltd  (NCM.AX) 
• -2.89%   -  Oil Search Ltd  (OSH.AX) 

 

From the Weekly COT Report (Commitment of Traders)

From Tuesday 15^th June 2021:

• Ahead of last week’s FMC meeting, net-long exposure on the US dollar index (DXY) fell to a three-month low yet remained net-long by 1.7k contracts. We expect long exposure to have risen significantly with prices over the last few days.
• Net-short exposure increased for a third consecutive week on AUD futures ahead of last week’s FOMC meeting. -7.2k long contracts were closed and +277 long contracts were initiated.
• Bearish exposure to Japanese yen futures were trimmed to a three-month low. However, the move was seen on declining volumes as opposed to a noteworthy increase in short bets.
• Net-long exposure to platinum and copper futures continued to fall. Long exposure was at a 6-month low for platinum and a 12-month low for copper but, in both cases, we expect traders to have flipped to net-short exposure by next week’s report.

Long/short positioning (75% and above):

• S&P 500 futures: 83.9% (down from 83.9% prior week)
• WTI futures: 81.7%
• Gold futures: 78.4%
• BRL/USD futures: 75.5% (up from 54% prior week)

 

Forex:

The dollar was higher across the board again on Friday, which saw the US dollar index (DXY) close to a two-month high and rally 1.8%. It has stalled at its 50-week eMA but Friday found support above tis 200-day eMA. If there’s any upside left in this move we doubt last week’s volatility will persist, but its hard to image the dollar falling any meaningful amount under the current climate.

The Australian and New dollar fell to their lowest levels this year and closed below its 200-day eMA’s on Friday, placing the antipodean currencies as the weakest performers last week. Cleary, the US dollar was the strongest and the only major currency to stand up to the greenback was the Japanese yen, which only closed -0.5% lower for the week. Month-to-date, NZD, CAD and AUD are the weakest majors having fallen -4.6%, -3.2% and -3.2% respectively.  

EUR/AUD hit out initial target at 1.5851 and now within striking distance from the 1.5900/47 target zone. GBP/AUD rose to an 8-month high CAD/JPY had its worst week in a year and EUR/NZD broke above 1.7072 resistance to invalidate our short bias from last week.

 

EUR/NZD closed above 1.7072 resistance, having found support at the 200-day eMA on Friday. A series of higher lows formed on the daily chart ahead of Friday’s breakout and three touches of a lower trendline suggest a bullish channel is in play. With no clear structural resistance levels until the highs just above 1.7300, the reward to risk ratio appears adequate for bulls whilst prices hold above the 1.6974 low. Should prices retrace ahead of its next leg higher we’re looking for prices to hold above 1.70000.

 

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Commodities:

Oil prices were one of the few markets to rise against the mighty greenback on Friday, after OPEC said they expect limited output growth from the US this year, despite higher prices. Brent futures managed to remain above 72.00 after printing a buying tail just above this level on Friday and rallied from US open to settle at 73.27. WTI had a bit of a skirmish around 70 but tracked brent higher to close at 71.14.

It was a dire week for metals, with platinum falling nearly -10% last week and closing below its 200-day eMA, copper falling 8.4% and breaking trendline support, gold shedding -6% and silver down -7.5%. The Thomson Reuters CRB index (commodity basket) was down -3% and printed a bearish engulfing week.

 

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