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Stocks extend losses as the Fed nears tapering

Asian futures:

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

UK and Europe:

  • The UK 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%) and closed at 4,189.42
  • The German DAX index rose by 44.02 points (0.28%) and closed at 15,965.97
  • France’s CAC 40 index fell -49.73 points (-0.73%) to close at 6,770.11

Tuesday USA closed:

  • The Dow Jones Industrial lost -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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Selling stocks accelerates on the ‘T’ word

The Fed minutes show that most of the members were aiming for the throttling this year, but there remains disagreement over the recovery of the labor market. You can read Matt Weller’s FOMC minutes report here, but on the surface it seems they are dragging it out to reveal their plans at the Jackson Hole Symposium in two weeks’ time.

Stocks were broadly lower, with most of their losses occurring in the last hour of trading. While US retail sales and consumer confidence may have pushed some investors on the cautious side, the tightening was enough to spur more aggressive profit-taking that is just below record highs and the earnings season is drawing to a close.

All major US benchmarks fell around -1%, closing below their 20-day eMA. 10 of the S&P sectors were in the red, led by energy and technology stocks. Nasdaq biotech was down -1.3% and value stocks also underperformed the S&P 500 and Russell 2000.

That ASX 200 has fallen for 3 consecutive sessions, bearish momentum is fading and yesterday’s Doji closed above the 20-day eMA and monthly R1 pivot. However, the futures markets are pointing to a weak open around the 7448 support, so the early reaction of prices around this support level could be critical to the course of the day. Should the bears keep control, the bulls’ next line of defense is 7400.

ASX 200 internal market:


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

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

Outperformer:

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

Underperformer:

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

Forex: Delta weighs NZD, AU employment up next

That New Zealand dollar retained its place as the weakest major currency after daily newfalls rose to 10 and the RBNZ held rates against the market consensus. In the short term, higher falls are likely to mean lower NZD, but should new falls begin to fall, the kiwi dollar is likely to make an attractive long position for bulls as the RBNZ took a “hawkish break” yesterday.

That Canadian dollar was also trading lower, although inflation was higher than expected. It rose 3.7% year-on-year in July, which is the fourth month above the upper limit of the BOC target range of 2-3%. Lower oil prices proved to be the main drag on the CAD pairs.

The US dollar index (DXY) climbed to a 4-month high but closed on an indecision candle. Technically, we think 93.43 will be a tough nut to crack initially, so the dollar strength could simply ease and allow gold to break higher and push the EUR and AUD from their lows.

EUR / JPY showed a countertrend rebound yesterday, in line with our short-term bias, pausing just below 1.29 before forming a bearish engulfing candle on the 4 hour chart. GBP / AUD reach our goal of 1,9000.


AUD / USD fell to its lowest level since November, despite technical arguments in favor of a break in the trend; Both the monthly S1 and weekly S3 pivots are right at the 0.7220 low. However, keep an eye on employment in the AU later as it will likely be the deciding factor on which side the Aussie support level closes today.

Australia releases July employment data at 11:30 AM AEST. Given that the RBA said in its August minutes it was “ready to act” if necessary, it leaves the Australian dollar vulnerable to bearish looks should the data disappoint more than expected. With the states of Victoria and New South Wales long on lockdown, unemployment is projected to rise in the first month of year 8 (from 4.9% to 5%) and jobs are expected to have fallen -42.5k.

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Raw materials:

Commodities fell to a 6-day low a fourth day, it said CRB Shopping cart.

oil Prices were lower for a fifth day as demand concerns subsided as Covid cases continued to mount as new supply hit the markets. WTI fell -1.96% to a 3 month low and fell for most of the US session.

gold stood up to strengthen the dollar but traded sideways for a second session, just below its 7-day highs and below its 200-day EMA and 1800. Something has to give way at some point and should the dollar weaken we may determine that it helps gold break higher.

Next (times in AEST)

You can view all of the events planned for today in our economic calendar and keep up to date with the latest market news and analysis here.

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