Dow Jones Retreats amid Tech and Oil Rout, Will the Hang Seng and ASX 200 Fall?

DOW JONES, HANG SENG, ASX 200 INDEX OUTLOOK:

• Dow Jones, S&P 500 and Nasdaq 100 fell -0.46%, -1.48% and -3.13% respectively

• Surging 10-year yield catalysed another round of profit-taking in the tech sector

• Crude oil prices tumbled nearly 8% as a slowdown in vaccination programs and resurging viral cases in Europe dented the energy demand outlook

  

Tech Rout, Vaccines, Yields, USD, Crude Oil, Asia-Pacific at Open:

A plunge in technology sector pulled the Dow Jones Index from its record high on Thursday, setting a negative tone for Asia-Pacific markets at open. The 10-year US Treasury yield surged 4.4% to a fresh 13-month high of 1.714% after the Federal Reserve revised up GDP and core PCE inflation forecasts from the FOMC meeting a day ago without addressing rising longer-term rates. This probably sparked a new round of profit-taking activity in the technology sector, which tends to offer relatively thin dividend yields and is of higher valuation.

Besides, sentiment appeared to be further dented by concerns surrounding a slowdown in vaccine progress and rising Covid-19 cases in parts of Europe. France‘s prime minister announced that several regions of the country will go under new lockdowns starting today. Germany, Italy and France have halted the use of AstraZeneca’s vaccine due to concerns about possible side effects earlier this week. The UK will have to slow its vaccine rollout next month due to a temporary shortage in supply. Daily Covid-19 vaccine doses administered per 100 person in Europe fell to 0.08 on March 17th, trailing below the world average of 0.11 and far behind the US (chart below).

Source: Our World in Data

WTI crude oil prices tumbled more than 7% as the viral resurgence in Europe raised the prospects for further travel restrictions and thus lowered demand for energy. The US Dollar index (DXY) edged higher to 91.83, reflecting a surge in demand for safety as sentiment turned sour. A stronger US dollar alongside rising longer-dated yields may exert downward pressure over Asia-Pacific equities. Futures across Japan, Australia, Hong Kong, Taiwan, Singapore, India and Indonesia are pointing to open in the red.

WTI Crude Oil - Daily Chart

Chart by TradingView

Australia‘s ASX 200 index opened down nearly 1 percent, with all 11 sectors trading lower. Energy (-2.38%) and information technology (-1.67%) were among the hardest hit. Hong Kong’s Hang Seng Index looks set to retreat from Thursdays gains, with big tech names such as Tencent, Alibaba and Meituan most vulnerable to selling. Video-streaming company Bilibili kicks off a secondary public offering in Hong Kong, expecting to raise HK$ 24.7 billion.

Looking ahead, the BOJ interest rate decision will be closely eyed by forex and equity traders. The central bank was reported to be considering widening the movement range around its 10-year bond yield target to 25bps from 20 bps. Find out more from theDailyFX calendar.

Looking back to Thursday‘s close, 6 out of 9 Dow Jones sectors ended lower, with 66.7% of the index’s constituents closing in the red. Energy (-3.62%), materials (-1.95%) and information technology (-1.75%) were among the worst performers, whereas healthcare (+1.16%) and financials (+0.30%) registered small gains.

Dow Jones Sector Performance 18-03-2021

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