Dow Jones soars, Wall Street targets best week since March. ASX 200, Hang Seng may increase

Dow Jones, ASX 200, Hang Seng, Retail Earnings, Technical Analysis – Asia Pacific Indices Briefing

  • Dow Jones soars on pink retail profits as Wall Street eyes strong week
  • Traders dismiss weaker US GDP figure, where internal results are still encouraging
  • The ASX 200 and the Hang Seng Index may rise, but will their surges last long?

Recap of Thursday’s trading session on Wall Street

Market sentiment has improved significantly over the past 24 hours. On Wall Street, futures on the Dow Jones, S&P 500 and Nasdaq 100 rose 1.63%, 1.99% and 2.82% respectively. This means that on average, the stock market is heading for the best 5-day performance since March if sentiment holds in the last 24 hours of the week.

Looking at the sector allocation of the S&P 500, it was very clear where the most optimism could be found. It was in consumer discretionary stocks. During Thursday’s session on Wall Street, a slew of optimistic views from retailers such as Macy’s (+19.31%), Dollar Tree (+21.87%) and Dollar General (13.71%) helped improve market sentiment.

This is despite weaker-than-expected US GDP data. Economic growth contracted by 1.5% q/q in the first quarter against an estimate of -1.3%. This was the first drop since the second quarter of 2020. However, internal data revealed that this was mainly due to the continued strength of US imports. Personal consumption, the heart of the US economy, gained 3.1% against 2.5% in the first quarter.

Sector breakdown of the S&P 500 05/26/2022

Data source: Bloomberg

Friday Asia Pacific Trading Session – Keep an Eye on Sentiment, Australian Retail Sales

With that in mind, the bullish mood on Wall Street sets things up for a follow-up in Friday’s Asia-Pacific trading session. That could leave regional benchmark stock indices, such as Australia’s ASX 200 and Hong Kong’s Hang Seng Index, able to take advantage of lower volatility. Given the increasingly hawkish pivot from the Reserve Bank of Australia, traders will be watching local retail sales closely. These should increase by 1.0% m/m in April against 1.6% in March. A stronger result could risk dragging the ASX down if it leads traders to turn to an increasingly hawkish central bank.

ASX 200 Technical Analysis

On the 4-hour chart, the ASX 200 appears to be trading within the confines of an ascending triangle chart formation. The direction of the breakout could hint at the next key move for Australia’s benchmark stock index. On the upside, this would expose the 200-period simple moving average (SMA). The latter could still restore the downward trend. Alternatively, a break lower could see prices revisit the 6881 – 6912 support area.

ASX 200 4 hour chart

Dow Jones soars, Wall Street targets best week since March.  ASX 200, Hang Seng may increase

Chart created in TradingView

Hang Seng Technical Analysis

On the 4-hour setting, Hang Seng index futures are trying to break above a declining trend line from February. However, prices are stuck at resistance around 20670. Pushing higher would emphasize the 21202 inflection zone, perhaps raising the outlook for a retest of the April high at 22670. A false breakout would bring attention back to the 19913 inflection point.

Hang Seng Futures Daily Chart

Dow Jones soars, Wall Street targets best week since March.  ASX 200, Hang Seng may increase

Chart created in TradingView

— Written by Daniel Dubrovsky, Strategist for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter

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