Key US benchmark stock indices had closed lower for the third consecutive session yesterday, the higher beta Nasdaq 100 declined by -0.7% while the S&P 500 recorded a modest loss of -0.15%. The outperformance of the S&P 500 was supported by financials and energy stocks; the S&P energy and fnancials sectors rallied by +1.2% and +0.8% respectively.

Yesterday’s sell-off on US stock indices futures for S&P 500 and Nasdaq 100 started during the European session, due to rising coronavirus infection cases in Europe. The decline on the S&P 500 and Nasdaq 100 futures had led price action towards their respective key short-term support levels of 3,420 and 11,720, coupled with oversold conditions seen in shorter-term momentum indicators. Hence, yesterday's closing levels on the S&P 500 and Nasdaq 100 seen near the highs of their respective intraday ranges can be explained by such technical factors.   

The latest key US economic data continued to suggest a weakening job market, as weekly jobless claims for the week ended 10 October jumped to the highest level since August unexpectedly to 898,000 versus consensus estimates of 825,000. Gridlock continued between White House Administration, the Democrats controlled House and Senate Republicans over the finalised amount for the much needed second US fiscal stimulus package. President Trump commented that he was willing to go beyond the $1.8 trillion proposed earlier by White House but Senate Majority Leader Mitch McConnell rejected such offer.

“Trenches” have continued to be dug in the long drawn battle between US and China over the dominance in the high technology arena. China is now set to pass a new law over this weekend that would restrict sensitive exports vital to national security that applies to all companies in China, including foreign-invested ones. A likely “tic for tat” measure towards US’s latest hawkish stance towards China’s mega tech firms such as Tencent, ByteDance and Semiconductor Manufacturing International.

Over at Asia, benchmark stock indices had started to trade in the positive territory, taking the cue from the positive movement seen in the US stock indices futures at this time of the writing, Hong Kong’s Hang Seng Index +0.6%(24,285), Hang Seng Technology Index rallied by +0.9% (7,611), China’s CSI 300 +0.3% (4,815) and Singapore Straits Times Index +0.6% (2,538) despite a weaker Singapore export data where the non-oil domestic export for September came in at 5.9% year-on-year below July’s figure of 7.7% and consensus estimates of 10.8%. Japan’s Nikkei 225 almost unchanged at 23,519.

Hong Kong stockbrokers are painting a positive picture to the much awaited Alibaba’s financial arm, Ant Group blockbuster IPO to go smoothly where they are willing to offer retail investors as much as 20 times leverage to have a stake in the IPO. Time is running out for Ant Group IPO to get regulatory approval from the Hong Kong Exchange by the end of October ahead of risk events such as the Nov 03 US Presidential Election and potential sanctions imposed by US administration over Ant’s digital payment platform due to national security concerns. Ant’s IPO will dual list in Hong Kong and Shanghai with an expected amount of at least US$35 billion to be raised, making it the world’s largest potential IPO to date.  

Events to watch

Brexit decision day; PM Boris Johnson is set to decide today whether to abandon trade talks with EU after lacklustre talks between both sides in the past few days. Officials on both sides had commented that the recent exchanges had increased the risk of UK walking away without a deal that implied that businesses and consumers would face additional costs and disruption when UK leaves the EU’s single market on December 31. Intermediate resistance for the GBP/USD stands at 1.3075 with near-term support at 1.2835. A break below 1.2835 opens up scope for a further potential slide to retest 1.2680, the recent 23/25 September 2020 swing low area.

US options expiry day; today marks the expiration of monthly options on equites, indices and exchange-traded funds and notes where an increase in volatility may occur for US stock indices.


Disclaimer: CMC Markets is an order execution-only service. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.