US equities erased earlier gains and dived into negative territory in the half-day trading on Tuesday, following a report on China’s retaliation on US semiconductor manufacturer Micron Technology, whose share price fell over 5%.
Fear of trade war was re-enlightened and traders took this opportunity to offload chips before the US holiday on Wednesday. Technology, financial and consumer discretionary were among the worst performers last night.
Technically, the S&P 500 index has reached the lower bound of an ascending channel, which serves as an immediate support level. Trend indicators, however, have turned bearish, suggesting more downside in the days to come.
Asian equities took a deep V-shape rebound on Tuesday after HK market resumed trading and caught up with the mainland equities’ losses on Monday. Higher correlation between the forex and equtiy market was observed, when Hang Seng Index’s performance inversely mirrored that of the USD/CNH.
In an attempt to calm the market, PBoC governor Ji Gang made an statement on Tuesday afternoon, where he emphasised a prudent, neutral monetary policy and that financial risk is controllable. Market confidence was boosted as investors cheered on PBOC’s pledge to keep the yuan stable. The offshore CNH since rebounded to a key psycological level of 6.660 after shooting up to 6.733 area in early morning.
Strong Chinese yuan is now the key to Asian stock market direction. Renminbi serves as a gauge of capital outflow and panic selling in the mainland and HK markets. Strong rebound in the currency was helpful in stablising market movements and restoring confidence.
Singapore market was dragged down by poor performances in the external markets, however, the Straits Times Index has exhibited resillience against the headwinds. Rising oil price and recovery in the residential propertymarket buoyed market sentiment. Its near-term support and resistance level remained to be 3,200 and 3,300 respectively.
US SPX 500 – Cash
By Margaret Yang in Singapore
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