Shares in Asia are positioned to open sharply lower this morning, following a dramatic sell-off in US and European equities last night.

Rising political uncertainties in the White House and a terror attack in Barcelona hurt investor confidence, resulting in the sharpest fall in the S&P 500 index since May 2015. The S&P, Dow and NASDAQ tumbled 1.5%, 1.24% and 1.94% respectively.

President Trump’s handling of the white supremacist violence last week disappointed many, including several business leaders in his advisory council, who decided to leave the camp. President Trump fought back by dissolving the two business panels, in typical ‘Trump’ style. 

Ongoing political chaos in the White House further dampened investors’ confidence in the new president, who won the last year’s vote by promising to ‘Make America Great Again’. Trade, tax, infrastructure and jobs were at the top of his campaign agenda, yet none of these investor-friendly policies has been pushed through yet. They are sounding more and more like empty promises. 

The Dow Jones index has registered a gain of over 20% since the November election, largely driven by hope in the delivery of ‘Trumponomics’. The sell-offs in US equities over the last two weeks were a reflection of both profit-taking and unwinding activities.

The terror attack in Barcelona killed 13 and injured more than 100 innocent people, making it the worst terrorist attack in Spain since the Madrid train bombing in 2014. ISIS claimed responsible for the attack. Risk-aversion sentiment pushed gold and the Japanese yen to their highest level since 11 August. 

Technical Analysis:

US 30 - Cash

  • 10-Day Simple Moving Average has flipped downward (bearish signal)
  • SuperTrend (10,2) has flipped into a bearish set-up (red colour), indicating that a technical correction has started
  • The momentum indicator RSI has trended lower, suggesting more downside 

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