NASDAQ 100, HANG SENG, ASX 200 INDEX OUTLOOK:

• US equities returned to upward trajectory as retail trading frenzy faded, stimulus in focus
• Alphabet and Amazon delivered strong Q4 earnings, surging 7.7% and 1.3% respectively afterhours
• Asia-Pacific markets are poised to extend a three-day gain amid favourable sentiment, oil gained

All three major US equity benchmarks climbed for a second day as a retail trading frenzy faded and market volatility declined. The Nasdaq, Dow Jones and S&P 500 indices finished up 1.6%, 1.6% and 1.4% respectively. Market focus returned to corporate earnings, pandemic developments and President Joe Biden’s US$ 1.9 trillion fiscal stimulus plan. Sentiment appears to be boosted by strong Q4 corporate earnings, with Alphabet and Amazon and Alibaba delivering upbeat results in afterhours trade. This may lead the Nasdaq 100 futures to advance further and set a favorable tone for Asia-Pacific markets.

Alphabet (beat):

• Revenue: US$ 46.3 billion vs. US$ 44.55 billion estimated
• EPS: US$ 22.30 vs. US$ 15.57 estimated
• Strong advertisement revenue and growth in the cloud business are among the highlights

Amazon (beat):

• Revenue: US$ 125.6 billion vs. US$ 119.7 billion estimated
• EPS: US$ 14.1 vs. US$ 7.34 estimated
• Largest quarterly revenue by far is encouraging, but change in CEOmay raise concerns over the transition period

Alibaba (beat) :

• Revenue: 221.08 billion yuan, vs. 214.4 billion yuan estimated
• EPS: 22.03 yuan vs. 20.87 yuan estimated
• Core commerce revenue registered 38% yoy growth, and cloud computing business turned profit

On the pandemic front, the US has vaccinated 32.22 million people, more than the total number of Covid-19 infections in the country (26.4 million). The 7-day average of the daily new cases has fallen to 146,486 on February 1st from a peak of 259,564 seen on January 8th, marking a rapid decline in new infections with the rollout of vaccines. This trend may hint at a faster removal of lockdowns and normalize in business activity, buoying reflation hopes.

WTI crude oil prices advanced to a 12-month high of US$ 54.93, reflecting an improved energy demand outlook as the rollout of coronavirus vaccines have shown effectiveness in bringing down the global infections.

Nasdaq 100 Top 10 Stocks Performance 02-02-2021

Source: Bloomberg, DailyFX

Asia-Pacific markets look set to gain for a third day following a strong US lead overnight. Australia’s ASX 200 index traded 0.8% higher at open, testing a key resistance level of 6,810. Yesterday, the RBA unexpectedly announced an extension of its asset purchasing program by another A$ 100 billion after the current one expires in April. The move led the Australian Dollar and the 10-year yield to fall and boosted equity prices. The central bank’s dovish stance may continue to support a rally in its stock market alongside improvement observed in the labor market.

The Hang Seng Index is attempting to recover some lost ground this week as mainland investors returned to bid for tech stocks. Liquidity conditions eased after the PBOC injected CNY 80 billion via reverse repo operations on Tuesday, leading the short-term money market rates to fall. Southbound net capital flows via the stock connections rebounded this week, with HK$ 17.3 billion flowing into the Hong Kong stock market on Tuesday. Total southbound flows contributed to around 30% of total turnover in the HKEX.

Source: Bloomberg, DailyFX

Nasdaq 100 Index Technical Analysis:

Technically, the Nasdaq 100 index has returned to the “Ascending Channel” and is set to carry on its upward trajectory within it as highlighted in the chart below. The bull trend remains intact and is well-supported by its 50-Day Simple Moving Average (SMA) line. The formation of a bullish MACD crossover suggests that near-term momentum has turned upwards. Immediate support and resistance levels can be found at 13,360 (127.2% Fibonacci extension) and 13,860 (161.8% Fibonacci extension) respectively.

Nasdaq 100 Index – Daily Chart

Hang Seng Index Technical Analysis:

The Hang Seng index has regained upward momentum after suffering from severe selling last week. The index has likely found strong support at the 50% Fibonacci retracement level (28,060) and has since rebounded. Clearing the next resistance of 29,160 (23.6% Fibonacci retracement) may open the door for further upside potential with an eye on 30,000-30,140.