S&P 500 Wobbles as Bank Earnings Due, China GDP in Focus| MENAFN.COM

Saturday, 02 July 2022 03:27 GMT

S&P 500 Wobbles as Bank Earnings Due, China GDP in Focus



  • Dow Jones , S&P 500 and Nasdaq 100 indexes closed -0.56%, +0.08% and +0.75% respectively
  • JPMorgan and Citigroup dipped after earnings reports. Both highlighted higher expenses as key headwinds
  • Asia-Pacific futures are pointing to a mixed start for the week. US markets are shut for a holiday

US Bank Earnings, China GDP, Nikkei 225, ASX 200 - Asia-Pacific Week-Ahead:

Wall Street stocks were mixed on Friday, with some large US banks posting disappointing forward guidance amid cost 'headwinds' during their earnings release. JPMorgan fell over 6% as its CEO expected higher expenses as a result of a tight labor market and moderating Wall Street revenue. Citigroup dropped over 1% as its net income fell 26% YoY due to a sharp increase in expenses. Wells Fargo's share price jumped over 3.6% as its earnings per share exceeded forecasts by a wide margin.

This is just a snapshot of how a tightening labor market could impact corporates' profit margins, and ultimately threaten sky-high stock markets. Wage inflation will also spur the Federal Reserve to tighten monetary policy this year, with three to four rate hikes expected by the market. While higher interest rates may boost the banks' net interest margin, the comparatively more rate-sensitive technology sector may be vulnerable. Goldman Sachs, Procter & Gamble, Bank of America, Morgan Stanley and Netflix are reporting earnings this week. Click here for a preview.

Looking ahead, China's Q4 GDP, industrial production and retail sales figures will be in the spotlight. The world's second-largest economy is expected to expand at 3.6% YoY in the latest quarter, marking the slowest pace of growth since 3Q20. Industrial production and retail sales are expected to moderate further from November's level as well. This may be attributed to a cooling property market, curbs on debt and the“zero-Covid” policy. Lower-than-expected actual readings may urge policymakers to ease monetary and fiscal policy to foster economic growth and stabilize the job market.

China 4Q GDP – Forecast

Source: Bloomberg, DailyFX

APAC markets look set to kick off the week witha mixed tone. Futures arehigher in the Japan, Australia, Taiwan and Indonesia but lower in mainland China, Hong Kong, South Korea, Singapore, Malaysia, India and Thailand. US stock markets are shut for a holiday on Monday.

Japan's Nikkei 225 index is positioned to trade mildly higher after falling for two days. Core machinery orders, a highly volatile leading indicator of capital spending, surged 11.6% YoY in November. This compared to a 6.1% estimate. This is an encouraging sign that private firms are spending and the broader economy is recovering at a faster-than-expected pace.

Australia's ASX 200 index traded higher at the open, led by health care, financials, materials and consumer discretionary sectors. The information technology sector may catch as its peers on Wall Street rallied on Friday. Rising crude oil prices may also boost some of the energy companies, such as Santos and Woodside Petroleum.

For the week ahead, the BoJ interest rate decision and Australian employment data dominate the economic docket alongside a slew of statistics from Germany, the UK, Canada and Japan. Find out more from the DailyFX calendar .

Looking back to Friday's close, 4 out of 11 S&P 500 sectors ended higher, with 41.8% of the index's constituents closing in the green. Energy (+2.45%), information technology (+0.89%) and communication services (+0.53%) were among the best performers, whereas real estate (-1.18%) and financials (-1.01%) trailed behind.

S&P 500 Sector Performance 14-01-2022

Source: Bloomberg, DailyFX

S&P 500 Index Technical Analysis

The S&P 500 index pulled backed from all-time highs, which may be another healthy correction along its upward trajectory. The overall bullish trend remains intact, as suggested by an“Ascending Channel” formation. The next resistance level can be found at 4,900– the 261.8% Fibonacci extension. The MACD indicator formed a lower high however, suggesting that near-term momentum may be weakening.

S&P 500 Index – Daily Chart

Chart created with TradingView

Nikkei 225 Technical Analysis:

The Nikkei 225 index is hovering within a“Symmetrical Triangle” pattern over the past few month, waiting for fresh catalysts for a decisive breakout. The September high of 30,700 serves as a key resistance level, whereas the lower trendline may provide some near-term support. Breaching below this trendline may open the door for further losses. The MACD indicator is trending lower, suggesting that near-term momentum remains weak.

Nikkei 225 Index – Daily Chart

Chart created with TradingView

ASX 200 Index Technical Analysis:

The ASX 200 index pulled back to a range-bound zone between 7,200 to 7,500, extending its consolidation. The floor and ceiling of the range may be viewed as immediate support and resistance levels respectively. The overall trend remains bullish-biased, as the MACD indicator pierced through the neutral midpoint and moved higher. A meaningful breach above 7,500 may intensify buying pressure and expose the next resistance level at 7,760.

ASX 200 Index – Daily Chart

Chart created with TradingView

--- Written by Margaret Yang, Strategist for DailyFX.com

To contact Margaret, use the Comments section below or @margaretyjy on Twitter


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