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Market Brief: Asian Markets Lower, ASX 200 in Red But Off The Daily Lows


Asian stocks are trading lower on Friday after yesterday’s sharp sell-off in Wall Street. Concerns about a second round of coronavirus infections after the reopening of the economies weigh on risky assets. Wall Street suffered heavy losses that we haven’t seen since March when the coronavirus start to spread in Europe and the USA. Fed cautious stance on the speed of the recovery also disappointed investors.

Fed holds interest rates unchanged while Governor Powel said that it would not increase rates until 2022 amid the sharp drop in employment. Federal Reserve will continue to buy Treasuries and mortgage-backed securities as it projects a contraction of 6.5% this year. The unemployment will stand at 5.5% higher than pre-coronavirus levels while inflation is seen at 1.7%. Fed might take further actions if need it, such as the Yield Curve Control for specific interest rates maturities but for now, is not the first option.

We should not be surprised by yesterday’s sell-off as stocks had gone up too much and too fast. Some investors who lost the recent rally see the pullback as a buying opportunity.

The Nikkei index finished 0.77% lower at 22,299 after the Japan BSI Large Manufacturing Conditions Index plunged to -52.3 in the second quarter, the previous quarter was -17.2. The Industrial Production came in at -9.8%, below the forecasts of -9.1% in April, the yearly reading came in at -15%, also below the expectations of -14.4%. The Japan Capacity Utilization drop to -13.3% in April from previous -3.6%.

The Hang Seng Index is 1.05 lower at 24,235. The Shanghai Composite index is 0.25% higher at 2,928, while the Singapore Straits Times index is 1.65% lower at 2,659.

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ASX 200 Breaks Below the 100-Day Moving Average

ASX 200 continues lower for the second day breaking below the 10-day moving average. The index was down over 3% in the morning session, as energy, travel, and bank stocks plunged as were the sectors that benefited the most from the recent rally. Australia’s Finance Minister warned that the second wave of coronavirus infections might cost the Australian economy $80 billion over the next two years. 

ASX 200 breached below the 100-day moving average and cancelled the positive momentum. If the index fails to return soon above the 100-Day SMA, then we might experience further pressures.

On the downside, first support for the ASX 200 index stands at 5,756 the daily low. In case of a break lower, sellers might test the next support area at 9,697 the low from June 1. Next support for the ASX 200 will be met at 5,510 the 50-day moving average.    

On the other hand, the immediate resistance stands at 5,909 the 100-day moving average, and then at 5,960 the daily high. Next obstacle will be met at 6,156 the high from June 11.