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Market Brief: Hong Kong Stocks Drop, Nikkei 225 Higher Above The 200-Day MA

Nikkei 225
Nikkei 225

Asian markets trading mixed for one more day as tensions between China and USA rise after President Trump said he plans to take action against China over the national security laws on Hong Kong. Hong Kong administration in a move to calm investors said that the new law would not alter the civil liberties. The House of Representatives yesterday passed legislation for sanctions against Chinese officials for the detention of Uighur Muslims. China’s Foreign Ministry warned that it would retaliate against any sanctions imposed.

In Europe, the EC commission announced its plan on a recovery fund. The proposal exceeded market expectations as it proposes 250 billion in loans and 500 billion in grants. The proposal offers a strong signal for the unity of the EU.

Wall Street managed to end higher after a volatile session as the optimism around the reopening of the economy boosts investors sentiment. Many analysts now believe that a V-Shape recovery is on the cards as the economy returns faster than anticipated.

Bank of Korea Cut Interest Rates

Bank of Korea cut the key interest rate by 0.25 basis points to 0.50% The central bank also downgraded the 2020 forecasts to a 0.2% decline, from its February forecast for 2.1% growth.

While the focus today will be on the geopolitical tensions in our calendar US jobless claims will also be in focus.

Nikkei 225 ended 1.86% higher at 21,818. The Hang Seng Index is 1.22% lower at 23,015. The Shanghai Composite index is 0.20% lower at 2,831. The Singapore Straits Times index is 0.22% lower at 2,514. The ASX 200 is 2.43% higher at 5,915.

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Nikkei 225 Closes the March Gap

Nikkei 225 index finished 1.98% higher at 21,846, making fresh three month highs and managed to close the gap from early March. Sentiment has improved after the reopening in Tokyo and four other prefectures. In a Reuters poll, 23 analysts and fund managers asked between May 12-26 put the Nikkei 225 at 21,000 at the end of 2020. 

Earlier today reported that the Japan Foreign Investment in Japan Stocks climbed from previous ¥-223.2B to ¥75.4B on May 22, the Foreign Bond Investment increase from previous ¥-463.5B to ¥-432.9B.

However, the Japanese economy is in recession as the Japan GDP for the first quarter, came in at -0.9%, better than the expectations of -1.2%, the annual GDP registered in at -3.4%. That was the second straight quarter for the Japan GDP marking the first recession since 2015.

On the technical side, the index managed today to Return above the 200-day moving average, enhancing the bullish momentum. The initial resistance for the Nikkei 225 index stands at 21,926 the daily top. The next resistance for the Nikkei index stands at 22,276 the high from February 27. If Nikkei 225 breaks above 22,276, the next supply zone is at 22,465 the high from February 26.  

On the other side, first support stands at 21,580 today’s low. If the Nikkei 225 breaks below, then the next support will be met at 21,113 the 100-day moving average. In case the selling pressure continues in the Nikkei, the next support area stands at 20,916 the low from May 26.  

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