Market Brief: Nikkei At 10-Week Highs, Asian Stocks Mixed As Tensions Rise Between China and USA

Asian stocks started mixed the new week as the tensions between China and the USA over the Hong Kong new security law with shares in Hong Kong, extending losses for one more day. President Donald Trump said that Washington would address the Hong Kong issue “very strongly”. Chinese foreign minister warned the U.S. to drop ‘wishful’ thinking of changing China and added that some forces in the U.S. were pushing the two superpowers towards a new ‘cold war’.

There is little in the way of economic data releases today. Asia calendar is quiet while in Europe, we await Germany’s Final GDP for the first quarter. Germany’s IFO Business Climate will also be released today. Also in Europe, the debate around the common bond 500bn recovery fund from France and German is expected to continue this week. Four countries, Denmark, Austria, the Netherlands and Sweden, are against the proposal and will come with another suggestion. I expect low volumes and cautious trading today with U.S. and U.K. markets closed for Memorial Day. 

On the coronavirus front, more and more countries around the globe continue to re-open the businesses as the coronavirus cases drop. However, things are not looking good in emerging market countries like India, Brazil, and Mexico.

Nikkei 225 ended 1.59% higher at 20,711. The Hang Seng Index is 0.44% lower at 22,827. The Shanghai Composite index is 0.10% higher at 2,816. In Australia, the ASX 200 is 1.65% higher at 5,588. 

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Nikkei 225 Higher On Relief Package

Nikkei 225 index finished 1.58% higher at 20,712, making fresh 10-month highs boosted by news that the government is set to lift the COVID-19 state of emergency in Tokyo and four other prefectures. On the data front, the Japan Leading Economic Index came up to 84.7 in March from previous 83.8 while the Coincident Index came in at 90.2 in March from 90.5 in February. The Japanese government is ready to announce a 100 trillion yen relief package by Wednesday.

The Japanese economy is in recession as the Japan Gross Domestic Product for the first quarter 2020, came in at -0.9%, slightly better than the expectations of -1.2%, the annual GDP registered in at -3.4%. That was the second straight quarter for Japan marking the first recession since 2015.

On the technical side, first resistance for the Nikkei 225 index stands at 20,741 the daily high. The next resistance for the Nikkei 225 index stands at 21,065 the high from March 6. If Nikkei 225 breaks above 21,065, the next supply zone is at 21,182 the 100-day moving average. 

On the contrary, initial support stands at 20,584 today’s low. If the Nikkei 225 index breaks below, then the next support will be met at 20,348 the low from Friday’s trading session. In case the selling pressure continues in the index, the next support area stands at 19,987 the May 18 lows. 

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