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Morning Brief: Nikkei 225, DAX Index, Dow Jones Gain as FTSE 100 Retreats

Asian stocks rose today as traders reacted to the relatively strong manufacturing data from the region. In Japan, the Nikkei 225 index rose by 1.40% while in Hong Kong, the Hang Seng index rose by 0.95%. In mainland China, the Shanghai composite rose by just 0.10%.

Data released by Markit showed that the Chinese manufacturing PMI rose from 53.0 in September to 53.6 in October. The report cited the rising domestic and foreign demand and rising optimism about the economy.

Similarly, in Japan, the report showed that the manufacturing PMI rose from 47.7 to 48.7. While the PMI remains below the important level of 50, it was a sign of improvement in the country’s manufacturing sector.

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The Nikkei 225 is also rising ahead of the important corporate earnings from some of its constituent firms. Among these companies are NTT Data, Sumitomo Corp, Yamaha, Nippon Meat Packers, and Fujikura. The index is trading at ¥23,295, which is substantially higher than last week’s low of ¥22,945.

In Hong Kong, the Hang Seng index has risen as traders wait for the upcoming Ant Financial IPO. The company, which will go public on Thursday, will be the biggest IPO in the world, raising more than $34 billion. Indeed, according to media reports, the offering has been oversubscribed by retail traders.

Meanwhile, in the United States, futures tied to the Dow Jones, S&P 500, and Nasdaq 100 have also gained by more than 0.30% as investors remain focused on the upcoming US election. While polls point to a resounding victory by Donald Trump, they are also focused on the likelihood of a stimulus deal in the next few weeks after the election ends.

In Europe, FTSE 100 index have dropped by more than 0.30% as traders react to the new lockdown that was announced in England. As we have written before, the impact of this lockdown could be dire for companies in the FTSE. For example, travel-related companies like Whitbread and IAG could continue falling as travel is almost halted. Elsewhere, the DAX index is up by 0.30%.

Looking at the economic calendar, we see that the key events to watch will be manufacturing PMI numbers from Europe and the United States. Also, we will receive key earnings from the UK and the US. Among the most notable companies that will release their earnings are Berkshire Hathaway, PayPal, Estee Lauder, Mondelez, and Clorox, among others.

Nikkei 225 technical outlook

On the four-hour chart, we see that the Nikkei 225 has risen to the current level of ¥23,295, which is along the 25-day and 15-day exponential moving averages. The index has also formed an ascending triangle pattern that is shown in blue. It has also moved above the 78.6% Fibonacci retracement level. Therefore, I suspect that the index will soon breakout, possibly higher in the next few weeks. However, a decline below last week’s low of ¥22,945 will invalidate this trend.

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Nikkei 225 technical chart

Nikkei 225

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