Market news

Overnight Headlines

*USD edged lower pushing EUR above 1.18

*US equities closed at record highs, Hang Seng down 5%

*Bitcoin spiked above $40,000 before Amazon denied it will accept the token

USD slid against most of the majors and DXY is closer to last week’s low at 92.50. EUR is now trading around 1.18 and GBP enjoyed a good day, breaking trendline resistance from the June high and pushing above 1.38. AUD and CAD broke Friday’s highs as stocks extended their recoveries from the Asian weakness.

US equities finished the day at fresh record highs, each notching five-day win streaks. Tesla is up after hours after confirming they are profitable for the first time in their history with the exclusion of regulatory credits. Futures are in the red as Asian markets fell to fresh troughs led by a third straight session of heavy selling in Chinese internet giants. Apple, Microsoft and Alphabet report their earnings after the close tonight.

Market Thoughts – China crackdown

China regulatory fears have continued to hurt Asian sentiment. The MSCI’s broadest index of Asia-Pacific shares fell to its lowest level since mid-December, extending the low set the day before. The Hong Kong benchmark is down around 11% in three days and has lost 40% from a February peak. Big losses have been seen in tech and education shares, with property stocks also coming under fire. The recent tumult was sparked by a move by Beijing to ban academic tuition groups from making profits, raising capital or going public.

This crackdown followed other regulatory moves to rein in financial and tech companies including Alibaba and Didi raising concerns that no sector would avoid more stringent policing. The speed and size of the crackdown is unprecedented, which is creating fear and selling pressure – what sector might the Chinese government want control over next? For FX, JPY and CHF may be in favour if this volatility continues.

Chart of the Day – CSI 300 breakdown

The main Chinese stock index (CSI 300) has broken down today, falling over 3%. It has crushed the 200-day SMA and trendline support held since the third quarter of 2020. Notably, margin trading debt remains elevated. This begs the question as to whether the next stage in this selloff is a big reduction in leverage.

Prices have fallen through near-term support around 5,000 and the March low at 4,883. Next major support lies at the 50% retrace level of the March 2020 to February 2021 move around 4,716.

Jamie DuttaAnalyst / Trader

"With extensive experience as a full time trader and financial market commentator, I have worked as a trader in top tier investment banks and trading houses, including Morgan Stanley and GAIN Capital trading Forex, Index derivatives. and Bonds. I combine technical analysis with a deep fundamental knowledge to identify trade set-ups. My real life experience allows me to break down the complexities of financial jargon and trading. This means everyone can better understand the compelling forces of greed and fear which are realised every day in countless ways across markets."

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