The global reaction to the US 10-year note breaking out above the 4.6% barrier has not gone unnoticed by Asia-Pacific equity markets. The Hang Seng Index is losing 1.36% in the cash market today, while HK.cash futures are off 0.98%. Thus, the benchmark is breaking below the 23.6% Fibo elimination of the massive downtrend channel that was initiated during the internal Covid turmoil in China (February 2021).
The jump in US yields is primarily the result of the hawkish stance of the US Federal Reserve, which is pushing back the market's valuation of interest rate cuts this year. In this aspect, reactions to today's GDP data from the US and tomorrow's PCE report also from the country may prove key. If there is a slight slowdown in the measure of inflationary pressures on Friday, this could encourage the market to re-evaluate the possibility of an interest rate cut in September. This is currently estimated at a 42% chance.
Start investing today or test a free demo
Open account Try demo Download mobile app Download mobile appThe unfavourable environment from overseas means that the elements that previously supported the Chinese market are now receding into the background. These included internal regulations supporting the local stock market and incoming better data from specific sectors of the economy.
A look at the chart
Looking at the chart of HK.cash on the W1 (weekly) interval, we can see that the ongoing wave of declines is reminiscent of the behaviour of the index in early 2023, when the index attempted a sustained breakout above the 100-week exponential moving average (purple curve). Eventually, however, the index quickly reverted to a downtrend, slipping below this structure. The situation also seems to be similar now, nevertheless at this point it is hard to say whether this is just a correction or whether the market supply side will actually try to return to the long-term downtrend. In this aspect, the key may turn out to be the reaction to the 50-week EMA (blue curve), which may now prove to be the most important support barrier to watch.
Source: xStation
This content has been created by XTB S.A. This service is provided by XTB S.A., with its registered office in Warsaw, at Prosta 67, 00-838 Warsaw, Poland, entered in the register of entrepreneurs of the National Court Register (Krajowy Rejestr Sądowy) conducted by District Court for the Capital City of Warsaw, XII Commercial Division of the National Court Register under KRS number 0000217580, REGON number 015803782 and Tax Identification Number (NIP) 527-24-43-955, with the fully paid up share capital in the amount of PLN 5.869.181,75. XTB S.A. conducts brokerage activities on the basis of the license granted by Polish Securities and Exchange Commission on 8th November 2005 No. DDM-M-4021-57-1/2005 and is supervised by Polish Supervision Authority.
