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Hong Kong talks scrapped, market jitters return

Asian stocks are poised to be under pressure today, as worries mount over Europe’s economy due to warnings by the European Central Bank.

Data board
Source: Bloomberg

Talks between the pro-democracy movement and authorities have also been cancelled, which could weigh on sentiment.

A clear signal of market jitters returning is the overnight spike of 24% in the VIX index to 18.76 points – an 18-month high.

This was also reflected in the sell-off in the S&P 500 where a 2.1% dip erased the year’s gains.

Other signs of investors losing confidence in the strength of the global economy were seen in copper and crude oil prices.

Both continued to drift lower, with copper losing 0.6% overnight and oil more than 1% making it the fourth day of decline.

All these developments point to a weak end to the trading week. Investors are likely to cash out and wait on the side-lines, especially with little macro data to watch out for today. We are scheduled to get some figures on Chinese credit growth today with new loans data. Any disappointing data will likely accelerate the slide in regional markets.

Ahead of the Hong Kong Open

While Hong Kong shares jumped on the euphoria of the Fed minutes on Wednesday night, this is likely to be short lived amid the turn in sentiment. On that basis, we are calling for the Hang Seng Index or Hong Kong HS50 to open 1.48% lower at 23,181.1 points.

On a daily chart, it looks like the Hang Seng Index is finding resistance on the 50% Fibonacci retracement level at around 23,253 points.

Will the bearish sentiment be short lived and could this be a long-term buying opportunity? Some indicators such as the MACD may suggest so, with the MACD crossing above the signal line. More conservative traders should wait for price to break above the resistance level before taking a long position.

Hong Kong HS50 Cash
Click to enlarge

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