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On Thursday, the tech sector of the Asia-Pacific stock markets experienced a decline, triggered by the poor performance of the tech-heavy Nasdaq 100 on Wall Street, which saw a fall of over 1%. The Dow Jones and S&P 500 performed better in comparison. This drop came after a round of disappointing US economic data, which led traders to focus on the ISM non-manufacturing PMI print.
The PMI reading showed a much lower reading of 51.2, down from 55.1 prior, which is a significant indicator of service activity and economic growth. A further deterioration in this sector could pose a significant challenge to the economic growth outlook, indicating a possible recession, which could create a negative market trend.
Technical Analysis
On the daily chart, the Nasdaq 100 is back to facing the 12846 – 12987 former resistance zone. It could hold as new support, pivoting prices higher and reinforcing this range as an inflection point. However, if it fails to hold, extending lower would offer an increasingly near-term bearish technical bias. The rising trendline from January is maintaining the broader upside trajectory. This indicates that although the market is currently bearish, there is still potential for an overall upward trend in the long term. It’s a must to understand the Nasdaq 100 to properly comprehend its recent performance and the impact it has on the overall market.
Once Google revealed that its supercomputers outpaced similar components built by the chipmaker, Nvidia Corp. suffered a blow with a 2.1% decline in its stock price. Nvidia Corp’s weight on the S&P 500 as a result of the announcement triggered a decline in investor confidence.
The Nasdaq declined due to reversal in recent gains made by some of Wall Street’s most valued businesses, including Tesla Inc., which dropped 3.7%, and drops in Amazon and Apple of over 1%. Investors are worried about the market’s general health because of this event, which has sparked concerns about a possible economic slowdown.
Caterpillar, the industrial sector’s leading indicator, suffered a serious setback with a 1.8% decline that resulted in a 7% loss overall over the previous two days. In contrast, Johnson & Johnson gained 4.5% after reaching settlements with thousands of claims in talc-related litigation, removing a hurdle in the way of its ambitions to float its consumer health company.
ADP payrolls
ADP payrolls missed expectations, but the market did not pay much attention to it due to its unreliable property of predicting non-farm payrolls report. Instead, traders focused on the ISM data, which has been gradually falling since the end of 2021. This trend is concerning, and markets have increased their dovish Federal Reserve policy expectations as Treasury yields declined.
The service sector is the largest segment of the economy, and a further decline in the sector could indicate a recession. Tech stocks fell as traders focused on the negative economic implications of the unexpectedly softer data. The market sentiment remains bearish as investors brace themselves for a potential recession.
Caixin China PMI Data Could Improve Risk Appetite
The Caixin China PMI data release is of significant interest to the Asia-Pacific region’s stock markets. As the world’s second-largest economy, China plays a vital role in global trade and economic growth. The Covid-zero strategy implemented by the Chinese government has helped the country gradually recover from the pandemic’s economic impact. The Caixin China PMI data is a crucial indicator of the country’s service and manufacturing sectors’ health, providing insights into the overall economic growth.
The previous Caixin China PMI data showed the country’s service sector’s expansion slowing in March, albeit still in growth territory. The manufacturing sector, on the other hand, expanded at its fastest pace in three months, suggesting that the country’s economic recovery is still on track. However, any further signs of health could improve risk appetite, increasing investors’ confidence in the region’s stock markets.
The Asia-Pacific stock markets could face volatility over the remaining hours following Wall Street’s mood if the Caixin China PMI data fails to show any significant improvement. The negative sentiment in the US markets following the soft economic data release could translate into the Asia-Pacific region’s markets, further weighing down the tech sector. The market sentiment remains bearish, and any adverse news could trigger a significant sell-off, leading to further declines.
Therefore, investors should closely monitor the Caixin China PMI data release and any subsequent market movements. The data could provide insights into the region’s economic growth prospects, and any improvement could signal a potential buying opportunity. However, caution is advised as any adverse news could lead to further market declines. Overall, the Caixin China PMI data release is an essential event to watch out for in the Asia-Pacific region’s stock markets.
Bottom Line
The Asia-Pacific markets’ bearish sentiment is a reflection of the recession fears sparked by the soft US economic data. The declining trend in the service sector is a significant indicator of economic growth, and investors are wary of the potential recessionary impact.
The Caixin China PMI data release could improve the market sentiment and increase risk appetite if it shows signs of further economic recovery. The technical analysis of the Nasdaq 100 indicates that although the short-term outlook is bearish, the overall trend remains upward. Investors should remain cautious and monitor the economic data and market trends closely.
