Market Room Incoming Data | Hong Kong stocks temporarily need consolidation; consider adding positions after the war situation clarifies.

Market concerns are growing that the U.S. and Iran may fail to reach a ceasefire agreement due to their significant differences, coupled with reports that the U.S. is increasing its military presence in the Middle East to potentially deliver a final blow to Iran at any moment. This news has spurred a rise in international oil prices, causing a sharp decline in U.S. stocks on Thursday. The Dow Jones closed down 469 points or 1.01%, at 45,960; the S&P 500 fell 114 points or 1.74%, to 6,477; and the Nasdaq dropped 521 points or 2.38%, to 21,408.

New York oil futures surged by 5.67% at one point last night, reaching a high of $95.44 per barrel. Although there was a slight retreat this morning during the Asian session, prices have remained above $90. The spike in oil prices has intensified inflation concerns, with the OECD’s latest outlook report predicting that average inflation among G20 member countries will reach 4% this year, up 1.2% from December’s estimate. The U.S. inflation forecast has also been adjusted upwards to 4.2%. The economic growth forecast remains unchanged at 2.9%, with the OECD stating that without the current conflict, the economic forecast would be raised by 0.3%. The OECD pointed out that the extent and duration of the conflict are uncertain, and if energy prices remain high for an extended period, it will significantly increase business costs and consumer prices, thus weakening economic growth and potentially triggering a revaluation in financial markets. It is precisely because of high oil prices that global stock markets have been experiencing ongoing volatility.

Joachim Nagel, the President of the German central bank, mentioned in a Reuters interview that if the war in Iran leads to a deteriorating price outlook, a rate hike by the European Central Bank in April is an option. However, Rick Rieder, BlackRock’s Global Head of Fixed Income, called on the U.S. Federal Reserve to cut rates to ease market speculation about rate hikes. He candidly stated that high interest rates harm small businesses, young people, and low-income individuals. Although the volatility in energy prices means patience is needed regarding rate cuts, he still believes that authorities should take swift action.

U.S. stocks experienced a tepid atmosphere yesterday among heavyweight tech stocks, mainly due to fines imposed on both Google and Meta, with Meta plunging 8%, marking its largest single-day drop since October 30 of last year. The company has lost two significant lawsuits this week, and although the fines are relatively small compared to the company’s size, Meta’s courtroom losses have raised questions about the role of large tech companies in social media safety and platform free speech protection. However, at around $550, Meta presents some appeal, with a defensive level at $530, and a rebound to $600 seems plausible. As for Google, it is now at a level where a rebound could be considered, using $260 as a defensive level, and if it stabilizes at $280, it could see prices rise back to the $300-$320 range.

As for the NQ, it plunged sharply after breaking the 24,000 mark, with support only at the 23,700 level. Tonight, the NQ’s critical inflection point is at 23,850, with support at 23,750/23,650. If it breaks below 23,600, the decline is likely to intensify, and this level is crucial. On the rebound side, watch whether 24,000 will act as resistance after previously being support. If it stabilizes above 24,000, resistance is at 24,100/24,200, while the 24,400 resistance remains significant.

Global stock markets are still affected by news of the conflict in the Middle East, and the Hong Kong stock market is no exception. Yesterday, the Hang Seng Index fell below the 25,000 mark again, closing down 479 points or 1.89%, at 24,856, with turnover decreasing to 261.6 billion, a significant drop of over 100 billion from the previous day, reflecting that the selling pressure in a declining market is not too severe. While both the U.S. and Iran have expressed a desire for a ceasefire, the significant differences between them still leave the outcome of the conflict uncertain. The ongoing conflict in the Middle East continued to weigh on U.S. stocks, with the three major indices experiencing notable declines last night, especially the Nasdaq, which fell over 2%, dragging down Hong Kong’s night futures and showing weak performance. ADRs were down over a hundred points compared to the Hang Seng’s close yesterday, while night futures closed still below the 24,800 level, hovering around 24,700 this morning, leading to a lower open for the Hong Kong stock market.

However, this morning the Hong Kong stock market opened low but moved higher, mainly because there were indications that negotiations with Iran would extend the deadline to April 6, suggesting that there would be no further aggressive strikes on Iran’s energy facilities during this period. The Hang Seng Index opened 87 points lower, with early losses expanding to 143 points, hitting a half-day low of 24,712. As the A-shares rebounded after a lower open, the Hang Seng Index rose 139 points to 24,995 at one point, closing up 135 points or 0.54%, at 24,992; half-day turnover was 135.7 billion, which is quite average. Since the Hong Kong stock market failed to stabilize above the 250-day moving average, around the 25,100 level, selling pressure re-emerged, and the market closed below the 25,000 level, failing to hold the 5-day line. Fortunately, this morning it returned to the 24,900 level, and after regaining the 5-day line, it could gain momentum again. In the second half, there is hope to challenge the 250-day line again, around the 25,100 level. If it stabilizes above 24,900, or even above 25,000, the index futures settlement next week should be able to maintain above 25,000. Additionally, since next Tuesday is the end of the month and the end of the quarter, Man estimates that the market can maintain above the 25,000 level for settlement early next week.

It is worth noting that global stock markets are still troubled by the conflict in the Middle East. However, due to the ongoing high oil prices resulting from the conflict, if oil prices remain high for an extended period, it will ultimately push up inflation and could even drag down global economic growth. As inflation reignites, not only is the prospect of rate cuts bleak, but there is also a possibility of a reversal in monetary policy. If the U.S. economy slows down or even falls into recession while simultaneously facing inflation threats, it could lead to stagflation, placing the Federal Reserve in a dilemma. For now, the Hong Kong stock market has yet to recover the 250-day line, and the technical trend appears mediocre. However, Trump is a clever businessman, and his every move currently reflects his intention to cease hostilities. As long as both sides can return to the negotiation table, one piece of news could reverse the current weakness. Man is not too pessimistic for now; once the U.S.-Iran conflict ends, the Hong Kong stock market could recover all moving averages and return to the 26,200 level, potentially regaining upward momentum. Of course, the U.S.-Iran conflict still carries considerable uncertainty, and with the Easter long holiday approaching, a cautious approach is advisable during this period. While not being overly pessimistic, one should also avoid being too aggressive, keeping a certain amount of cash on hand to wait for clarity in the conflict, allowing for reinvestment once the Hong Kong stock market confirms a return to an upward trend.

McDevitt

(Xu Di-yi, licensed person of the Securities and Futures Commission)