Crude Oil Surged to Seven-Year High, Power Crunch in China, Earning Season Coming

Weekly Wrap Content for the week of Oct 8:

1. Week 40 major indexes performance;

2. Week 40 US sector indexes performance;

3. Major indexes weekly charts of support and resistance levels;

U.S

For the week ended Oct 8, the three major U.S indexes recorded gains, with the S&P 500 Index recovering a portion of the previous week’s losses. Nonfarm payroll report on Friday saw job growth figure missed but unemployment rate fell more than expected. The report seemed to preserve expectations that the Fed will still begin to rein in its monthly asset purchases later this year. Investors prepared for the unofficial kickoff of third-quarter earnings reporting season, set to begin with some major bank announcements the following week. Refer to major indexes’ weekly performance table below.

Key highlights for the week:

1.    The yield on the benchmark 10-year U.S. Treasury note briefly neared 1.62%, its highest level since early June, as latest nonfarm payroll missed way below expectation. 

2.    Debt ceiling agreement calms worries, if only temporary. Senate Republicans had agreed to take up a bill to raise the Treasury’s borrowing limit by USD 480 billion, which would allow the federal government to keep paying its bills through at least early December. Debt problems at another Chinese property developer also dampened sentiment. See below China section. 

3.    Energy crunch adding to supply-chain disruptions. Coal, Natural gas and oil prices all spiking up. The rocketing prices have triggered an energy crunch in Europe and China. Crude oil prices hit seven-year high in the week to close at 79.59, as major oil exporters decided not to increase production more than their modest previously agreed-upon amount.

Among 11 SPX sectors, Energy(XLE) stocks led the gains as natural gas prices and crude oil prices hit new highs. The small real estate sector(XLRE) lagged with modest losses. Refer to SPX sector indexes weekly performance below.

Technically, all three major indexes' weekly long-term uptrend remain well intact,  though SPX had its bearish cross in 20dma and 50dma. SPX currently just closed below its 50dma after the recent rebound.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

Mainland Chinese stocks rose Friday following the week-long Golden Week holiday as the Shanghai Composite Index (SSE weekly chart) added 0.67%, according to Reuters. Investors looked past the government’s regulatory crackdown, property sector turmoil, and a nationwide power crunch and focused on positive economic data. Data released Friday showed the Caixin/Markit services Purchasing Managers’ Index rose to 53.4 from 46.7 in August, rebounding from the lowest level seen since the height of the 2020 pandemic.

On Friday, Beijing ordered an immediate increase in coal output to fight the nationwide power crunch, Reuters reported. China has been gripped by power shortages, which hurt production in industries across several regions of the world’s second-largest economy.

News from the property sector continued to dominate investor concerns after developers reported sharply lower sales for September, with more announcements of missed debt payments. Fantasia Holdings, a small developer, said that it failed to pay a USD 206 million debt shortly after a subsidiary missed paying a RMB 700 million loan on the due date.

Hang Kong(HSI weekly chart) stocks rebounded for 2^nd week, reversing its losses in early of the week and closed at a three-week high.

Technically, we remain the same stance for .HSI index as the previous week. .HSI index rebounded from its major support level at around 24,000, going forward, it’s expected the index downside is limited. SSE index trading in its three-week consolidation range.

Singapore

STI index(STI weekly chart) ended the week hit a five-week high, rebounded after a three-week down streak. For the coming week, continues to watch out major support level around 3060-3050, upside immediate target at 3180.