Equities Turning Higher Again

Global equities benchmarks are back trading on a stronger footing this week with most indices advancing amidst an improved risk backdrop. The passing of Biden’s $1.9 trillion stimulus package has helped boost sentiment, offsetting some of the concern over the ongoing rise in yields. Last week, the disappointment in last week’s US inflation figures saw US yields pulling back temporarily, though they have once again turned higher again this week, as has the Dollar. However, looking to the FOMC this week, traders are expecting the Fed to attempt to talk down yields, as we saw from the ECB last week. While no adjustment to policy is expected, the Fed is likely to reaffirm its message that the market’s inflation expectations are out of sync with its own. However, given that the bank’s economic forecasts are likely to be upgraded, the Fed will have to tread carefully to avoid fueling a further rise in yields if it comes off as too optimistic.

In terms of the vaccination backdrop, the global drive is gathering pace, with the US and UK leading the pack. However, there have been issues in Europe with several countries rejecting the Astra-Zeneca jab after issues were identified. If this causes a material slowing of the supply this could start to impact investor appetite there.

Technical Views

DAX

The DAX remains near recent highs, having broken above the 14128.76 level last week. While above here, the outlook is for a further breakout higher. Below that level, the bull channel low will be first support ahead of the 13744.70 level.

S&P500

The S&P has turned firmly higher again here and is now putting pressure on the current 3964.25 highs, having found support at a test of the bullish trend line. While price holds above the trend line the outlook is for further gains. However, momentum studies are showing bearish divergence here and should we correct, below 3786.25, the next support is 3654.75.

FTSE

The FTSE has broken out of the contracting triangle framing the correction from 2021 highs. Price is now testing the 6803.1 resistance level. A break here will put the focus on the 7025.8 level next. To the downside, below the 6640.6 level, the 6396.4 level is the next support to watch.

NIKKEI

The NIKKEI has turned firmly higher here with price breaking back above the 29749.1 level. However, there is a risk of the current rally forming a lower high against the current 2021 highs unless bulls can break the 30752.5 level. To the downside, 29005.6 is the main support to note.

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