Stocks Rebound Ahead of US Elections

Global equities benchmarks have seen firm buying across the European session so far today. Ahead of the US elections, a slew of positive PMI readings yesterday helped buoy investor sentiment. The eurozone, US and UK each saw October manufacturing PMIs coming in above expectations. Risk appetite had been weaker over recent sessions in response to news of fresh lockdowns in the UK and Europe over the coming month. Uncertainty ahead of the US elections has also been a headwind for equities markets. However, with central banks poised to provide fresh easing and with governments insisting that the new measures in place will only be one month in duration, markets look hopeful here that the economic impact can be managed. There are, of course, clear downside risks here and should the new measures in place in countries such as England, Germany and France, end up running longer than a month, markets are likely to weaken once more.

In terms of the US elections, the market is still expecting a Biden win at this point, which should keep the focus on the large fiscal stimulus package the Democrats have proposed. However, a Blue Sweep no longer looks likely to occur given the recent polling which shows an uptick in support for Trump in some key swing states. A divided government, however, is not necessarily bad for stocks given that it means the democrats would likely face a tough time in passing regulations and reforms which could be seen as less favourable for businesses. Furthermore, should Trump surprise markets by winning again, his pro-business stance will see markets retain their support.

Technical Views

DAX

From a technical viewpoint. The DAX is rallying off the bear channel low currently having reversed higher just ahead of the 11241.12 level. 12290.40 is the key resistance level to watch here and while below here, the medium term view remains bearish.

S&P500

From a technical viewpoint. The S&P is fighting to rebound off the 3226.50 level as the range between support at that region and resistance at the 3586 level continues. Price is now fast approaching interim resistance at the 3391.75 level which, if broken, will turn attention back to the top of the range.

FTSE

From a technical viewpoint. The FTSE has rebounded firmly off the bear channel low and is now trading back above the 5626 level. The next test for the FTSE will be the bear channel top. If price can break higher through here the 5922.4 level will then be on watch.

NIKKEI

From a technical viewpoint. The NIKKEI is coming back with a vengeance following a brief dip below the local bullish channel. Price is now moving firmly back above the 23273.6 level and while above here, price is on course to test the key 24069.4 level next.

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