Muted Action As COVID Fears Return

Global equities benchmarks are trading with a muted tone as we head into the middle of the European summer. The rise of the Delta variant around the world is creating some cause for concern. Of particular note, has been the surge in infections in the two leading economies, the US and China. In the US, cases have risen to a six-month high while in China, fresh outbreaks have been difficult to control as effectively as previously due to recent flooding which has impacted some regions.

With travel restrictions and social restrictions in parts of Europe dampening the return of the summer tourist season, the focus now is on the outlook post-August and into the autumn with many health authorities warning that the spread of the Delta variant will worsen. However, for now, with vaccination rates still climbing and hospitalisations/deaths in key economies still relatively muted, markets are continuing to hold near highs.

Over the remainder of the week, focus will shift to US data. On the ack of Friday’s bumper US jobs report, tomorrow’s CPI figure has the potential to further fuel the USD rally which could case some deeper pullback in stock markets. Alternatively, if CPI misses the mark, equities are likely to be given some breathing room near term.

Technical Views

DAX

The index remains on hold near recent highs following the rebound off the approach to the bull channel support. With MACD and RSI both bullish, the focus remains on further upside while the 15486.96 level remains in place.

S&P500

The S&P has broken above the recent contracting triangle pattern which formed mid-channel. However, the breakout has lacked momentum so far and with MACD flat and RSI near overbought, there are risks of a correction lower. Focus remains on further upside while 4383.50 holds as support.

FTSE

The FTSE is now challenging the 7137 level which will be make or break as the level might still prove to be the right shoulder of a large head & shoulders pattern. Following the breakout of the corrective bear channel, RSI and MACD are both bullish, keeping the focus on further upside for now. However, bulls will need to see a firm break higher here to alleviate corrective risks.

NIKKEI

The Nikkei is once again being capped by the bearish trend line from YTD highs, following several attempts to breakout. For now, the 27422.9 level is holding as support. However, if price breaks below, the focus will shift to the 26932.1 level next.