US Stimulus & COVID Driving Markets

It's been a mixed start to the week for global equities benchmarks with US and Japanese indices trading higher and European and UK asset markets depreciating. Expectations of greater US stimulus in the wake of Biden's confirmation look likely to keep US equities primed for further upside. The market is expecting that the incoming Democrat administration will look to do something significant to mark the transition away from the Trump regime. The Nikkei has benefitted from weakness in the Yen over recent days as a result of a resurgent US Dollar. There are downside risks, however, with Japan confirming this week that it has identified a new strain of COVID.

In the UK and Europe, indices are trading with a heavier tone. Both the DAX and the FTSE are lower this week as fears over the intensifying second wave of COVID dampen sentiment. While vaccination programmes have begun, they are yet to match the speed at which the virus is spreading, suggesting that current lockdowns risk being extended beyond Q1.

Technical Views

DAX

The DAX continues to move higher within the bullish channel which has developed since the November lows. Price recently broke out above the 13744.70 level and while above here, the near term bias remains bullish. A break below will challenge the bull channel support and the 13322.69 level below that.

S&P500

The S&P has broken out above the prior 3714.50 highs , trading up to fresh highs of 3821.75. While price remains supported by the rising trend line from 2020 lows, the near term bias remains bullish. To the downside, any correction should find support into the 3586 level next.

FTSE

The breakout above 6640.6 saw the ftse rallying up to just shy of testing the 7025.8 level. However, sellers have stepped in early, marking a reversal away from the level. While price holds above the 6640.6 level, however, the near term bias remains bullish with focus on an eventual break of the 7025.8 level .

NIKKEI

The NIKKEI continues to trade higher within the bullish channel which has framed the recovery off the 2020 lows. Price recently broke out above the 27701.1 highs and while above here, the near term bias remains bullish. Any break below there will see the 26949.5 level support come back into play.

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