Delta Fears Hit US Equities

It’s been a mixed start to the week for benchmark global equities indices. The S&P is proving to be the laggard so far, languishing near the foot of last week’s declines. Rising concerns around the Delta variant, as well as recent data weakness, are taking their toll on recovery optimism in the US. With the August jobs report having shown dismal employment growth over the month, the market is growing fearful over the potential for further COVID disruptions heading into the fall/winter season.

This week, the focus turns to US CPI, due later today. Both core and headline inflation are forecast to decline. However, if data does disappoint, this might actually prove to be a positive for US equities, further reducing the near-term likelihood of Fed tapering.

In Europe, asset prices have been boosted this week by the rise in the energy sector which is helping lift the market. Asian equities remain near highs also with the Nikkei boosted ahead of the Japanese elections. The FTSE is seeing decent demand also with the UK PM set to lay out his winter COVID plan today, where further lockdowns are expected to be taken off the table.

Technical Views

DAX

The recovery off the 15486.94 level in the DAX has seen the market retesting the broken rising wedge and 15432.01 level which is holding as resistance for now. While below here, and with the MACD and RSI turned bearish, there is room for further losses towards the 15078.83.

S&P500

The correction from recent highs has seen the market breaking below the 4475.25 level with price now testing the rising channel support. Both MACD and RSI are turned lower here, suggesting the risk of a deeper move towards the 4383.50 level should the channel break.

FTSE

The move lower in the FTSE has seen the market falling back into the middle of the 6968.7 – 7137 range. With indicators turned lower, the focus is on a test of the range base and broken bull channel in the near term with 6895.6 the deeper support to note.

NIKKEI

The explosive reversal higher has seen price clearing above several key levels, most notably the recent 30502.8 highs. While price is softening currently, above here, there is room for the rally to continue, supported by bullish indicator readings. Any drop back below the level will turn focus to the 29464.9 support next.