Equities Markets Unwind Sharply Amidst Fresh COVID Fears

Its been a wild start to the week for global equities benchmarks with all four indices tracked here in the red following a heavy sell off yesterday. Equities investors have been spooked by ongoing reports of rising Delta variant cases around the world, prompting fears that lockdowns will need to be reintroduced. Equities had started to come under pressure at the end of last week, initially weighed on by the USD rally in response to better than expected June retail sales data. This week, however, the focus appears to have swung back to the COVID outlook.

In the UK, the government’s “freedom day” move has been widely criticised amidst fears it will simply exacerbate the situation, potentially leading to new variants. Consequently, risk markets have come under fire this week with traders projecting a return to lockdowns over the next few months. The greenback has seen a steady inflow of safe haven demand, adding further fuel to the equities sell off. This week, traders will be looking to the ECB. Following news of the bank adjusting its inflation target higher, the market is keen to hear further details on this development as well as the bank’s latest outlook and assessment for the economy.

Technical Views

DAX

The sell-off in the DAX this week has seen price breaking down below the 15486.96 level. With MACD and RSI both bearish here, the focus is on a further push lower with the rising channel support the next downside area to watch, ahead of the 14791.27 level thereafter.

S&P500

The S&P has now broken through the bullish trend line from YTD lows, taking out the 4295.75 level as it fell. Price has so far found support at a teat of the 4236.50 level. However, with MACD and RSI both bearish, while price remains below 4295.75, the focus is on further downside.

FTSE

The sell off in the FTSE this week has seen price breaking below the key 6895.6 level support. So far, the decline has found support into the 6806.5 lows. However, with MACD and RSI both bearish, the focus is on a further break lower, targeting 6625.5 next, unless bulls can get back above the 6968.7 level.

NIKKEI

Following the failure at the channel top, price has since reversed and broken lower. For now, the index is sitting on the 27422.9 support. However, with MACD and RSI both bearish here, the market is vulnerable to a further drop lower with 26932.1 the next support to note. To the topside, bulls will need to see a break above the 28356.6 level to change this view.