US Stimulus Concerns & COVID Fears Dominating Sentiment

Global equities benchmarks are trading with a softer tone so far this week as sentiment continues to weaken. Investors are sceptical of US politicians being able to pass a new fiscal stimulus package within the deadline announced this week by House Speaker Nancy Pelosi. Pelosi announced a 48 hour deadline yesterday in order to agree a deal ahead of the US elections. However, with Republicans still pushing for a significantly lower amount than Democrats, a deal is looking unlikely.

The global COVID backdrop is also causing fresh concerns this week, with the US registering more than 50k infections a day and with more and more European countries announcing fresh lockdown measures, global growth fears are once again creating a drag on investor sentiment.

On the data front this week, the market will be watching the latest round of Eurozone, UK and US PMI data sets due later in the week. The rebound in factory and non-factory sectors appears to be losing momentum. Should the latest data show a further loss of momentum.

While equities sentiment has weakened notably at the start of the week, a renewed sell off in the US dollar is offsetting some of this weakness for now. Should US lawmakers fail to agree a new stimulus package, however, the equities sell off is likely to develop further.

Technical Views

DAX

From a technical viewpoint. The DAX continues to trade within the sideways range between the 12290.40 support and 13322.69 resistance. For now, price is hovering around the midpoint at 12916.11. Momentum studies ware waning, however, raising risks of a move lower.

S&P500

From a technical viewpoint. The S&P is at an important technical juncture. Price recently failed at the retest of the broken bullish trend line, accompanied with bearish divergence on momentum studies. There is now the chance of this developing as a double top if the 3226.50 level is broken to the downside.

FTSE

From a technical viewpoint. The FTSE continues to struggle around the 5922.4 level. Price has attempted to break out of the local bearish channel but remains flat for now. To the downside, the 5626 level remains the key support zone to watch.

NIKKEI

From a technical viewpoint. The NIKKEI continues to trade within the local bullish channel for now, however, momentum has waned following the break above the 23273.6 level. While above here, the near term view remains bullish with bulls looking for a break above 24069.4 next.