Risk Appetite Sours On Fresh COVID Fears

Global equities benchmarks have started the week under pressure as fresh COVID fears in Europe as and contagion from the central bank adjustment in Turkey have taken their toll on sentiment. With France, Germany and Italy announcing fresh lockdown measures this weekend in response to the rising third wave of COVID seen on the continent, there are growing fears that the return of unrestricted tourism this year will be pushed back beyond the summer.

European countries had been aiming for a big return to tourism this summer, offering hope for the many battered economies still struggling through the pandemic. However, with a third wave of the virus now underway in parts of Europe, these plans now look highly unlikely, fuelling a big sell off in travel and leisure sector stocks as well as hospitality stocks. There are fears too over the progress of vaccinations in Europe especially with many countries now turning against the Astra-Zeneca jab over safety concerns. With many European countries well below the UK and US in terms of vaccination numbers, the threat of a bigger third wave outbreak remains high.

Over the weekend also, the shock replacement of the new CBRT governor by President Erdogan following a rate hike last week has thrown the countries stability into question once again. The Lira has dropped around 15% following the announcement with the country’s stock market falling 7%, adding to the bearish shift in global sentiment this week.

Technical Views

DAX

The DAX is clinging to positive territory this week with the index having corrected lower over recent days. For now, the sell-off is purely a correction from the top of the bullish channel following the breakout above the 14128.76 level. While price holds above the level, the outlook remains bullish in the medium term.

S&P

The sell-off in the S&P has found support into a retest of the rising trend line from 2020 lows. While price holds above the trend line, bulls are still looking for a break of the 3964.25 resistance. If price falls below the trend line, however, the next support to note is down at the 3786.25 level.

FTSE

The breakout above the contracting triangle failed as price ran into selling pressure at the 6803.1 level. Price is now retesting the broken pattern structure and 6640.6 level support. While this region holds, the outlook is still for further upside. Below there, the triangle low and 6396.4 level are the next two support zones to note.

NIKKEI

The sell off in the Nikkei looks to be confirming a lower high against the 30752.5 peak. If price breaks below the 28372.5 level this could open the way for a deeper run down towards the bottom of the rising channel and the 26949.5 level support.

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