Markets Still Grappling With Stimulus Expectations & COVID Fears

It's been a fairly muted start to the week for equities traders. However, most indices were able to reverse initial weakness seen yesterday to trade back into the green on the week today. The main market themes for now, remain the issue of forthcoming US stimulus and the fluctuating COVID landscape.

In the US, Biden continues to push for the $1.9 trillion relief package proposed ahead of his inauguration. However with some Democrats calling for a higher figure and Republicans pushing for a reduction, there is no visibility yet on when such a package might be approved in Congress. This delay has taken some of the steam out of the recent rally in equities markets which was largely built on expectations of stimulus being pushed through quickly.

Concerns around COVID developments have also diluted some of the bullish sentiment seen recently. With infections and deaths still soaring globally, there is an urgent need for vaccination programs to be stepped up. However, concerns around supply issues and the effectiveness of current vaccines on new strains of the virus, are causing concern. With many European nations, including the UK, facing longer lockdowns, the economic costs continues to mount. In Europe scenes of rioting marked the weekend, along with news that Italy will pursue legal action against Pfizer over delays with its vaccine.

Technical Views

DAX

The DAX has broken below the rising channel from 2020 lows but has managed to hold a test of the 13744.70 support for now. While thus level holds, upside bias remains intact. A break lower here though, opens the 13322.69 level next.



S&P500

The S&P continues to hold above the 3821.75 level which was broken last week. In line with the broader bullish trend, the near term bias remains for continues upside. Any correction lower should find support into the 3714.50 level with the rising trend line coming in just below.

FTSE

The FTSE has corrected lower from its first approach of the 7025.8 level. So far, the correction has found support into a test of the 6640.6 level. While this level holds continued upside is favoured. Below here, 6414.6 is the next support zone to note.

NIKKEI

The NIKKEI continues to hold beneath the 29005.6 level. Price has been trading in a tight range between that level and support at the 28372.5 level for over a week now. While support holds, the outlook remains bullish in line with the broader bull trend.

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