Virus Fears & US/China Tensions Create Headwinds For Risk
Global equities benchmarks started the week with a bid tone on Monday, with most indices seeing gains initially, before sentiment weakened over the day leading to a reversal into negative territory. Selling has continued this morning at the European open as investors remain caught between the downside impact of rising COVID-19 fears and the supportive wave of central bank easing in place which has offered support in recent months.
The World Health Organisation has warned that the virus is reaching a new and dangerous level, warning that the pandemic will “get worse and worse and worse”, adding that too many countries are “headed in the wrong direction”. Equities markets have so far been shrugging off steady reports of increasing infection rates across the US due to the death toll remaining low. However, if the death toll starts to rise again, as the WHO warns it will, this could lead to a broader risk sell off in equities markets.
There are also fresh concerns this week over US/China tensions following an announcement by the Trump administration, rejecting nearly all of China’s claims in the South China Sea noting that it stands with its “Southeast Asian allies… in defense of freedom of the seas”. China immediately responded with a statement of its own accusing the US of “deliberately distorting the facts and international law.” This marks the latest in a series of standoffs between the US and China over recent months and investors remain concerned that continued hostilities could eventually impact the ongoing trade negotiations though, for now, negotiations remain intact; albeit with very little momentum.
DAX (Bullish above 12343.65)
From a technical viewpoint. The DAX remains within the bullish channel from 2020 lows currently, however, momentum is stalling and price is currently held up at the 12916.11 resistance. Failure to breach this level raises downside risks. However, while the yearly pivot at 12343.65 remains intact, the near-term bias remains bullish.
S&P500 (Bullish above 3080.50)
From a technical viewpoint. The S&P continues to trade above the monthly pivot (3080.50), supported by the rising trend line from year to date lows. While above here, the near-term bias remains bullish with an eventual break above the 3226.50 level the primary objective for bulls.
FTSE (Bearish below 6213.8)
From a technical viewpoint. The FTSE has broken under both the monthly pivot (6213.8) and the rising channel support. While below here, the near-term bias remains skewed towards further losses with the 5922.4 level the next key downside zone to watch. A break below here will open the way for a move down to deeper support at the 5626 level.
NIKKEI (Bullish above 22319.5)
From a technical viewpoint. The NIKKEI continues to hold within a narrow sideways range caught between the yearly/monthly pivot around 22319.5 and resistance at the post recovery highs of 23273.6. With the pivots remaining intact, the near-term bias remains bullish with the 24609.4 level the next upside target to note.
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