By James Harte, market analyst for Tickmill
It’s been a difficult start to the week for global equities benchmarks.
Leading indices have come under pressure on the back of Friday’s US jobs data which has fuelled a shift in Fed expectations, leading to a stronger US Dollar.
Friday’s data saw the headline NonFarm Payrolls print coming in at 517k, vs 193k expected, with the unemployment rate tumbling to lows last seen in 1969 at 3.4%. These figures are diluting expectations of a near-term pivot from the Fed, downplaying the risks of a recession this year (or a deep one at least) and giving the Fed plenty of room to push ahead with further tightening this year.
Traders now await comments from Federal Reserve chairman Powell later today, with plenty of downside risks for equities should Powell reaffirm the Fed’s hawkishness.
The DAX has come under pressure following the release of worse than expected German industrial orders data. Fears of a recession in Germany this year are still a big headwind to the eurozone economy, particularly with the European Central Bank’s Holzmann and Mann warning that rates would need to stay at restrictive levels for longer.
The FTSE has been boosted by a bumper set of earnings from BP. The oil giant posted record gains last year and announced an increase in the dividend as well as a $2.75 billion share buyback for Q1.
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Technical Analysis
DAX
The rally in the DAX has seen the market breaking out above the 15163.41 level while continuing higher within the bull channel which has framed the move off last year’s lows. Though momentum studies are weakening, while price holds above that level, focus is on further upside.
S&P 500
The rally in the S&P saw price briefly testing above the 4153.50 level. The move has since reversed with price trading back below that level. With indicators turning lower, while below here there is risk of a further drop lower towards 3910 next. Above here, 4305 is the next level to watch.
FTSE
The rally off last year’s lows which has been framed by a steep bull channel, has seen the FTSE100 index trading up to a test of the 7904.7 level. This area is holding as resistance for now. However, while price remains above the 7678.8 level and within the bull channel, focus is on an eventual break higher.
NIKKEI
The rally in the Nikkei has seen the index trading back up to test the broken bull trend line and the bear trend line from last year’s highs. For now, this resistance is holding. However, if price can stay atop the 27422.9 level, focus is on further upside. Below there, risks of a full retreat towards 25500.5 are seen.
