Pre-Market Analysis And Chartbook: Europe Leads Rally in Stocks, as Yields and Dollar Rise
Monday Market Snapshot
|Asset||Current Value||Daily Change|
|WTI Crude Oil||67.16||-0.70%|
Risk assets are a having a generally positive day so far, as the recent selloff ran out of steam, and the oversold momentum readings triggered a rally in the weakest assets. China has been the negative outlier, as after a few days of relative strength sellers are back in control of the weakest global market. European equities are spearheading the advance, with especially the battered DAX bouncing back hard, while the key US benchmarks opened with modest gains.
Shanghai Composite Index CFD, 4-Hour Chart Analysis
The Shanghai Composite now gave back most of its recent gains, and the bear market in China is well and alive, with the first major resistance level already capping the oversold rally. After the major breakdown to new multi-year lows in recent weeks, a choppy consolidation period could be ahead in China, as European and US markets work their way through the oversold momentum readings.
We expect the downtrend to resume after the correction and investors should still remain defensive towards the country.
DAX 30 Index CFD, 4-Hour Chart Analysis
We noted the positive divergence and the possible seller-exhaustion in the DAX last week, and today the German index jumped by more than 2% thanks to the improving sentiment. Angela Merkel is reportedly planning to step down from leading her after a bad result for the CDU on the regional election in Hesse.
The move, which would leave Merkel in place as Chancellor didn’t rock the German market, and with it, she would distance herself from her party and could use the last 2 years of her tenure to cement her legacy.
US Stocks Higher Despite Inflation Beat
US stocks are broadly higher after the first hour of trading, with all of the main sectors being in the green and with the Nasdaq and the S&P 500 both being up by more than 1.5%. The slightly lagging Dow also recovered a large chunk of its losses from Friday, and on a positive note, the Russell 2000, the main small-cap benchmark is outperforming for the second day in a row, so the current advance could be more than just another intraday rally attempt.
S&P 500 Futures, 4-Hour Chart Analysis
The S&P 500 is no likely headed to the strong resistance zone in the 2735-2750 zone, and even a move to 2800 would keep the downtrend intact. The Volatility index (VIX) is notably lower today, but it’s still above the key 20 level, and the broader risk-off shift is confirmed by market internals too, so long positions should only be considered as short-term trades.
EUR/USD, 4-Hour Chart Analysis
Currencies are relatively calm so far today, with the Dollar rallying against most of its peers following the higher-than-expected PCE price index, the Fed’s favorite inflation gauge. Treasuries gave back their initial gains due to the release and the bounce in stocks, even as personal income missed the consensus estimate.
The Yen is among the weaker currencies before the Bank of Japan’s meeting, as traders are betting on a dovish surprise following the turmoil in financial markets, and especially China, and as we have more and more evidence pointing to a global economic slowdown.
Major Stock Indices
Nasdaq 100 Futures, 4-Hour Chart Analysis
Dow 30 Futures, 4-Hour Chart Analysis
VIX (US Volatility Index), 4-Hour Chart Analysis
FTSE 100 Index CFD, 4-Hour Chart Analysis
EuroStoxx50 Index CFD, 4-Hour Chart Analysis
Nikkei 225 Futures, 4-Hour Chart Analysis
EEM (Emerging Markets ETF), 4-Hour Chart Analysis
USD/JPY, 4-Hour Chart Analysis
GBP/USD, 4-Hour Chart Analysis
EUR/GBP, 4-Hour Chart Analysis
AUD/USD, 4-Hour Chart Analysis
WTI Crude Oil, 4-Hour Chart Analysis
Gold Futures, 4-Hour Chart Analysis
Copper Futures, 4-Hour Chart Analysis
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