Stocks Rally On Strong US Earnings Season
Global equities benchmarks are mostly in the green across the early European trading on Tuesday. Stocks have been well supported in recent sessions by better-than-expected US earnings reports, headline by the strong performance from JP Morgan and Citigroup reported on Friday. Strong profits from key US banks is helping downplay the recent banking sector turmoil we saw, offsetting fears of a deeper crisis developing. While banks were seen boosting their capital buffers (typically carried out in anticipation of a recession or period of economic uncertainty), strong gains across Q1 helped backstop confidence.
This week, traders will continue tracking developments in the US earnings landscape, particularly the banking and tech sectors. However, while better performance is encouraging for risk sentiment, yields have also been rising in line with more hawkish Fed expectations. Given the strength of current performance (particularly banks) in Q1, the market has now moved to price in a .25% hike in May with odds on a further hike in June also lifting. This dynamic is stifling US stocks a little more than their global counterparts, consequently.
Better data out of China this week has also been welcomed by traders. Chinese quarterly GDP was seen rising to 4.5% from 2.9% prior, well above the 4% the level the market was looking for. With the post-reopening recovery gathering momentum, traders are hopeful of a positive knock-on effect for global trade going forward.
Technical Views
DAX
The breakout above the 15642.76 level continues to hold for now. With momentum studies bullish, the focus is on a continuation higher while price holds above that level with 16278.35 the next target for bulls. To the downside, should we drop back under that level, 15163.41 is the next support to note.
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S&P 500
The rally in the S&P has seen the market testing above the 4153.50 level with price holding above the level for now. Momentum studies remain bullish here, suggesting the bias remains in favour of a further topside push. The next area to watch for bulls will be the 4305 and 4396.25 zones.
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FTSE
The rally in the FTSE off the 7337.6 level continues to move higher this week. The market recently broke out above both the bear trend line from 8023.5 highs and the 7834.7 level. While above here, focus is on a test of the YTD highs around 8023.5 next.
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NIKKEI
The rally in the Nikkei has seen the market bouncing sharply off support at the 27422.9 level. Price is now testing above the 28356.6 level and looks poised for further gains while above here, in line with bullish momentum studies readings.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.