Indices Updates by Solid ECN

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US100 tests 13,000 pts ahead of GDP data​

Reading close to market estimates could be a positive for Wall Street and may help alleviate concerns around banking sectors. Simultaneously, it should be neutral for USD as it will be more reactive to Fed. A strong GDP reading could provide fuel for USD gains as it would boost odds for more hikes from Fed. This, in turn, could be negative for Wall Street. Weak GDP report may have mixed impact on Wall Street but would most likely be negative for USD.

US100 is trading in the 13,000 pts area. Yields resumed climb (drop on TNOTE) and suggest a pullback.​

 

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DE 30​

• Friday marked the end of April trading and it ended with solid gains, sending DE30 to the highest level since January 2022 and US indices to back to resistance zones. For DE30 it was the fourth straight green monthly candle meaning that each month of 2023 has been positive so far.​
• Monday trading has been subdued as trading is halted on most markets due to the Labour Day holiday. US indices are trading close to Friday’s session highs and JAP225 is adding around 0.5%.​
• The Chinese PMIs were released over the weekend and they both were below expectations. The services index slid from 58.2 to 56.4 points but more worryingly the manufacturing one dropped from 51.9 to as low as 49.2 points, just around 4 months after the China reopening. It suggests that while domestic demand picked up on reopening, the global manufacturing keeps struggling.​
• Adding to those concerns, the Australian PMI dropped from 49.1 to 48 points. However, manufacturing PMI in India expanded from 56.4 to 57.2 points in a rare showing of manufacturing strength.​
• Investors were reminded of the US banking issues last week when the First Republic Bank kept suffering deposit flight and eventually the regulator announced that the Bank would be sold. The idea was to sell the Bank over the weekend, however, the process continues as of the Monday morning.​
• The markets did not seem overly concerned though, using strong earnings reports from Microsoft and Meta to catapult stocks towards the 2023 highs.​
• FX markets are bit mixed as of today with AUD being the strongest and the JPY the weakest currency. The JPY could be under pressure after the BoJ did not change the course of monetary policy with the new chairman at the helm.​
• Crypto markets are sliding after strong gains in recent weeks while the majority of the commodity markets are down as well.​
• The calendar for today is mostly focused on the US releases with the ISM (4pm CET) the key release.​
• The week has a chance to be very eventful with the FOMC (Wednesday) and the NFP report (Friday) the main points on the calendar.​

There’s a large divergence between the US500 that is at the resistance and AUDUSD just picking up off the support zone. The Fed meeting this week should clarify the picture for the markets.​

 

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DE30​

On Wednesday, German Index DAX opened higher after a long weekend due to the Labor Day on Monday. Today's stock market session in Europe brought a continuation of the uptrend. The German DAX (DE30) started strongly after the opening bell and set new highs for this year. However, the momentum did not last long, and a few minutes after the session started, profit-taking occurred, resulting in the DE30 being traded in negative territory.

From the technical analysis point of view, on the chart a false breakout above the consolidation level occurred. After DE30 dropped below the zone around 16,060 points, the decline accelerated and the price touched the EMA100 moving average, where the bulls came into play. If the moving average is defended and a hammer formation appears on the H1 chart, there is a possibility of a retest of resistance levels around 16,060 points. On the other hand, if the formation is invalidated and the price drops below the moving average, a further decline towards last week's lows around 15,830 points cannot be ruled out.​

 

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Jap225​

Economic Outlook

Japanese NIKKEI 225 is on the rise trading near an all-time high following positive GDP data and supportive comments from country leaders. The Japanese economy grew at a faster-than-expected rate of 1.6% in Q1, surpassing the projected 0.7% growth. This strong economic performance has boosted market optimism.

The recent earnings season has been a positive catalyst for Japanese equities, supported by Warren Buffett's endorsement and improvements in corporate governance. The projected operating profit growth in the fiscal year ending March 2024 is about 6% for Tokyo Price Index (Topix) companies. Additionally, Goldman Sachs sees a potential in the Japan market, attributing the gains to corporate reforms and easy monetary policy.

The Bank of Japan (BoJ) may consider revising its Yield Curve Control (YCC) policy in the upcoming June meeting, supported by the robust GDP outcome. However, the BoJ is likely to remain patient in taking any policy actions and may wait until next year to make rate hikes, as they review recent developments in inflation and other macroeconomic data. Current interest rate is maintained at -0.1% level and has remained unchanged since 2016. The argument for the YCC policy to remain unchanged is the government's approval of an electricity bill rise, which likely will support inflation to stay above 2% for a longer period.

JAP225 (Nikkei 225) index is trading at 30,100 points, which is near its all-time high of 30,500. The price is also approaching the upper line of an uptrend channel (marked with blue line) that started in early March. The next significant resistance level should be expected at 30,500, indicating a potential target for further price gains. On the other hand, the support levels are identified at 29,300 and 28,300, which can act as price floors in case of a downward movement.

The MACD indicator, a momentum oscillator, indicates a strong bullish momentum without any signs of divergence at the moment. This suggests that the upward trend may continue, supporting the bullish outlook for the Nikkei 225 index. Traders and investors will be closely monitoring the resistance and support levels for potential trading opportunities.​

 

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DE30 Closes in on all-time highs​

European indices rally, DE30 closes in on all-time highs

European indices are rallying at the beginning of today's cash trading session on the Old Continent. This comes after a stellar Wall Street session yesterday that saw major US indices gain over 1%, with small-cap Russell 2000 jumping over 2%. Optimism on Wall Street yesterday was triggered by upbeat comments on US debt ceiling negotiations - US president Biden said that talks are progressing and he will have more news on the matter on Sunday, when he returns from G7 summit, while US House Speaker McCarthy said that default is off the table and reaching a deal this week is doable.

Major blue chips indices from Europe are trading over 0.5% higher on the day. German DAX deserves a special mention as the index outperforms regional peers with 1.5% gain. Taking a look at DAX futures (DE30) we can see that price broke above a recent trading range and reached a fresh 1-year high today. Moreover, the index is currently trading just 0.4% below all-time highs from November 2021.​

 

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DE 30​

German DAX rallied over the past two days, adding almost 2% over Wednesday and Thursday combined. The upward move was being continued on the futures market during the Asian session today as optimism over possible agreement on US debt ceiling drove equities higher. As a result, DAX futures (DE30) briefly traded above 16,300 pts mark at fresh all-time highs.

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Taking a look at DE30 chart at H1 interval, we can see that the upward move on the German index accelerated after breaking above the 15,810-16,085 pts range. While the index pulled back a bit after reaching a fresh ATH, there is still some room for gains from a technical point of view. A textbook range of the upside breakout from the aforementioned 15,810-16,085 pts trading range suggests a possibility of the upward move to as high as 16,355 pts - or around 0.6% higher from current market price.

 

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US100​

A new week has begun and there is still no agreement on the US debt ceiling. Moreover, comments made by Democrats and Republicans suggest that two sides grew more apart in their positions over the weekend. Nevertheless, talks are still ongoing and US president Biden is set to meet with House Speaker McCarthy today to look for solutions. US Treasury once again warned that deadline to reach the agreement is June 1, 2023 and failure to do so by then could risk US defaulting on its obligations. Goldman Sachs assesses that US default would happen on June 8-9, 2023 without an agreement.

Deadline to reach the deal is looming large but, interestingly, markets barely reacted to the latest setbacks and launched new week's trading little changed. This shows that there is a strong belief in the markets that the deal will eventually be reached and sides to the negotiations are just trying to win as many concessions from the other as possible. Nevertheless, failure to reach a deal this week could see markets start to get nervous.

Taking a look at Nasdaq-100 futures chart (US100) at D1 interval, we can see that the index reached a 13-month high last week. While a small pullback occurred last week, price remains close to recent high. While markets seem to ignore negative news on debt ceiling negotiations, it does not mean that positive news will be similarly ignored. Headlines suggesting that definite agreement was reached would likely trigger a positive reaction on indices with US100 possibly moving above 14,000 pts. Apart from debt ceiling talks, US tech index may also move on FOMC minutes (Wednesday, 7:00 pm BST) this week or Nvidia earnings (Wednesday, after market close).​