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Equity Analysis and News

  • Defensive Stocks Outperform Cyclicals
  • S&P 500 | Enters Correction Territory
  • FTSE MIB | EU vs Italy
  • FTSE 100 | Brexit Uncertainty Persists

Price

200DMA

RSI

IG Sentiment

Europe

FTSE 100

7044

7462

14

Bearish

DAX

11569

12522

23

Bearish

CAC 40

5080

5379

20

Bearish

FTSE MIB

18939

22159

25

-

US

S&P 500

2768

2768

30

Bearish

DJIA

25379

25147

34

Bearish

Nasdaq 100

7155

7129

40

-

Asia

Nikkei 225

21090

22435

25

-

Shanghai Composite

2598

3023

39

-

ASX 200

5665

6067

18

-

Defensive Stocks Outperform Cyclicals

Another week of volatility as equity markets continue its descent. While US authorities continue to suggest that the move lower in stock markets is a healthy correction, a continuous decline may begin to provide angst among officials. The deteriorating risk sentiment looks set to persist as defensive stocks continue to outperform cyclical stocks as reflected in the spread between the US Industrial Sector ETF and US Consumer Staples ETF (Risk Sentiment Proxy).

Global Equity Rout to Persist with eyes on BoE, Italy and Brexit

S&P 500 | Enters Correction Territory

Having erased its gains for this year, the S&P 500 quickly moved into correction territory, falling 10% from its all time high. Rising concerns over the global growth prospects continue to weigh on US equity markets with soft tech earnings also adding to investor angst. The sentiment for US markets look to remain bearish in the near term as uncertainties regarding trade wars, Brexit and Italy persist, while US Mid-Term elections will also garner attention in the coming days. On a technical note, bears will be eying a close below the rising trendline from the 2018 low, which leaves the index vulnerable to testing 2600 level to the downside.

S&P 500 Price Chart: Daily Time Frame (Jan – Oct 2018)

Global Equity Rout to Persist with eyes on BoE, Italy and Brexit

FTSE MIB | EU vs Italy

Italian assets remain under pressure as the EU and Italy lock horns over Italy’s expansive budget. Investors will react to S&P’s sovereign credit rating decision, which could see a downgrade by one notch, similar to recent actions taken by Moody’s. However, while this may lead to initial selling in the FTSE MIB, markets have largely priced in a potential downgrade from S&P, which suggests that the FTSE MIB may in fact see a slight bounce. The February 8th swing low at 18420 is the initial target for sellers, which has been rejected previously. As sentiment suggests selling looks to resume, this level may indeed be tested yet again.

FTSE MIB Price Chart: Daily Time Frame (Sep 2016 – Oct 2018)

Global Equity Rout to Persist with eyes on BoE, Italy and Brexit

FTSE 100 | Brexit Uncertainty Persists

The FTSE 100 is on course to test YTD lows situated at 6840 as Brexit uncertainty persists. The following will see the focus turn to the Bank of England’s quarterly inflation report. Given the recent weakening in UK data, coupled with the global softness, the central bank could potentially lower their economic growth forecasts, while also downgrading their inflation outlook as CPI prices continue to dip. Elsewhere, eyes will be on the fiscal stance at the beginning of the weak with the Chancellor set to announce the latest Autumn budget.

FTSE 100 Price Chart: Daily Time Frame (Jan 2018 – Oct 2018)

Global Equity Rout to Persist with eyes on BoE, Italy and Brexit

RESOURCES FOR FOREX & CFD TRADERS

Whether you are a new or experienced trader, we have several resources available to help you; indicator for tracking trader sentiment, quarterly trading forecasts, analytical and educational webinars held daily, trading guides to help you improve trading performance, and one specifically for those who are new to forex.

--- Written by Justin McQueen, Market Analyst

To contact Justin, email him at Justin.mcqueen@ig.com

Follow Justin on Twitter @JMcQueenFX