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S&P 500, DAX 30 and FTSE 100 Forecasts for the Week Ahead

S&P 500, DAX 30 and FTSE 100 Forecasts for the Week Ahead

2020-04-26 12:00:00
Justin McQueen, Analyst
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SP500 Price Chart

S&P 500, DAX 30, FTSE 100 Analysis and News

  • S&P 500 | Are we following 2008?
  • DAX | ECB Takes Center Stage After EU Summit Failure
  • FTSE 100 | Brexit Risk Premium Cannot Be Forgotten
Equity index performance chart

Source: DailyFX

Economies are now beginning to look at re-opening, however, the question remains as to what a post-lockdown world will look like. This is particularly tricky given the risk of a second wave of COVID-19 infections. Over the coming week, economic data will provide further evidence as to just how severe the impact of COVID-19 and subsequent lockdown measures have been across the globe. Focus on US and Eurozone GDP figures, alongside the ISM Manufacturing Survey. In light of recent sentiment surveys (Markit PMI), it is widely expected that economic growth will show a sizeable contraction. On a stock-specific front, Apple is due to announce its earnings on April 30th.

S&P 500 | Are we following 2008?

The past week has seen modest losses for the S&P 500 (2.7% at the time of writing) as hopes of a potential vaccine for COVID-19 in the short-term had been dampened after Gilead’s drug failed at its first trial. That said, while equity bulls may take comfort from the pullback in volatility, as we have noted previously, the peak in the VIX does not necessarily mean the bottom for the equity market. As such, given that the macro-backdrop remains weak (data to confirm as much), this begs the question as to whether we are following the 2008 pattern.

US 500 MIXED
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily -10% 0% -3%
Weekly -2% -7% -6%
What does it mean for price action?
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Month-end rebalancing may also play its part in curbing further upside in equities as investors look to rebalance their portfolios. Of note, US equities have gained 7-8% since the beginning of April.

Figure 1. Is this a Bear Market Rally?

S&P 500 since VIX peak versus 2008

Federal Reserve in Focus

Details of the Federal Reserve policy meeting will be announced on Wednesday. However, while there are no expectations of fresh monetary policy measures, given the significant stimulus already announced, eyes will be on any changes to current credit measures. Alongside this, the Fed will also likely reaffirm its commitment to stand ready and ease further if necessary.

S&P 500 Price Chart: Daily Time Frame

S&P 500 price

Source: IG Charts

DAX | ECB Takes Center Stage After EU Summit Failure

Following the lack of progress made at the EU Summit, the focus will shift back to the ECB with Chief Lagarde expected to elaborate on the potential implications that the “Too Little Too Late” (in Lagarde's own words) will have on the ECB. With the ECB already announcing crisis tools, little is expected in the way of new policy measures at this weeks meeting. Particular focus has been on the Bund/BTP spread, which had widened to the highest level since the ECB’s PEPP announcement.

Germany 30 BEARISH
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily -1% -14% -10%
Weekly -1% -4% -3%
What does it mean for price action?
Get My Guide

Figure 2. Watch the Spread

Bund BTP Spread

DAX 30 Price Chart: Daily Time Frame

DAX 30 price chart

FTSE 100 | Brexit Risk Premium Cannot Be Forgotten

While Brexit may have been easily forgotten due to the focus on COVID-19, this week provided a reminder that Brexit is still a key risk to the UK. Round 2 talks yielded little in the progress with both the EU and UK stating that Brexit stances remain wide apart. The next round of talks will be from the week beginning May 11th, but expect Brexit risks to become elevated in the run-up to the June 30th extension deadline. Key resistance situated at 2900-50.

FTSE 100 BEARISH
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 30% -25% -4%
Weekly 11% -8% 1%
What does it mean for price action?
Get My Guide

FTSE 100 Price Chart: Daily Time Frame

FTSE 100 Price chart

Source: IG Charts

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--- Written by Justin McQueen, Market Analyst

Follow Justin on Twitter @JMcQueenFX

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