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Global Markets Recover, However, Risk Sentiment Barometer Remains Fragile

Global Markets Recover, However, Risk Sentiment Barometer Remains Fragile

2018-10-31 11:01:00
Justin McQueen, Analyst
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Equity Analysis and News

  • US Equity Markets Rebound
  • Cyclicals vs Defensive Stocks
  • FAANG Earnings May Extend Recovery

See our Q4 forecasts to learn what will drive price action through the quarter

Price

200DMA

RSI

IG Sentiment

Europe

FTSE 100

7141

7432

40

Mixed

DAX

11426

12444

35

Mixed

CAC 40

5087

5359

30

Mixed

FTSE MIB

19092

21982

38

-

US

S&P 500

2682

2763

39

Mixed

DJIA

24874

25104

41

Bullish

Nasdaq 100

6885

7131

39

-

Asia

Nikkei 225

21805

22429

41

-

Shanghai Composite

2602

3012

51

-

ASX 200

5830

6067

45

-

Hang Seng

24979

29229

45

US Equity Markets Rebound

Yesterday saw a notable rebound in US equity markets into the close with the DJIA moving towards the psychological 25,000 level, while the S&P 500 found support at the rising trendline from the 2018 low. The positive sentiment spilled into Asian equity markets with the Shanghai Comp and Hang Seng shrugging off the weak Chinese Manufacturing PMI, which shows an evident slowdown in the Chinese economy that continues to feel the pressure from the trade war environment. Supportive measures thus from Chinese authorities have failed to benefit Chinese bourses, which reside in a bear market.

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Cyclicals vs Defensive Stocks

In light of the recovery in US equity markets, the spread between cyclical and defensive stocks (Risk on Risk off Barometer) curbed its recent selling. However, unless there is a meaningful recovery in the spread, equity markets remain fragile.

Global Markets Recover, However, Risk Sentiment Barometer Remains Fragile

Source: Refinitiv

FAANG Earnings May Extend Recovery

After US market hours, Facebook announced their latest financial reports, which were relatively mixed with the tech giant beating on earnings, although, missed estimates on revenue, daily and monthly average users. Despite this, Facebook shares are called to open higher by 3%. Elsewhere, eyes will be on Apple who are due to report after-market tomorrow, whereby option straddles suggest an implied volatility of 6.5% (Historical share price movement has been 3.8%).

Much like the S&P 500, the rising trendline from the 2018 low continues to keep the Nasdaq 100 afloat. However, risk sentiment continues to remain fragile with a move above 7000 needed to suggest a near term bottom.

Nasdaq 100 Price Chart: Daily Time Frame (Dec 2017 - Oct 2018)

Global Markets Recover, However, Risk Sentiment Barometer Remains Fragile

KEY TRADING RESOURCES:

--- Written by Justin McQueen, Market Analyst

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

Follow Justin on Twitter @JMcQueenFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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