Key Talking Points:
- Vaccine jitters cause investors to be more defensive
- Positive Brexit news keeps UK assets supported
- Bullish momentum is stalling in some European indices
The same old topics are the ones driving equity markets into the weekend, as vaccine news is starting to confuse investors despite keeping markets supported going forward. News broke out towards the end of yesterday’s session that Pfizer had to cut its planned delivery targets on account of supply issues, which cause most major indices to retreat from daily highs.
Today’s session is expected to be a quiet one on the data front, with US non-farm payrolls being the one data point to focus on today. Forecasts are for 589 thousand jobs created in the month of November, down from 638 thousand in the previous month, but if ADP figures are anything to go by, we might see actual job creation fall short of expectations as Wednesday’s figure came in at 307 thousand.
FTSE Mid 250 Forecast
The FTSE Mid 250 was the biggest winner of yesterday’s session in Europe and there are likely a few factors attributed to this. First of all, positive Brexit headlines were keeping UK assets supported as news reports came out that one of the three issues in Brexit negotiations was considered to be resolved, meaning that a deal could come as early as next week.
Secondly, the UK government has been the first European country to fast-track the approval of the Pfizer-BioNtech vaccine, hoping to start distribution within a few days, making investors hopeful about returning to normal as quickly as possible. And lastly, the UK has officially come out of lockdown and has now entered a 3 tier system, allowing more freedom to some parts of the country.
But we must be conscious that all these factors can quickly falter and sour sentiment, which means investors should be prepared for increased volatility with regards to Brexit and vaccine headlines in the days to come.
Technically, the FTSE Mid 250 is in a healthy position having been able to push above the 76.4% Fibonacci with ease. The index has seen higher lows this week which points to continued bullish momentum, but overbought conditions remain prominent on momentum indicators, so quick price reversal cannot be discarded.
FTSE Mid 250 Daily Chart
IBEX 35 Forecast
Elsewhere in Europe, the European Union has come under some pressure recently as they have received some criticism for not acting as quickly as UK regulators for vaccine approval, despite them arguing they are undertaking a more extensive review of the drug. This may keep European equities slightly subdued compared to the FTSE, but recent euro strength has also come up as a key issue the ECB is fighting, given it undermines the rate of recovery of majority exporting countries like Germany.
In Spain, new cases of coronavirus have come down significantly and is now one of the countries with smaller numbers in Europe. That said, the impact on the tourism sector has been severe and expectations going forward are for a slow recovery into the summer season, so despite there being room for recovery, this is likely to take its time.
IBEX 35 Daily Chart
From a technical standpoint, the IBEX 35 has done a good job at closing the gap with its European counterparts, having pushed above the 50% Fibonacci level and the long-term resistance at 8,000. Looking ahead, further upside is expected but momentum has stalled at around the 8,280 mark, just shy of closing the coronavirus gap seen back in March. I still believe we need to see a close above the 61.8% Fibonacci at 8,450 in order to be able to capitalize further gains, but further sideways trading can be expected in the next few days. To the downside, support remains solid at the 8,000 mark. Traders should be aware that Monday and Tuesday next week are bank holidays in Spain so trading volumes may be lighter.
CAC 40 Forecast
Looking at the French stock index, we see a similar picture to the IBEX 35, where upside momentum has stalled and the index seems to be in consolidation. Short-term support on the 76.4% Fibonacci at 5,500 remains, whilst further upside may be met with resistance at 5,705. Looking at momentum indicators, the stochastic shows there is still further room to grow before overbought conditions begin to show, and moving averages are placed in descending order so further buyer support is expected.
CAC 40 Daily Chart
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--- Written by Daniela Sabin Hathorn, Market Analyst
Follow Daniela on Twitter @HathornSabin
