Risk Appetite Recovers Into February

Benchmark global equities indices have started the week on a better footing amidst a generally improved backdrop. Following on from the sell off seen last week amidst uncertainty linked to the Reddit trading controversy, most indices have seen demand kicking in again this week fueled by better risk appetite.

The focus this week is on US fiscal stimulus negotiations as the two sides begin working on agreeing a deal. Republicans are pushing for a lower amount than Biden's proposed $1.9 trillion figure though, so long as the administration doesn't lose any centrists, they should be able to get it through congress via a simple majority.

The global vaccination effort is well underway this week. The US has now vaccinated more people than have had COVID so far, hopefully marking a turning point in the fight against the virus. The UK has announced this week that the second wave has now peaked with its vaccination effort currently on track to hit government targets. Traders will now be looking to the BOE this week though easing expectations have dropped somewhat amidst the success of the vaccination drive.

Controversy around the Reddit WSB trading movement is still getting traction this week with the group having affected a rally in silver yesterday to its highest levels since 2012 before reversing. However, the broader impact seems more contained this week, not troubling equities investors as much as last week.

Technical Views

DAX

The rally off the 13322.69 level in the DAX has seen price breaking back above the 13744.70 level this week. The recent move lower is viewed as corrective and while above here, the near term view is for a continued push higher towards the 141287.76 level.

S&P500

The S&P has bounced back firmly following the downside break of 3714.50 last week. Finding buyers on the approach of the rising trend line from 2020 lows, price is now heading back towards the 3821.75 level keeping the near term view geared towards a further breakout.

FTSE

The sell off in the FTSE since the 2021 highs has seen price breaking below the 6640.6 level and back down to test the 6414.6 level which is holding as support for now. Bulls will need to see price quickly back above the 6640.6 level to avoid a deeper move towards 6123.3 next.

NIKKEI

The downside correction in the Nikkei found support into the 27701 level, taking price back up to challenge the 28377 level resistance. While within the broader bullish channel, the outlook remains for a continuation higher in the near term.

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