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Equities continue their rough end to Jan and start to Feb. The UK Index has broken below 7475 to extend a week-long falling channel (-3%) that has taken UK blue-chips 4.3% from mid-Jan’s 7800 peak and back close to mid-Dec’s pre-Santa Rally lows. All our major indices are in the red, the UK Index outperforming while Germany’s DAX underperforms.
Ever rising bond yields (multi-year highs) is one reason for equity under-performance, as bonds continue to reverse from multi-decade and QE-fuelled lows, reacting to expectations of an accelerating US economy and more Fed rate hikes, finally offering better relative returns versus what many had regarded as overvalued stocks.
Another culprit in Europe is persistent GBP and EUR strength as the USD remains under pressure. The latter derives from reasons including; 1) waning relative Fed hike potency vs peers, already done hard work, others also normalising to catch up; 2) US issuing more debt to fund rising deficit under Trump, 3) higher oil price (higher value $ sales), and 4) Rotation out of overvalued US stocks after a strong Trump tax cut inspired Santa Rally flowed into Jan, only for Q4 results season to deliver some disappointments, dealing a blow to general sentiment and exacerbating existing hindering FX trends.
The UK UK Index is being dragged lower by the likes of BATS (breach of support, strong GBP), BT/AZN (results), GLEN (metals lower), HSBC (Deutsche Bank results), GSK (AZN results read-across) while we have insufficient buoyancy from gains by Royal Dutch Shell (bounce after results, strong oil price) and VOD (pref. over BT).
The UK Index 100 holds a falling channel towards 7400. The DAX 30 looks inclined to make a test of 2018 lows. Dow Jones Futures have found support at 25900. Gold has pulled back from a bullish test of $1350 as USD comes off its lows.
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The UK Index 100 holds a falling channel towards 7400.
Solid Green line
Possible support
Solid Red line
Possible resistance
Important: The information provided above does not constitute advice or opinion and must only be regarded as technical observations.
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The DAX 30 looks inclined to make a test of 2018 lows of 12740.
Solid Green line
Possible support
Solid Red line
Possible resistance
Important: The information provided above does not constitute advice or opinion and must only be regarded as technical observations.
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Dow Jones Futures have found support at 25900.
Solid Green line
Possible support
Solid Red line
Possible resistance
Important: The information provided above does not constitute advice or opinion and must only be regarded as technical observations.
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Gold’s has pulled back from a bullish test of $1350, as USD comes off its lows.
Solid Green line
Possible support
Solid Red line
Possible resistance
Important: The information provided above does not constitute advice or opinion and must only be regarded as technical observations.
Click here for help with Support & Resistance Click here for help with technicals
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