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Equities Pressured By Hawkish Central Bank Backdrop 

Global equities benchmarks have seen a tricky start to the week with most indices under pressure across the early European session on Tuesday. Against a backdrop of hawkish central bank expectations, elevated inflation, and global supply chain issues, equities have struggled recently and looked vulnerable to further downside near term while the current market view remains intact.

Yesterday, Fed’s Jefferson was heard echoing the sentiment of other Fed members recently in calling for the central bank to push ahead with further tightening in order to bring inflation down sustainably. These comments were also shared by ECB board member Vujic who made the same call on the ECB to act while inflation remains at elevated levels.

In the UK and Europe, the main story this week is the development within the Brexit landscape. Yesterday, EU and UK leaders agreed on the ‘Windsor Framework’ which provides a new set of trade terms for Northern Ireland. The deal has been hailed as a major triumph within the Brexit process and is now awaiting a vote in UK parliament with the hopes that the deal will receive the necessary backing and help bolster trade between the UK and EU.
 

Technical Views

DAX

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For now the market remains within the rising wedge pattern which has framed the recovery off last year’s lows. The 15642.76 level continues to act as resistance, stalling the rally, while 15163.41 acts as support. Given the bull trend, the focus is on an eventual break higher while current support holds. Below here, however, focus shifts to 14703.98 next.

S&P 500

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The reversal lower from the 4153.50 area has seen the market trading back down below the rising channel. Price is now fast approaching support at the 3910 area which bulls will need to defend to stop a deeper move back down towards 3647 and last year’s lows.

FTSE

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While the market has softened from the recent highs above 8000, the index is still within the bull channel, keeping the focus on further upside. 704.7 is acting as a magnet here. However, should we drop lower, 7678.8 is the big support to note with the broader outlook still bullish while we hold above this level.

NIKKEI

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Despite dropping back below the level, the Nikkei is now once again attempting to breakout above the 27422.9 level. With the bear trend line and retest of the broken bull trend line just above, there is plenty of resistance for the market to contend with before hitting the next bull objective at 28356.6. 

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