Equities in stabilization mode – Market Overview

Equities in stabilization mode – Market Overview

The markets remain without significant movements today, through stability that has been the dominant note since the beginning of the year.

Investors are on the lookout for two events that will take place today: the intervention of Federal Reserve Chairman Powell in a webinar with Princeton University in which the main topic will be monetary policy and therefore will be able to give clues about the future evolution of interest rates, especially regarding the inflation target.

As we said in previous articles, analysts are beginning to appear in the market who anticipate a change in monetary policy as early as the end of this year. It is one reason why there is a significant rally in the yields of US treasury bonds. Depending on Powell's statements. It could be an essential element that influences the market.

The other event is Biden's appearance, at which he could talk about the fiscal stimulus package. Yesterday the CNN chain spoke of an amount of 2 trillion Dollars for this budgetary policy measure. It must be considered that both facts are interconnected.

The greater the fiscal stimulus package, the more likely the Federal Reserve will withdraw its expansionary monetary policy earlier than expected, and this would be reflected, as is already happening, in long-term interest rate hikes, which in turn would have a direct and positive impact on the price of the US Dollar.

Without relevant economic figures, all the eyes of the market will be attentive to these two appearances.

EUR /USD continues to trade since yesterday above the 1.2150 support line in a very narrow price range. Market participants are waiting for news that can boost the pair one way or the other.

Indeed, the announcement of a larger fiscal stimulus package would immediately mean strengthening the Dollar that could take the pair to the next supports in the 1.2060 and 1.2000 area. To this must be added the weakness of the European economy still without giving clear signs of recovery.

Germany's annual GDP published today shows a fall of 5%, somewhat less than what was initially expected, but it is still a significant drop. With the recently adopted lockdown measures in Germany and most European countries, recovery is still a long way off.

The German economy minister Almaier declared today that economic growth would be weaker than expected for this year. In this sense, and if the situation continues like this, it will be interesting to know the comments that the members of the ECB may make shortly, for now, some of them have already stated that they will maintain their ultra-expensive monetary policy even with inflation rebound above the 2% target, something that should generally be considered harmful for the price of the Euro.

Sources: BK Asset Management, Forexlive.com.

This information/research prepared by Miguel Ruiz (“the research analyst”) does not take into account the specific investment objectives, financial situation or particular needs of any particular person. The research analyst primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views and consequently any person acting on it does so entirely at their own risk.

The research provided does not constitute the views of JME Financial Services (Pty)Ltd nor is it an invitation to invest with JME Financial Services (Pty)Ltd. The research analyst also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report.

As of the date the report is published, the research analyst and his/her spouse and/or relatives who are financially dependent on the research analyst, do not hold interests in the securities recommended in this report (“interest” includes direct or indirect ownership of securities).

The research analyst in not employed by JME Financial Services (Pty)Ltd. You are encouraged to seek advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit that conforms to your specific investment objectives, financial situation or particular financial needs before making a commitment to invest.

The laws of the Republic of South Africa shall govern any claim relating to or arising from the contents of the information/ research provided.

JME Financial Services (Pty) Ltd trading as ZA.CAPEX.COM acts as intermediary between the investor and Magnasale Trading Ltd, the counterparty to the contract for difference purchased by the Investor via ZA.CAPEX.COM, authorised & regulated by the Cyprus Securities and Exchange Commission with license number 264/15. Magnasale Trading Ltd is the principal to the CFD purchased by investors