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Dow Jones, DAX 30, Nikkei 225 Fourth Quarter Forecasts

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Dow Jones, DAX 30, Nikkei 225 Forecasts: Bearish

  • The Dow Jones closed higher for the week, suffering minimal losses on Friday compared to the Nasdaq
  • The DAX 30 will juggle an economic recovery and an uptick in coronavirus cases in Europe
  • The Nikkei 225 may remain a laggard compared to its western counterparts

Equities Forecast

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Dow Jones Forecast

Outlook: Bearish

September saw equity markets tread lower as resurgent covid cases suppressed economic recovery hopes and US election uncertainty eroded risk appetite. Nevertheless, stocks emerged victorious in the third quarter, continuing their ascent from the covid-crash lows. With the fourth quarter upon us, can equity markets continue higher or will election uncertainty and a second coronavirus wave overwhelm bulls and accommodative monetary policy?

Dow Jones Price Chart: 4 – Hour Time Frame (May 2020 – October 2020)

Dow Jones Chart

While it is difficult to forecast directional moves with certainty, the themes and conditions that the market will have to endure are more readily apparent. To be sure, it seems the same themes that dominated September trading will continue into the fourth quarter in the form of stimulus hopes, political developments and accommodative monetary policy. Thus, the Dow Jones, S&P 500 and particularly the Nasdaq 100 look poised to continue leading speculative risk appetite in equity markets.

How does the Stock Market Affect the Economy? A Trader’s Guide

That being said, the Dow Jones finds itself in an interesting position. Lacking significant technology exposure, the Dow has missed out on some of the bullish extremes experienced by the Nasdaq, but also some of the targeted declines in the tech sector that became commonplace in September. Consequently, the Dow might be in an ideal position to benefit – relative to the tech-heavy Nasdaq 100 – in the event of a stimulus package that would lift corporations that are more closely aligned with a traditional economy.

Either way, US equities appear vulnerable heading into a historically volatile time of year. While the DAX 30, CAC 40 and Nikkei 225 juggle concerns of their own, they might enjoy a comparatively stable political backdrop that could help soothe fear. To read the complete fourth quarter forecast for the major equity markets, download the guide using the banner below.

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–Written by Peter Hanks, Strategist for DailyFX.com





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Pound Cuts Gains as U.K. PM Drags Heels on Resuming Brexit Talks By Investing.com

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© Reuters.

By Yasin Ebrahim

Investing.com – The pound cut its gains against the greenback Tuesday, as the U.K. continues to dig in its heels over restarting trade talks with the EU and parts of Britain go into lockdown to curb virus infections.

fell 0.05% to $1.2940.

U.K. Prime Minister Boris Johnson reportedly told the Greek prime minister Brexit talks will remain paused until the EU changes its stance on the discussions.

“He reaffirmed that the EU have effectively ended those negotiations by stating they did not want to change their negotiating position,” Johnson’s spokesman said following the call with Prime Minster Kyriakos Mitsotakis. “Should the EU fundamentally change their position, then the UK would be willing to talk on that new basis.”

Issues including fishing access and state aid rules have held up progress on talks.

EU negotiator Michel Barnier who just a day earlier extended an olive branch after suggesting that the bloc was committed to intensifying talks called on the U.K. to “make the most of the little time left” with just months ago until the end of the transition period at year-end.

Without a trade deal, the U.K. will trade with the EU on World Trade Organization trade terms, which many have said will hurt growth, particularly a time when Britain has resumed some lockdown to curb a surge in cases.

Johnson confirmed Greater Manchester would be going into the highest level of lockdown – Tier 3 – from 12.01am on Friday morning.

Coronavirus infections in the U.K. soared by 21,330 since Monday, the highest one-day rise since June 5.

The prime minister also had to contend with a widely expected defeat in Parliament as his internal markets bill, which seeks to undermine parts of the Brexit withdrawal agreement, was voted down.

Sterling remains vulnerable until there is meaningful progress on talks, analysts have warned.

“A true breakthrough would be the news that an agreement has been reached on the issue of fishing. That would be more suited to justifying strong Sterling appreciation as this is one of the real stumbling blocks in the negotiations. Until that is reached, I would remain cautious as a Sterling bull,” Commerzbank (DE:) strategist Thu Lan Nguyen said.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





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Trump Vs. Biden on Economies and Markets

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Trump versus Biden Policies Overview

  • The November 3 elections are around the corner, and the state of the economy thanks to the coronavirus pandemic is at the top of voters’ minds.
  • While a Trump administration would likely continuation of lower tax rates, a Biden administration might bring about the end to trade wars.
  • The composition of the Congress matters greatly, insofar as a mixed result could bring more gridlock to Washington, D.C. – regardless of whoever is the president.

A decade after The Great Recession, Americans are dealing with the worst economy since The Great Depression. Onset by the coronavirus pandemic, US growth cratered in the second quarter of 2020, with inconsistent evidence emerging of a widespread V-shaped recovery in the third quarter.

Now past the Labor Day holiday, we are officially in the US presidential election season, and the state of the economy amid the coronavirus pandemic is at the top of voters’ minds as they weigh sending back to the White House Republican Donald Trump, or Democratic nominee and former Vice President Joe Biden.

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Depending upon the outcome of the November presidential election, the US economy could take very different tracks. While there may be some agreement in terms of trade or infrastructure, Trump and Biden diverge on nearly every other economic policy facet – from taxes, to jobs, to the coronavirus pandemic recovery itself.

We outline below key areas and explain how we see them differ in a Trump or a Biden administration.

Taxes

Trump – Tax rates have been cut during the first Trump term, both at the corporate and individual level. Comments made during the campaign suggest that Trump would seek further cuts to both corporate and individual tax rates to help spur the economy’s recovery from the coronavirus pandemic.

Biden – Tax rates would be poised to go higher under a Biden administration, both at the corporate and individual level. But at the individual level, the Biden plan calls for an increase of 0.4%, while the top tax bracket would jump nearly 13%, back to levels seen under Obama.

Infrastructure

Trump – “It’s infrastructure week!” proved a well-worn quote during Trump’s first term, but nothing materialized despite repeated promises for a robust infrastructure spending bill. Trump continues to beat the drum, saying that he’d like to see a $1 trillion infrastructure program passed; the holdup may be Senate Republicans.

Biden – The Democratic challenger has released a $2 trillion infrastructure spending program, aimed at spurring development and investment in carbon-neutral and green energy solutions over four years. The plan was enhanced from its original $1.3 trillion spend over 10 years, insofar as increased spending on a shorter time horizon will enhance the US economy’s recovery from the coronavirus pandemic.

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Jobs/Coronavirus Response

Trump – The White House has been pushing for a skinny fiscal stimulus boost after the $2 trillion used to fund the CARES Act has been depleted. Against a robust automatic unemployment benefits program (seeking $300 per month, down from $600 in the CARES Act), the Trump campaign has proven hesitant about leaning into more deficit spending as the economy, particularly the labor market, has produced above-expectation results in the second half of summer 2020. Likewise, the Trump campaign has proven ambivalent about increasing federal spending to subsidize damaged tax revenue streams at the local and state level.

Biden – The economy will receive much more fiscal support under a Biden administration, insofar as plans outlined thus far suggest that Biden would seek to extend the $600 per month unemployment benefits program established vis-à-vis the CARES Act. Furthermore, a Biden administration would likely be more willing to use the federal purse to help localities and states that have seen their tax bases depleted thanks to reduced income tax and sales tax revenues.

Trade

Trump – The US-China trade warwas a hallmark of Trump’s first term. While there have been mixed signals about compliance on both sides of the deal, it is likely that a second Trump term would see the US-China trade war deepen. The trade conflict has started to take on a militaristic aspect in the South China Sea, and it would seem likely that a second Trump term would result in a rekindled US – China trade aggressions, as well as further tensions with allies like the European Union, Japan, and South Korea.

Biden – While a Biden administration would likely take a similarly hard line on China, there would likely be moderation in the US-China trade war, with some efforts at removing tariffs and trade barriers that were constructed during the first Trump term. But even if the US-China trade war doesn’t revert back to its pre-Trump status (Biden is truly starting to sound more like Trump on China), it would be likely that trade relations are normalized with allies like the European Union, Japan, and South Korea.

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Conclusion

The composition of Congress will also shape a future US economy. A Biden administration with a Democratic House and a Republican Senate will get little accomplished. Similarly, a Trump administration with a Democratic House and a Republican Senate – what we have now – will get little accomplished. Under both, even in a split Congress, it is highly likely that the federal deficit continues to rise, bringing the deficit hawks out of the woodwork.

Unless both chambers of Congress align with the president’s party after November 3 – either Biden has a Democratic House and Democratic Senate, or Trump has a Republican House and a Republican Senate – we will be stuck with gridlock, making the US economy’s recovery from the coronavirus pandemic all

the more anemic.

— Written by Christopher Vecchio, CFA, Senior Currency Strategist





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Gold Prices May Fall Further as US Fiscal Stimulus Hopes Fizzle

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GOLD & CRUDE OIL TALKING POINTS:

  • Gold prices down with stocks as US fiscal stimulus hopes fade
  • Key negotiations deadline looms, may sour market sentiment
  • Crude oil prices still languishing in a familiar trading range

Gold prices slide alongside stocks as hopes for a boost in US fiscal stimulus before next month’s presidential election soured. House Speaker Nancy Pelosi and Treasury Secretary Steve Mnuchin reportedly made progress in negotiations but that is unlikely to inspire passage in the Republican-controlled Senate, where the majority seems to favor a $500 billion effort. The Democrat-led House as well as the Trump administration are aiming for something closer to $2 trillion.

Fading fiscal stimulus hopes are coupled with a Federal Reserve that is now seemingly content to be on the sidelines after offering markets a crucial lifeline earlier in the year, even as the recovery in economic growth appears to stall. Global PMI figures from JPMorgan and Markit Economics show manufacturing- and service-sector growth slowed for the first time in five months in September. Meanwhile, Citigroup reports that economic activity data has been weakening relative to forecasts since mid-August.

Not surprisingly, this has been damaging for market-wide risk appetite. The anti-risk US Dollar traded higher against this backdrop as capital sought out its unrivaled liquidity as a bulwark against adverse volatility. That understandably pressured gold, a standby anti-fiat alternative. That benchmark bond yields did not fall against this backdrop – as might have been expected in risk-off trade – probably compounded the non-interest-bearing yellow metal’s woes. The Fed’s hands-off stance was probably on display there.

GOLD PRICES MAY FALL AS US FISCAL STIMULUS HOPES FADE

Looking ahead, US fiscal stimulus prospects are likely to remain in focus after Ms Pelosi set a Tuesday deadline for reaching agreement on any pre-election program. S&P 500 futures are pointing cautiously higher in late Asia Pacific trade but optimism may fizzle – marking for a repeat of yesterday’s cross-market dynamics – if it becomes clear that additional support is not in the cards near-term. Third-quarter earnings reports from consumer-goods giant Procter & Gamble, aerospace heavy-weight Lockheed Martin as well as tech champions Netflix and Snap Inc are also on tap.

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GOLD TECHNICAL ANALYSIS

A tepid recovery in gold prices is struggling at resistance in the 1911.44-28.82 area, marked by former range support and a falling trend line defining the bearish bias in play since mid-August. Immediate support is in the 1848.66-63.27 zone, with a daily close below that seeming opening the way below the $1800/oz figure. Alternatively, a breach of resistance may set bring on a test back above $2000/oz.

Gold Prices May Fall Further as US Fiscal Stimulus Hopes Fizzle

Gold price chart created using TradingView

CRUDE OIL TECHNICAL ANALYSIS

Crude oil prices continue to mark time below range resistance in the 42.40-43.88 area. Support is in the 34.64-36.15 zone. A top side break may set the stage for a challenge of the $50/bbl figure. Alternatively, establishing a foothold below support probably targets the 27.40-30.73 region next.

Gold Prices May Fall Further as US Fiscal Stimulus Hopes Fizzle

Crude oil price chart created using TradingView

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— Written by Ilya Spivak, Head APAC Strategist for DailyFX

To contact Ilya, use the comments section below or @IlyaSpivak on Twitter





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