Yesterday, it was poor Chinese export data that sank equities. Today, it is Chinese tax cuts that buoyed equities. It shows how dependent global equity markets are on China these days.
With the risk tone now set, equity indices in Europe and US rebounded from yesterday’s close. For the Dow Industrials, the index remains beneath the key round number level at 24,000. This level was the prior support. Thus we expect some bears to mount a counter attack here. Also, remember that there are lots of ‘stale bulls’ above 24,000, who may be desperate to get out. So expect Dow’s recovery rally from here to be choppier that the V-shaped rebound it enjoyed earlier this year. Watch to initiate trading buy on setbacks.
As an aside, it is the Brexit vote later today. Expectations are low about the PM deal. Investors are hoping that Brexit can be delayed. This helps Sterling/USD to sustain its breakout above 1.280 (see below).
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Jackson has over 15 years experience as a financial analyst. Previously a director of Stockcube Research as head of Investors Intelligence providing market timing advice and research to some of the world largest institutions and hedge funds.
Expertise: Global macroeconomic investment strategy, statistical backtesting, asset allocation, and cross-asset research.
Jackson has a PhD in Finance from Durham University.