After an upward trend that has lasted for at least five quarters on the equity markets, even a physiological pause was predictable, according to IG’s mid-year outlook, previewed by milanofinanza.it. In the forecasts for the second half of this year, IG experts believe that as long as central banks, especially the Fed, ECB, Bank of England and Bank of Japan, will continue to inject liquidity into the system and maintain an ultra- dovish, there is still scope for further upward moves for equity indices to new all-time highs. These expectations are built on a base scenario that provides for an easing of tensions due to the coronavirus pandemic thanks to the efficient vaccination campaigns carried out in industrialized countries. Ftse Eb
The trend of the Italian index will depend on many factors, some exogenous to the Italian economy and others endogenous, explained Filippo Diodovich, Senior Strategist of IG. For the exogenous elements it is worth mentioning: global economic growth, the development of vaccination campaigns and the ability of vaccines to protect against new variants (especially the Delta that will become dominant in the coming months), the monetary policies of central banks, especially the ECB ( pace of purchases of government bonds in the Pepp plan) but also of the Federal Reserve which could soon begin a process of tapering.
The endogenous factors of the Italian economy are mainly linked to the Draghi government if it is able to carry out the reforms necessary to allow Italy to relaunch productivity (thanks also to the funds that will come from the NGEU fund for recovery and national resilience) and measures are in place to support the Italian micro-enterprise system. “The Draghi government must also be credible and maintain political stability in the country, avoiding majority crises and thus speculative attacks especially on Italian government bonds. A new debt crisis in Italy could be a destabilizing element for the Italian financial system”,
The four main players that will participate in new mergers are: Unicredit, Bper, Banco Bpm and Banca Mps. “With a possible outsider like Mediobanca who could enter into some negotiations on a possible marriage with some big names in the sector”, Diodovich hypothesized according to which the speculative appeal on the Italian banking sector could favor a positive trend for the Italian Ftse Mib index closely linked to the performance of financial stocks.
From a technical point of view, a peremptory victory of the resistance positioned at 25,924, the high of June 8, “could create the conditions for an extension in the direction of long hypothetical objectives at 27,180, a projection of the width of the horizontal band that had contained prices. in the eight weeks between the end of March and the end of May “, Diodovich predicted, adding:” above 27,180 the green light towards the ambitious target of 28 thousand points. This technical scenario would begin to falter with the bearish break-out of the support at 23,900, bottom tested five times recently but also in recent months, a condition that could lead to a decline towards the next supports located at 22,644 “, concluded Diodovich. Ftse 100
After a particularly difficult 2020 compared to other global markets, the most important index in the UK has made a good recovery. Since the announcement of an effective vaccine to fight Covid-19, and after the change in the US leadership, the index has gone better and better, despite the fact that even now it is still far from the other indices of Western countries in terms of performance, even including dividends, noted Chris Beauchamp, IG’s Chief Analyst.
The most striking aspect of the Ftse 100, over the past year and beyond, is that its main limitations have become notable virtues, moreover in a very short time. Throughout the summer of 2020, there was nothing but discussion of how the index of the largest British stocks had been far outstripped by US stocks, in particular by technology ones and especially by Apple. At one point it was seen that Apple was worth much more than the entire Ftse 100. “The index certainly had lost a lot of appeal. While Wall Street could boast astronomically performing stocks like Amazon and Apple, the Ftse 100 looked like a lump. of old-fashioned mining companies, oil companies and banks,
While the virus held the world in check, the big global winners were those companies that made money from using the internet, for shopping or socializing. In the FTSE 100, the only representative of the sector was Ocado, who saw a huge rebound in his shares by the time millions of Brits started shopping online. “But in terms of weighting, Ocado represents only a small part of the index, so its support for the FTSE 100 was not enough,” Beauchamp said.
Meanwhile, companies tied to the real economy suffered, and when the Dow, S&P 500 and Nasdaq took off, the Ftse 100 continued to flounder. “This all changed in October / November 2020. The arrival of a real vaccine meant that, however distant, an end to the pandemic and lockdowns was a real possibility. Joe Biden’s election as US president promised, moreover, to enter a new era of fiscal stimuli, which would have revived both the US and the global economy “, emphasized Beauchamp.
Suddenly, the old economy of physical goods and buildings (among other things) regain popularity, resurrecting the Ftse 100. But years of disappointing performance have left their mark. In the last five years, the index had already lost ground compared to its competitors, so in the last year the gap has only widened. “The FTSE 100 is far behind, to the point that, in order to be able to get even closer to its slower competitors, it still has a long way to go. But maybe there is some glimmer of optimism. The global economy is probably at the beginning of a new phase of growth. Despite the increase in cases of the Delta variant, the global vaccination campaigns are bearing fruit, and the
The difficult summer of 2020, the IG expert said, “looks like a necessary correction to the big rebound from 4,790 that started in March 2020, with an October low at 5,500 followed by the current strong rally to an annual high. now the gains have stopped below 7,200, but with the summer, usually a weaker performance period for equities, towards the upward trendline after March 2020 there could be a decline towards 6,500 “, Beauchamp predicted. . On the positive side, “a new push above 7,200 opens the way to the previous peaks of 7,690 (from the beginning of 2020) and then to 7,900, the all-time highs of the beginning of 2018. From the point of view of relative performance, the Ftse 100 could continue to struggle compared to peers,Dax
Currently, according to Christian Henke, Senior Analyst at IG, the German index seems rather lacking in enthusiasm. This is due on the one hand to the constant fear of rate hikes in the United States, and on the other to the imminent summer slowdown on the Frankfurt Stock Exchange. Despite the misgivings, “the Dax is firmly in bullish territory and its rally could very well continue over the longer term,” Henke suggested. The crucial point was the first quarter of the year. At the end of March, the main German index managed to definitively eliminate two important resistances.
“One was the high of 13,534 points hit since the last quarter of 2017, the other the rising resistance line currently at 14,420 points, drawn since the 2000 peak. The first hurdle has been holding the Dax for years. Although the resistance line was breached in 2018 and 2020, it was not on the basis of a closing price, for example at the end of the quarter in question. The index never breached this level until early 2021. “, Henke noted that the Dax could continue to rise towards 17,700 points, a level at which the previous bullish line of 2009 stands, which returns to decline in the autumn of 2018.
It is currently in the lateral phase. “The upper limit of the current rather static market phase is the rising resistance line at 15,675 points. Below, the ascending line of the 13-day exponential average, currently at 15,518 points, and the previous all-time high of 15,501 points from the goal. of April of this year, limit the downside. A technical decision and therefore still pending. To continue the bullish movement, the all-time high of 15,733 points since the beginning of June, and the subsequent record of 15,806 points since June 14, should be outbid on the basis of a closing price, “Henke said. “Only then could the index move towards 16,000 points. At 15,948 points, at the moment the level and the Fibonacci level of 161.8% (extension)”.
In Germany, the summer holidays will begin shortly. This is when most investors go on vacation as well. Over the next three months, trading volume on the Frankfurt Stock Exchange is usually quite low and seasonality marks the beginning of the summer lulls. This all starts at the end of July and statistically lasts until the beginning of October. Subsequently, over the last thirty years the Dax has always started the autumn rally, which then becomes the famous end-of-year rally. “However, it must be said that seasonal patterns may also not be present, as the last year has shown. Despite all the concerns surrounding the imminent end of ultra-expansionary monetary policy, the Dax shows its bright side in the overall chart. In the near term, the bullish momentum appears to have faded, in part due to the impending phase of seasonal weakness. In the medium and long term “, concluded Henke,” the uptrend remains intact “. (Reproduction reserved)
