Morning Brief: Dow Jones, DAX Index, and Nikkei 225 Extend Rally as FTSE 100 Retreats

Rates

Asian stocks soared to a 29-month high as investors reacted to the mixed PMI data from China. The manufacturing PMI declined slightly to 51.0 from the previous 51.1 while the non-manufacturing PMI rose to 55.2. A PMI reading of 50 and above is usually a sign of expansion in the industry. The stocks also rose after Warren Buffett made a $6.5 billion bet on Japan sogo shoshas including Mitsui and Mitsubishi. The Nikkei 225 rose by 1.75% while the Hang Seng rose by 1.20%.

DAX index, FTSE 100, and CAC 40 mixed

In Europe, the major indices are mixed in the futures market. Futures tied to the DAX index and CAC 40 are up by 0.45% and 0.05%, respectively while those tied to the FTSE 100 are down by 0.50%. The pan-European Stoxx 50 index is up by 0.60%.

European stocks are rising in part because of the positive economic data from China. As the second-biggest economy in the world, signs of strength are usually seen as a positive to European and American equities.

The stocks are also rising, in part because of the policy shift by the Federal Reserve. In a statement at the virtual Jackson Hole summit on Thursday, Jerome Powell said that the bank will allow inflation to move slightly above the 2% target. This policy shift is seen as being positive for stocks because it will incentivise people and investors to put their money to work. And there is a possibility that the European Central Bank (ECB) and other central banks will follow the footsteps of the Fed.

The DAX index and Stoxx 50 rose by 1% and 0.5% in August while the FTSE 100 declined by 2.50%.

Dow Jones, S&P 500, and Nasdaq 100 extend rally

The Dow Jones, S&P 500, and Nasdaq 100 have gained by more than 3%, 3.65%, and 6.50% in August. That makes it one of the best-performing Augusts in recent years. And, the stocks are extending the rally. Futures tied to the Dow Jones, S&P 500, and Nasdaq 100 are up by more than 0.45%. Analysts believe that the rally will continue as the Fed continues to support the market. Also, the weaker US dollar has contributed to the rally. The US dollar index has fallen by more than 0.10%.

Dow Jones technical outlook

The Dow Jones is in a strong upward trend. The daily chart shows that the index has risen in the past five consecutive days. It has moved above the 78.6% Fibonacci retracement level. Also, it is above the 50-day and 100-day exponential moving averages. It seems like bulls are in total control, which means that the index is likely to continue rising as they attempt to move above this year’s high of $29,595.

Furthermore, the Nasdaq and S&P 500 have both pared back their yearly losses. On the flip side, a move below the 78.6% retracement at $27,185 will invalidate this trend.

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Dow Jones Technical Chart

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