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Morning Brief: Dow Jones, FTSE 100 and DAX Rally Eases on Stimulus Fears

Global equities are mixed today as investors continue focusing on US stimulus and new infections in the White House. In the United States, futures tied to the Dow Jones are up by just 0.10% while those tied to the S&P 500 and Nasdaq 100 are down by ~0.10%. In Europe, DAX index futures are down by 0.20% while the FTSE 100 is down by 0.10%. The pan-European Stoxx 50 is up by 0.15%. In Europe, the Nikkei 225 and Hang Seng have gained by more than 0.50%.

Dow Jones wavers on stimulus stalemate

The Dow Jones index rose by more than 465 points yesterday as investors reacted to Donald Trump’s improvement. The S&P 500 and Nasdaq 100 also rose by 1.80% and 2.3%, respectively. Investors were reacting to news that President Trump’s health had improved, which partially removed some of the then risks.

The equities also rose because of the strong economic data from the United States. Data from the Institute of Supply Management (ISM) showed that the non-manufacturing PMI rose to 57.8 in September. That was a better number than the consensus estimates of 55. It was also the fourth consecutive month that the PMI has been in the green.

In addition, investors were pleased with the new deals. Yesterday, Bristol Myers Squibb said it would acquire MyoKardia in a $13 billion deal. In a smaller deal, Vistaprint acquired 99designs while NEM acquired Aveloq.

Today, the Dow Jones and other indices are wavering because stimulus talks between the White House and congress appear to have stalled. While Pelosi and Mnuchin met yesterday, nothing concrete came from those talks.

The Dow Jones, S&P 500, and Nasdaq are trading at $28,090, $3,392, and $11,450, respectively.

Elsewhere, in Europe, the DAX index, FTSE 100, and CAC 40 are all under pressure as investors continue to focus on stimulus.

Economic calendar

Unlike yesterday, the economic calendar will be relatively calm today. The EIA will release its short-term energy outlook that will have an impact on crude oil price. In the United States, the Commerce Department will release the latest export and import data that will have minimal impact on US equities and the dollar. In Europe, Markit will release the UK construction PMI that will also have minimal consequences to the sterling GBPUSD.

Dow Jones technical outlook

The four-hour chart shows that the Dow Jones has been in a strong upward trend since September 25 when it formed a double bottom pattern at $26,542. The price has moved above the 25-day and 50-day exponential moving average. Also, it has moved above the pivot point and is now at the first resistance level.

Therefore, I suspect that the index will continue rising with bulls aiming for the second resistance at $28,600. On the flip side, a move below the pivot at $27,680 will invalidate this trend.

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