Morning Brief: Global stocks in the red amid spiking US Dollar Index

Dow Jones
Dow Jones

Global stocks are in the red today as investors reflect on the minutes by the Federal Reserve. In the U.S., futures tied to the Dow Jones, S&P 500 and Nasdaq 100 are down by almost 0.50%. In Europe, the DAX Index, CAC 40, and Stoxx 50 index futures are down by more than 1%. Likewise, stocks in Asia are also in the red, with the Hang Seng, Shanghai composite, and Nikkei 225 index falling by more than 1%. At the same time, the U.S. dollar index is in the green for the second consecutive day.

In its minutes of the previous meeting, the Federal Reserve warned that the current health crisis would weigh heavily on economic activity in the country. Its members said that a rebound in economic activity depended mostly on how the US handled the crisis.

At the same time, investors are concerned about whether momentum in global equities that helped propel the S&P 500 into the green this week will continue. Also, there are serious concerns about valuations in global equities after Apple crossed the important $2 trillion valuation. If it was a country, Apple would be the 9th biggest economy in the world. It would also be bigger than Brazil and Canada. Also, if the five FAANG companies were countries, they would be the third country after the US and China.

China stocks also reacted mildly to the decision by the Chinese central bank to leave interest rate unchanged. In its decision, the PBOC left the key lending rate unchanged at 3.85% as most analysts were expecting.

Looking ahead, today will see an interest rate decision from the Turkish central bank as well as Norges bank. The two banks are expected to leave rates unchanged. But the Turkish bank’s decision will come at a time when volatility of the Turkish lira has increased. Other key numbers to watch today will be the initial jobless claims in the U.S., minutes from the European Central Bank, and the flash manufacturing PMI from Australia.

The chart below shows that the Dow Jones index has found strong resistance after it reached $20,000 last week. It has finished in the red in the past six consecutive days. Therefore, there is a possibility that it will continue falling as bears target the 78.6% retracement at $27,186.

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