Equities Bounce Back, UK And US Final GDP Numbers

Yesterday, equities across the globe rebounded from their Monday lows. During the early hours of the Asian morning, we received the minutes from the last meeting, which was held by the Bank of Japan last week. During the European morning, Britain came out with its third-quarter final GDP figures. The same as the UK, the US will also deliver its final QoQ GDP number for the third quarter.

EQUITIES BOUNCE BACK INTO THE GREEN

Yesterday, equities across the globe rebounded from their Monday lows. The rise already started off with the Asian indices and then was followed by positive trading in Europe. The US equity indices also followed the footsteps of Europe and Asia and closed their sessions in the green. This is exactly what we have mentioned in our Tuesday’s daily report, where we said that Monday’s decline could just be considered as a temporary correction, before another possible leg of buying.

During the US session, the best performing sectors were consumer cyclicals, energy and technology. On Monday, the consumer cyclicals were the worst-performing sector, where Ralph Laurent Corp. (NYSE: RL), Nike Inc. (NYSE: NKE) and Tesla Inc. (NASDAQ: TSLA) were among the biggest losers. That was not the case on Tuesday, as those exact companies managed to recover their Monday’s losses and take the role of the best performers. In the US energy sector, one of the top performers yesterday was the Devon Energy Corp. (NYSE: DVN), which gained almost 8%. From the technology sector, Micron Technology Inc. (NASDAQ: MU) and Citrix Systems Inc. (NASDAQ: CTXS) led the way, by gaining around 10% and 13% respectively. It seems that investors shrug off some of the worries surrounding the pandemic and decided to plough through their initial concerns.

Although all sectors were in positive territories overall, there were still some that did not perform well and were at the bottom of the list. Consumer defensive, utilities and healthcare were the laggards. From the consumer defensive sector General Mills Inc. (NYSE: GIS) was the biggest loser, dropping around 4%. From utilities it was the WEC Energy Group Inc. (NYSE: WEC), losing 1.6% and from the healthcare sector — Pfizer Inc. (NYSE: PFE) lost the most, wiping off a bit more than 3% of its value.

IBEX 35 — TECHNICAL ANALYSIS

Yesterday, the IBEX 35 index managed to break above a short-term tentative downside resistance line drawn from the high of November 16th. If the price continues to trade above that trendline, there is a good chance we may see further advances. That said, we would still prefer to wait for a pop above the 8434 barrier, in order get slightly mover comfortable with higher areas.

If, eventually, IBEX 35 breaks above that 8434 barrier, which is the high of December 16th, that could invite more buyers into the game, potentially sending the price further north. The index might then drift to the current highest point of December, at 8581, a break of which could set the stage for a move to the 8696 level. That level marks the low of November 23rd and coincides with the 200 EMA on our 4-hour chart.

Alternatively, a drop back below the aforementioned downside line and below the 8273 hurdle, marked by yesterday’s low, that may spook some buyers from the arena for a while. IBEX 35 could travel to the current lowest point of December, at 8077, a break of which might set the stage for a move to the 7919 level, which is the low of February 12th.

BOJ MEETING MINUTES, UK AND US FINAL GDP

During the early hours of the Asian morning, we received the minutes from the last meeting, which was held by the Bank of Japan last week. During that gathering, the Monetary Policy Committee of the BoJ kept their short-term interest rate target at -0.1%. That said, the Bank reduced its corporate bond and commercial paper buying.

During the European morning, Britain came out with its third-quarter final GDP figures. The initial expectation was for the numbers to stay the same as previous. The QoQ one was forecasted to show up at +1.3% and the YoY number was expected at +6.6%. The actual QoQ figure showed up worse than expected, falling below the initial forecast and appearing at +1.1%. The revision of the previous reading was at +5.4%. Now the YoY figure managed to beat its forecast, coming out at +6.8%. However, the biggest shock was the revision of the previous reading of +6.9% to +24.6%. The British pound was seen reacting positively to the news as it rose slightly higher against its major counterparts.

The same as the UK, the US will also deliver its final QoQ GDP number for the third quarter. And in a similar fashion, the current expectation is for the reading to stay the same, at +2.1%. The US GDP QoQ price index for Q3 is also expected to stay at the same level of +5.9%. In addition to that, investors will be on the lookout for the US CB consumer confidence figure for the month of December. Currently, analysts are forecasting the number to show up at 110.2, which is slightly above the previous reading of 109.5.

GBP/JPY — TECHNICAL OUTLOOK

GBP/JPY is currently trading between two short-term trendlines, an upside one drawn from the low of December 3rd, and a downside one taken from the high of November 19th. If the two trendlines stay intact, the rate could continue moving in between the two lines for a while.

A further push could bring the pair closer to the 151.81 hurdle, or even the aforementioned downside line. If it that line holds, another slide might be possible and GBP/JPY may drift back to the 151.10 obstacle, or even the 150.40 zone, which is the inside swing high of December 20th.

On the other hand, if the pair is able to overcome the previously discussed downside line and then also climb above the 152.63 barrier, marked by the current highest point of December, that might attract more bulls into the field. Such a move would confirm a forthcoming higher high and GBP/JPY could rise to the 153.41 area, marked by an intraday swing low of November 25th. If the buying doesn’t stop there, the rate may travel to the next potential resistance level, at 154.22, which is the high of November 23rd.

AS FOR THE REST OF TODAY’S EVENTS

The US will also deliver its existing home sales number for November on a MoM basis. Currently there is no expectation for that indicator, but one thing we know is that the last reading, which was at +0.5%, was a lot worse than the one before that, which was at +7.0%. If this tendency continues, then we might even see today’s actual figure showing up below zero.

Disclaimer:

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Originally published at https://www.jfdbank.com.

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