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Stocks rise amid insatiable appetite towards risk

Fawad Razaqzada Fawad Razaqzada 06/01/2021
Stocks rise amid insatiable appetite towards risk Stocks rise amid insatiable appetite towards risk
Stocks rise amid insatiable appetite towards risk Fawad Razaqzada
Stocks are higher again which means investors are continuing to ignore the deteriorating virus situation, as they did for most of 2020. As well as the huge stimulus measures supporting the markets, the recent development and now the rolling out of COVID vaccines means investors are looking forward to more normal times ahead and are overlooking short term risks posed by the latest lockdowns. In addition, the fact that a no deal Brexit has been avoided has further boosted the appetite for risk, which is why the FTSE has started the new year in a bullish mood and the pound has been able to hold its own relatively well in the face of another likely contraction in Q1 GDP due to the fresh national lockdown. That said, the latest support from the U.K. government is undoubtedly going to help offset some of the negative impact of the lockdowns. It is imperative that the government is now able to vaccinate as many people as possible, so that when the latest lockdown ends, things can go back to normal as quickly as possible.
 
Data not too bad
 
Meanwhile, the latest economic numbers released so far this week haven’t been too bad, even if the European services PMIs were all revised a touch lower this morning. This shouldn’t have come as surprise to anyone given what’s happened with the lockdowns. Indeed, the services sector is highly likely to suffer further in January and the upcoming ISM services PMI from the US on Thursday is likely to show a similar picture to Europe. But crucially, manufacturing has been a relatively brighter spot as Monday’s final European, Canadian and Japanese PMI readings showed. In fact, the US ISM manufacturing PMI, released on Tuesday, was quite strong at 60.7, reducing concerns that the world’s largest economy slowed down sharply again at the back end of last year. Meanwhile the focus is going to turn to the jobs market as key US employment numbers are set to be realised this week, starting with the ADP private sector payrolls report today and culminating in the release of the official non-farm payrolls report on Friday.
 
Central bank support here to stay
 
Regardless of the outcome of data releases over the coming weeks and months, investors know full well that central banks will ignore any short-term overshoots in employment and inflation. Monetary policy is going to remain loose for a while yet and even if central banks were to start tightening their belts, this won’t happen until at least the latter parts of the year and in any case will be limited.
 
So, with global monetary policy set to remain extraordinary loose for some time to come, and as we hopefully near the end of the pandemic, investor sentiment could remain positive towards risk assets for the foreseeable future. Granted, there will be hiccups along the way, but the general trend is likely to remain positive for stocks, especially value stocks – in particular in Europe, where equities have lagged behind their US counterparts.
 
DAX could be heading to new highs
 
Indeed, the German DAX looks set to resume its bullish trend after consolidating near its recent highs for a few days:

DAXSource: ThinkMarkets and TradingView.com

The index created a doji candle on the daily chart yesterday and now it looks like it wants to break higher again. The path of least resistance this remains to the upside. As a result, it could rise to a new record high, possibly as early as later this afternoon. That said, we have to be prepared for all outcomes. As such, a break below the bullish trendline around 13460ish would invalidate this short-term outlook.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.

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Meet our contributors
Mohammed Zidan
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Mohamed Zidan
Chief Market Strategist, Dubai

Mohamed Zidan is a chief market strategist in Dubai and CFA Level III candidate. He reports to London office and has more than eight years of experience focusing on Forex, Commodities, Indices and global economic developments as well as central bank policies and intermarket analysis. worked as FX Analyst, and Strategist in several different organizations and for various departments. He holds a bachelor’s degree from Cairo University in Egypt. Mohamed Zidan is a regular guest on several major TV networks such as; CNBC Arabia, Fran24 Arabic, Alarabiya , Dubai TV, Sama Dubai, Skynews Arabia, Saudi National News, and Egypt National news.

Zidan presents insight to the markets movements, holds open discussions and relays possibilities related to the world’s financial market and economies.

Mohamed Zidan has been invited as a guest speaker for several international seminars. Zidan provides daily and weekly outlook for the markets. His experience ranges from currencies, commodities, stocks and options. he applies a top-down, global macro approach combined with price action to generate trade ideas and anticipate the next move.

Victor Golovtchenko
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Victor Golovtchenko
Global Macro Analyst, Sofia

Victor Golovtchenko has been analysing and trading foreign exchange markets since 2004, and is actively involved in the online media space since 2014. His tenure as a Senior Editor at a major brokerage industry news outlet was followed with a breakthrough into the financial news space with the brand new TradeStar website.

As an affectionate macro-focused analyst, he has an integrated framework to look at financial markets as a whole, identifying gaps between currencies, stocks, bonds, and other asset classes to get a core complete picture of the macroeconomic environment.

Fawad Razaqzada
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Fawad Razaqzada
Market Analyst, London

Fawad is an experienced analyst and economist having been involved in the financial markets since 2010, producing market commentary and research for a number of global FX, CFD and Spread Betting brokerage firms. He leverages years of market knowledge to provide retail and professional traders worldwide with succinct fundamental & technical analysis. Fawad also offers trading education to help shorten the learning curves of developing traders.
 
His colleagues consider him an expert at reading price action on the charts. This together with his deep understanding of economics and fundamental analysis, and trading experience, puts him in a great position to forecast short term price movements. Fawad covers a wide range of markets, including FX, commodities, stock indices and cryptocurrencies and his comments are regularly quoted by the leading financial publications such as Reuters and Market Watch. In addition to ThinkMarkets, Fawad also provides analysis and premium trade signals on his own website at TradingCandles.com.
 
 

Carl Capolingua
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Carl Capolingua
Market Analyst, Melbourne

Carl has over 20 years' experience in financial markets and has held senior analyst roles at a number of financial institutions. Specialising in Australian and US stock markets in particular, Carl uses a top-down approach to assess the global macro picture before using both technical and fundamental techniques to select stocks. He regularly appears as an expert commentator on a number of media outlets throughout the Asia-Pacific region.
 
 
 

Mohammed Zidan
Mohamed Zidan
He has more than eight years of experience focusing on Forex, Commodities, Indices and global economic developments as well as central bank policies and intermarket analysis.
Victor Golovtchenko
Victor Golovtchenko
Victor Golovtchenko has been trading on the foreign exchange markets since 2004, and is actively involved in the online media space since 2014. His tenure as a Senior Editor follows his role with TradeStar.
Fawad Razaqzada
Fawad Razaqzada
Fawad is an experienced analyst and economist having been involved in the financial markets since 2010, producing market commentary and research for a number of global FX, CFD and Spread Betting brokerage firms.
Carl Capolingua
Carl Capolingua
Carl has over 20 years' experience in financial markets and has held senior analyst roles at a number of financial institutions.

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Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.
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