Hope of a new virus treatment in the US saw markets jump on Friday. This saw some of the hard-hit Airline and Covid-19 lockdown affected companies rally. This saw the DOW and SP500 out perform the tech-heavy Nasdaq on Friday.
This week the focus will be on Earnings which will kick off in a big way on Wednesday. In particular, we will have an eye on the big financials in the US which could lead our banks locally. We will be seeing the big names like Citigroup, Wells Fargo & Co, JPMorgan Chase & Co on Wednesday, and then both Goldman Sachs Group and Bank of New York on Thursday.
Dalian Futures smashed through the 800-yuan level in late trading Friday, this should see the Iron Ore miners push higher locally today. Metals, in general, traded higher which should see materials perform well today.
It looks like we are going to see a short-term spike in sentiment to start the week. To see this continue we will need to see better than expected earnings from the US.
The XJO has been stuck in a tight channel for some time between 5,800 and 6,200 since early June. More often than not the longer it takes to break out of a pattern like this the more it moves. It’s like we are building up energy here. But we don’t know with any certainty which way this will break, but with the trend up it will likely break to the upside.
With earnings in the US kicking off this week we could see a catalyst to cause a break. This will come down to if companies report better than expected or not. Also, investors will be favoring companies that can give strong forward guidance or a strong recovery story over the next few years.
So at this stage, our key levels remain in play, with 6000 being somewhat of a magnet, switching between being support and resistance. If we do push higher, we have interim resistance at 6100 and the local high of 6200. If we fall, we have the uptrend line immediately to help keep us buoyed, but if that fails, we look to roughly 5800.
US shares pushed higher on Friday night, with shares rising strongly despite a soft open. Strength in equities was perhaps down to optimism around the COVID-19 situation, with Gilead Sciences reporting that its Remdesivir treatment cut mortality risk for the virus by 62%. Almost all the major sectors of the market pushed higher, with Oil & Gas and Basic Materials stocks the standout performers.
The only sector to close lower was the Health Care space. The strength came despite consistently high virus cases in parts of the US, particularly the southern states, with Florida, Texas, and South Carolina reporting their biggest daily increases over the weekend. We will see the US earnings season kick off in earnest tomorrow night, with several of the major banks reporting earnings for Q2 – which will have an influence on the future direction of global share prices.