- Indices appear rangebound
- BoE hint at rate rises
- Oil tracks sideways
Stocks in Europe a tad weaker at the open after Monday’s rally, sticking to the recent well-worn ranges. US trading returns today with futures indicating a flattish open. There was a decent session in Asia overnight spurred on by strong data from China with the Nikkei 225 touching 30,000 for the first time since April, and the Topix hitting a 31-year high as the technical breakout from last week continues. Stocks in Shanghai and Shenzen were also up +1 per cent. Despite all the worries about supply chains and Delta, Chinese exports surged in August by 25.6 per cent year-on-year, up from the 19.3. per cent increase in July and beating the forecast of 17.1 per cent. Sticking with China for a moment, shares in Evergrande, the indebted real estate giant, sank further to the weakest since 2015 as the fallout from its default risk continues to ripple through the property sector, where bond yields are rising fast.
With stock futures doing little in the US and coming off the back of a three-day weekend, the focus will be on the cash equity open later on Wall Street in the wake of Friday’s disappointing jobs report and the lapsing of those last $300 stimulus cheques. Still the relentless low-vol grind up is holding and Barclays today has lifted its S&P 500 price target to 4600 from 4400. Question is whether Sep/Oct produces a spike in volatility. A 3 per cent drawdown – mild by anyone’s standards - takes you back to the 50-day SMA support that has held up so well this year, while a 10 per cent correction tests the 200-day SMA. Technicals at the moment indicate sideways action and a loss of upwards momentum – merely a question of timing as to when we get a rollover.