Nikkei 225 outlooks
Japan’s Nikkei 225 stock market benchmark may fall when resuming trade next Monday after a long weekend. This is mainly attributed to US headwinds as the initial weekly jobless claims count climbed for the first time since 27th March, to 1.416 million. It is also higher than the market forecast of 1.30 million. This probably also marks a resurgence of unemployment, alongside a second Covid-19 viral wave in the ‘sun belt’ states of the US. A sobering US trading session may have set a downbeat tone for Asia stocks at the open. But this seems more like a healthy correction rather than a major reversal of the bull market, as US corporate earnings continue to deliver more positive surprises. More than 80 percent of the S&P 500 companies that have already reported have beaten market forecasts.
DAX index starts correction phase of the elliot wave pattern
The DAX index is in the second day of straight losses. The index is down by more than 2 percent after it dropped by less than 1 percent yesterday. Other indices in Europe are in the red too. The FTSE 100 has dropped by more than 1.52 percent while the CAC 40 has fallen by almost 2 percent. The Stoxx 50 has fallen by 2.10 percent. Similarly, in the United States, futures tied to the Dow Jones and Nasdaq are down by 157 and 120 points.
The main reason why the DAX index is falling on Thursday is the rising tensions between the US and China. As the two most powerful economies, the impact of a new cold war would have immeasurable impacts on companies in the DAX index. That is because most of these firms like BMW, Volkswagen, and Daimler do a substantial amount of business in the two countries.
The tensions have been ongoing during the Trump administration. But in January, after months of talks, the tensions cooled off. In recent weeks, Trump has reignited his criticism of China as the number of coronavirus cases have jumped and his polls have declined.
The tensions reached a new level this week after the US ordered China to close one of its embassies in the US. Earlier, China retaliated by ordering the US to close one of its embassies.
FTSE 100, DAX and dow fall towards key support
The FTSE 100 is on the slide this morning, with yesterday’s rebound faltering as expected. This has brought about another period of weakness to build on the failed attempt to break through the 6324 level.
With the mid-July sell-off taking the index back below the 6026 lows, there is a risk that we could see a similar thing here with a break back below the 5995 level established on 10 July. Conversely, this could be a retracement of the rally from 5995, where the 76.4 percent Fibonacci support levels provides the final hurdle to overcome in this bearish move.
As such, further downside looks likely, yet the reaction to 6072 and 5995 support levels will be key.
The DAX declines have continued, with the price falling below the 76.4percent Fibonacci retracement level. That points towards a potential decline through the key 12,807 swing low from Monday.
Ultimately, we would need to see that low broken to signal a wider bearish move coming into play.
The Dow Jones is on the back foot once again on Thursday, with the index building on recent losses to fall back to the key 26,441 level. A break below that threshold provides us with a bearish double top formation.
As such, much of the forthcoming outlook will be dictated by whether to break below the 26,441 level or not.
Sensex falls over 300 points
Domestic stock markets fell in early trade on Friday as Asian equities paused short of a six-month high amid rising COVID-19 cases around the world. The S&P BSE Sensex index declined as much as 0.88 per cent – or 335.9 points – to 37,804.57, shortly after opening down 190.88 points at 37,949.59. The broader NSE Nifty 50 benchmark slid to as low as 11,123.65, down 91.8 points (0.82 per cent) from its previous close, having started the day down 0.58 per cent at 11,149.95. Losses in financial and automobile stocks weighed on the markets, however gains in energy and pharmaceutical shares limited the fall.
At 10:01 am, the Sensex traded 147.98 points – or 0.39 per cent – lower at 37,992.49, while the Nifty was down 50.50 points – or 0.45 per cent – at 11,164.95.
Axis Bank, Zee Entertainment, HDFC, Tata Consultancy Services and Bharti Infratel, trading between 2.02 per cent and 2.93 per cent lower, were the worst hit among the 43 losers in the 50-scrip Nifty basket.
Reliance Industries and Sun Pharma, up 3.99 per cent and 2.75 per cent respectively, were the top percentage gainers in the Nifty.
HDFC, HDFC Bank and ICICI Bank were the biggest drags on the Sensex.
Analysts awaited larger cap companies to report their financial results for the April-June period.
Asian markets succumbed to losses, with MSCI’s broadest index of Asia Pacific shares outside Japan last seen trading 0.90 per cent lower. However, it was still up more than 1 per cent for the week, and near its highest since mid-January.