EQUITIES MARKETS
Technical Overview
Big picture
THEMES AFFECTING Equities
Dow Jones Industrials - Daily
S&P 500 - Daily
NASDAQ Composite - Daily
US Equity Indices
The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the Nasdaq. The old economy stocks are said to be represented by the Dow. The Dow tends to be the leading indicator for international investment.
While the Dow reflects the BIG money, S&P 500 reflects the broader view is the preferred gauge of equity markets due to its bread coverage of the market. Historically it has shown a negative correlation to the yen (even on an intraday basis). It is a market value-weighted index made up of the prices of 500 large stocks traded in the US market, covering about 75% of US equities.
Nasdaq Composite is highly followed in the U.S. as an indicator of the performance of stocks of technology companies and growth companies. Since both U.S. and non-U.S. companies are listed on the NASDAQ stock market, the index is not exclusively a U.S. Index. The NASDAQ represents the speculative retail money.
Generally speaking, if the U.S. equity markets rise, they cause an increase in investors' risk appetite in which case foreign investment dollars will flock the U.S. equity market pumping the U.S. dollar higher.
EUROPEAN EQUITY INDICES
Germany DAX - Daily
UK FTSE 100 - Daily
The Deutscher Aktien Index, or DAX 30 for short, is the blue-chip market index for the Frankfurt Stock Exchange. It follows the top 30 German stocks on the electronic Xetra system that is used on the exchange. The DAX indices are all calculated using capitalization-weighted index using the total return Laspeyres index for calculations.
Called the footsie, the Financial Times Stock Exchange 100 is a market capitalization-weighted index representing the top 100 blue-chip companies on the London Stock Exchange. The index is said to map more than 80% of the total capitalization in the United Kingdom. Stocks are free-float weighted to ensure that only the investable opportunity set is included within the index.
The constituents of the index are revised every 3 months, based on market capitalization. For this reason, the FTSE 100 should not be assessed for any market breadth index, other than for the recent period for which the components have remained unchanged.
JAPANESE EQUITY INDICES
The Nikkei is a stock market index for the Tokyo Stock Exchange (TSE). It has been calculated daily by the Nihon Keizai Shimbun (Nikkei) newspaper since 1950. It is a price-weighted average (the unit is yen), and the components are reviewed once a year. This market is close correlated with US 10-Year Treasury notes. It's also useful to spot risk appetite and gauge FX flows.
Usually it's negatively correlated to the Yen. It can be explained as a reasonable decline in the yen usually lifts stocks of export-oriented companies (cheaper Japanese products), which tends to boost the overall stock index.
But the Nikkei-yen relationship is sometimes reversed (positive correlation): wherein a strong open market in the Nikkei tends to boost the yen (weighs on USD/JPY) as investors’ funds flow into yen-denominated stocks.
Nikkei225 - Daily
Relationships between stocks and currencies
Currencies are probably the most difficult asset class to fit into a consistent or idealized intermarket model. To start with, think that in order to purchase stocks from a particular country, investors must pay in the local currency, increasing the demand for it. The other way round, a strong currency makes bonds and stocks from that particular country look attractive.
In any case, the correlation is not always clear, there are response lags between each of the markets' reactions, Forex and equities, which leaves the investor holding foreign equities exposed to exchange rate fluctuations.
This correlation can also be fragile among international equity markets themselves. There are so-called "global divergences" when the stock market in one country starts performing better than the stock market in another country. Currency driven capital flows from the country with the weaker stock market to the country with the stronger stock market, is often the cause.
US Dollar Index - Daily
Latest STOCK INDICES Analysis
Editors' picks
EUR/USD battles 1.19 after cautious ECB minutes
EUR/USD has stabilized around 1.19 after the ECB meeting minutes pointed to some caution about expanding the bond-buying scheme. Earlier, the dollar weakened after the Fed signaled openness to more QE. The US holiday implies thin volume.
GBP/USD falls below 1.3350 amid Brexit concerns
GBP/USD retreats from near 1.3400, undermined by Brexit woes and renewed dollar demand. Doubts arise about Chief EU Negotiator Barnier traveling to London.
USD/JPY slides to fresh session lows, around 104.25-20 region
USD/JPY witnessed some selling on Thursday amid persistent selling surrounding the greenback. COVID-19 vaccine optimism might cap gains for the safe-haven JPY and help limit the downside. Holiday-thinned liquidity conditions could further hold investors from placing fresh bearish bets.
XAU/USD remains supported above $1800 level amid quiet holiday trade
Spot gold (XAU/USD) continues its gradual grind higher for a second day, the precious metal having bounced at support at the psychological $1800 mark on Tuesday, following a hefty sell-off at the start of the week that saw spot prices drop from the high $1800s.
WTI retreats from tops beyond $46.00 per barrel
Prices of the WTI met sellers above the $46.00 mark. Demand concerns re-emerge and weigh on sentiment. The EIA reported US crude supplies dropped by 0.754M last week.