S&P 500, FTSE Face FOMC, BoE; DAX Looks to Extend ECB-Rally

Talking Points:

  • Big week for the S&P 500, highlighted by FOMC on Wednesday, jobs report on Friday.
  • DAX gets a boost from dovish ECB last week; key German and Eurozone data on tap
  • BoE meeting on Thursday could be impactful on the FTSE, as the central bank is expected to raise rates

Check out the DailyFX Q4 Forecasts to find out what key themes are expected to drive markets through the end of the year.

S&P 500

Next week is a busy one on the fundamental-front. We begin a new month on Wednesday, and with it brings the November FOMC meeting. The market, as per the CME FedWatchTool, shows Fed fund futures pricing in virtually no chance of a rate increase. However, at this time there is a 98% probability of a 25-bps increase at the December meeting. Barring a surprise increase on Wednesday the market will be focused on the policy statement. ‘High’ impact data releases on the docket begin on Monday with Core Personal Consumption Expenditure, Consumer Confidence on Tuesday, ISM Manufacturing on Wednesday, and to conclude the week on Friday we have the October jobs report. The Non-farm payrolls figure is expected to show a sharp rebound of +315k jobs added during October after the loss of 33k jobs in September in the wake of hurricanes hitting the U.S. For release details, see the economic calendar.

After putting in a bearish engulfing day on Monday we saw weakness set in, but that turned out to be short-lived as the S&P found buyers just below the June trend-line it was using as support during the earlier part of the month. Friday led to a new record high to close out at 2578. It’s unclear if this will continue to extend from here, but betting against rising prices is a tough wager these days so we’ll give the benefit of the doubt to the prevailing trend. A period of consolidation would do some good for working off overbought conditions before moving higher. On a dip back lower keep an on eye on the June trend-line and last week’s low of 2544.

S&P 500: Daily

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DAX

On Thursday, the ECB announced that they will extend their bond-buying program beyond December until September 2018, halving the current €60 billion per month to €30 billion. The central bank left all key rates unchanged and said it plans to keep them at current levels for an extended period of time. This dovish outcome resulted in euro selling and buying in European equity markets. Looking ahead to next week, there are a few ‘high’ impact data points to keep market participants on their toes. On Monday, German CPI will be released, Euro-zone GDP & CPI on Tuesday, and Thursday brings the October German employment report. Markets will also be keeping an eye on how U.S. markets respond to Wednesday’s FOMC meeting and the U.S. jobs report on Friday.

The DAX exploded higher on Thursday as a result of the ECB outcome. This sent the index above the long-term trend-lines we had penciled in as resistance for much of the month. At this juncture there isn’t any visible resistance to contend with, and if the euro continues to trend lower and risk appetite remains strong then the German benchmark should continue higher. Support comes in on a pullback at the aforementioned trend-lines between 13115/50.

DAX: Daily

FTSE

The big event coming up next week in the UK is the BoE rate decision on ‘Super Thursday’, where the central bank is expected to raise rates to 0.50% from a record low 0.25%. The Asset Purchase Target is expected to remain at £435 billion. Additionally, the quarterly inflation report will be released. For details on timing and data releases throughout the week, see the economic calendar. Just as the case is for the other key global markets, traders will be watching how markets react on Wednesday to the outcome of the FOMC meeting and U.S. jobs report on Friday.

On Wednesday, the footsie broke hard and took out the February 2016 trend-line it was previously leaning against as support. To end last week, it found support in the vicinity of 7430/60 and bounced back towards the underside of the long-term trend-line. To get the index back into gear higher it needs to recapture not only the trend-line, also but climb firmly above 7550. If this takes place then the 7599 record intra-day high recorded in June comes into play. A failure at resistance and turn back lower will bring last week’s lows back into the picture. It’s a tough market to get a gauge on at this time, preference is towards other indices until things become clearer.

FTSE 100: Daily

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