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Global Indices Monthly Outlook – April 2017

By:
Colin First
Updated: Apr 2, 2017, 13:20 UTC

We would have expected the US stock indexes to have had a lot of volatility in the month of March considering the fact that Trump and his team

Global Indices Monthly Outlook

We would have expected the US stock indexes to have had a lot of volatility in the month of March considering the fact that Trump and his team were still trying to push through some of their major policy changes and we also had the Fed trying to push through its rate hikes. Under normal circumstances, this would have been enough to drive the stock markets into a frenzy but what we got was actually nothing of that sort.

US Stock Indices Consolidate

The early part of the month was dominated by the Fed and its rate hike. The market was expecting a rate hike in March and since the move was well anticipated for quite some time, it did not have much of an impact on the stock indexes when it did happen. But what shook the markets was the statement that followed from the Fed which was not hawkish enough for the markets and as a result of that, the S&P dropped by around 50 points over a period of a few days following this event as the market showed its disappointment.

SPX Weekly
SPX Weekly

This did recover in the coming days as the effect of the statement tapered off but overall, we could see that the indexes stuck to tight ranges. The bulls needed some rest after all the buying that they had been doing since the beginning of the year while the bears were worried about carrying their selling too far in the knowledge that the indexes could snap back anytime. So, even the risks and the uncertainties surrounding the healthcare bill proposed by Trump, which was eventually dropped and pushed the healthcare stocks lower, could not bring in any large scale selling in the stock markets.

Looking ahead to the coming month, we believe that this range and consolidation is likely to continue with a bullish tone. The Trump team is looking to push through their healthcare bill with the support of some Democrats while the economic data from the US continues to throw up some strong numbers. This should keep the stock indexes buoyed in the coming month.

DAX Finally Manages a Break

The European stock indexes, with the exception of the DAX, sought to follow what the US stock indexes were doing and we saw the UK100 trading within a tight range for most of the month. The DAX, on the other hand, finally managed to break through the highs of its range and after almost 2 months of consolidation, the bulls managed to push through 12300 and reach the all time highs in the 12350.

The DAX has closed strongly for the month which is likely to translate into a strong month in April as well. But the Eurozone is likely to be dominated by the headlines surrounding the upcoming French and German elections and this, along with the Trump administration and its policies, are likely to be the risk factors for the stock indexes in Europe in the coming month. We expect the stock markets to have a bullish tone in April though the UK100 is likely to be volatile with a bearish tone due to the ongoing Brexit process. The DAX is likely to have some correction in the first half of the month and if the risk-on mode continues, the DAX should threaten the all time highs around the 12350 during the second half of the month. The French stock markets are also likely to be volatile with a bullish undertone due to the upcoming French elections.

Asian Stock Indexes Take Cue from the US

Asian stock markets chose to trade within a tight range with no major economic or fundamental events dominating the markets in this region. The stock indexes were more guided by the US stock indexes and with those indexes being in a tight range, the same was seen in the Asian stock markets as well. The Indian stock markets were more buoyed than the others due to the continuing victories achieved by the ruling government in various state elections which helped to build confidence in the stability and continuity of its policies.

Technically, the upcoming month points to some more consolidation and ranging from the various Asian stock markets though later on, the quarterly company results are likely to keep the markets under high volatility. The Trump trade continues in many of the stock markets around the world and the same is likely to be the case with the stock indexes in this part of the world which means that they are likely to maintain the bullish undertone.

About the Author

Colin specializes in developing trading strategies and analyze financial instruments both technically and fundamentally. Colin holds a Bachelor of Engineering From Milwaukee University.

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