Market Opinion - Equities... Bulls on the Move:
Equities Bulls On The Move The bullish view of the S&P, Nasdaq, FTSE, Dax, Nikkei, and Hang Seng that we have held over the past few months has born fruit. Low global interest rates, solid economic activity, especially in the US, and improving company earnings have all combined to lift equity valuations. All the above markets are looking well supported medium term. With regards to the S&P, the index needs to make a decisive break of 1,230 to set up further gains over the coming six months beyond the 1,300 area. The close above 2,150 for the Nasdaq is highly encouraging, and suggests that our original upside target of 2,200 is still in sight. On a technical basis, this level holds much importance. We would become really bullish this market on any break above this point. The FTSE closed weak at 5,230. Support levels to watch are 5,220 and 5,120, with major long-term trendline support existing at 5,000. As for the DAX, we are still adhering to our 5,400 upside target. Along with the low cost of borrowing, the weakening euro is helping to improve exporter bottom line. The Nikkei has been trying hard to climb to the all-important 12,000 level. On a fundamental basis, the Bank of Japan recently alluded to growing optimism over prospects for the Japanese economy, citing in its monthly report the improvement in business investment due to rising corporate profits and a general upturn in business sentiment. There are signs too that wages, and, as a result, domestic demand, are on the rise. This is encouraging foreign investors back into the Nikkei, with data from the Ministry of Finance showing that foreign investors purchased JPY424.9bn worth of equities in the week ending July 8, the largest total since early March. This bodes well going forward. However, as we have often said in the past, the market needs to break through the 12,000-12,100 area to look really bullish. If this can be achieved, then a move towards 15,000 cannot be ruled out. We would stress though that there have been a number of false dawns over the past couple of years. As for the Hang Seng, the rally of the past few days has taken the index into somewhat overbought territory. On a medium-term basis, though, we still envisage further potential upside to the 16,000 mark. .
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