Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Positive Earnings Improve Investors' Risk Appetite

By JFD TeamMarket OverviewOct 15, 2021 04:02AM ET
www.investing.com/analysis/positive-earnings-improve-investors-risk-appetite-200605177
Positive Earnings Improve Investors' Risk Appetite
By JFD Team   |  Oct 15, 2021 04:02AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

Global equity indices were a sea of green yesterday and today in Asia, perhaps due to strong quarterly earnings by big banks, but also due to a better than expected US initial jobless claims report and a slowdown in the nation's producer prices.

Today, we get the US retail sales for September, with investors eager to determine how much bottlenecks and high inflation impacted them.

Investors Increase Risk Appetite

The US dollar continued trading lower against all but one of the other major currencies on Thursday and during the Asian session Friday.

It lost the most ground versus NZD, CAD, and AUD in that order, while it eked out some gains only against JPY.

USD performance against major currencies.
USD performance against major currencies.

The performance in the FX world points to further improvement in investors' risk appetite, which is also evident by the performance in the equity world.

Major EU and US indices soared on average 1.42% each, with the optimism, although softer, rolling into the Asian session today as well.

Major global stock indices performance.
Major global stock indices performance.

Market participants continued buying stocks, perhaps due to strong quarterly earnings by big banks, like JP Morgan (NYSE:JPM), Citigroup (NYSE:C), Wells Fargo (NYSE:WFC), and Bank of America Corp (NYSE:BAC).

All four banks reported a combined profit of $28.7 billion for the third quarter. Elsewhere, US initial jobless claims fell by more than expected last week, while producer prices slowed somewhat on a monthly basis.

In our view, this was a blend of developments pointing to an improving US economy, but without the fear of inflation accelerating further. One could argue that this is just a day's data and that on Wednesday, the headline US CPI ticked higher. In our view, it seems that with equities correcting, investors may have jumped back into the action due to fear of missing out. 

Wednesday, the inflation data revealed a slight acceleration. As a result, US equities were up, indicating the extent to which the Fed's aggressive tightening is priced in. The Producer Price Index (PPI) is a forward-looking indicator. Producer prices feed into future consumer prices, and thus, a slowdown may have raised some hope that the Consumer Price Indexes (CPIs) could ease somewhat in the months to come.

Until yesterday, we were reluctant to turn our eyes to the upside, and we said there was a chance for another setback in equities. In our view, with no significant change in the fundamental background, a chance of a correction remains on the table.

Technically, several equity indices pointing to breaks above significant downside resistance lines. Investors may have already accepted that the Fed will taper in November and raise interest rates next year. That said, we are far from a long-lasting recovery. We will take things step by step, and we will re-evaluate with the first sign of weakness.

Today, the main economic release on the agenda is the US retail sales for September. Market participants will pay close attention to this report to see how much bottlenecks and inflation affected sales. The consensus is for headline sales to slide somewhat and for core ones to increase, but at a slower pace than in August.

Exceeding forecasts may suggest that the economy is faring better than many believe, despite the surge in inflation. This could be positive for equities and the US dollar, allowing policymakers to implement their monetary policy plans. Worse-than-expected data could have the opposite effect.

DJIA – Technical Outlook

The Dow Jones Industrial Average cash index surged yesterday, breaking above the downside resistance line drawn from the high of Sept. 3, as well as above 34985, marked by the high of Oct. 7, confirming a forthcoming higher high. In our view, this has turned the short-term picture into a positive one.

We would expect participants to challenge the 35110 level soon, marked by the high of Sept. 10, the break of which may extend the advance towards the 35280 area, which acted as support between Aug. 31 and Sept. 6.

If that zone cannot stop the bulls, extension towards 35520, which acted as a ceiling between Aug. 25 and Sept. 6, is likely. We will aim lower if we see a retreat below 34610, a support marked by the inside swing high of Oct. 12.

This could confirm the index's return below the downside line and pave the way towards the 34260 barrier, or the 34100 hurdle, marked by the low of Oct. 13. Another break below 34100 could extend the fall towards the 33845 territories, which acted as a support on Oct. 4, 5, and 6.

Dow Jones 4-hour chart technical analysis.
Dow Jones 4-hour chart technical analysis.

USD/JPY – Technical Outlook

USD/JPY edged further north yesterday, and today in Asia, it managed to overcome the 113.80 level, marked by Tuesday's and Wednesday's highs. 

This has confirmed a forthcoming higher high, which, combined with the fact that the pair is trading above the upside support line drawn from the low of Sept. 22, paints a positive near-term picture.

We believe that the bulls could soon target the 114.20 level, marked by the peak of Nov. 12, 2018, the break of which could extend the advance toward the apex of Oct. 4, 2018, at 114.55. 

If they don't stop there either, we could see them climb even higher, perhaps to the 115.50 area, marked by the high of March 10th, 2017. The move that could signal a short-term reversal may be a dip below 112.17, a support marked by Monday's low. 

The dip could head towards the 111.80 level, the break of which could see scope for declines towards the 111.20 or 110.83 barriers, defined as supports by the lows of Oct. 6 and 4, respectively. Now, if the bears are strong enough to overcome both of those obstacles, the next territory to consider may be at 110.43, marked by the inside swing high of Sept. 8.

USD/JPY technical analysis 4-hour chart.
USD/JPY technical analysis 4-hour chart.

Elsewhere

Besides the US retail sales, the other data releases worth mentioning are the New York Empire State manufacturing index for October and the preliminary University of Michigan consumer sentiment index for the same month. New York Fed President John Williams is due to speak today.

Positive Earnings Improve Investors' Risk Appetite
 

Related Articles

Positive Earnings Improve Investors' Risk Appetite

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: The content we produce does not constitute investment advice or investment recommendation (should not be considered as such) and does not in any way constitute an invitation to acquire any financial instrument or product. The Group of Companies of JFD, its affiliates, agents, directors, officers or employees are not liable for any damages that may be caused by individual comments or statements by JFD analysts and assumes no liability with respect to the completeness and correctness of the content presented. The investor is solely responsible for the risk of his investment decisions. Accordingly, you should seek, if you consider appropriate, relevant independent professional advice on the investment considered. The analyses and comments presented do not include any consideration of your personal investment objectives, financial circumstances or needs. The content has not been prepared in accordance with the legal requirements for financial analyses and must therefore be viewed by the reader as marketing information. JFD prohibits the duplication or publication without explicit approval. 68.02% of the retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money. Please read the full Risk Disclosure - https://www.jfdbrokers.com/en/legal/risk-disclosure .
Continue with Google
or
Sign up with Email