U.S. Indices surge to new records – Market Overview

By: Miguel A. Rodriguez

14:24, 06 April 2021

The stock markets experienced a significant upward momentum, primarily visible in the case of North American indices.

The spectacular progress in vaccine administration in the United States suggests a rapid recovery of the economy in this country. Although the numbers of infections remain high, experts predict the pandemic crisis could end soon, leading to a potential reopening of the economy and more relaxed restriction measures.

Together with the Government’s fiscal stimulus, all these convinced economists to forecast a strong rebound in growth for the second half of this year.

In recent days, an element of concern was President Biden’s government proposal for corporate tax increases to help finance the budget deficit. Contrary to the fiscal policy carried out by Trump, Biden’s looks more in line with the Democrats' view, but it could still lead to a break in the upward movement of the stock markets.

The USA500 index reached a new all-time high yesterday near the 4074 zone. Although the trading session started with a slight retracement today, it technically does not encounter any resistance on its bullish path, with the RSI indicators still at levels below the overbought zone.

The Composite PMI figures for China released this morning reaffirmed this feeling of recovery in the economy, showing a rise to 53.1 from a previous level of 51.7. The Chinese authorities are beginning to implement more restrictive credit measures due to its strong growth and avoid overheating.

The U.S. Dollar, in this scenario of better risk sentiment, experienced a downward correction. However, the U.S. Treasury bond yields rose again above 1.70% in the case of the 10-year bond. The forecasts anticipate this upward movement to carry on as long as the economy continues to recover.

This downward movement of the Dollar was reflected the EUR/ USD price that rebounded from the support zone located around 1.1710 to levels close to resistance located at 1.1840. It can be considered a correction after almost a month of continuous declines that have brought the daily RSI indicator to oversold levels.

Fundamental factors continue to point towards a weaker euro against the Dollar due to the increase in the interest rate differential favoring the Dollar. Below the 1.1710 support zone, the next benchmark level could be at 1.1610.

Sources: Bloomberg, reuters.com.

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