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Week in brief: Stock markets rebound on renewed stimulus hopes

Martin Young

Stock markets in the U.S. have rebounded this week as hopes are renewed for further economic stimulus packages.

Dow Jones Industrial Average futures were up over 120 points, while the S&P 500 and Nasdaq 100 futures gained 0.4% and 0.3%, respectively on Thursday. The S&P 500 has reached its highest level for over a month, topping 3450 points on Friday.

According to the Bank of America, a bullish technical analysis pattern called an inverted head and shoulders suggests that the S&P 500 could jump a further 7%. A target of 3640 points could be in play if the index can break above neckline resistance.

Chart – finviz.com

The premise of further fiscal stimulus measures appears to be driving investor confidence at the moment. The House Speaker and Treasury Secretary Steven Mnuchin had a conversation regarding such measures which was tweeted by the deputy chief of staff to Nancy Pelosi.

Keith Buchanan, portfolio manager at GLOBALT, added;

“Stimulus talks are really dictating the market action on a day-to-day basis,”

IBM shares jumped 12% on Thursday following news that the tech giant will spin off its managed infrastructure unit to focus more on the hybrid cloud market. Tesla shares also rallied this week following another ‘leaked’ email from Elon Musk suggesting a new production milestone is in reach.

Coronavirus cases in the U.S. have surpassed 7.7 million, with deaths above 216,000, and there appears to be no slowdown in infections which is keeping the economic outlook suppressed for the near future.

The U.S. central bank and lawmakers have spent trillions of dollars on different measures to keep the economy afloat during the coronavirus pandemic but aside from debasing the currency and inflating stock markets, most have failed to make a significant impact.

Commodities and forex outlook

President Trump’s u-turn on economic stimulus packages has given the greenback a boost against a basket of currencies in the world of forex.

Chart – xe.com

Cable has recovered from a mid-week dip to trade at 1.290 while the Euro pair has remained relatively flat trading at 1.177 on Friday. The yen has strengthened this week closing at 105.9 on Thursday.

Gold prices surged late this week to top $1,910/oz, however the asset is still down almost 8% from its all-time high in early August.

Bitcoin prices continue to consolidate ranging around the mid-$10k range as the cryptocurrency shrugged off recent negative news.

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