Overnight Headlines

*USD hovering below two-month highs with EUR/USD little changed

*US equities retreated, but outperformed Europe

*Risk sentiment sours on concerns about Delta variant spreading

*Facebook market cap hits $1 trillion, Big Tech strong

USD drifted a touch higher in generally thin trading with many traders sidelined ahead of the all-important NFP US jobs report to be released on Friday. Both the dollar and the yen benefited from some safe-haven demand as the more contagious Delta strain of the coronavirus spread in Asia and elsewhere, stoking fears of more lockdowns.

US equities ended a mixed bag with investors rotating again into defensives and growth as the S&P500 and Nasdaq extended 0.2% and 1.25% of Friday’s record levels. The Dow and small cap Russell indices closed lower with energy the big decliner. There are broad based declines in Asia and US stock futures are currently in the red.

Market Thoughts – Coronavirus concerns, but tech continues advance

General risk appetite turned notably sour yesterday with fixed income performing well while stocks traded on a weaker footing with notably travel and leisure underperforming the broader markets. The UK is sadly leading the way in new Covid-19 Delta case growth despite the advanced vaccination programme. However, importantly a sharp rise in hospitalisations and deaths has not been seen as the new health secretary suggested we may have to “get used to” living with the virus.

Interestingly, the Nasdaq fuelled by tech stocks, notably outperformed all other equity markets, hitting new all-time highs as investors bet on a robust earnings season kicking off in a few weeks. Big tech led the way continuing their momentum after registering the best weekly performance in 20 weeks on Friday. This helped push Facebook’s market cap over $1 trillion for the first time after a US judge dismissed antitrust complaints that sought to force the company to sell Instagram and WhatsApp.

Chart of the Day – Dax tight ranges

The Dax has been trading in narrow ranges over the last few sessions with the smallest range day in seven yesterday. This normally points to increased volatility and range expansion in the near future. The index of Germany’s thirty leading companies also looks to be forming a bullish continuation pattern in the form of a symmetrical triangle pattern. This is where we get a series of lower highs and higher lows forming a triangle which then should ordinarily break out in the direction of the underlying longer-term trend.

Prices are currently trading around the previous cycle high at 15,501 so support lies here before last week’s low at 15,309 offers the next level of major support. Bulls will target the break of the upper trendline at today’s high around 15,668 which would see a move towards the recent highs at 15,802.