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US market volatility at a two decade low


US bourses met Monday’s news of a Macron victory in France positively, albeit without much gusto, as two of the three major indices notched fresh intraday record highs.

Accendo Markets Analyst, Mike van Dulken noted – “Both the Tech-focused Nasdaq Composite and blue-chip S&P 500 topped their previous bests during the session, with the former closing 2 points higher while the latter closed flat. The Dow Jones closed 5 points higher as Apple continued its recent impressive run of form, aided by Energy names Chevron and Exxon Mobil.”

In Europe, yesterday’s early gains had dissipated by the end of the session.

Spreadex Analyst, Connor Campbell commented – “The CAC suffered most; while the French index initially grazed a new 9 and a half year high, by closing time it was notably red-faced, plunging back below 5400. It has taken Tuesday’s empty economic calendar as a chance to claw back some of its growth, however, the index rising around 0.4% after the bell. The DAX went through the same experience on Monday. It briefly spiked to a fresh all-time peak of 12850, only to find itself back at 12700 by the end of the day. And though it is in the green this morning, its 0.1% rise still leaves it more than 100 points away from the levels struck in the immediate aftermath of Macron’s victory.”

The FTSE ended up being the best performer yesterday. Campbell added – “the UK index not as reliant on the Macron-result as its Eurozone peers. It’s added another 25 or so points this morning, and is continuing to lurk at its best levels since its rapid decline following Theresa May’s snap election announcement in mid-May.”

The US Dollar has remained in focus, showing some strength off the back of the Non-Farm Payrolls data last week. Traders are likely to be watching the Euro today. Macron’s win appears to have been priced in so what is the outlook for the single currency?

ADS Securities Analyst, Konstantinos Anthis suggested – “This morning it is testing the 200-period moving average situated at the 1.0920 level. It appears the Euro is being pushed lower by two factors: the rise of the US Dollar on the back of bullish data and profit taking, but there is also a sense that lower is the path of least resistance for the Single currency. Indeed, looking at the short-term charts traders will look towards the important 1.0880 support to the downside, and below that the road is clear until the 1.0800 area.”

“However, the ECB’s President Mario Draghi is delivering a speech in the Dutch Parliament tomorrow and his remarks could be what the Euro needs at this time. Euro longs will be hoping that he will steady the nerves around the currency.”

It’s interesting to note that the VIX index, which is an indicator of volatility within the US markets, is currently at a 23-year low. It suggests that investors are awaiting the next catalyst to extend the current long-term uptrend. LCG’s Ipek Ozkardeskaya suggested – “Investors continue buying into the tax reform story, despite the political shenanigans on Mike Flynn and news that he may have been ‘blackmailed by the Russians’.

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This article does not constitute investment advice. Make sure you do your own research or consult a professional advisor.

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