Individual investors continue to actively buy up shares of companies while professionals began to see the first signs of a significant overbought in the stock market, primarily in the US. Some even believe that the local stock market’s value has reached the level seen before the crash of 1929, causing a long and prolonged recession.
Of course, now the situation is markedly different from almost 100 years ago. At that time, the local stock market was not regulated in any way. The Government was not engaged in rescuing the sinking economy, as has been the case over the past decade with massive stimulus measures from the Fed and the US Treasury.
The high likelihood that a $ 900 billion anti-COVID-19 stimulus agreement will be reached between Democrats and Republicans fuels demand company shares while simultaneously putting downward pressure on the US currency. But after reaching new highs, the S&P500 and DOW30 indices stalled in growth, as if hitting a wall, and only the NASDAQ100 continues to grow stubbornly, supported by the demand for shares of companies capable of doing successful business in a pandemic.
On Thursday, data from the PMI for the eurozone’s services sector, the United Kingdom and Germany were published. The German indicator fell. The British one, although grew above expectations, was still worse than the October value. The eurozone index also became slightly higher than the forecast, but still worse than the previous period’s value under review. All data remains below the critical 50-point mark that always signals growth, which has an overwhelming effect on the European stock market.
The rally of the euro currency continues on the foreign exchange market. There are two reasons for this – the anticipation of this month’s launch of the European Relief Fund and anti-COVID-19 stimulus measures in the US. The first reason supports the euro, while the second increases the pressure on the dollar. That is why the eurodollar pair experienced the most substantial growth. But in my opinion, the rally is gradually starting to fizzle out, which may lead to the beginning of a correction.
What to expect soon:
Today the market’s attention will be focused on the publication of employment data. The unemployment rate is expected to fall to 6.8% from 6.9%. The number of employment in the non-agricultural sector will grow by only 460,000 in November against 638,000 in October. I believe that if the data are not higher than expected, this may lead to a weakening of demand in the stock market and even to a short-term rise in the dollar as a safe-haven currency.