European shares are trading higher on Monday as hopes of a US stimulus package and strong macro data from China provided a fresh boost to bullish sentiment. Even if the recent battle between Republicans and Democrats over the new stimulus package scared some investors last week, the four new executive orders recently signed by President Trump aimed at assisting students, tenants and the unemployed is reassuring everybody. In addition, investors are also digesting today’s positive data from China as they show the recovery is well on its way, boosting appetite for risk assets. However, investors continue to monitor simmering tensions between Washington and Beijing as these are seen as a real sword of Damocles hanging above financial markets at the moment. There is a high chance any evolution, positive or negative, in this case would lead to an increased volatility and significant price actions on stock markets.
The Stoxx-50 Index is still trading sideways between 3,225pts and the strong technical resistance (Kijun-Sen) at 3,300pts. The Ichimoku cloud remains thick and is providing significant support to the market but the downside risk will exist as long as the price stays below the Kijun-sen level. The next support can be found above 3,050pts if the support level at 3,225pts fails.
