Summary:
- The US30 has made another all-time high today
- 9th consecutive day of record highs
- Ended last week above 22k for the first time
US stock markets have made further gains today, with the US30 posting a record high for the 9th day in a row. The market has now made no fewer than 50 record closing highs since the US election with bulls seemingly unperturbed about the state of political gridlock in Washington.
The US30 has been on an incredible run higher of late. Whilst there are signs the market is overbought (the RSI has hit 78.6 on D1), without a reversal signal further gains may lie ahead
The rise in US stocks is in contrast to their European peers with the DE30 recently hitting its lowest level since the first round of the French presidential election in April. Due to Macron’s progression being seen as a pretty sure sign of his victory (he did ultimately win by a large margin) the positive news should in theory have provided a greater boost to European equities than the US equivalents.
However, the divergence seen in recent weeks can be explained in part due to movements in the FX space. The EURUSD also rose strongly on the French election results and as this pair rises it weighs on the bottom line of exporters in the continent. German automakers such as BMW, Volkswagen and Daimler have all been under pressure due to the rise in the Euro whilst exporters in the US have seen their prospects improve as the US dollar has fallen to multi-year lows.
Both the EURUSD and US30 have risen strongly since the 1st round of the French elections in mid-April.
An overlay of charts reveals a strong correlation between the EURUSD and US30 in recent months. The DE30 was also moving higher with both of these for the two months or so after the French election, due to the improvement in risk sentiment that the result provided. However concerns about the impact that a sustained rally in the single currency would have on exports has seen European bourses sell back in the past couple of months.
The DE30 also rose strongly alongside these markets in the weeks that followed the vote. However recent months have seen a pullback in several European indices perhaps due to concerns about a sustained appreciation of the Euro.