(MENAFN- ProactiveInvestors)It has been a mixed week for equities as Wall Street hit record highs while the FTSE 100 succumbed to profit taking as the heavyweight mining sector came under pressure from lower commodity prices. Earlier this week the S&P 500 briefly climbed above the record close set in May while the technology heavy Nasdaq touched an all-time high. The CBOE Vix volatility index the so called 'fear gauge' for equities touched it lowest level of the year on Monday as investors welcomed an end to the debt saga in Greece. Greek Prime Minister Alexis Tsipras won parliamentary approval for a second package of reforms required to start talks on a financial rescue deal. Greek banks reopened on Monday and the European Central Bank provided emergency funding to Athens in the first signs of a return to normality after last week's deal to agree a tough new package of bailout reforms. Elsewhere in Europe manufacturing activity grew at its fastest pace in four years in June. Markit's flash Eurozone composite output index which measures the combined output of both the manufacturing and service sectors rose to 54.1 in June from 53.6 above forecasts for a reading of 53.6. Germany's manufacturing purchasing managers' index came in at 51.9 in June from 51.1 in May ahead of expectations for a reading of 51.3 while French manufacturing and services data also beat analysts' expectations. As macro-economic concerns diminished investors focus turned to second quarter earnings season. Of the first 89 S&P 500 companies to report 73% exceeded estimates although poorly received results from bellwethers IBM Microsoft and Apple contained the euphoria. Strong US economic data and comments from Federal Reserve officials heightened speculation about a rate rise this year. Strong housing data solid employment growth and a gradual pick-up in wage inflation make a September rate increase look increasingly likely. The dollar index strengthened towards 12 year highs weighing on dollar-denominated commodities with Brent crude falling back to $56 a barrel its lowest since April while gold sank to its lowest level in more than five years. Minutes from July's Monetary Policy Committee meeting showed members voted unanimously for unchanged interest rates yet the strong impression coming across is that the MPC is stepping up the rhetoric to prepare for a Bank of England rate hike. Yet with UK inflation falling back to zero and poor retail sales figures analysts are still forecasting the first rise in the UK bank rate to be in March 2016 earlier than the end of May that was previously expected. Technical analysis of the FTSE 100 depicts a few days of profit taking after a 400 point rally from the low seen earlier in the month. Initial support 6650 and 6620 could provide a foundation for the index to build on with the oscillators indicating another possible entry level. A close above 6800 may be needed to reinvigorate the bulls with targets seen at 6875 7040 and 7125. In conclusion global macro conditions are improving and the start of earnings season has been welcomed by the market with many UK equities to follow next week. The main headwind on the horizon is the tightening of US and perhaps UK monetary policy yet investors have been aware of this for some time and any move is likely to be gradual leaving equities set to retest the highs seen earlier this year. Apple took a bite out of chip designer Arm Holdings (Epic: ARM) as a 32% rise in quarterly profit was eclipsed by a worse than expected revenue outlook from its key customer. Apple stock fell this week as investors seemed disappointed by another set of record-breaking results that wiped $38 billion off Apple's value causing a knock-on effect on Arm's share price. Arm one of the UK's only large global technology companies sells licences for blueprints for its chips to manufacturers which pay royalties on each unit shipped. Its components are used in more than 95% of smartphones with record sales of Apple's iPhone 6 and iPad powering growth in recent years. The tech behemoth reported strong sales of its signature phone in its third quarter financial report with 47.5 million iPhones up more than a third year-over-year for a net revenue of $31.4bn. Sales in China were particularly robust doubling from last year while Mac sales reached 4.8 million units up 9% and the company sold 10.9m iPads down 18%. Gross margin came in at 39.7%. Analysts however worried whether Apple can keep up the momentum when it comes to the iPhone which accounts for the lion's share of revenue at the company. Industry concerns around a slowdown of the smartphone market were felt in a trading statement Arm released in April 2015 when the Cambridge-based company warned that results could be affected by a 'sequential decrease in industry wide revenues'. Yet Arm's second quarter results on 22nd July were more optimistic stating that 'assuming macroeconomic uncertainty does not further impact consumer spending we expect overall group dollar revenues for full year 2015 to be in line with current market expectations'. Arm has benefitted from their increasing focus on the internet of things as it looks to diversify its product offering. The group signed 54 processor licences in the second quarter and become a key supplier to most large electronics manufacturers with its chips set to be used in products ranging from biometric sensors for mobile payments to automotive engine controls. The chart of Arm illustrates the recent deterioration in the shares briefly dipping below major support at 1000p on the back of Apple's numbers. It is however worth noting the strong bullish divergence evident from the rising oscillators that have moved higher while the underlying stock fell earlier this week indicating momentum remains supportive. 1000p is likely to provide major support while little resistance until 1100p could facilitate a short-term move higher. Arm has been one of the largest fallers in the FTSE 100 during the past month having given up over 10% in the last four weeks dragging the stock to a five-year valuation low. Since then second quarter earnings showed licences returning to growth a record number of new contracts and no material signs of slowing in its end markets. At the time of writing the share price is 1015p which I believe is a good entry point in a compelling medium-term investment case. Targets are seen at 1065p 1096p and 1170p while traders might consider a stop-loss below support at 979p to minimise risk. This report was written by Mark Allen – Head of Derivatives at SI Capital Stockbrokers. The writer does not hold a position in Arm Holdings but client accounts may. The material in this report has come from SI Capital's internal data sources and Arm Holdings' corporate website.
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