Jump to content

European Stocks Drop as Yields Tick Higher, EU Stocks, DAX


MongiIG

Recommended Posts

EU STOCKS 50, DAX ANALYSIS:

  • Uptick in US -2 year yield has EU equities trading lower – in lead up to Fed meeting next week
  • Euro Stoxx Index weighed down by tech, real estate and financial sectors
  • DAX, EU Stocks technical analysis and key near-term levels to watch
 

European stocks followed the Asian market lower in early trade on Tuesday, as higher, short to medium term yields in the US and Germany reinforced the market expectation of a ‘hawkish’ Fed and multiple rate hikes in 2022.

The big mover was the US 2 year (most responsive to near term rate expectations) as it surpassed the 1% mark for the first time since the start of the pandemic. In fact, the US 2 year yield last traded around the 1% handle in February of 2020, just before the start of the global lockdowns. The German 10 year bund trades slightly lower this morning around -0.03 but largely continues on its upward path towards zero.

US Bond Yields (2 year. 10 year and 20 year)

European Stocks Drop as Yields Tick Higher, EU Stocks, DAX

Source: Tradingview, prepared by Richard Snow

Elsewhere, in the Euro Stoxx 50 Index, sectors such as tech, real estate and financials trade in the red this morning with the one unsurprising standout being the energy sector, trading up by nearly 0.5% on the day.

Euro Stoxx 50 Sector Summary

European Stocks Drop as Yields Tick Higher, EU Stocks, DAX

Source: Refinitiv, prepared by Richard Snow

EU STOCKS 50 TECHNICAL ANALYSIS

The broad-based equity sell-off thus far looks rather tame for the time being. There has already been a sizeable pullback from the daily low as it failed to break and hold below the zone of support (4245 – 4255) however, the daily close will ultimately reveal whether a bounce or break is most favored.

Support: (4245 – 4255), 4195, 4135

Resistance: 4322

Euro Stocks 50 Daily Chart

European Stocks Drop as Yields Tick Higher, EU Stocks, DAX

Source: IG, prepared by Richard Snow

GERMANY 40 (DAX) TECHNICAL ANALYSIS

The DAX witnessed a bounce off the 200 day SMA earlier today and currently tests the 15770 zone of support. Failure to break and hold below the 15770 level and 200 SMA, may suggest that the sell-off is a temporary response to the uptick in rates and represents an opportunity to rejoin the bull trend as opposed to a deep pullback.

Support: 200 day SMA, 15770, 15430

Resistance: 16032, 16300

Germany 40(DAX) Daily Chart

European Stocks Drop as Yields Tick Higher, EU Stocks, DAX

Source: IG, prepared by Richard Snow

 

Written by Richard Snow for DailyFX.com. 18th Jan 2022

Link to comment

image.png

The 10-year U.S. Treasury yield jumped to its highest point in two years on Tuesday morning, topping 1.83%.

image.png

The yield on the benchmark 10-year Treasury note soared 5 basis points to 1.8305% at 3:40 a.m. ET. The yield on the 30-year Treasury bond climbed 3 basis points to 2.1492%. Meanwhile, the 2-year rate topped 1% for the first time in two years, hitting 1.0364%.

Yields move inversely to prices and 1 basis point is equal to 0.01%.

The move, which comes after a market holiday in the U.S. Monday, indicates that investors are preparing for the possibility of more aggressive tightening by the Federal Reserve.

Last week, Fed Chair Jerome Powell told the U.S. Senate that he expected to see a series of interest rate hikes this year, along with a pullback in other pandemic economic support measures.

Philadelphia Fed President Patrick Harker told CNBC last week that the central bank could raise rates three or four times this year. He noted that inflation is “more persistent than we thought a while ago.”

James Athey, senior investment manager at Aberdeen Standard Investments, told CNBC that the sudden spike in yields couldn’t be explained by any one new piece of news.

“The reality is that the market is still adjusting to the Fed’s ongoing hawkish evolution,” he said via email.

Athey referred to JPMorgan CEO Jamie Dimon’s comments on Friday, when he said the Fed could hike rates as many as seven times this year, according to multiple reports.

These comments, along with speculation that the Fed may hike rates by 50 basis points as soon as March, “are driving the front end to reprice which is dragging all yields up – though notably still the curve is flattening,” Athey said.

“Technically we look a little bit stretched given the pace of this repricing so I expect to see some consolidation around here – especially as the Fed is in blackout and they are the main driver of higher yields at the moment,” Athey explained.

Fed officials have gone into a no-comment “blackout” period ahead of the next central bank meeting on Jan. 25-26.

In terms of data releases due out on Tuesday, the January National Association of Home Builders housing market index is expected out at 10 a.m. ET.

Auctions are scheduled to be held for $60 billion of 13-week bills and $51 billion of 26-week bills. CNBC

Link to comment

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • image.png

  • Posts

    • Copper Elliott Wave Analysis - buy the dip strategy is ideal Function - Counter-trend Mode - Corrective Structure - Zigzag Position -Blue wave a of black wave Y Direction - Blue waves b-c of black wave Y Since October 2023, Copper has gained over 8%. Meanwhile, the Elliott wave perspective is looking at this commodity to continue the giant corrective structure it started in March 2022. Copper is expected to resume a strong rally once the current minor dip is subdued by the bullish flow again. But the questions are, where can traders and investors look for opportunities and how strong can the rally from October 2023 go into the future? Let’s dive into our commodity Elliott wave analysis that covers Copper. On the daily time frame chart, from March 2022, when the commodity was trading for nearly $5, we could identify the decline to 3.145 (July 2022 - a 38% decline in just 4 months) as a corrective wave. That fall was wild! However, the bullish response has been corrective and has taken over 1.5 years. As a result, we are forecasting a double zigzag blue wave ‘W-X-Y’ from 5.043 top. Wave W ended at 3.145 and wave X is subdividing into red wave (W)-(X)-(Y). Wave (W) closed at 4.3575 and (X) at 4.52 and (Y) is ongoing. Wave (Y), on its own, seems to be subdividing into black wave W-X-Y. We seemed to have completed wave W and X but Y is in the early stage. Thus, with Elliott wave theory, we have identified the position of the current price in the large scope of the last 2 years' price framework. Let’s head to the H4 chart to see where and how we can find a position. On the H4 time frame chart, after wave X ended, the price advanced in a 5-wave rally. Good response! With the current decline coming out corrective, we will anticipate at least the blue wave  ‘a-b-c’ of Y above the 4.00 medium level. Our focus will now be on how blue wave ‘b’ ends. The further decline for red wave (a)-(b)-(c) of blue b could continue to the 3.72 minor level which is also close to the 70.7% retracement of blue wave ‘a’. The setup will be invalid at 3.65 i.e. price below wave X. In summary, our forecast supports the recovery of Copper to continue further upside. Therefore the current dip is expected to be corrective and stay above 3.65. Buying interest is expected to surge from there.  Technical Analyst : Sanmi Adeagbo            
    • DCAed here... Let's hope it may perform like BRC20 tokens!
×
×
  • Create New...
us