Jump to content

European equity indices update: renewed pressure for the FTSE and DAX


Recommended Posts

European equity indices have enjoyed a healthy rebound over the past 36 hours but given the Fed's recent rate rise, the markets are feeling the pressure.

 

bg_janet_yellen_321567602.jpgSource: Bloomberg

 
 Tony Sycamore | Market Analyst, Australia | Publication date: Thursday 23 March 2023 

Following the violent intraday sell-off that followed the UBS-CSFB takeover on Monday, European equity indices have enjoyed a healthy rebound over the past 36 hours.

Helping the recovery, substantial gains in European Banking stocks after US Treasury Secretary Yellen stated "similar actions could be warranted if smaller institutions suffer deposit runs that pose the risk of contagion."

The upbeat tone will likely evaporate when European markets re-open, taking their lead from a softer session on Wall Street following this morning's FOMC meeting.

While the Fed raised rates by 25bps to 4.75%-5.00% and left the median dot unchanged at 5.125% - a dovish development relative to expectations a few weeks ago, the tone of the press conference had hawkish elements. Fed Chair Powell noted he doesn't "see rate cuts this year" and that the Fed is "committed to restoring price stability."

Risk sentiment further soured after Treasury Secretary Janet Yellen said that the government is not considering "blanket" deposit insurance across the banking system, contradicting earlier reports—an explosive mix of communique to drop on markets with wounds still fresh after recent banking stress.

Given the central bank's stubborn focus on inflation, the fallout of a red-hot UK. inflation print last night (10.4% vs 9.9% expected), which guarantees a 25bp rate hike when the BoE meets tonight, will also be felt.

Of particular concern to the BoE, paying close attention to domestic inflation, an increased contribution to CPI from services by 3.1pp from 2.8pp in January.

DAX technical analysis

The view remains that the Dax completed a five-wave advance (Elliott Wave) from the October 11,829 low to the recent 15705 high and is currently tracing out a corrective pullback.

This week's bounce from the 14617 low is viewed as Wave B or the second wave of the correction, missing another leg lower into the 14,400/14,200 support band.

DAX daily chart

 

FDAX1_2023-03-23_11-37-03.pngSource: TradingView

FTSE technical analysis

The recent break below the band of horizontal support 7700/7650 area confirms that a medium-term high is in place at the February 8047 high and that it is currently tracing out a corrective pullback.

This week's bounce from the 7206 low is viewed as Wave B or the second wave of a three-wave correction that has room to extend back to resistance at 7700 before a deeper decline towards 7100/7000 in the weeks ahead.

FTSE daily chart

 

 

UKX_2023-03-23_11-38-36.pngSource: TradingView

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
  • General Statistics

    • Total Topics
      22,132
    • Total Posts
      93,015
    • Total Members
      42,518
    • Most Online
      7,522
      10/06/21 10:53

    Newest Member
    Mak30
    Joined 06/06/23 09:56
  • Posts

    • Charting the Markets: 06 June Dow and Nasdaq 100 look to move higher but Hang Seng struggles. EUR/USD volatility diminishes while AUD/USD rallies on RBA rate hike and USD/JPY slips. And Brent crude oil slips while gold and silver stabilise.   Axel Rudolph FSTA | Senior Financial Analyst, London | Publication date: Tuesday 06 June 2023               This is here for you to catch up but if you have any ideas on markets or events you want us to relay to the TV team we’re more than happy to.    
    • Greetings fellow traders! Today, I wanted to delve into a crucial topic in the world of forex trading: the key differences between fundamental analysis and technical analysis, and how traders employ these approaches to make informed trading decisions. Fundamental analysis focuses on evaluating the intrinsic value of a currency by analyzing economic, political, and social factors. Traders employing this approach examine macroeconomic indicators, such as interest rates, GDP growth, inflation, employment data, and geopolitical events. By assessing the fundamental factors driving supply and demand, traders aim to determine the fair value of a currency and identify potential trading opportunities. On the other hand, technical analysis primarily revolves around studying historical price patterns, chart formations, and statistical indicators. Traders employing this method analyze past price movements and patterns to forecast future price behavior. They utilize tools like moving averages, support and resistance levels, trend lines, and oscillators to identify trends, reversals, and entry/exit points. While fundamental analysis emphasizes the "why" behind price movements, technical analysis focuses more on the "what" and "when." Traders employing fundamental analysis seek to understand the underlying factors driving currency value, while technical analysts focus on interpreting price patterns and indicators to predict future market movements. Traders utilize these approaches in various ways to make informed trading decisions. Fundamental analysis helps traders identify long-term trends and assess the overall health of an economy. By examining economic indicators, monetary policies, and geopolitical events, traders can anticipate major market shifts and adjust their positions accordingly. Technical analysis, on the other hand, aids traders in identifying short-term opportunities. By analyzing historical price data and utilizing technical indicators, traders can spot entry and exit points, determine stop-loss and take-profit levels, and manage risk effectively. In practice, many traders combine both fundamental and technical analysis to form a comprehensive trading strategy. They use fundamental analysis to identify long-term trends and establish a general bias, while technical analysis helps with precise entry and exit timing. It's important to note that no single approach guarantees success in forex trading. Each approach has its strengths and limitations, and traders should choose the one that aligns with their trading style and preferences. I'm eager to hear your experiences and insights on utilizing fundamental and technical analysis. Let's discuss and enrich our understanding of these powerful trading tools!  
    • Ignoring market expectations for a hold, the RBA hikes rates for the twelfth time in thirteen months, intensifying the scrutiny on economic data and heightening concerns for the struggling ASX 200.   Source: Bloomberg   Indices Inflation Market Data Consumer price index Interest rate  Tony Sycamore | Market Analyst, Australia | Publication date: Tuesday 06 June 2023  At its board meeting today, the Reserve Bank of Australia raised its official cash rate by 25bp to 4.10%. Once again, the RBA's twelfth rate rise in thirteen months caught the interest rate market on the wrong foot; the market had priced in an 80% chance of a 'hold' outcome. Last month, after surprising the market with a rate rise by 25bp to 3.85%, the RBA noted that inflation remained too high. It issued a warning that further rate increases might occur, depending on economic and inflation trajectories. RBA prioritises inflation management Choosing to disregard softer data in May across the Wage Price Index, labour market data, retail sales and building approvals, the RBA refocused its attention on the upside surprises in the monthly CPI indicator and the wage increase at the Fair Work Commissions Review. This move aligned with the Path of Least Regret, as anticipated here. Today's decision was influenced by a repeated note on inflation from last month's statement, in which the RBA underscored the significance of keeping inflation expectations stable, stating, "Inflation in Australia has passed its peak, but at 7 per cent, it remains too high. It will be some time yet before it re-enters the target range." The RBA maintained its tightening bias and noted that further rate hikes could occur, depending on incoming data. "Some further tightening of monetary policy may be required to ensure that inflation returns to the target within a reasonable timeframe, but that will depend upon how the economy and inflation evolve." Key data points to determine RBA's next move The following incoming data will be closely scrutinised for clues around when and how much further the RBA might tighten. RBA Governor Lowe's speech: Wednesday, 7 June at 09:20 am AEST Q1 2023 GDP: Wednesday, 7 June at 11:30 am AEST (preview available) Labour force report for May: Wednesday, 15 June at 11:30 am AEST RBA Meeting Minutes: Tuesday, 20 June at 11:30 am AEST Monthly CPI indicator for May: Tuesday, 28 June at 11:30 am AEST Retail sales: Thursday, 29 June at 11:30 am AEST The interest rate market is 80% (19bp), priced for another 25bp hike to 4.35% by the September RBA Board Meeting. What happened to the ASX 200? Today's RBA rate hike is another RBA hammer hit to the ASX 200, already trading 36 points lower at 7180 (-0.5%), before the meeting following a weak lead from offshore markets. Post the announcement, the ASX 200 dropped another 55 points to a low of 7125, led by the Consumer-facing Discretionary (-2.1%) and Staples (-1.14%) Sectors. Also weighing on the index, a 1.3% fall in the heavyweight Financial Index, heavily exposed to struggling households facing cost-of-living pressures and rising interest rates. A break of support at 7115 (the 200-day moving average) and last week's 7077 low would be problematic and lead to a test of year-to-date lows at 6900. ASX 200 daily chart   Source: TradingView TradingView: the figures stated are as of June 6, 2023. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.
×
×
  • Create New...