Jump to content

DAX and FTSE outperform amid US inflation concerns, European manufacturing rebounds


Recommended Posts

German and UK stock markets end the week strong, defying US inflation worries with Germany's booming factory orders and an optimistic European manufacturing outlook signaling economic recovery.

 

original-size.webpSource: Bloomberg

 

Written by: Tony Sycamore | Market Analyst, Australia
 
Publication date: 

While US equity markets limped into the weekend on concerns over hotter-than-expected inflation data, the German and UK stock markets ended the week on a solid note.

Despite a lack of AI names, the DAX has followed US equity markets to new highs in 2024, due to several important factors. The energy shock from the Russian invasion of Ukraine has now subsided. Sentiment towards the Chinese economy, which Europe and particularly Germany is leveraged to, appears to be turning high, albeit from a low base. Finally, global manufacturing appears to have turned higher and falling inflation will likely allow the ECB to cut rates in the coming months.

While Germany has been late to join the manufacturing upswing, data released last week showed factory orders in Germany surged by 8.9% in December, compared with a market forecast of a flat reading. It was the strongest rise since June 2020, boosted by large orders across several industries. Further signs of optimism are expected to be viewed in the Euro Area flash PMIs set to be released this week.

What is expected from the Euro Area HCOB PMIs (Thursday, 22 February at 8.00pm)

The Euro-Area Manufacturing PMI surged to 46.6 in January, the highest in ten months, with services stable around 48 for a third month.

This month, the manufacturing PMI is projected to rise to 47.0 from 46.6, and the services PMI is anticipated to edge higher to 48.7, up from 48.4. The composite PMI is expected to increase to 48.8 from 47.9 in January.

HCOB composite flash PMI chart

 

original-size.webpSource: TradingEconomics

FTSE technical analysis

Following a strong rally at the end of last week, the FTSE starts the new week eying resistance at 7750/65ish, which has held for the past nine months. If the FTSE can see a sustained break above 7750/65ish, it would open up a test of the April 7936 high, with scope to the 8047 high.

However, should the FTSE again reject resistance at 7750/60ish, the FTSE would likely rotate back towards the support at 7550/00, coming from the 200-day moving average and last week's 7492 low.

FTSE daily chart

 

original-size.webpSource: TradingView

DAX technical analysis

In our updates in mid to late January, we noted that due to the nature of the three-wave decline from the early January the 17,123 high to the mid-Jan 16,464 low, it was likely a corrective sequence, and that the DAX would push to new highs.

The Dax has since made a fresh record high at 17255. However, given the continued evidence of bearish RSI divergence and based on our wave count, which suggests the up move is mature, we remain of the view that a 5-10% pullback is not too far away.

DAX daily chart

 

original-size.webpSource: TradingView

  • Source: TradingView. The figures stated are as of 20 February 2024. 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.

 

 

This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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

    • In the decentralized future, collaboration is key. Builders shaping the next wave of gaming, entertainment, finance, and community spaces require blockchain infrastructure that's scalable, cost-effective, and adaptable. They seek an ecosystem where creativity thrives, and support is abundant. This is where SAGA comes in. With its recent listing on Bitget exchange, its native token is gaining significant traction, signaling growing interest in SAGA's mission to empower Web3 builders.
    • The cryptocurrency industry has undergone substantial growth in recent years, largely fueled by centralized exchanges. However, with this growth comes a responsibility to adhere to regulatory standards. Recent revelations have cast a shadow over BingX, a prominent cryptocurrency exchange, as it has been found to be facilitating transactions for Iranian users in defiance of US sanctions. This blatant disregard for regulatory prohibitions, which are in place to combat terrorist financing and illicit arms procurement through crypto channels, raises serious ethical questions. The decision by BingX to engage with Iranian clients despite the associated risks and legal constraints has sparked concerns about the judgement of its management team. Of particular concern is the lax enforcement of Know Your Customer (KYC) verification, allowing users to withdraw significant sums without proper identity authentication. Inevitably, regulatory bodies such as the DOJ and SEC will seek explanations from BingX regarding these breaches. The repercussions of such inquiries are likely to be severe, with users already expressing alarm and initiating mass withdrawals. Beyond regulatory scrutiny, BingX's actions threaten its reputation and long-term viability. By flouting US sanctions and disregarding regulatory compliance, the exchange risks damaging its integrity and credibility. As BingX navigates this ethical quagmire, the extent of the fallout remains uncertain. What are your thoughts on the potential implications of these breaches for the exchange? Source: https://cointelegraph.com/news/bingx-exchange-iran-sanctions-evasion      
    • Current Bitcoin Price USD $67,710.6 GBP £54,355.5 Euro €63,529.5  
×
×
  • Create New...
us