EU50 Down.EU50 Down.
Divergence. Squeeze at top.
Change in volume.
High confluence area.
4x move possible.
EU50 trade ideas
EURO50 index under bullish pressureLikely to rise to resistance level 4700.00
EUR50 index is under the bullish pressure now after the price broke above the resistance level 4585.00 (which stopped the previous impulse wave 1 at the end of last year).
The breakout of the resistance level 4585.00 follows the earlier upward reversal from the 4465.00 (former major resistance from 2023, acting as support after it was broken recently).
Given the clear weekly and the daily uptrend, EUR50 index can be expected to rise further to the next resistance level 4700.00.
End of the correction for equity markets ?- the market has been trading lower and lower, within a bearish channel since mid-December 2023. The medium-term trend is therefore bearish.
- This bearish channel occurs as a continuation flag pattern, correcting the bullish trend that began in October 2023.
This correction was explained at the fundamental level by fading hopes for a dovish change in monetary policies in Europe and the United States, due to the latest encouraging economic data, as well as central bankers confirming that the battle against inflation still wasn't over.
Very recently, prices registered a strong rebound above 4,380.0pts, thanks to the latest very positive results from Taiwan Semiconductor Manufacturing which forecasts a strong increase in growth in the sector.
These results encouraged investors to pile up long positions in a market that has become much more attractive after the recent discount.
Technically speaking, prices are trading very close to the upper limit of their bearish channel, but the 2 moving averages continue to validate the rise while the RSI has already announced a bullish breakout to come.
- It is now possible to envisage that the correction that began in January is coming to an end. If prices manage to confirm the bullish breakout of their medium-term channel, this would pave the way for new tops. The next resistances could be found around 4,500.0pts, 4,600.0pts then 4,680.0pts and even higher by extension.
European shares rose on FridayEuropean shares rose on Friday, despite Asian benchmarks closing in the red, as investors brace for Eurozone’s CPI figures.
The sell-off in Asian Equities due to the US-Sino trade war resurgence didn’t spread to European contracts on Friday, as investors continued to cheer on the prospect of a much more dovish monetary policy to come.
Indeed, cooling inflation, bad economic data and lower oil markets all tend to fuel hopes of a significant switch in central bank monetary policy.
Speaking of inflation, most traders now have their eyes towards the next reading coming from the Eurozone to see if what they saw last week in the US will also be confirmed on the old continent.
Analysts also expect a significant drop here, with a 2.9% projection compared to 4.3% last month. Again, if these figures regarding the deceleration of price pressure were to be confirmed, or are even surprisingly better, then we should expect the current rally to continue further as risk appetite will likely grow more.
This scenario is currently getting priced in as the STOXX-50 index briefly traded above its short-term resistance at 4,330.0pts, with the 4,350.0pts zone now in sight.
Elsewhere, investors will also pay attention to today’s US housing starts data alongside speeches from Fed officials, while the spectre of a deadline regarding a deal about the government’s funding is slowly coming back into the spotlights.
Pierre Veyret – Technical analyst, ActivTrades
European Central Bank is holding rates untill Q3 Market Insight:
ECB policymaker Francois Villeroy de Galhau has emphasized that the decision on rate cuts in 2024 will be data-driven, rejecting a fixed timeline. ECB President Christine Lagarde, while suggesting a potential rate cut in the summer, emphasizes the importance of data in timing the decision. Central bank officials are cautious about immediate easing but acknowledge a long-term trajectory of lowering borrowing costs.
Rationale:
Anticipating the likelihood of a delayed rate cut by the European Central Bank (ECB), potentially impacting businesses' cost of borrowing and consumer spending, which could lead to lower revenues for companies in the European stock index.
Trade Strategy:
Short Position on European Stock Index: Consider initiating a short position in the European stock index (e.g., Euro Stoxx 50).
Entry Point: Look for technical signals indicating a reversal or weakness in the index.
Stop-Loss: Place above a recent significant peak to manage potential upward movements.
Take-Profit: Target the next support level, considering potential downward pressure on index components.
Macro Monday 27 - Headwinds in Europe but Spain thrivingMacro Monday 27
Headwinds for Europe but Spain demonstrating relative strength
As it is New Years Eve I wanted to do an early release for tomorrow.
This week we are taking a look at another major market Index in Europe and we will also look at one smaller market within this geographical location, Spain, due to its strong chart set up and promising economic data released in December 2023.
EURO STOXX 50 Index - $SE5E
The EURO STOXX 50 index is known as Eurozone’s leading blue-chip index and is designed to represent the 50 largest and most liquid companies in the eurozone.
It was designed by STOXX, an index provider owned by Deutsche Börse Group (which operates one of the world's largest stock exchanges by market capitalization – the Frankfurt Stock Exchange). STOXX have an array of interesting index’s that we might review over coming weeks.
The Euro STOXX index is composed of 50 stocks from 11 countries in the Eurozone. These are the top fifty largest and most liquid stocks. The index futures and options on the EURO STOXX 50, traded on Eurex, are among the most liquid products in Europe and the world.
The Top Three Holdings (representing 20% of overall EURO STOXX 50 index):
1. ASML Holding NV NASDAQ:ASML : Microelectronics solutions provider that offers semiconductor manufacturing equipment.
2. LVMH Moët Hennessy Louis Vuitton OTC:LVMHF : World Leader in luxury brands such as Tiffany & Co, Christian Dior, Marc Jacobs, TAG Heuer, and Bulgari.
3. TotalEnergies SE EURONEXT:TTE : This is a global multi-energy company that produces and markets energies: oil and biofuels, natural gas and green gases, renewables and electricity. The company has 100,000 employees and is active in 130 countries.
Interestingly the EURO STOXX 50 Index typically represents approximately 60% weighting of the STOXX Europe 600 Index, which is derived from the STOXX Europe Total Market Index LSE:TMI which is a subset of the STOXX Global 1800 Index. Talk about a game of Russian dolls. We will look at these other charts at another time, for now we are focused on the arrow head of the commercial European markets, the Top 50 companies in the EURO STOXX 50.
The EURO STOXX 50 Index can provide a great overview on how the largest and most liquid companies in Europe are performing in aggregate, thus giving us insight into the European commercial markets direction and the European economy. So lets take a look at the chart.
The Chart
Whilst the chart is in a general uptrend since 2009 with successive higher lows, we appear to have made a long term pennant breakout however there are a number of concerns that jump out at me.
▫️ We are approaching the July 2007 market highs and if surpassed we will then have another overhead resistance from the March 2000 All Time Market highs. These are significant resistance levels.
▫️ We could be forming a rising pennant at present so even if we breach the July 2007 highs, we have the intermittent pennant ceiling to also contend with.
Whilst these are genuine concerns, at present we are trending upwards with the 21 month SMA sloping upwards.
What to watch for?
Bear Perspective:
▫️ A breach of the 21 month moving average followed by,
▫️ A breach of the rising wedge lower boundary. NOT GOOD
Bull Perspective:
▫️ We break above the July 2007 Top and make support on it eventually finding additional support from the 21 monthly moving average as time moves on.
Would I trade this chart? No! However, it is an exceptionally interesting chart that offers valuable perspective on the major components within the European commercial markets. It provides us with an interesting perspective on the European Economy and can help us understand the broader opportunity or risks within the market.
IBEX 35 Index - BME:IBC
We are now going to have a look at the top 35 stocks in the Spanish stock market as this market has proven to be an outlier in 2023.
The IBEX 35 Index is made up of the 35 most liquid stocks traded on the Spanish stock market. Between 2000 and 2007, this index outperformed many of its Western peers, driven by relatively strong domestic economic growth which particularly helped construction and real estate stocks. In these bull markets Spain proved to have more volatility to the upside, however that obviously comes with the potential opposite downside volatility also. In any event, we can take advantage of one of Europe’s fast paced markets and consider individual stocks within it.
Spain as an outlier
I have focused in on Spain as the chart looked more promising than the markets in other European countries, thereafter I found some economic data and narratives that support this potentially strong chart set up.
▫️ Spain is the 4th largest economy of the EU - save for that of the United Kingdom - and the 14th largest in the world.
▫️ Spain is the 13th largest recipient of foreign investments in the world. More than 14,600 foreign firms have set up their business in Spain and this appears to be a continuing trend.
▫️ As recently as the 18th December it was announced that Spanish exports exceeded €320 billion from January to October 2023, an all-time high, according to government statistics.
▫️ Industries leading this boom were the automobile, capital goods and food, beverage, and tobacco sectors.
▫️ The Spanish state also confirmed that the nation has a current account surplus of 3% of GDP, the best figure recorded since 2018.
▫️ Geographically, 61.6% of total Spanish exports were sent to the European Union in October 2023, while exports to non-EU countries accounted for 38.4% of the total, demonstrating Spain’s global reach is versatile and not restricted to Europe.
Finally a quote from the Spain's Ministry of Economy, Trade and Business "The Spanish economy ……in the complex international context, has maintained its constant weight in international trade in goods and increased its share of the European market in recent years,".
IBEX 35 Index Top 3 Holdings:
1. Iberdola BME:IBE (14%) – A clean energy utility company with 40,000 employees. It constructs, operates and manages power generation plants, transmission and distribution facilities and other assets. The company produces electricity using conventional and renewable energy source
2. Inditex BME:ITX (14%) – One of the worlds largest distribution groups for the likes of ZARA, PULL&BEAR, MASSIMO DUTTI and BERSHKA. These brands are more aligned with mid-range affordability for the middle class.
3. Santander BME:SAN (11%) – The 28th largest bank I the world with 200,000 employees, 166 million customers and 1.7 Trillion in total assets (all global figures).
The top three holdings making up almost 40% of the IBEX 35 weighting are actually a nice blend of Energy, Staples and Finance. This adds to my preference to actually invest in the IBEX 35 Index as it appears to be a nicely diversified index from a review of the major holdings.
The Chart
A long term pennant has made a defined breakout of the range and found support with a bounce off the 21 month moving average.
Historically you can see the relevance of the 21 month moving average, once lost after the 2000 and 2007 top it was a clear indication to exit the market. Conversely, once price is established above the 21 month moving average you can see that you typically have good odds of upward momentum.
The advantage of watching an index like this, outside of a liquid trade, is that it gives us an indication that the Spanish market has relative strength at present and companies within the index, and potentially outside it, may offer a greater probability of returns than other markets in the Eurozone. I guess being a smaller well diversified and more nimble market in the sunny Mediterranean has its benefits.
I highly recommend you review last weeks Macro Monday which looked at how positive four large Global Index’s are looking at present. These were the Vanguard Total World Stock Index ETF - AMEX:VT , iShares Global Energy ETF - AMEX:IXC , Global X FinTech ETF - NASDAQ:FINX and the Global X Blockchain ETF - NASDAQ:BKCH
If you enjoy my coverage of these indices or would like me to cover some others, please let me know in the comments,
Happy New Year Folks, sláinte 🥂
PUKA
European Stock Index Shows Signs of WeaknessAs the comparison chart shows, the ESX50 lags behind the US500. And this trend has been observed since mid-December, a period when central banks around the world published interest rate decisions and set expectations for the future. The divergence suggests that Europe's central bankers are in no rush to join the US turn to lower interest rates — even as investors continue to insist that they will have to accept easier monetary policy soon enough.
According to Bloomberg, after Federal Reserve Chairman Jerome Powell signalled that the focus is now on lowering borrowing costs, colleagues from Frankfurt to London said that a further slowdown in inflation cannot be taken for granted. That is, for now in Europe, policy easing is not yet on the agenda.
“We should absolutely not lower our guard,” European Central Bank President Christine Lagarde told reporters in December, while her Bank of England counterpart Andrew Bailey noted there was “still work to be done” in the fight to rein in consumer prices.
The chart shows that overall Western stock markets were positive in December, but a comparative analysis allows us to make interesting observations:
the ESX50 index was the top gainer in December;
but after a series of central bank meetings in the middle of the month (shown by the arrow), the lead was lost. While the S&P 500 is in close proximity to an all-time high, European stocks have lost bullish momentum.
It is possible that the mid-December highs will prove to be important resistance. And if a correction occurs in the stock market (which will be a reason to write about the end of the Santa rally), then the ESX50 will again be a leader, but in a downward trend.
This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.
European Shares Await Year-End FOMC MeetingEuropean shares traded sideways on Wednesday as investors held their breath ahead of the last FOMC meeting of the year.
The STOXX-50 index still trades inside its narrow range between 4,5330.0pts and 4,550.0pts, with patchy performances across all sectors. At the same time, investors await further monetary developments following yesterday's US inflation reading that took some by surprise.
While the YoY US CPI data came out at 3.1%, just as expected, investors were disappointed to see a 0.1% increase compared to November, which had an immediate bullish impact on the US dollar, undermining hopes of a quick dovish switch from the Fed.
That is why today's FOMC meeting will be crucial and probably shape market sentiment for the rest of the year. Investors, supported by cooling inflation over the last few months, have already largely priced in a monetary dovish turn from the Fed. This puts them at risk as Fed Chairman Jerome Powell may choose to temper strong dovish expectations, keeping the doors open for the "higher for longer" narrative, especially following yesterday's CPI report.
If that happens, a sharp downside price action could quickly occur on equities, likely driving benchmarks towards a correction zone before the year's end.
On the other hand, no significant hints from today's meeting could keep the current status quo alive on stocks, while of course, any dovish semantic should fuel market sentiment and drive share markets to new highs.
Pierre Veyret – Technical analyst, ActivTrades
European Stocks Open Mixed Amidst Risky Week AheadFollowing a patchy trading session in Asia, European stocks opened mixed on Monday as investors brace themselves for a risky week.
The STOXX-50 index still trades well above the 4,500.0pts mark despite its failure to clear the 4,535.0pts resistance, as gains in healthcare and industrial shares are offset by losses from the consumer non-cyclical, energy and basic materials sector.
The market lacks direction for the first exchanges of this new trading week, and investors are waiting for an extremely busy macro calendar in the next few days.
In addition to the new batch of key macro data such as PMIs and inflation rates, traders will pay close attention to the decision on rates from the US, EU and UK this week.
This week's challenge for investors will be to confirm their hopes of a monetary dovish turn to come. Many have already priced it in, and this sentiment still prevails even if the solid US employment data seen last Friday has slightly tempered the amplitude of rate cut expectations.
Volatility will likely increase significantly throughout the week, even though most benchmarks remain well-oriented.
The STOXX-50 index still trades inside its mid-term bullish channel, with both moving averages rising, while the DMI shows a directional price action inside a bull environment.
The 4,610.0pts zone should be seen as a strong resistance level if the market clears the 4,535.0pts and 4,55.0pts marks.
Pierre Veyret – Technical analyst, ActivTrades
EU 50 potential SHORTWait for the market direction to shift from a bearish to a bullish trend, or vice versa, in order to determine the most appropriate entry level to achieve more lucrative outcomes.
It is essential to implement appropriate risk-reward ratio, diversify your portfolio, and avoid excessive leverage in order to minimize losses and maximize profits.
Stock indices climbed higher in the EurozoneStock indices climbed higher in the Eurozone, alongside US futures contracts, as investors brace for the US jobs report.
Risk sentiment is on the rise everywhere in Europe this morning, with consumer cyclicals, industrial, energy and tech shares leading benchmarks higher towards new resistance levels following this morning’s German CPI data that came in line with expectations, and ahead of key macro developments in the US this afternoon.
All eyes are on the US employment sector as investors await further signs of cooling that could lead the Fed to confirm the monetary dovish switch many have already started to price in.
The nonfarm payroll is expected to show more job creations compared to last month (180K exp. vs 150K prev.) alongside the average hourly earnings, which is expected to go from 0.2% to 0.3%. Meanwhile, the unemployment rate is estimated to remain at the same level: 3.9%.
Like always, any number outside the “expected vs previous” window would likely cause a sharp price action in major FX pairs, treasuries and equities. However, with many anticipations of a cooling US economy already well on the table, NFP and average hourly earnings figures better than anticipated could dramatically reverse market sentiment across this wide range of assets, opening the door for a sharp short-term correction on stocks.
On the technical front, the STOXX-50 index is trading closer to its 4,500.0pts resistance, still inside its mid-term bullish channel.
Pierre Veyret – Technical analyst, ActivTrades
European shares rebounded after an initial dip on ThursdayEuropean shares quickly bounced back up after opening lower on Thursday, as market sentiment was shaken overnight by hawkish monetary hints in Japan.
Some investors have been caught by surprise after BoJ Governor Kazuo Ueda hinted towards the end of the negative rates era in Japan, where the sparks of a more hawkish approach had a ripple effect across a wide range of assets like JPY pairs, of course, but also treasury and equity markets.
This volatile price action will likely be a very short-term turbulence for EU stock traders as the market quickly defended support zones established recently as the STOXX-50 index remains above the 4,460.0pts mark.
Of course, there is still room for a more significant correction towards 4,445.0pts or even lower around 4,430.0pts, without threatening the mid-term bullish trend, but there is a high chance trader focus will switch back to the macro developments.
Indeed, on top of today’s EU GDP data, US employment figures loom tomorrow, while bets of a more dovish approach from the Fed and the ECB stay well on the table before next week’s FOMC and ECB’s rate decisions.
We expect the market to remain volatile without a clear direction before this news.
Pierre Veyret – Technical analyst, ActivTrades
Stocks edged higher in Europe on WednesdayStocks edged higher in Europe on Wednesday, extending gains registered in Asia overnight, as the prospects of a monetary dovish switch bolstered market sentiment.
In Europe, investors continue cheering on the recent dovish hints provided by ECB officials. Market sentiment towards riskier assets has significantly improved since historically hawkish central banker Isabel Schnabel confirmed inflation had slowed significantly, paving the way for the ECB to end its tightening campaign.
Another bullish leverage to stocks came from softer than anticipated US readings regarding employment, which also opens the door to a more dovish monetary policy in 2024, as the Fed will likely want to support a cooling economy to avoid a potential recession.
Of course, these are only anticipations so far and need to be confirmed with next week's FOMC meeting. But risk appetite remains high for now despite this morning's disappointing German factory orders data. Market volatility isn't likely to slow down as traders brace for today's US ADP Nonfarm employment change, another decision on rates from the BoC, and the US crude oil inventories later in the afternoon.
Technically speaking, the STOXX-50 has now hit a crucial long-term resistance at 4,465.0pts (38.2% Fibonacci Daily Fibonacci extension). A pull-back to the newly established floor over 4,430.0pts may take place before potentially reaching new highs.
Pierre Veyret – Technical analyst, ActivTrades
Tuesday's European Stocks: Modest Opening GainsStocks climbed slightly before paring some of their gains at the opening of Tuesday’s trading session in Europe, while Asian shares closed in the red, as macro data led market sentiment sideways.
The STOXX-50 index still trades inside its consolidation zone between 4,400.0pts and 4,430.0pts. Investors are experiencing patchy performances across all sectors as they struggle to reconcile positive dovish hints from ECB official Isabel Schnabel with the debt situation in China, which remains a dark cloud for equity traders.
In addition, even though US PMI and JOLTs data may increase market volatility in the afternoon, the “wait and see” stance will likely continue as investors brace for the crucial US jobs data due tomorrow and Friday.
Meanwhile, a particular focus should be maintained towards central bankers’ speeches, as traders need to check whether their dovish expectations will be confirmed.
Technically speaking, no directional price action will be expected if the market keeps trading within its 30-point wide range.
Pierre Veyret – Technical analyst, ActivTrades
European Equities Hold Steady Amid Mixed Risk SentimentEquities traded sideways in Europe on Monday amid mixed market sentiment towards risk ahead of a significant batch of new macro data this week.
The STOXX-50 index drifted shortly after the opening bell before bouncing back as gains in consumer non-cyclicals, industrials, and real estate shares offset losses seen in basic material and energy stocks.
Investors’ appetite for risk remains, however, fragile for two reasons.
This week’s macro agenda is busy, with most traders waiting for PMIs and ISM data from the US, UK and EU while a batch of US job data looms. Investors will also wait and see where economies are going, checking that the anticipations that drove the autumn rally were on point before adjusting their portfolio’s exposure to risk.
The second reason is technical: as previously mentioned, the market has already gone a long way up since its rebound at the end of October. With the impact on key resistance levels, investors may want to consider taking out some profit while waiting for this week’s macro developments.
Pierre Veyret – Technical analyst, ActivTrades
European Shares Rise on Improving PMI ReadingsYesterday, the values of the PMI index (it is characterized as a leading indicator of industrial production and services) for European countries were published:
→ in Germany: fact = 42.3; expected = 41.1; a month earlier = 40.7;
→ in France: fact = 42.6; expected = 43.2; a month earlier = 42.6;
Although the index values are below 50, indicating a contraction in the economy, the dynamics are encouraging. Thus, in France, the index stabilized after a series of declines. And in Germany, the index is consistently growing after a minimum of 38.8 in July. In this way, business is reacting to the fact that the ECB may have reached the peak of increases and monetary policy will not tighten in the future.
At the same time, the ESX50 index of 50 European shares gained bullish momentum and reached its highest levels since mid-August. Equity market participants may be feeling strongly positive about the rally of more than +9% in less than a month.
However, the daily chart of the ESX50 shows that price dynamics allow a structure of trend lines (shown in blue) to be drawn, reminiscent of a Gann fan. And what's interesting is that the current value has reached an important line (shown as thickening) in this structure, which can serve as resistance - as it did more than once during the period from April to July.
Given that the RSI indicator is forming divergence in the overbought zone, it can be assumed that the market is vulnerable to a pullback.
This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.
European benchmarks opened without clear direction on Thursday European benchmarks opened without clear direction on Thursday after mixed macro data failed to bolster market sentiment ahead of a long weekend in the US.
Lower transaction volumes and decreased market volatility traditionally occur during the long Thanksgiving weekend, when US investors stay away from their trading desks.
In addition, the recent batch of mixed macro data with poor PMI figures from France and better-than-anticipated ones from Germany didn’t help lift or drop market sentiment in the region.
The pan European STOXX-50 index opened mixed, with gains in healthcare, basic materials and energy offset by losses in consumer non-cyclicals and tech shares.
The market is trading with muted volumes, close to its major short-term resistance around 4,350.0/4,355.0pts as the bullish momentum keeps cooling.
Despite another slew of incoming European macro data today, with the Eurozone PMI alongside speeches from ECB and Bundesbank officials, we don’t expect the market to register any sharp or directional price action for the end of the week.
Pierre Veyret – Technical analyst, ActivTrades
Stock markets traded slightly higherStock markets traded slightly higher but remained in their consolidation zone on Wednesday, as risk appetite seems to take a break ahead of the last batch of economic data before Thanksgiving.
European benchmarks are trading sideways, with the STOXX-50 index still inside its 20-points wide trading range, after yesterday's release of the FOMC minutes, alongside the speech from ECB President Lagarde, failed to bring more direction to equities.
The minutes from the last FOMC meeting indicated that the Fed would remain cautious with its next moves regarding rates. This may temper the dovish expectations of investors, even though it only has a limited impact so far.
Investors are now likely to keep their eyes on the December meetings from both the ECB and the Fed, hoping for a significant switch of semantics from central bankers.
Meanwhile, the focus should be on macro data, especially with today's Eurozone consumer confidence, the US initial jobless claims, University of Michigan consumer sentiment, and durable goods orders.
The Stoxx-50 index trades above its moving averages, close to its 4,350.0pts resistance following a slight rebound supported by consumer non-cyclical and real estate shares, while the RSI indicator continues displaying a cooling bullish momentum.
Pierre Veyret – Technical analyst, ActivTrades
Equities continued to consolidate on Tuesday in EuropeEquities continued to consolidate on Tuesday in Europe, following a mixed trading session in Asia, as risk appetite lost momentum.
Most benchmarks traded sideways from Frankfurt to Madrid this morning, with gains in the industrial and basic material sectors offset by losses in financial and energy shares.
Not only have markets become less directional since the beginning of the week, but volatility has also decreased, highlighting the current slowdown in risk appetite.
The big question in investors’ minds is: are equity markets set for a correction following a three-week rally, or is the current consolidation just a breath before reaching new highs?
Technically speaking, the scenario of a coming correction prevails, as the price action currently diverges with the RSI indicator, which also already shows a break-out of the bullish dynamic trendline.
However, the macro front tells another story. With today’s release of the minutes of the last FOMC meeting and a speech from ECB President Christine Lagarde, investors may also prefer to sit back and wait for further developments on the monetary front before adjusting their exposure to equity markets.
The dovish narrative has now been largely priced in, and some investors are starting to think that one cooler-than-expected inflation print cannot be sufficient to reverse market sentiment completely: it will need to be confirmed by central bank officials.
The STOXX-50 index keeps trading sideways between 4,350.0pts and 4,330.0pts, with 4,385.0pts as the next major resistance, while 4,300.0pts can be seen as a key support for the market.
Pierre Veyret – Technical analyst, ActivTrades
European Markets Open Mixed on MondayShares markets opened mixed in Europe on Monday, holding gains ahead of further macro developments this week.
Market sentiment fluctuated this morning, as losses in Germany due to the sharp price action in Bayer, were offset by gains in Paris and Madrid.
Even if equities started the week without direction, risk appetite remains high from investors as the dovish narrative started two weeks ago remains in place.
Traders and investors are now focused on the release of the FOMC and ECB minutes of their last meetings, while speeches from many central bank officials, including ECB President Christine Lagarde and BoE Governor Andrew Bailey, also loom this week.
Elsewhere, geopolitical tensions remain an uncertainty driver for equity traders, especially after a vessel was seized by Houthi rebels in the Red Sea.
This raised concerns of an energy supply disruption, which drove the sharp price action in the energy sector this morning.
On the technical front, the STOXX-50 index still trades above the 4,330.0pts level despite an ongoing bearish divergence between prices and the RSI indicator, highlighting a rally slowdown. The break-out of the newly established support level could open the doors to a correction towards 4,300.0pts and even deeper.
Pierre Veyret – Technical analyst, ActivTrades
