DAX: Europe kicks off the week robustly
European stock markets started the week little changed due to the disappointing update on China's stimulus, which generated uncertainty among investors. Although the technology and telecommunications sectors showed slight gains, luxury, leisure and travel stocks, especially those linked to the Chinese market, fell significantly. French companies LVMH and Hermes experienced declines of between 1.4% and 3.6%, reflecting concerns about the lack of clarity on the size of the Chinese stimulus package.
In the European context, expectations are focused on the upcoming meeting of the European Central Bank (ECB), which could announce a further interest rate cut. This move is in response to weak economic indicators in the euro zone, which point to a slowing economy. Markets have already discounted a 99% probability of a 25 basis point cut, which could have an impact on the performance of European stock markets in the short term.
Despite the uncertainty, companies in the STOXX 600 index are expected to report earnings growth of 4.6% in the third quarter, although estimates have been declining since September. Earnings season will be key in determining the future of the European market, especially in sectors such as technology and financials, which have attracted significant capital inflows.
Meanwhile, the British betting sector was hit by the possibility of a tax hike, while luxury brand Mulberry stood out with a 16% rise following an improved takeover bid.
Overall, European investors' focus is divided between international developments, such as Chinese stimulus, and local events, such as ECB decisions and the earnings season.
On the technical side DAX (Ticker AT: GER40) has evolved through the upper part of its long-range channel bouncing in the middle zone without exceeding the 161.80% area of the previous Fibonacci retracement which coincides with the all-time high of 19,501.94. It would not be difficult to see a further climb to the highs given that RSI is at 62.34% and could extend the move until the ECB announcements. The crosses of averages and bollinger bands do not seem to give a sign of narrowing but of extension of the movement of the index. Relevant for the index this week will be German retail sales, economic sentiment and general Eurozone data on inflation that may affect German exports. The control point of the bell is located in the area of 18,500 points so it would not be unusual to see a sharp correction to the bottom of the long-term channel if the rate cuts and economic sentiment do not accompany temporarily slowing the escalation.
Ion Jauregui - ActivTrades Analyst
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The information provided does not constitute investment research. The material has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and such should be considered a marketing communication.
All information has been prepared by ActivTrades ("AT"). The information does not contain a record of AT's prices, or an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information.
Any material provided does not have regard to the specific investment objective and financial situation of any person who may receive it. Past performance is not reliable indicator of future performance. AT provides an execution-only service. Consequently, any person acing on the information provided does so at their own risk.
In the European context, expectations are focused on the upcoming meeting of the European Central Bank (ECB), which could announce a further interest rate cut. This move is in response to weak economic indicators in the euro zone, which point to a slowing economy. Markets have already discounted a 99% probability of a 25 basis point cut, which could have an impact on the performance of European stock markets in the short term.
Despite the uncertainty, companies in the STOXX 600 index are expected to report earnings growth of 4.6% in the third quarter, although estimates have been declining since September. Earnings season will be key in determining the future of the European market, especially in sectors such as technology and financials, which have attracted significant capital inflows.
Meanwhile, the British betting sector was hit by the possibility of a tax hike, while luxury brand Mulberry stood out with a 16% rise following an improved takeover bid.
Overall, European investors' focus is divided between international developments, such as Chinese stimulus, and local events, such as ECB decisions and the earnings season.
On the technical side DAX (Ticker AT: GER40) has evolved through the upper part of its long-range channel bouncing in the middle zone without exceeding the 161.80% area of the previous Fibonacci retracement which coincides with the all-time high of 19,501.94. It would not be difficult to see a further climb to the highs given that RSI is at 62.34% and could extend the move until the ECB announcements. The crosses of averages and bollinger bands do not seem to give a sign of narrowing but of extension of the movement of the index. Relevant for the index this week will be German retail sales, economic sentiment and general Eurozone data on inflation that may affect German exports. The control point of the bell is located in the area of 18,500 points so it would not be unusual to see a sharp correction to the bottom of the long-term channel if the rate cuts and economic sentiment do not accompany temporarily slowing the escalation.
Ion Jauregui - ActivTrades Analyst
*******************************************************************************************
The information provided does not constitute investment research. The material has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and such should be considered a marketing communication.
All information has been prepared by ActivTrades ("AT"). The information does not contain a record of AT's prices, or an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information.
Any material provided does not have regard to the specific investment objective and financial situation of any person who may receive it. Past performance is not reliable indicator of future performance. AT provides an execution-only service. Consequently, any person acing on the information provided does so at their own risk.
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