Dax, Ftse and Dow Jones Talking Points:
- DAX 40: DAX edges higher even though Eurozone CPI meets estimates
- FTSE 100: Steady in European trade after lackluster week
- DOW JONES: US equities positive in premarket trade, as recession jitters persist
DAX 40: DAX edges higher even though Eurozone CPI meets estimates
As investors remain vigilant about the potential of a significant global economic downturn, European indices remain under pressure, with the DAX falling by approximately 5% over the course of the week.
Despite the uncertain geopolitical backdrop, European Central Bank Governing Council member Klaas Knot has suggested that several half-point rate hikes may be required if inflation worsens. Knot, an ECB hawk who was the first Governing Council member to float the idea of a hike above the usual quarter-point, said that even by moving in larger increments he doesn’t expect rates to be raised by a cumulative 200 basis points before early 2023.
The latest Eurozone consumer prices for May were released this morning, with the MoM and YoY numbers meeting expectations of 0.8% and 8.1% respectively. Adding to the inflation conundrum, news that Russia may cut off gas supplies to Europe has caused further concern over the longer-term effects of persistently high inflation.
With marginal gains this morning, notable movers on the DAX were Delivery Hero AG, Zalando SE and Airbus Group SE posting gains of 6.2%, 3.45% and 3.4% respectively.
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From a technical perspective, we saw a bounce of support (13270 area) on Wednesday, followed by yesterday’s decline which broke the support level (13270 area). In doing so we finally tapped into the psychological 13000 level before bouncing this morning.
We have posted gains of approximately 200 points since the start of the day with price about to retest the previous support turned resistance (13270 area). With price still under pressure any rejection of this area could open up a retest of the 13000 level and possibly head lower.
Key intraday levels that might be worth watching:
DAX 40 Daily Chart- June 17,2022
FTSE 100:Steady in European trade after lackluster week
The FTSE 100 posted moderate gains in the European trading session following on from yesterday interest rate hike of 25 basis points from the Bank of England (BOE). On the back of the announcement, we saw the FTSE post declines of 3.1% for the day after a positive trading day on Wednesday.
The FTSE remains under pressure, as experts warn that the UK may be in for ‘tough times’ ahead as inflation could possible hit 11% this autumn. The economy is already fairly stagnant, and the cost-of-living crisis is being exacerbated by a number of external shocks, including the Covid-19 pandemic and the war in Ukraine.
Even though the BOE has been raising rates steadily, with Thursdays hike a record fifth hike in a row in seven months inflationary pressures may be mounting on the domestic front as well. The worry for experts is supply problems, falling real wages, and concerns relating to Covid-19 could slow the UK’s recovery even more during the winter months.
Among the notable movers on the FTSE 100 this morning included Glencore, whose stock rose 2.5% in early London trade after it said it had cashed in handsomely on the volatility in commodity markets this year. Other performers of note include the Ocado Group PLC and EasyJet who posted gains of 4.5% and 4.2% respectively.
FTSE 100 Daily Charts– June 17,2022
The FTSE experienced a bounce on Wednesday after tapping the support area (7120) before retesting trendline resistance around 7330 as indicated on the chart. Yesterday saw a steep decline from the trendline retest which broke our support area around 7120 and testing the psychological 7000 level.
As the 7120 handle continues to hold bulls at bay, an increase in selling pressure may give way for a retest of 7000, paving the way for further declines.
Key intraday levels that might be worth watching include:
DOW JONES: US equities positive in premarket trade, as recession jitters persist
US equities were up in premarket trade on the back of a grueling week for equities. This comes after the 75-basis point hike by the US Federal Reserve on Wednesday which sparked recession fears in some quarters.
Federal Reserve officials have run out of patience with high inflation. That means heightened focus on short-term indicators that were previously played down in favor of longer-term ones and a hawkish pivot on policy. Chair Jerome Powell’s nod to that measure suggests Fed officials are placing increasing emphasis not only on shorter-term swings in actual inflation, but also on shorter-term measures of inflation expectations.
Chair Jerome Powell said the Fed was not out to drive the economy into recession, but effectively admitted that a downturn was possible, though he argued that it wouldn’t be the Fed’s fault.
Among the notable moves in premarket trade were American Express, Boeing and Walt Disney who posted gains of 2%, 1.7% and 1.1% respectively.
DOW JONES Daily Chart- June 17,2022
Following other major Equities, the DOW experienced a bullish Wednesday before posting further losses yesterday. Wednesday candle close however failed to break above resistance area of 30600 indicating a lack of momentum proven by yesterday’s 600-point decline to post a low of approximately 29650.
A retest of the 30600-support area (now resistance) may see a rejection, allowing price to decline back below the 30000 psychological level and post further losses. A Daily candle close back above 30600 could see a bullish push heading into next week.
Written by: Zain Vawda, Market Writer for DailyFX.com
Contact and follow Zain on Twitter: @zvawda