DAX 40: Continues Recovery Post Jackson Hole Symposium, Clears 13000 Key Level
The Dax opened higher in early European trade pushing back above the key psychological 13000 level. Markets continue their rebound following last Friday’s sell-off, which was started by US Federal Reserve Chair Jerome Powell’s hawkish tone. Sentiment was further boosted thanks to news that Chinese authorities pledged to stimulate the world’s second-largest economy.
The Chinese Finance Ministry confirmed its commitment to stabilize employment and prices in the second half of the year. This comes after a package of new economic stimulus measures announced by the cabinet last week and includes billions of dollars’ worth of policy financing. Global growth will be key moving forward and a faltering China would severely increase global recession risks.
Eurozone consumer confidence met expectations while economic sentiment fell modestly from 98.9 to 97.6 in August. Industry and services indicate weakening economic activity and recession prospects are causing more moderation in selling price expectations for the months ahead. Later in the day, we have the preliminary inflation numbers for Germany out at 12:00 GMT.
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In a rare positive on the energy front, European natural gas prices on Monday plunged the most since March after Germany said its gas stores are filling up faster than planned. Germany still runs the risk of not being able to make it through the winter if Russia stops gas flows, according to Klaus Mueller, President of the Federal Network Agency, the country’s energy regulator. Following Monday’s plunge in futures prices, they are still trading six times higher than a year ago. Uniper (UN01) stock fell 2.2% after the German energy company said on Monday it has now fully exhausted the EUR9 billion credit line it got as part of its recent bailout, due to the latest spike in natural gas prices.
DAX 40 Daily Chart – August 30, 2022
From a technical perspective, we had a huge bearish candle close last week which closed as a marubozu candlestick with no downside wick. Such a candle usually indicates further downside ahead which might still occur as the week progresses.
On the daily timeframe, we have seen a bullish close yesterday followed by a bullish European open as we now trade above the previous wing point low which now forms a resistance area at 13105. We do need to clear the 50-SMA which will provide resistance while at the same time needing a daily candle close above the key 13000 psychological level if we are to push higher for the rest of the week.
Key intraday levels that are worth watching:
FTSE 100: Led Higher by Banking and Commodity Stocks
The blue-chip indexopened lower in early trade after the UK bank holiday weekend before bouncing 100 odd points. The bounce in early trade can be attributed to bank stocks which are enjoying a positive session with HSBC (HSBA) up 2.18%, Lloyds (LLOY) gaining 2.28% and Barclays (BARC) advancing 3.62%.
Despite the resilience displayed by the index in limiting last week’s losses, there remain several global challenges that promise volatility ahead. Apart from the continuing monetary tightening from central banks, inflation remains a persistent problem with the likelihood of earnings downgrades growing as the third quarter enters its final month.
Meanwhile, pubs and brewers across the UK warn of mass closures as energy bills leap 300%. Bosses of six of the UK’s biggest pub and brewing companies have signed an open letter to the Government urging it to act to avoid “real and serious irreversible” damage to the sector. Having braved the covid-19 storm, one could forgive pub and brewery owners for believing the worst was behind them. On Friday, UK regulator Ofgem confirmed that bills for an average UK household would surge by 80% in October when the new price cap comes into force.
In corporate news, oil majors are enjoying a fine run as we have seen a spike in the price, with Shell (SHEL) and BP (BP) gaining ground, up 2.29% and 2.29% respectively. On the flip side, Rio Tinto (RIO) and Glencore (GLEN) were in the red amid concerns of an economic slowdown.
FTSE 100 Daily Chart – August 30, 2022
The FTSE continues to display resilience even though we had a bearish close to last week. Yesterday we had a bearish engulfing daily candle close before bouncing of support provided by the 100-SMA. We currently trade between 20 and 100-SMA and would need to see a daily candle close above the 20-SMA to see more upside. With the bullish trend still in play, there remain significant technical roadblocks that need to be cleared for a further move higher.
Key intraday levels that are worth watching:
Written by: Zain Vawda, Market Writer for DailyFX.com
Contact and follow Zain on Twitter: @zvawda