EUROPEAN SHARES
European stock indices dropped on Monday, following the Asian trend, as the global sell-off continues this week. Sellers are clearly in control as risk appetite has been weighed down since the uncertainty arising from last week’s macro developments. Traders and analysts were disappointed that the Federal Reserve did not make any monetary moves during its latest rate decision.
The latest US NFP figures - the weakest since the pandemic - fuelled the argument that the FOMC should have proceeded with a rate cut. Indeed, the latest batch of poor macro data sparking the prospect of a US recession, combined with the lingering hawkish stance from the Fed, is discouraging investors from remaining long on riskier assets. In addition, the rising tensions in the Middle East, with fears of Iranian retaliation against Israel following the latest attack, are also putting pressure on global stock markets.
This price action isn’t technical but is instead seen as fear trading, where investors reduce their risk exposure and seek safety, hence the current rally in treasuries and on the VIX index. This stance will likely prevail until investors witness clear bullish catalysts, provided by strong evidence of US economic resiliency or solid dovish hints in the next batch of speeches from Fed officials.
The STOXX-50 index has broken out of another major support level and is currently trading below the 4,560pts level, with financial and energy shares as the worst performers. The next significant support level can be located above the 4,400pts level.
Pierre Veyret – Technical analyst, ActivTrades
Source: ActivTrader
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