Key Points
- European markets gain post-Davos.
- UK retail sales show significant drop.
- Tech sector resilient; telecoms face challenges.
European Stocks Gain as Davos Concludes
European markets are experiencing modest gains as the World Economic Forum in Davos wraps up. The Stoxx 600 index saw an uptick, led by travel stocks, while industrials experienced a slight decline. Investors are now shifting their focus back to corporate earnings and upcoming data releases after policymakers at Davos indicated that a rate cut from the European Central Bank might not be imminent.
At 12:06 GMT, the broad-based Stoxx 600 is trading 471.28, up 0.83 or +0.17%. Germany’s Dax Index is at 7491.85, up 32.76 or +0.44% and the UK’s FTSE Index is trading 7491.18, up 32.09 or +0.42%.
UK Retail Sales Impact on FTSE-100
In the UK, retail sales figures were disappointing, showing a significant drop in December – the largest monthly fall since January 2021. This decline has increased speculation about a possible mild recession in the UK, affecting the pound and bond yields. Despite this, the FTSE Index managed to advance, buoyed by the weaker pound.
DAX and Financials
In the meantime, European shares, particularly in the financial sector, have seen an uptick. However, this has been tempered by the European Central Bank’s hawkish stance, causing the DAX to aim for a weekly fall. German producer prices showed a notable decrease, yet the DAX 40 index still managed to rise slightly.
Tech and Telecom Sector Movements
The technology sector in Europe showed resilience, rising for a second session. Notable gains were seen in Teleperformance and Temenos following positive ratings and earnings reports. Conversely, telecom giants Ericsson and Nokia faced declines after a downgrade by Barclays due to concerns over the 5G rollout in India.
Short-Term Forecast: Cautious Optimism
With mixed signals from retail sales data and central bank policies, the European market outlook remains cautiously optimistic. Investors are likely to stay focused on corporate earnings and macroeconomic data, with particular attention to any shifts in central bank policies and their impact on market sentiment.
Dax Index Technical Indicator
The Dax Index is trading higher on Friday for a second straight session, but the move isn’t enough to turn the market higher for the week.
The short-term trend is down, but the market seems to have reestablished support at 16427.00. Additionally, the major support is the intermediate 50-day moving average at 16359.21. The longer-term support remains the 200-day moving average at 15897.82.
FTSE-100 Technical Indicator
The FTSE-100 Index is edging higher for a second straight session on Friday. Since the intermediate and longer-term trends are down and the market is recovery, following a test of support at 7401.87, we’re calling this a technical bounce.
Minor resistance is 7524.87, but the major resistance is the 50-day moving average at 7556.20 and the 200-day moving average at 7568.75. Buyers would have to take out these levels to change the trend to up, but we expect to sellers return on a test of this resistance area.
