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DAX Index, FTSE 100, STOXX 600: German Recession Threats, UK’s Falling Inflation Shape Market Trends

By:
James Hyerczyk
Updated: May 26, 2024, 13:04 GMT+00:00

DAX fluctuates amid Germany's recession risk; FTSE-100 climbs with UK inflation relief, hinting at consumer spending rise.

FTSE-100 Index, Dax Index, Stoxx Index

In this article:

Key Points

  • Germany’s GDP contraction signals DAX volatility.
  • FTSE-100 benefits from UK’s reduced inflation rate.
  • Central bank policies heavily influence DAX and FTSE-100.

Euro Zone GDP and Recession Risks

European stocks are moving higher on Tuesday, driven by investor reactions to the latest GDP figures from the euro zone. Key indexes like the Stoxx 600, Germany’s Dax, and the UK’s FTSE-100 all reported gains, indicating a positive shift in investor sentiment.

At 11:28 GMT, the broad-based Stoxx 600 Index is trading 486.09, up 1.25 or +0.26%. Germany’s Dax Index is at 16963.81, up 22.10 or +0.13% and the UK’s FTSE-100 Index is trading 7676.30, up 43.56 or +0.57%.

Despite this, concerns loom as Germany, Europe’s economic powerhouse, exhibited a contraction in its economy by 0.3% in the fourth quarter of 2023. This contraction places Germany on the verge of a recession, following two consecutive quarters of stagnant growth.

Mixed Economic Performance Across the Euro Zone

The economic landscape across the euro zone presents a mixed picture. While Germany faces potential recession, other major economies like France reported zero growth in the same period. In contrast, Italy and Spain showed modest expansions, growing at 0.2% and 0.6% respectively. This divergence in economic performance across key European nations suggests a complex and uneven recovery path post-pandemic.

Renault’s Strategic Shift and Market Response

Renault’s decision to scrap its plans for an IPO of its electric vehicle unit, Ampere, sparked a 5% surge in its shares. This move, deviating from its previous ambition to compete with major EV players, reflects the shifting strategies in the evolving automotive sector. Renault’s stock fluctuated following the announcement, highlighting market sensitivity to corporate strategy shifts.

Sector-Specific Movements

In other market news, British advertising giant WPP’s shares climbed 6.5% due to newly announced financial targets and cost-cutting strategies. Conversely, Delivery Hero’s shares fell by 6% following its decision to divest from Deliveroo, indicating a cooling demand in the delivery service sector.

The UK market received a boost from favorable inflation data, as shop price inflation plummeted to its lowest in nearly two years. This decrease to 2.9% in January, down from 4.3% in December, marks the continuation of a seven-month downward trend. This easing inflation reflects aggressive discounting strategies by retailers during the festive season.

Short-Term Outlook

In the short term, the DAX and FTSE-100 face volatility amid contrasting economic signals. The DAX grapples with Germany’s recession risks, while the FTSE-100 may gain from the UK’s easing inflation. Both indices will react to global trends and central bank policies, requiring traders to stay alert to market shifts.

Dax Index Technical Analysis

Daily Dax Index

The Dax Index is edging higher on Tuesday, within striking distance of a record high at 17003.28. A move through this level will reaffirm the uptrend for the first time since December 14. On the downside, the nearest support is the uptrending 50-day moving average at 16552.01. A trade through this MA will change the intermediate-trend to down.

FTSE-100 Index Technical Analysis

Daily FTSE-100 Index

The FTSE-100 Index is trading sharply higher on Tuesday, building upon the counter-trend rally that began at 7446.30 on January 17, following a steep plunge.

After a steady six day climb, the index changed trend on January 26 when it crossed to the bullish side of the 50-day and 200-day moving averages. This move helped fuel the acceleration to the upside that is driving the momentum at this time. The 50-day MA at 7567.36 and the 200-day MA at 7563.71 are now support.

The index is approaching pivotal resistance at 7687.48. Overcoming this level could trigger a further acceleration with 7764.37 the next target, followed by 7804.79.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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