DAX Index, FTSE 100, STOXX 600: Lower Amid Inflation Fears, Hawkish Central Bank Remarks

Highlights

• DAX and Stoxx 600 slide nearly 1% on fresh U.S. inflation data, testing market confidence.
• FTSE 100 endures a volatile week, with a 0.52% dip offset by strong sectoral gains in metals.
• Latvia’s central bank signals hawkish view on rate hikes, adding to inflationary concerns.
• Sartorius AG nosedives 10.8% on reduced full-year outlook, while Swiss Re climbs 1.4%.

European Markets Stumble on Inflation Worries

DAX and STOXX

Markets reeled Friday as fresh U.S. inflation data sent jitters across European stocks, dampening earlier optimism about the easing of monetary policies. At 10:56 GMT, Germany’s DAX and the Stoxx 600 indices slumped 0.90% and 0.8% respectively, with only the oil and gas sector buoyed by surging crude prices.

Amidst heightened volatility, investor focus shifts toward interest rate dynamics for the coming year. Notably, Latvia’s central bank governor Mārtiņš Kazāks maintains a cautious but hawkish stance on further rate hikes, underscoring the uncertainty about inflation and geopolitical risks.

FTSE’s Volatile Run

Across the channel, the FTSE 100 dipped by 0.52%, rattled by Bank of England Governor Andrew Bailey’s comments on persistently tight monetary policies. However, both FTSE 100 and FTSE 250 are on track for their best weekly performance in a month, primarily led by gains in precious metals and oil and gas sectors. A rising tension in the Middle East has lent unexpected support to gold prices, providing some relief to investors.

Sectoral Play

Sectors leading the losses were healthcare and financial services in the Stoxx 600 and the mid-cap index FTSE 250. In contrast, commodity-related sectors like oil & gas and miners found some respite as prices of oil and copper rose, potentially signaling a demand uptick in the near term.

Corporate Updates

In corporate news, Sartorius AG plummeted by 10.8% following a downward revision of its full-year forecast, while Swiss Re gained 1.4% after an upgrade from Berenberg. St. James’s Place felt the regulatory heat, tumbling 14.3% as it grapples with an overhaul of its fee structure.

Short-term Outlook

Looking forward, a cocktail of looming inflation, hawkish central banks, and geopolitical unrest creates a bearish short-term outlook for European stocks. Yet, with U.S. bank earnings on the horizon, any positive surprises could offer a temporary uplift to the beleaguered markets.

Dax Index Technical Analysis

The DAX Index is currently trading at 15326.08, below both its 200-day moving average of 15640.75 and its 50-day moving average of 15617.28. This suggests a bearish sentiment in the short-to-medium term, as the index is underperforming these crucial benchmarks.

Main and minor support levels stand at 15096.75 and 15264.23, respectively, which could act as potential cushions for further downside. Conversely, the index would need to break past the minor and main resistance levels at 15472.44 and 15723.01 to establish a bullish trajectory.

Given these dynamics, the current market sentiment leans bearish.

FTSE 100 Index Technical Analysis

The current FTSE 100 price stands at 7619.98, situated closely to its 200-day moving average of 7644.74, signaling a market in a balanced state. However, the price is higher than its 50-day moving average of 7510.81, potentially hinting at a budding bullish momentum in the near term.

The FTSE 100’s position relative to its key moving averages suggests a cautiously bullish market sentiment with trader reaction to the 200-day moving average setting the tone.