STOXX 600 rises, mining stocks surge on China’s data.
European PMI up, but manufacturing still contracts.
ECB rate cut speculation grows with inflation dip.
European Markets Climb, Eyeing Rate Cut Speculations
European stocks advanced on Friday, buoyed by positive manufacturing data and lowered inflation forecasts, continuing the momentum of their strongest month since January.
Manufacturing Data Fuels Optimism
The STOXX 600 and other key indexes are higher, with Germany’s DAX and the UK’s FTSE-100 both posting gains, driven particularly by a surge in mining stocks. This uptick aligns with China’s manufacturing sector unexpectedly expanding, indicating a rise in new orders and hinting at stronger market conditions than previously anticipated.
PMI Signals Modest Expansion
In Europe, the manufacturing downturn showed signs of easing, with the Purchasing Managers’ Index (PMI) rising from October to November, although the sector still sits in contraction. New orders increased at the fastest pace since June, offering a ray of hope despite a slight decline in overseas work.
Inflation and Monetary Policy Outlook
European inflation rates dipped more than expected, which, paired with cooling U.S. inflation, sparked conversations about potential rate cuts. The European Central Bank has been firm against early rate cuts, but the latest data could prompt a reevaluation, with some market observers forecasting a cut as early as April 2023.
Oil Prices and Housing Market Trends
OPEC+’s decision not to extend production cuts initially lowered oil prices, but voluntary cuts by Saudi Arabia and others could temper the impact. In the UK, house prices experienced an unexpected rise, and revised rate expectations from the Bank of England could provide relief to the housing market.
Short-Term Forecast and Economic Indicators
The European market’s short-term forecast is cautiously optimistic, with lower inflation and potential rate cuts providing a supportive backdrop. U.S. markets are also reflecting a hopeful stance, pricing in multiple Federal Reserve rate cuts for the next year. As the final trading month of the year commences, investors remain watchful of the housing sector and broader economic indicators, which will shape monetary policy and market trends going forward.
DAX Index Technical Analysis
Daily DAX Index
The DAX Index is exhibiting bullish signals in the current trading session. The daily price of 16328.28 stands above both the 200-day and 50-day moving averages, positioned at 15682.34 and 15362.41, respectively. This alignment above the moving averages typically indicates a strong upward trend.
Furthermore, the index is trading above the main support level of 15993.10, which could serve as a solid foundation for further gains. The absence of defined minor and main resistance levels suggests that there may be less immediate upward resistance, potentially paving the way for the index to establish new highs.
Given these technical indicators, the market sentiment for the DAX Index can be considered bullish in the short term.
FTSE-100 Index Technical Analysis
Daily FTSE 100 Index
The FTSE 100 Index is currently trading at 7505.14, which places it above the 50-day moving average of 7477.71 and just below the 200-day moving average of 7585.08. This positioning suggests a neutral to slightly bullish sentiment as the index hovers between these key moving averages.
The index has surpassed the minor support level of 7401.87, which may now act as a platform for potential upward movement. However, it has not yet breached the trend line resistance at 7626.27 or the minor resistance at 7524.87, which could limit its upward potential in the short term. The main resistance at 7687.48 remains a longer-term target for bullish advancement.
Overall, the market sentiment for the FTSE 100 appears cautiously optimistic as it tests pivotal levels that could dictate the trend direction moving forward.
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.