DAX Index, FTSE 100, STOXX 600: Mixed Trade with Europe Cautious, UK Resilient

James Hyerczyk
Published: Feb 1, 2024, 13:10 GMT+00:00

Euro zone's inflation eases to 2.8%, while BOE holds firm at 5.25%, impacting DAX and FTSE-100.

Dax Index, FTSE-100 Index, Stoxx 600 Index

In this article:

Key Points

  • Euro Zone inflation meets economists’ predictions
  • BOE maintains rate amid inflation control efforts
  • UK inflation decreases yet remains over target

European Market Overview

European stock markets presented a mixed performance on Thursday. The Stoxx 600 and Dax Index experienced losses, while the FTSE-100 Index saw modest gains. The Stoxx 600 dropped by 0.08%, the Dax Index also fell by 0.08%, and the FTSE-100 Index rose by 0.33%.

Bank of England’s Monetary Policy

The Bank of England (BOE) continues its battle against inflation, maintaining the Bank Rate at 5.25%. The Monetary Policy Committee (MPC) voted 6–3 in favor of this decision, indicating a cautious approach towards economic growth and inflation control.

The UK’s inflation has decreased from a high of 11% in 2022 to 4% by December 2023, thanks to the BOE’s progressive interest rate hikes. Despite this reduction, inflation remains above the BOE’s 2% target.

Global and Domestic Economic Outlook

Global GDP growth remains subdued, with some recovery in the U.S. The UK anticipates gradual GDP growth and a slight rise in unemployment. Inflation projections are set around 2.75% by year-end, primarily driven by domestic factors.

Euro Zone Inflation Data

Euro zone’s annual headline inflation eased to 2.8%, matching economists’ predictions. Core inflation figures declined less than expected, indicating continued economic pressure.

Corporate Highlights

  • BNP Paribas shares dropped 8% following a sales miss and profit target delay.
  • Volvo Cars’ shares soared 23% after announcing the end of funding for Polestar Automotive, signaling a new growth phase.
  • Shell reported a full-year profit beat, announcing a $3.5 billion share buyback.
  • Adidas expects a significant increase in operating profit for 2024, aided by selling off Yeezy stock.
  • Deutsche Bank’s fourth-quarter net profit exceeded expectations, with plans to increase shareholder returns.

Market Forecast

In the short-term, the FTSE-100 is expected to exhibit resilience, buoyed by a favorable corporate earnings landscape and gradual economic growth in the UK. The index might experience volatility but maintain an upward trend, reflecting investor confidence in the UK market’s stability.

The DAX Index, on the other hand, faces a more cautious outlook. Economic uncertainties in the Eurozone, combined with mixed corporate performances, could lead to restrained gains or slight fluctuations. Overall, investors in the DAX may adopt a more defensive stance, focusing on sectors likely to withstand macroeconomic pressures.

Dax Index Technical Analysis

Daily Dax Index

The Dax Index is under pressure on Thursday as traders take a breather following a failed attempt to breakout over the December high at 17003.38.

The price action suggests the market is poised to break back into the uptrending 50-day moving average at 16591.83, where it is expected to attract new buying.

FTSE-100 Index Technical Analysis

Daily FTSE-100 Index

The FTSE-100 Index is up on Thursday, but trading well off its high, following the Bank of England’s (BOE) monetary policy decision.

The intraday price action suggests that momentum may have shifted to the downside after two failed attempts to overtake static resistance at 7687.48.

A sustained  move under 7687.48 will indicate the presence of sellers. If this move creates enough downside momentum then look for the selling pressure to extend into the 50-day moving average at 7580.89, followed by the 200-day moving average at 7559.06.

A clean breakout over 7687.48 could trigger a short-term surge into the January 2 main top at 7764.37.

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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