Euro Stoxx Holds Gains as Auto Stocks Slide, Tech and Miners Lift Market Amid Fed Uncertainty

Auto Stocks Slump as EV Outlook Weakens, Weighing on Euro Stoxx

European equities opened the week flat. The Euro Stoxx 50 consolidated around the 5,500 resistance level, while the Euro Stoxx 600 held near the 555 level. Gains in tech and mining stocks helped support the market, but losses in the auto sector capped overall momentum. Porsche shares dropped over 5% after it cut its 2025 profit outlook and scaled back electric vehicle (EV) plans, signalling weaker demand. Moreover, Volkswagen lowered its guidance and dropped more than 6%.

These warnings highlight deeper challenges in the European auto industry. EV adoption is slowing, and rising input costs are squeezing profit margins. Investors are now pricing in a longer recovery period. As a result, the STOXX 600 Automobiles and Parts ETF continues to decline, as shown in the chart below. Without a clear catalyst to revive demand, the sector may keep dragging down the broader market. A break below $43.60 will trigger a substantial drop in this sector.

BBVA’s Sabadell Bid Faces Resistance, Pressuring Spanish Banks

Banking stocks also underperformed, led by Spain’s Sabadell and Banco Bilbao Vizcaya Argentaria (BBVA). BBVA raised its takeover bid for Sabadell by 10% to €17 billion in an all-share offer, aiming to create Spain’s second-largest bank. The move follows a hostile bid in 2024 and months of regulatory scrutiny, including government-imposed restrictions that prevent a complete merger for three years.

Sabadell’s CEO dismissed the sweetened offer as too small, noting it offered just a 1.6% premium, and stated he would not tender his shares. The market reaction was adverse, with stocks declining after the announcement. Without better terms, investor resistance could derail BBVA’s consolidation plans.

Chipmakers and Miners Offset Losses, Boosting Broader Market Sentiment

On the other hand, the technology stocks provided some relief. The Euro STOXX 600 Technology ETF continues to show and build positive momentum, as shown in the chart below. This momentum is led by gains in chipmakers ASML Holdings and ASM International. These gains reflect strong earnings momentum and a flight to quality amid macro volatility. Investors continue to rotate into high-margin, globally exposed companies in semiconductors, which benefit from long-term AI demand.

Miners also helped lift sentiment. The Euro Stoxx Basic Resources ETF rebounded, as shown in the chart below. Fresnillo jumped 4.1%, while Glencore and Rio Tinto (RIO) increased 2.7% and 1.9%, respectively. The rally in gold (XAU) prices highlights growing safe-haven demand as investors brace for policy uncertainty and geopolitical tensions.

Markets Brace for Fed Commentary as Rate Cut Uncertainty Lingers

Investors remain cautious ahead of key commentary from multiple Federal Reserve officials, including John Williams and newly appointed Governor Stephen Miran. Fed Chair Jerome Powell is scheduled to speak on Tuesday. After last week’s 25-basis-point rate cut, markets are watching for clues on the central bank’s next move. The Fed’s policy path will shape risk sentiment across global markets, particularly for European equities that are sensitive to U.S. monetary shifts.

Euro Stoxx 50 Technical Outlook: Bullish Setup Builds Above Key Support

The long-term outlook for the Euro Stoxx 50 Index remains strongly bullish, as shown on the monthly chart below. The index had been trading below an ascending trendline from April 2015 to December 2023. However, a breakout in January 2024 triggered a strong upward move.

Recently, the retracement toward the red trendline signals a buying opportunity near the 4,590 to 4,670 region. Importantly, this area marks a long-term support zone, reinforcing the bullish setup. Over the past few months, the index has been consolidating below the 5,500 level, indicating price compression. Therefore, a breakout above this level would likely initiate a strong new rally.

The short-term outlook for the index also shows intense bullish price action, supported by the formation of an inverted head and shoulders pattern. This bullish setup has appeared multiple times since 2024.

Recently, the index has been consolidating just below the 5,500 level, and a breakout above this resistance could trigger a strong upward move. Additionally, the RSI remains above the midline, reinforcing the positive trend and signalling further upside in the coming weeks.