Looking at the DAX, we are looking at a probable reversal around the 10800-10820 region that may take place in sessions ahead, as price seems to be trading in final stages of an impulse that began at the beggining of September.
Some of the mainland European stock indices eked out small gains last week despite the falls in United States, UK and Japanese stock markets. However, at the start of this new week, global equities have rebounded across the board while the dollar has extended its gains further against a basket of foreign currencies.
European stocks edged toward consecutive daily gains for the first time in three weeks today, drawing support from a weak euro as investors moved to price in a U.S. interest rate rise, boosting the dollar.
Bad news is good news for the markets that rely on central banks’ support--and so it proved again this morning’s as the latest European data disappointed expectations, yet the major stock indices rallied as if everything was just fine. The rationale is that weakness in data will ensure that the likes of the European Central Bank and the Bank of England will maintain their uber-dovish policy stance for longer. Their actions would keep bond yields depressed, underpinning higher yielding assets like equities.
In a speech last week, New York Fed Chief William Dudley said they could raise rates as soon as September. After all, the jobs report was so good how could they resist? Well, that was Tuesday and the markets didn’t like it. But the rest of the week was more or less flat because we’ve all seen the Fed’s various chiefs play bad cop to Fed Chair Janet Yellen’s good cop every 6 weeks or so.
This week saw data from the UK surprise positively and the severally-oversold pound bounced back sharply, while the dollar fell across the board as the Fed watered down rate hike expectations in the minutes of the FOMC’s last meeting and after some weakness in U.S. data was observed, causing the Euro/U.S. dollar (EUR/USD) currency pair to climb to its best level since June 24.
European stocks have started Tuesday’s session on the front foot after a lacklustre performance on Monday. Sentiment remains upbeat for global equities mainly because of the actions of central banks, rebounding oil prices and the mostly better-than-expected U.S. corporate earnings results.
World stocks fell for a third straight day today, depressed by growing nervousness surrounding central bank policy and the spike in world bond yields, although European bank shares rebounded after two major earnings reports.