GER40

After hitting a new all-time high in February, the FTSE has struggled to find any sustainable support, hurt by concerns over China, UK’s struggling economy and high interest rates across the world. But we have had some positive data out of China, the UK and US this week, which may mean the worst days are behind us.

As investors assess the risks of interest rates remaining high for longer, and of course, the escalation of the situation in the Middle East following the bombing of the hospital in Gaza, they are not going to be aggressive in risk-taking you would think.

DAX falls with eyes on the Middle East. Oil holds onto Friday’s gains.

Price action on USD/JPY has remained confined to a range since its volatile selloff from 150, but we note a pivotal area worth keeping an eye on today for potential bullish or bearish setups. And whilst the DAX has bounced since its fall to 15k, bulls seem to lack legs which has us on guard for a potential swing high.

The slight recovery in European indices can be attributed to an oversold technical bounce, meaning we could see the selling pressure resume once again. In fact, there is a risk that things could get worse before stock prices become attractive again in these tough economic times.

Risk off is the key theme in the markets right now and we are seeing stock averages continue to struggle. Despite yesterday’s tech-fuelled rally, US futures have been dragged lower by weaker European and Asian markets. The FTSE 100 fell 1.4%, while the German DAX was off by around 1% at the time of writing by mid-morning EU trade.

European stock markets were able to recoup Tuesday’s sharp losses in the first half of Wednesday’s session, which also helped to fuel a modest recovery in the risk-sensitive EUR/USD pair. Sentiment improved for two reasons, but whether the recovery will hold remains to be seen.

After Monday’s positive close, the “risk off” trade returned Tuesday as European stocks and US futures slid. The Italian stock markets fell more than 2.5% to lead Europe lower. We saw noticeable falls for the Germany DAX and other leading indices in the region. The risk-off tone kept the dollar underpinned, which weighed down on the commodities like copper, gold and oil.

Core inflation rose to a fresh record high of 5.6%...

The overnight session had a slight risk-on vibe as China claims to have reached ‘park covid’ ahead of the lunar holiday.

Sentiment boosted because of warmer-than-expected weather which has reduced fears about gas shortages.

The volatile moves seen across yen pairs overnight does not bode well for risk appetite today, given traders across Europe and the US are yet to react to the BOJ.

Futures markets are pointing higher for Europe ahead of the open, but DAX could face further selling pressure after a retracement higher.

Central banks from two of the world’s largest trading blocs signalled that their restrictive monetary policies are going to remain in place for longer than expected.

The slightly softer Eurozone inflation data gives hope that the ECB is starting to see the light at the end of the tunnel in its fight against inflation

More strict mobility curbs were implemented over the weekend

Several metrics show how strong the DAX has been of late, but we suspect it may have had too much of a good thing and is due to be knocked from its perch.