EU Stocks Could Rebound Despite Recession Concerns
Fawad Razaqzada March 22, 2019 7:21 AM
Earlier, the euro and European stock markets sunk after purchasing managers in the services and particularly manufacturing sectors reported sharply deteriorating conditions for March.
Earlier, the euro and European stock markets sunk after purchasing managers in the services and particularly manufacturing sectors reported sharply deteriorating conditions for March. The bleak PMI numbers raised recessionary concerns, causing investors to pile into haven government debt. As a result, the yield on the German 10-year debt fell to 0% for the first time since 2016.
Ironically, the lower yields and a weaker euro could actually help to boost the appeal of some higher-yielding European stocks. So, we may see a rebound in the major EU indices in the not-too-distant future, possibly as early as this afternoon. In other words, we could see the return of “bad news is good news” for stocks, as investors push their expectations over an ECB rate increase further out amid deteriorating Eurozone data.
In fact, Euro Stoxx 50 index is currently hovering around a key technical support area between 3335 and 3350, following this week’s retracement from the 2019 high of 3422. This 3335-3350 area is where several technical indicators converge:
- backside of the medium-term broken bearish trend line
- short-term bullish trend line
- 21-day exponential moving average (which has a positive slope)
- Base of the previous breakout
For all the above considerations, I wouldn’t be surprised if the Euro Stoxx 50 index, and European markets in general, were to bounce back, despite growing worries over a recession in the eurozone. However, if the major indices begin to breakdown meaningfully, then we will have to put our bullish views on hold. For this particular index, the line in the sand is around 3270/90 area, the March lows.
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.