DAX Index, FTSE 100, STOXX 600: Earnings, Central Bank Moves Bolster Stocks

Key Points

• Stoxx 600 Rises, Led by Automotive; Oil and Gas Dip
• Central Banks Hold Steady, Influencing Market Sentiment
• Corporate Earnings Propel Individual Stock Performance

European Markets Rally

European stock markets witnessed an uptick on Friday, propelled by a flurry of corporate earnings and critical decisions from major central banks. The pan-European Stoxx 600 index climbed, led by a 1.4% increase in the automotive sector, as most sectors and key bourses experienced gains. However, the oil and gas sector diverged from the trend, dropping by 1.1%.

At 10:53 GMT, the broad-based Stoxx 600 Index is trading 486.97, up 3.11 or +0.64%. Germany’s Dax Index is at 16992.55, up 133.51 or +0.79% and the UK’s FTSE-100 Index is trading 7649.21, up 27.05 or +0.35%.

Central Bank Decisions

The European market’s rebound comes after a slight downturn the previous session, following an impressive peak in late January. The Bank of England’s recent decision to maintain interest rates, amidst a split vote, underscores the complex landscape central banks are navigating as inflation edges closer to targets. The U.S. Federal Reserve’s stance also remained unchanged, with Chair Jerome Powell dismissing early speculation of a rate cut in March.

Inflation and Earnings Impact

Inflation in the Eurozone showed a marginal easing in the headline consumer price index for January, while core figures declined less than anticipated. Services inflation remained stable, adding another layer to the economic outlook. Corporate earnings have significantly influenced stock prices throughout the week, with notable movements in companies like Deutsche Bank, BNP Paribas, Adidas, and Volvo Cars.

Corporate Earnings Outlook

Friday’s corporate earnings are less bustling, with CaixaBank being one of the major names reporting. No significant earnings or economic data releases are expected from Europe on this day.

Key Stock Movements

Vallourec’s shares surged to a 10-month high, up by 8%, following predictions of exceeding full-year earnings expectations. Danske Bank’s shares also rose by 6% due to a new share buyback program. Conversely, Electrolux experienced a more than 5% drop in shares, attributing this to anticipated continued weak consumer sentiment in early 2024.

Short-Term Forecast

Given the current earnings momentum and central bank policies, the short-term outlook for European markets is bullish, with investor focus remaining on corporate performance and inflation trends.

Dax Index Technical Analysis

The Dax Index is trading higher on Friday and within striking distance of a record high. The current move represents a huge rebound from yesterday’s dismal performance, which indicates investor willingness to buy even the shortest of breaks.

The first major support is the uptrending 50-day moving average at 16612.41. This represents the intermediate trend. Minor levels come in at 16427.00, 16208.93 and 15993.10. The long-term support or 200-day moving average is at 15951.29.

FTSE-100 Index Technical Analysis

The FTSE-100 Index is higher on Friday, crawling back from a two-day setback. Once again, the price action represents investor willingness to buy even the smallest of breaks rather than wait for a pullback into the major support.

The key support levels are the 50-day moving average at 7583.69 and the 200-day moving average at 7557.68.

With the 50-day MA trading on the bullish side of the 200-day MA, investors are expecting the upside momentum to continue and to possibly accelerate following a breakout over resistance at 7687.48.