DAX Index, FTSE 100, STOXX 600: European Markets Rise Amid Powell’s Caution

Key Points

• European markets rise as investors assess Jerome Powell’s cautious approach.
• Unicredit’s stock soars by 9.8% on strong profits and investor returns.
• Short-term forecast: Dax and FTSE-100 expected to maintain a bullish trend.

Market Analysis

European markets experienced slight gains on Monday as investors considered the recent remarks made by U.S. Federal Reserve Chairman Jerome Powell. While the pan-European Stoxx 600 rose, it was a mixed day for sectors. Autos saw a decline of 0.7%, whereas food and beverage stocks rose by 1.1%.

At 11:47 GMT, the Stoxx-600 Index traded at 485.13, marking a 0.25% increase.

Unicredit’s Soaring Performance

Unicredit, the Italian bank, witnessed a remarkable surge of 9.8% in its stock price, reaching its highest level since 2015. This rally followed Unicredit’s announcement of returning 8.6 billion euros ($9.2 billion) to investors, a move fueled by profits exceeding expectations.

Other Stocks in Focus

Lotus Bakeries: The Belgian biscuit maker saw a substantial rise of 14.9% in its stock price, becoming the top gainer in the Stoxx 600. This surge followed strong full-year results, with revenues increasing by 21% to over 1 billion euros ($1.07 billion).

Nordea Bank: On the flip side, Nordea Bank witnessed a 5.4% decline in its shares due to lower-than-expected fourth-quarter profits. Operating profit for the period fell to 1.42 billion euros, below analysts’ forecasts.

Powell’s Cautious Approach

Jerome Powell, in an interview with CBS’ “60 Minutes” on Sunday, emphasized the Federal Reserve’s intention to proceed cautiously with rate cuts, contrary to market expectations. Powell expressed the central bank’s careful stance on interest rate reductions, highlighting the need for additional evidence of inflation aligning with the Fed’s 2% target range.

Powell reiterated that the pace of rate cuts would be slower than anticipated by the markets, affirming that rate cuts are unlikely to commence in March. This approach follows the recent Fed meeting, where interest rates were maintained for the fourth consecutive time, but with indications of potential cuts later this year.

Short-Term Market Forecast

Dax Index (Germany)

The Dax Index is currently trading at 16,961.85, reflecting a 0.26% increase. In the short term, the Dax is poised to maintain its positive momentum, driven by favorable economic indicators and a cautious approach to rate cuts. Investors can anticipate a bullish trend in the Dax Index.

FTSE-100 Index (UK)

The FTSE-100 Index stands at 7,646.78, showing a 0.41% increase. Over the short term, the FTSE-100 is expected to continue its upward trajectory, supported by positive sentiment in the market. A bullish outlook prevails for the FTSE-100 Index.

Dax Index Technical Analysis

The Dax Index is higher on Monday, sitting just below last week’s record high at 17004.55. With no resistance in sight, the only fear for investors is a sudden reversal lower. This is because the market’s position relative to the uptrending 50-day moving average at 16630.83 is making some longs uncomfortable.

The first sign of weakness will be a new high, followed by a lower close. Breaking 16821.60 will be another sign of selling pressure.

FTSE-100 Index Technical Analysis

The FTSE-100 Index is higher but struggling to overcome last week’s series of highs including the 7689.69, the high of the week.

Since this level is on the strong side of static resistance at 7687.48, it could serve as a launching pad for a surge into a series of highs near 7764.37.

On the downside, the nearest support is the uptrending 50-day moving average at 7586.87, followed by the 200-day moving average at 7556.31. Traders should also note that the 50-day MA is trading on the strong side of the 200-day MA, which strengthens the intermediate trend.