DAX Index, FTSE 100, STOXX 600: European Markets Surge on Earnings and Dovish Central Banks

Highlights

• STOXX and DAX leap on automotive strength and earnings
• Central banks’ dovish moves spur market optimism
• FTSE 100 rallies on rate hold and sector gains

European Markets on the Rise

European markets edged higher at the open on Friday, buoyed by robust earnings and easing concerns over continued rate hikes, as central banks appeared to adopt a more dovish stance.

STOXX and DAX Lead Gains

The automotive sector, surging by 1.1%, led the gains in the Stoxx 600, which is on track for its strongest week since March, per LSEG data. The German DAX followed suit, with upbeat earnings fueling the market’s optimism.

Market sentiment was also lifted by the Federal Reserve’s decision to hold interest rates, increasing bets on the peak of rate hikes and possible future cuts.

This optimism was mirrored by the Bank of England, which maintained rates, noting that they would need to stay “in restrictive territory for some time,” according to BOE Governor Andrew Bailey. Investors are now keenly anticipating the U.S. labor market data, which could sway market directions further.

Earnings Propel STOXX 600

A slew of earnings this week from Shell, Novo Nordisk, Lufthansa, and BT have exceeded expectations, propelling the STOXX 600. Automobile stocks saw a particular boost, with BMW and Volvo Car reporting strong margins and sales. Andritz AG topped the index following an upgrade from J.P. Morgan, while A.P. Moller-Maersk fell after its quarterly report.

FTSE 100 Gains on Rate Decision and Earnings

The FTSE 100 ascended, driven by Smith+Nephew’s upgrade and the BOE’s rate hold, suggesting a bullish trend. The index is poised for its best weekly performance in seven weeks, supported by rising copper prices and a boost in medical equipment shares. The mid-cap FTSE 250 also saw a notable rise, heading towards its largest weekly gain in a year, while Currys PLC’s stock leapt after the sale of its Greek business.

Short-Term Forecast

Given the dovish signals from central banks, positive earnings reports, and anticipation of steady labor market data, the outlook for European markets remains bullish in the short term. Investors are likely to continue riding the wave of positive sentiment as they parse through the implications of the upcoming economic data.

DAX Index Technical Analysis

The DAX Index displays a modest uptick from the previous close, positioning it between minor resistance and the 50-day moving average, suggesting a potential for upward momentum.

Although the current price remains below the 200-day moving average, indicating a longer-term bearish trend, the proximity to the 50-day average could signal a short-term shift in sentiment.

The index is trading above the main support level, reinforcing this potential shift. While short-term traders might see a bullish sentiment, the significant distance from the 200-day moving average warrants caution for those with a longer-term perspective.

FTSE 100 Index Technical Analysis

The FTSE 100 Index is edging higher, sitting above the minor support level but remaining below both the 50-day and 200-day moving averages. This position below key moving averages typically indicates bearish sentiment in the medium to long term, despite recent gains.

The current price hovering close to the 50-day moving average may suggest that short-term sentiment could turn positive if it breaks above this level, potentially challenging the minor resistance. Without crossing the 50-day moving average, the outlook remains cautiously bearish. A failure at this level would suggest that traders are in “sell the rally” mode.