DAX Index, FTSE 100, STOXX 600: Investor Unease Rises Amid Prolonged US Rate Hike Fears

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Published: Oct 3, 2023, 11:49 GMT+00:00

Amid rising U.S. interest rates, Dax Index and FTSE 100 Index are in flux, signaling market caution and bearish sentiment.

Highlights

European markets display a volatile temperament, oscillating between gains and losses across key indices like the Stoxx 600 and DAX.
U.S. dollar’s 11-month high reverberates through European equities, eliciting a mixed bag of sector reactions.
Financials like banks and insurers find solace in higher U.S. interest rates, contrasting starkly with utilities.
UK’s FTSE 100 ekes out a modest recovery, buoyed by a weaker pound but weighed down by Boohoo’s outlook cut.

European Markets Navigate Economic Doldrums

European markets were in flux, reflecting investor unease in the face of mixed economic signals. While the Stoxx 600 and DAX Indexes vacillated, gains in banking could not fully offset losses in utilities and healthcare. The market’s fickle behavior comes as investors grapple with the possibility of prolonged high U.S. interest rates, buoying both the dollar and Treasury yields.

The Currency and Yield Effect

The dollar recently reached an 11-month peak, fueled by strong economic data and the passage of a U.S. funding bill to avoid a government shutdown. These developments rippled through European markets, affecting sectors differently. Banks and insurers, which generally benefit from higher interest rates, saw modest gains, contrasting sharply with the utilities sector, which sank to a 10-month low.

Sector-Specific Movements

In the European energy sector, shares of offshore wind developer Orsted and Vestas Wind Systems faced significant declines. The rising costs of capital and commodities have turned the economics of offshore wind projects on their head. Meanwhile, British luxury firm Burberry and German online fashion retailer Zalando saw stock prices dip following downgrades from Deutsche Bank and UBS.

UK Retail and Inflation

UK’s FTSE 100 managed a slight recovery, largely due to a weaker pound boosting dollar earners. However, Boohoo, a fast-fashion retailer, slid notably after cutting its outlook. This comes even as data showed UK shop price inflation slowing, providing a glimmer of relief amid broader economic concerns.

Short-Term Outlook

The current landscape suggests caution. The European and UK markets appear sensitive to both domestic and international cues, particularly from the U.S. While some sectors are finding room to grow, the overall sentiment leans bearish, especially with the looming risk of rising interest rates.

DAX Index Technical Analysis

Daily DAX Index

In today’s trading, the DAX Index is priced at 15,125.95, which is below both its 200-day and 50-day moving averages, situated at 15,590.26 and 15,766.08, respectively. This places the index in a generally bearish stance, suggesting that sellers are in control.

The index is hovering above the main support level of 15,096.75 but below the minor resistance of 15,472.44, indicating a potential for downside risk. Market sentiment leans bearish, particularly as the index is trading below key moving averages. Traders should exercise caution and consider the bearish context when making trading decisions.

FTSE Index Technical Analysis

Daily FTSE 100 Index

The FTSE 100 Index currently sits at 7,509.33, positioning it below both the 200-day moving average of 7,640.26 and the 50-day moving average of 7,528.60. This indicates a bearish market sentiment as the index trades under these crucial metrics.

While it hovers above the main support level of 7,438.83, it’s below the minor resistance of 7,640.99. Despite a main resistance set at 7,748.46, the index has yet to show signs of a bullish reversal.

Given these factors, the current market landscape for the FTSE 100 Index is largely bearish, urging traders to proceed with caution with the reaction to the 50-day moving average setting the tone.

About the Author

James Hyerczykauthor

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.