DAX: EU stocks less jubilant amid threat of new US tariffs

Sentiment appears a bit cautious following the release of disappointing global data and after the US threatened new tariffs on the EU. But with G20 and OPEC meetings behind us, the focus is turning back to economic data for market participants.

Sentiment appears a bit cautious following the release of disappointing global data and after the US threatened new tariffs on the EU. But with G20 and OPEC meetings behind us, the focus is turning back to economic data for market participants. On that front, it has been a poor start to the week. After Monday’s very disappointing showing from the global manufacturing sector, we have had some more bad numbers from Europe this morning. Consequently, European stocks have failed to build on Monday’s gains and there is a growing risk that the indices may ease back further to close their weekend gaps at least.

European data continues to soften

German retail sales fell 0.6% month-over-month when an increase of 0.5% was expected, while Spanish unemployment fell less than expected. In the UK, activity in the construction industry slumped sharply in June, to its lowest level in a decade, as purchasing managers in housebuilding, commercial and civil engineering all reported sharply deteriorating conditions. Confidence was hit because of ongoing Brexit uncertainty, causing delays in projects.

DAX could ease back a little

Although the FTSE broke to a new 2019 high today as the pound slumped on the back of poor UK data, the mainland European indices were less jubilant, no doubt because of the threat of new tariffs on the EU from the US. So, we could see the likes of the German DAX index close their gaps created at the weekend, base for a while, before they can potentially resume their bullish trends.

In fact, the DAX has managed to find support from the “key support area” we had highlighted last Tuesday and it has already reached our intended target above the 12455 area. But like the S&P 500 we wrote about yesterday (link already provided above), I think there is potential for short-term weakness for the DAX here as investors digest the latest fundamental developments and await further impetus later on in the week. The new support levels to watch now are at 12440 and 12340, levels which were previously resistance. However, any move below the most recent low at 12170 would invalidate the bullish bias in the short-term outlook.

Source: Trading View and City Index. Please note this product may not be available to trade in all regions.

Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.