- A wave of risk off sentiment swept over European market amid mounting evidence of slowing economic growth in the region.
- PMI data pointed to the eurozone economy stalling in the first quarter. Manufacturing in Germany and France, the two largest economies in Europe, experienced contraction. The manufacturing sector is proving to be the weakest link as it experiences its deepest downturn since 2013 amid a sharp drop in demand.
- Clearly problems in the eurozone are far from over. Brexit uncertainty coupled with the unresolved US – Sino trade dispute are only exasperating the problem. Brexit is going nowhere fast and a trade deal between the US and China is still some way off. All in all, the fundamental outlook is poor for the eurozone, as a whole, and more particularly for Germany.
- Growing concerns over the health of the eurozone and German economy are being reflected in the ever – trusty bond market. German bonds often considered one of the safest investments around have rallied as the region’s outlook worsens. Today treasury yields dipped below 0% for the first time since 2016.
- Weakness in eurozone business growth comes hot on the heels of a significantly more dovish Fed, adding to the slowing global growth story. The line between an accommodative policy boosting equities and fear of a significant slowdown hurting stocks has quickly been breached.
- The Dax shed a further 1.5%, putting losses across the week at 2.6%, the worst weekly performance for the German index since early December. The Dax had already fallen below its 50 MA, and today’s selloff pulled it below its 100 SM. The price is currently testing support at 11380. A meaningful move through this level could open the door to support at 11300.
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