UK FTSE 100 Clings to Support as German Dax Battles Resistance

UK FTSE 100 Clings to Support As German Dax Battles Resistance
UK FTSE 100 Clings to Support as German Dax Battles Resistance
After the Chinese government announced it was finally reopening its economy, risk sentiment has been lifted. The European market has rallied as well, with Germany’s DAX index breaking through its key resistance range to close above 15,000 at one point. This has seen the index trade around a 12-month high and a retest of this level should be followed by a breakout to new highs in the near future.

Meanwhile, the UK was hit by weak economic data that added to political uncertainty as the search for a new Prime Minister began following the resignation of Liz Truss. The economy grew by just 0.2% in the three months to September and that is much lower than City forecasts of 0.5% growth. This is particularly affecting the retail sector as consumers are feeling the pinch from higher energy prices and food costs.

Consumer confidence in October rose slightly from a fall the previous month but remains at historically low levels, according to GfK. The survey also showed that a growing number of people are struggling to pay their bills, a worrying trend which is likely to affect consumer spending over the coming quarters.

In the United States, stocks opened in the red with investors taking a wait-and-see approach as comments from a Fed official brought worries about interest rates back into the spotlight and overshadowed solid earnings reports. As expected, US markets retreated in the afternoon session to end the day down 91 points on the Dow Jones Industrial Average at 30,333, while the S&P 500 slipped 30 points and the Nasdaq Composite dropped 66 points.

The Federal Reserve raised its key interest rate this week in an effort to squelch inflation and reduce the impact of higher rates on global growth. This was the first rate hike since December and left many investors wondering whether it was truly enough to stifle price pressures.

Looking ahead to tomorrow, there will be a host of important economic reports that will impact the markets. The first of those is the German IFO business climate report, which is expected to show a further decline in the current business climate, along with the expectation that economic expectations are set to slide lower.

Another piece of economic data due is the ECB’s Q2 GDP report, which is expected to show that the eurozone economy grew by 0.2% in the second quarter of 2023. This is down from an initial estimate of 0%, and the decline is likely to be driven by the weakness in Europe’s service and manufacturing sectors.

The German Dax will also see a lot of attention this week as the index continues to battle through its resistance. The index is currently trading around a narrow zone of support and resistance between 15,100 & 15,200 where the psychological level of 15,000 is forming as a key level of confluence for price action. A break above this level will bolster the bullish momentum and support further gains above the psychological level of 15,000.