Euro Stoxx 50 index sits below key price as investors get jittery

July 18, 2023 03:18 PM AEST | By Invezz

Euro Stoxx 50 index sits below key price as investors get jittery — Image source: Invezz

European recovery fades

The Euro Stoxx 50 index has done well this year. It has jumped to a record high as local and foreign investors added their exposure to the European market. This happened as European countries like Germany and France responded well in the energy market.

Recently, however, there are signs that the European economy is slowing down. The most recent data showed that Germany has entered a recession as manufacturing activity slows. Manufacturing PMI has remained below 50 in the past six months.

Other European countries are not doing well either. Data by Eurostat showed that the Eurozone entered a recession in the first quarter. France recorded close to zero economic growth during the quarter.

The bond market is also signaling to more weakness ahead. The spread between the 2-year and 10-year bond yields in Germany has crashed to the lowest level in more than three decades. Historically, the inverted yield curve is one of the most accurate indicators of a recession.

Meanwhile, investors are getting jittery about the Euro Stoxx 50 index. Data in the options market shows that investors are buying put options in the market. A put option is a strategy that provides insurance against falling prices.

One of the most positive things in Europe is the surging euro. The EUR/USD pair has jumped to the highest level since March, as I wrote here. This rally is mostly because of the falling US dollar.

The top-performing Stoxx 50 index constituents this year are Philips, Inditex, CRH, Adidas, Infineon, SAP, and Hermes. The only laggards in the index are Vovovia, TotalEnergies, AB InBev, BASF, and Kone.

Euro Stoxx 50 forecast

The Stoxx 50 index found a strong resistance at €4,414 this year. It has failed to move above this level since April this year. The index has also formed what looks like an ascending triangle pattern.

It has also jumped above the 25-day and 50-day moving averages and the Ichimoku cloud. Therefore, because of the triangle pattern, there is a likelihood that the index will have a bullish breakout. This view will be confirmed if the price moves above the resistance level at €4,414.

The post Euro Stoxx 50 index sits below key price as investors get jittery appeared first on Invezz.

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