European Markets on Edge as Juncker and Trump Go Head-To-Head
Equity Analysis and News
- European Market Eye Juncker and Trump meeting
- Auto heavy DAX most exposed on soured relations
EU-US Trade War Tensions
Trade wars are at the forefront of investors mind which has led to a cloud of uncertainty for equity markets. Today, EU’s Juncker and Malmstrom will be meeting with President Trump, whereby both EU representatives will be looking to ease trade tensions, while Juncker will make a speech at 2000GMT.
The trade spat between the US and EU has centered around the auto sector given that EU have higher tariffs on cars at 10% compared to the US with 2%. Trump has previously threatened to hike tariffs on cars and auto parts from the EU to 20% if tariff rates are not lowered. Ahead of the meeting, tensions remain high, with President Trump tweeting yesterday that “tariffs are the greatest” adding that the EU is in the way of free trade. In response to threats made by President Trump, EU’s Malmstrom stated that they are planning tariffs of $20bln on US goods.
Easing Tensions to Support Auto Makers
However, if (a big if) indeed Juncker is able to ease the current trade dispute and potential reach an agreement in principle, this will likely provide a boost for auto names and in particular the auto heavy DAX index. Consequently, German auto names, Daimler, Volkswagen and BMW will be in focus. As a reminder, they hold roughly a 12.5% weighting in the DAX index.
Recent changes in sentiment warn that the current Germany 30 price trend may soon reverse lower despite the fact traders remain net-short.
DAX PRICE CHART: Daily Time-Frame (April-July 2018)
Chart by IG
Upside in the DAX has currently been capped by the 200DMA at 12697, while resistance also remains prominent at 12771, which marks the 61.8% Fibonacci Retracement of the 13184-12102 fall. Support lies with the 20DMA at 12551. Trend signals have weakened with RSI indicators shifting to the downside.
DAX Chart Analysis – Technical Signposts to Keep an Eye on (by Paul Robinson)
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--- Written by Justin McQueen, Market Analyst
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