DAX 40 Gains as US Tech Stock Earnings Soothe Investor Fears as the Fed Takes Centre Stage
- German GfK Consumer Confidence -30.6 Actual vs -28.9 Consensus.
- IMF Downgrades Global Outlook, German to Struggle.
- Natural Gas Prices Continue Higher as Nord Stream pumps at 20% capacity.
DAX 40: Gains as US Tech Stock Earnings Soothes Investor Fears as the Fed Takes Centre Stage
The DAX traded higher in European trade as investors were soothed by upbeat results fromU.S. mega-caps Microsoft Corp and Google parent AlphabetInc overnight. Investors remained cautious as European energy extended a scorching rally as Russia tightened its grip on the region’s supply, further threatening the economy and key markets. Natural gas increased as much as 14%, and prices are more than 10 times higher than the usual level for this time of the year, as supplies through a key pipeline slumped.
The International Monetary Fund (IMF) released its updated global outlook yesterday, predicting Germany will have the slowest G-7 growth as inflation and energy weigh. Sharp declines in confidence surveys suggest businesses and consumers are retreating fast, with gauges of expectations and new orders pointing to more trouble down the line.One in six industrial firms is cutting production or partially suspending operations, according to the Association of German Chambers of Commerce and Industry. German consumer confidence as measured by research firm GfK fell in August to the lowest level since data were first collected in 1991. More than 70% of Germans predict the economic situation will worsen in the next five years, a survey by polling firm Civey for Spiegel magazine showed. Only 11% see a longer-term recovery.
Interesting day on the earnings front as Deutsche Bank AG scrapped a cost target and warned its main profitability goal was getting harder to reach. The muted outlook, published along with second-quarter results, overshadowed a strong performance at the corporate bank, which benefited from higher interest rates, as well as in fixed-income trading, which beat Wall Street in a volatile market. Despite the positive results shares of Deutsche Bank fell 3.6%, the worst performer in a Bloomberg index of European lenders. The title for worst performer of the day goes to Adidas AG after it slashed its annual sales and profit outlook, citing the impact of strict COVID restrictions in China and fears of a slowdown in consumer spending. The shares were down 5% in European trade.
Investors are waiting with bated breath to see the extent the U.S. Central Bank will go to combat inflation - running at a 40-year high - as it concludes its two-day policy-setting meeting later in the session.Markets have largely priced in a 75-basis point hike, with only a small chance of a supersized 100 bp raise.
DAX 40 Daily Chart - July 27, 2022
DAX 40 2H Chart - July 27, 2022
From a technical perspective, the daily chart showsprice remains compressed between the 20-SMA and the 50-SMA. We came within a whisker of the key psychological level (13000) while printing a hanging man candlestick that hints at a reversal of the upside move enjoyed last week. Without a definitive candle break and close above the 50-SMA or below 20-SMA levels we remain rangebound as sentiment continues to shift.
The 2H chart on the other hand saw a break below the grey box within which price appeared to be consolidating. We had a retest of the box before pushing lower, failing to create a new low testament to the indecisive nature of markets at present. With eyes on the Federal Reserve meeting later today we may finally get some volatility and more importantly a clear direction.
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Written by: Zain Vawda, Market Writer for DailyFX.com
Contact and follow Zain on Twitter: @zvawda
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.