DAX 40 Buoyed by Solid US Earnings Results Despite Pervasive Fed Hawkishness

DAX 40, Natural Gas, EUR/USD, US Dollar, Fed, USD/JPY, Crude Oil - Talking Points

• Germany’s DAX 40 is at a 1-month high with other equity indices
• Netflix results have added to the sunny outlook and other techs may follow
• The Fed reminded markets of their intention and might still spoil the mood

The DAX 40 index has held recent gains as a rosier outlook for risk assets seemingly overwhelms a straight-talking Federal Reserve on further tightening of financial conditions.

European stocks have been aided by natural gas prices remaining subdued after retreating earlier in the week. The catalyst for the move appeared to be warmer weather and better than expected inventory levels in the build-up for the impending northern winter.

Wall Street saw an uptick of around 1% in the major indices on their close and futures are pointing toward another good start to their cash session later today.

Netflix reported after market and beat estimates with 2.4 million new subscribers added in the third quarter after two quarters of contraction. The stock was up 16% at one stage before easing a touch.

APAC equities were mixed with Australian and Japanese markets a touch higher while China and Hong Kong were in the red.

EUR/USD has retained recent gains with the US Dollar coming under pressure in the risk-on environment. This is despite Treasury yields continuing to rise with a couple of basis points added across the curve in Asian trade so far today. The benchmark 10-year note remains above 4.0%.

Overnight, Minneapolis Federal Reserve Bank President Neel Kashkari reiterated his hawkish stance by saying, “if we don’t see progress in underlying inflation, or core inflation, I don’t see why I would advocate stopping at 4.5, or 4.75, or something like that.”

The Biden administration announced that they will release an extra 15 million barrels from the Strategic Petroleum Reserve (SPR) to make a total of 180 million barrels. If needed, they have said that they will release more from the reserve.

They also said that they would buy back WTI oil in the US$ 67 – 72 bbl area. The WTI futures contract is edging up toward US$ 84 bbl while the Brent contract is around US$ 90.50 bbl.

USD/JPY traded at another 32-year high overnight with no sign of intervention today as the price nears 150.

After UK and European CPI figures today, Canada will see also CPI numbers and the Fed will release their Beige book later in the day. There is also a big line up of major central bankers expected to be making comments throughout the next session.

Alphabet and Tesla will be releasing their results later on.

The full economic calendar can be viewed here.

DAX 40 TECHNICAL ANALYSIS

The DAX 40 is rallying toward potential resistance levels at the 55- and 100-day simple moving average (SMA). They are currently at 12916 and 13079 respectively.

Further up there are two descending trend lines at 13270 and 13310 that might offer resistance.

On the downside, support could be at the prior lows of 12011 and 11829.

Chart created in TradingView

--- Written by Daniel McCarthy, Strategist for DailyFX.com

Please contact Daniel via @DanMcCathyFX on Twitter