Saturday, December 2, 2023

Europe is retreating to the support zone, but we have to wait for 4,000 to buy

You should not sell the hawk’s skin before hunting it. That’s what investors who bought stocks and debt a few weeks ago will be thinking when the market interpreted that there would be no more interest rate hikes on both sides of the Atlantic. However, this theory has been outdated in recent days following the ECB’s interest rate meetings last week and the Federal Reserve’s this Wednesday, which forced investors to pull the plug, resulting in losses in fixed and variable income.

Stock markets have suffered losses of around 2% since this Monday, with the French CAC being the most pessimistic in Europe and the Ibex being the least penalized at just 0.5%. The EuroStoxx 50 has come dangerously close to its support zone, which appears at 4,170 points, which was a possibility “as long as the EuroStoxx 50 did not overcome the resistance of 4,340 points, thus returning to the lateral base of the last four months,” explains Joan Cabrero, Ecotrader consultant.

“Well, the apparent inability of the EuroStoxx 50 to overcome this resistance means that we are once again witnessing a decline that needs to be watched because if the 4,170 point support is lost, I fear that we will end up witnessing the decline “I have been pointing out for weeks that this is a decline towards the March lows around 4,000 integers,” adds the expert. “I still think that for new medium-term purchases in the European stock market we will have to wait for this extremely supportive environment to be reached,” concludes Cabrero.

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While this is happening, what we have seen in the market this week can be explained by the reaction of bonds, particularly the American T-note, whose required yield has been increased by 18 basis points since Monday, reaching the value of 4.5% has reached. , which hadn’t happened since 2007. The curve has flattened slightly as fewer sales were achieved in the two years, although profitability remains above 5%. In Europe, the week also ended with fixed income outflows, although more moderate as it is not so clear that Lagarde’s people will raise rates again after last week’s move.

At the same time as the bond market, selling was also the common denominator in the US stock market this week, also influenced by the possibility of further interest rate hikes by the Fed this year. The major Wall Street indices posted losses of over 2% this week with mid-session data. In the end, the worst performer was the technology index, which fell by 2.8% and lost 15,000 points over the course of the week. The S&P 500 fell 2.4%, posting its worst weekly performance since March and trading at June levels.

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Looking at what has happened with bonds, it is also explained that there has been a closing of positions in the stock market because of the assumption that central banks will continue to remain tough because the fight against inflation is far from being resolved In the meantime, the damage to the economy will continue.

Focusing on the week within the walls of the Spanish trading floor, the restrictive tone that the market is adopting these days is logically to the benefit of the banking sector, which is why the Spanish index has suffered the least punishment. In fact, the four most bullish stocks of the week were Sabadell, CaixaBank, BBVA and Bankinter. The top group also includes Repsol, which grew by almost 3% thanks to the rise in oil prices, while Telefónica was also able to overcome the 4 euro mark for the first time since May, also rising over 2%. On the other hand, the two pharmaceutical companies on Ibex were the most pessimistic with losses of more than 5%.

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Brent – ​​the benchmark oil price in the Old Continent – ​​remained virtually unchanged this week at around $94 a barrel. However, more and more analysts are estimating the price of oil at $100 per barrel in the coming months. The euro, in turn, appreciated slightly against the dollar midway through the session, although the European currency fell to March lows over the week.

Nation World News Desk
Nation World News Desk
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