According to José Luis Cava on his YouTube channel, prices will fall in Europe, to the point where deflation is likely, and that now the European economy is suffering the effects of the ECB’s rate hike.
On Sunday, the electrical grid in western Germany was overloaded and, what’s more, it did so during rush hour. This is the reason, says José Luis Cava, that negative prices are applied. “When people consumed more, what the power companies did was pay the consumers money.” The question asked by the expert is whether it is due to a specific event on a hot day with strong winds, or if there is something we should pay attention to. The analyst explains that “we have observed that the percentage that people dedicate to real food spending, in France and Germany, is decreasing. The amount they dedicate to real food spending falls by almost 12% compared to 2021”.
Cava, looking at industrial activity, in a survey conducted by the Supply Management Institute, observed that across Europe there is a decline in industrial activity. What conclusion did the analyst reach? “First, prices tend to fall, Inflation levels will decrease significantly in Europe, and it is likely that in the coming months we will see deflationand now The European economy is suffering the effects of the sharp rise in interest rates made by the ECB.
The expert also wonders if now is the time to buy German bonds. “Not at the moment. The German bond yield is above the bullish guideline and passes through the 2.288% area. As long as German bond yields remain above that level, we will stick to money market funds, not bank deposits, with an average fund portfolio maturity between 30 and 60 days and only break through that level, which is 2.288%, it can. warn us of the moment where we can think about buying German bonds in the long term.
Can the DAX XETRA continue to rise? As José Luis Cava pointed out, the DAX XETRA is in a bullish channel, whose lower part passes through 15,750 zones. “As long as it stays above 15,750, the bias is strong.” The analyst continues to argue that it has stopped at 16,400 because they are the highest in November 2021 and January 2022.
How high can it go? “We set an upper target around 16,400, as long as it does not pierce 15,750,” the expert concluded.