- European stock markets have gotten underway mostly lower following the euro’s surge
- DAX (DE30 on xStation) marked a bearish gap at the opening
- All stocks within the DE30 decline in the morning, BMW unveils its new cars
When we were gearing up for a Draghi’s appearance in Jackson Hole on Friday expectations seemed to be quite high. Even as Chair Draghi did not even allude to monetary policy, euro bulls felt free to keep on buying the common currency. Understanding was as follows, if Draghi did not refer to the euro’s recent rally, he was not concerned about an adverse effect on inflation stemming from it. Having said that, the takeaway was easy – buy the euro for everything.
Let’s begin with a technical analysis. We have been explaining a correlation between the EURUSD and the DE30 in a long time, hence it shouldn’t be surprising that both assets have diverged. Looking at the hourly chart above, one could notice that 12080 points seem to be already defended. That said, a move to the upside is definitely on the cards. This is especially true when the price manages to draw a bullish engulfing in the vicinity of current levels.
If so, the DE30 could move upwards in order to close the gap entirely. Let us remind that kind of scenario took place several times in the past. Therefore, it’s worth keeping a close eye on the price action. On the other hand, a breakout of 12080 points (along with a short-term trend line) could be seen at least as a warning sign for bulls. Given a rosy backdrop for the euro at this stage and weighing it against the current attitude of the ECB one could assume that the DE30 could struggle to get back to an uptrend (a breakout of 12320 points might be treated as a tipping point).
At first, let’s whip through Asian markets which were quite mixed, on balance, positives outweighed negatives. The NIKKEI (JAP225) closed unchanged, the Australian S&P/ASX 200 (AUS200) deducted 0.6% while the Chinese indices were up once again. The Hang Seng Composite (HKComp) added 0.5% whereas its continental counterpart (CHNComp) moved up as much as 0.93%. Let us recall that widespread gains seen there over the course of couple weeks could have been attributed to a major party congress in the Autumn (October or November).
Having looked at the European stock markets, there has been a small bloodbath so far, losses have been partly erased though. The DE30 is the most laggard in the old continent dropping all but 0.5%. The CAC40 (FRA40) is going down 0.2%, the EuroStoxx50 (EU50) is slipping 0.3% while the FTSE100 (UK100) is closed today due to Summer Bank holiday.
In terms of specific stocks, it’s worth mentioning BMW (BMW.DE) which is falling despite the successful unveiling of its new sport cars – limited M3 and M4 editions during the ongoing Chengdu Motor Show 2017 (China). Moreover, the company unveiled its unrivaled progressive sports business sedan, a new BMW 5 Series Standard Wheelbase version just imported to the Chinese market to meet the diverse demands from premium clients.
When it comes to the other German automaker Volkswagen (VOW.DE), the stock is trading slightly lower following the weekend news. The firm said that an engineer who helped develop the engines at the center of the Volkswagen diesel emissions cheating scandal was sentenced in federal court in Detroit to 40 months in prison, becoming the first person in the scandal facing a prison term.