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European stocks fall as limited dip-buying coincides with a risk rally. Europe PMIs on Wednesday, ECB due on Thursday. PMIs for the euro area are predicted to grow slightly.
Tuesday saw a first leg up for European market indices, which reached near-term highs before reversing course and testing the low end of recent activity. European markets lacked the momentum from AI tech stocks that propelled US equities to new highs on Monday, preventing them from outpacing US equities in the upward direction.
The European Central Bank, which is anticipated to keep interest rates unchanged for the time being despite market forecasts of quicker rate decreases, will make another appearance this week.
With some particularly enthusiastic investors looking for rate cuts to start as early as March, ECB policymakers have been working double time over the past week to allay market anticipation for rate cuts to start soon. In response to overly optimistic markets, ECB policymakers have firmly retreated, putting forward a more realistic optimistic goal for the summer.
The European Bank’s Bank Lending Survey revealed that bank lending to both consumers and businesses has continued to decline through the third quarter, and further declines in credit facility access are expected through the first quarter of 2024. This news caused the European Consumer Confidence to decline in January from -15.0 to -16.1, versus the forecast -14.3.
The DAX in Germany and the CAC 40 in France both finished Tuesday’s trading session down slightly more than three percent. The DAX lost 56.27 points, closing the day at €16,627.09, while the CAC 40 lost 25.21 points, closing at €7,388.04, down 0.34% for the day.
London FTSO remained relatively unchanged for the day, finishing down 1.98 points to £7,485.73, and the pan-European STOXX600 equity index lost 1.33 points to settle down 0.28% at €471.53.
Technically, the DAX dropped following an early Tuesday rise that saw it reach an intraday high above €16,700 before dropping again. The primary stock index is approaching €16,600.00 and is currently in a congested area between the 50- and 200-hour Simple Moving Averages (SMA).
Although the DAX is still generally up, having risen 1.7% from its lows last week around €16,328.00, it is becoming more difficult to ignore the downside momentum as the equities index experiences regular declines mixed with consistent increases.
The 50-day SMA around €16,400.00 provides support for short-term prices, and a bearish extension would need to break over $15,800 before entering a significant downward trend.
