European stock markets expected to remain stable

The majority of European stock markets declined on Wednesday, but were restrained by stronger-than-expected German industrial data. However, the latest Fed statement regarding the upcoming rate hike, which is anticipated to be at a minimum of 25 basis points and a maximum of 50 basis points but is still being considered before the Federal Reserve policy meeting in the coming two weeks, is continuing to put pressure on the markets.

German industrial production increased significantly more than anticipated in January, rising 3.5% from the previous month, a better gain than expected of 1.4%, according to the Federal Bureau of Statistics in Germany. This increase was driven by growth in the manufacturing of electronics, including chemicals, while adjustments in the production of motor vehicles and auto parts, including pharmaceuticals, were in the opposite direction. German retail sales, meanwhile, showed an unexpected 0.3% fall in January, which was less than the 2.0% forecast, showing that pressure on German consumers was still quite severe.

Most recently, Eurostat revealed on Tuesday that the Eurozone saw no economic growth in the fourth quarter of 2022, which was 0.0% compared to the third quarter and 1.8% from the same quarter a year earlier, falling short of expectations of 0.1% and 1.9%, with Eurozone economic growth being driven by public spending, changes in inventory, and net trade, and being under pressure from household spending and gross fixed capital formation (GFCF). Notwithstanding the fact that labor force participation rates remain high.

The current total number of individuals with jobs was 165 million, up 3.6 million from the end of 2019 prior to the onset of COVID-19, highlighting the labor market's tightening. It is likely to imply that the ECB will continue to struggle to reduce inflation to 2% from double digits last fall.

It has indicated that the eurozone may be able to avoid a previously projected recession based on statistics from the labor sector. Before, the recession was expected to raise the unemployment rate, cool the labor market, and delay pay rises, but firms are having difficulty hiring new staff in the aftermath of the pandemic, and there is little tendency to lay off old employees even during an economic slowdown.

In terms of fiscal policy, the European Commission stated on Wednesday that the government no longer requires extensive budgetary support for businesses and people because the pandemic has ended and energy costs are declining. As a result, the EU will once again support its strict fiscal target for 2024 in order to reduce public debt to a reasonable level, encourage policy to be flexible and suitable for all member countries with varying levels of debt as a result of the economic shock caused by the epidemic and Russia's invasion of Ukraine, and in order not to contradict the European Central Bank's plan to reduce inflation, which in addition to the eurozone's robust labor market, if fiscal stimulus is maintained, inflation will continue to outpace economic growth. The policy is set to take effect in 2024 for nations with budgets that exceed the EU threshold of no more than 3% of GDP.

Data for Technical Analysis (5H)

CFD EU50 (Euro Stoxx 50 Futures - Mar 23)

Resistance : 4298, 4301, 4307

Support : 4286, 4283, 4277                   

5H Outlook

1H Outlook

Source: Investing.com                            

Buy/Long 1 If the support at the price range 4283 – 4286 is touched, but the support at 4286 cannot be broken, the TP may be set around 4302 and the SL around 4281, or up to the risk appetite.

Buy/Long 2 If the resistance can be broken at the price range of 4298 – 4301, TP may be set around 4307 and SL around 4285, or up to the risk appetite.       

Sell/Short 1 If the resistance at the price range 4298 – 4301 is touched, but the resistance at 4298 cannot be broken, the TP may be set around 4286 and the SL around 4303, or up to the risk appetite.

Sell/Short 2 If the support can be broken at the price range of 4283 – 4286, TP may be set around 4277 and SL around 4300, or up to the risk appetite.       

Pivot Points Mar 09, 2023 03:44AM GMT

Sources: Investing 1, Investing 2