European market update: FTSE and DAX divergence continues in early April
A mixed session overnight for European equities as the FTSE gained 0.37% and the DAX fell 0.54%, continuing the divergence seen of late between the two indices.
The gains in the FTSE came on the back of a 3% rise in the share price of AstraZeneca after it announced encouraging results for a treatment to help patients diagnosed with ovarian cancer.
A third straight session of weaker-than-expected US economic data weighed on the DAX. However, not before the German index shrugged off concerns around the recent banking crisis earlier this week to make a fresh and unexpected cycle high at 15,891.
The German index has benefitted as concerns around the energy shock and banking crises eased, and after German inflation data last week showed a sharp fall to 7.4% in March from 8.7% the previous two months.
Undermining a similar effort by the FTSE to retake lost ground, inflation in the UK unexpectedly rose to 10.4% last month compared to consensus expectations for a rise of 9.9%, suggesting the Bank of England still has considerable work to do to tame inflation.
DAX technical analysis
Last week’s push to new highs was unexpected.
Nonetheless, based on bearish divergence via the RSI indicator and a bearish or loss of momentum type reversal candle evident at Tuesday’s 15891 high, our bias is for a pullback towards uptrend and horizontal support at 14,950 in the sessions ahead.
Should the DAX then see a sustained break below 14,950, it would warn that a deeper pullback is underway towards the March 14,617 low with scope to the 200-day moving average at 14,400.
DAX daily chart
FTSE technical analysis
There is no change to our view of the FTSE.
The break below the band of horizontal support 7700/7650 in Mid-March confirms that a medium-term high is in place at the February 8047 high and that the FTSE is currently tracing out a corrective pullback.
The bounce from the March 7206 low is viewed as Wave B or the second wave of a three-wave correction which appears complete at this week’s 7727 high. We expect to see a third leg (Wave C) lower to commence shortly towards support at 7100/7000 in the weeks ahead.
FTSE daily chart
- TradingView: the figures stated are as of April 6th, 2023. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.
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