European stocks rise as geopolitical tensions ease and earnings season looms

Tracking financial profitability in the face of rising rates

European equity indices kicked off the new week on a firmer footing, supported by easing geopolitical tensions and ahead of key earnings releases in the US and Europe.

While US Megatech names will likely hog the spotlight, this week's focus of the European earnings season will be on banking names, including Deutsche Bank, Barclays, and Lloyds. Investors will be eagerly looking for clues on how higher interest rates are impacting profitability and whether the post-banking crisis rally in banks' share prices can continue to run.

In terms of macro data, investors will closely look at the release of European and UK PMI data tonight and the German Ifo business survey to fine-tune the expected timing of the first BoE and ECB rate cut, currently 65% priced to start in June.

What is expected from EA PMI for April

Date: Tuesday, 23 April at 6pm AEST

In March, the Eurozone composite PMI printed at 50.3, the highest level in ten months. This was a significant improvement from 49.2 in February and marked a return to growth for the eurozone's private sector for the first time since May last year.

For April, the market is looking for an improvement to 50.9, driven by growth in Germany and France, with a broad-based improvement expected across most sectors.

EA PMI decrease over five years

DAX technical analysis

A third consecutive week of weakness saw the DAX fall through uptrend support at 18,050/18,000 (drawn from the October 14,666 low), opening the way for the DAX to test support at 17,600, in line with our view from last week.

While a short-covering rally from here would not surprise (as part of a B wave of an ABC correction), we would need to see the DAX reclaim resistance at 18,200/18,400 to suggest that the correction is complete. Until then, we expect bounces to be temporary and for the correction in the DAX to continue (as outlined on the chart below).

DAX daily chart

FTSE technical analysis

Last week, we speculated whether the FTSE could still test and break its all-time high of 8,047 before a push towards 8,250 or whether the deterioration in risk sentiment meant it had missed its chance.

The ability of the FTSE to hold well above the medium-term support last week at 7,760/7,720, followed by a stunning rebound, has all but answered that question.

In summary, providing the FTSE holds above support at around 7,760, expect a break of the all-time high at 8,047 before a push towards 8,250.

FTSE daily chart

• ^{Source TradingView. The figures stated are as of 23 April 2024. 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.}