FTSE 100, DAX and CAC 40 set to end week in red amid Covid-19 fears

• European equities are set to end the week in the red amid second wave fears
• DAX expected to break above recent highs
• CAC 40 under pressure as daily cases above 10,000 in France

European stocks have moved lower this week as investors grow increasingly concerned about the threat of a second wave of Covid-19 cases that could lead to lockdowns across the region this winter.

As a result, the FTSE 100 ended the week 0.21% lower, but managed to stay above psychological 6000 benchmark, while the German DAX and French CAC 40 both fell 1.6% over the last five trading sessions.

According to data compile by the centre for Systems Science and Engineering (CSSE) at Johns Hopkins University, new daily cases of the virus are up to 3395 in the UK, 2194 in Germany and 10,530 in France.

However, it is Spain that is struggling most due to the resurgence in coronavirus cases, with daily cases hitting 11,291.

‘The reality of the epidemic in the community of Madrid is getting worse and we need to make greater efforts,’ senior official Ignacio Aguado said.

European airlines hit after WHO warns new cases higher than March peak

It is no secret that the travel industry has been hit hardest by the economic fallout from Covid-19, with the sector dealt another blow this week after the World Health Organisation (WHO) warned that case numbers are rising in Europe at a higher rate than during the March peak.

The news saw European airlines like easyJet, Deutsche Lufthansa and Air France-KLM saw earlier gains almost entirely eroded.

British Airways owner International Consolidated Airlines Group (IAG) meanwhile completed it €2.74 billion rights issue aimed at bolstering its balance sheet and helping the airline group capitalise on rising air travel demand.

IAG did admit, however, that passenger demand is unlikely to return to pre-crisis levels until at least 2023.

FTSE 100: technical analysis

The FTSE 100 recovered from a dip towards 6000 yesterday, but gains have stalled at 6060, with the 50-hour SMA (6058) rolling over for the first time since the beginning of this current rebound, according to Chris Beauchamp, chief market analyst at IG.

‘A drop below 6000 for the index would be a negative development, and suggest that a lower high at 6120 had been created,’ he said. ‘Further gains above 6060 target 6120.’

DAX stuck below recent highs

Despite the DAX recovery from the low early on in yesterday’s session the price has yet to mount a meaningful attempt to break through 13,300, a situation that has prevailed for over a week, according to Josh Mahony, senior market analyst at IG.

‘Dips towards 13,100 in past sessions have brought out the buyers, so we wait for a break of this range to provide clarity on the next medium-term move,’ he added.

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