FTSE 100, DAX 40 and Dow sell off sharply on weak US data and recessionary fears
Outlook on FTSE 100, DAX 40 and Dow following a plethora of central bank rate hikes.
FTSE 100 sell-off as BoE keeps up rate pressure
The FTSE 100 slid following the Bank of England’s (BoE) 9th consecutive rate hike as it tries to rein in soaring inflation by raising rates by a widely expected 50 basis points to 3.5%, a fresh 14-year high, and as weaker-than-expected US data triggered recessionary fears.
The index dropped to 7,409, a 3-week low, but remained within its December downtrend channel and above the 7,378 early November high and the 200-day simple moving average (SMA) at 7,334.
Immediate minor support is seen between the 7,429 to 7,421 area, made up of the mid-November high and late November low, as UK retail sales in the UK declined by an unexpected 0.4% month-on-month in November, after improving an upwardly revised 0.9% in October, helped by the impact of the additional Bank Holiday in September for the State Funeral.
While Tuesday’s high at 7,553 caps, the risk of further downside being witnessed remains in play. Failure at 7,409 would engage the early November high at 7,378 whereas a currently unexpected rise above Tuesday’s 7,553 high would target the 7,618 late November peak.
DAX 40 falls out of bed following ECB rate hike and hawkish tone
The Dax 40 fell by over 3% on Thursday as the European Central Bank (ECB) raised interest rates by an anticipated 50 basis points to 2.5% and as it, alongside other major central banks, remained hawkish by underlined the point that further tightening of policy is to be seen in 2023 to combat high inflation.
The Dax 40 is now trading in 5-week lows and may slide back towards the 55- and 200-day simple moving averages (SMA) at 13,600 to 13.573 into year end, provided that previous support, now - because of inverse polarity - resistance at the mid-November to early December lows at 14,125 to 14,129 caps on a daily chart closing basis.
Dow Jones Industrial Average drops on weak US data and recessionary fears
On Thursday the Dow Jones Industrial Average (Dow) sold off to a 5-week low, following a plethora of central banks raising their rates and remaining hawkish and as a sharper-than-expected retreat in US retail sales and manufacturing activities for November, which underscored the slowdown in the economy, worried traders.
The index dropped sharply to 33,010 and is now on track to reach the 55- and 200-day simple moving averages (SMA) at 32,457 to 32,436 as the year draws to a close.
Resistance can be spotted at last week’s 33,420 low.
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