European indices open higher for second consecutive day

​FTSE 100 opens higher on the back of stronger US and Asian markets

The FTSE 100 opened higher on the back of stronger US and then Asian markets despite the release of the Federal Reserve's (Fed) June meeting minutes which showed that another 50- or 75-basis point (bps) rate hike is in the pipeline for July and amid the ongoing political turmoil in the UK government on hopes that the inflation surge is easing as commodity prices continue to slide.

The fact that the UK prime minister, Boris Johnson, does not plan to resign, despite hanging on by a thread, and him firing his cabinet minister and levelling up secretary, Michael Gove, the FTSE 100 remains resilient and continues to bounce off this week’s low at 7,012.

It does so as some commodities such as wheat now trade at pre-invasion of Ukraine levels and investors therefore hope that inflation will diminish towards year end.

The two-month resistance line at 7,252 remains a possible upside target, as is this week’s high at 7,289, as UK house price growth hits its highest level since 2004. The Halifax house price index rose to 13% year-on-year in June, the highest rate of growth since November 2004.

Key resistance above 7,289 comes in at the 7,331 to 7,362 mid- to late June highs as well as along the 200-day simple moving average (SMA) at 7,366. The latter would need to be exceeded for a medium-term bottom to be formed.

Slips may find support between the 14 June low at 7,134 and the 1 July low at 7,100.

DAX bounces for second day despite German industrial production slowing sharply

The DAX 40 continues its recovery rally from Tuesday’s low at 12,386, made marginally below its March low at 12,432, despite much weaker than expected German industrial production which only increased by 0.2% month-on month in May.

This is compared to an expected 0.4% and an upwardly revised 1.3% in April, as the ongoing shortage of primary products and supply chain constraints caused by the war in Ukraine and lockdowns in China weigh on production.

Immediate resistance along the two-month downtrend line at 12,727 is being tested with the 23 June low at 12,838 representing the next upside target, followed by Monday’s high at 12,965.

Minor support is seen at the 30 June low at 12,617 and more significant support at the March low at 12,432 and this week’s low at 12,386.

Dow continues to sideways trade despite June FOMC minutes pointing to further rate hikes

The Dow Jones Industrial Average’s recovery from this week’s 30,356 low remains close to minor resistance at this week’s high at 31,234.

This is after the publication of the latest US Federal Open Market Committee (FOMC) minutes pointed to another 50- or 75-basis point rate hike in July and as a Bloomberg Economics forecast showed that the odds of a US recession in the next year stood at 38%.

A rise above 31,234 would engage the three-month downtrend line at 31,745 and the late June high at 31,885.

Slips may find support at yesterday’s 30,762 low and at the May low at 30,637.