European equities continue their irrepressible march higher

A mixed session for US equity markets as investors digested key earnings reports and messaging from Fed Speakers ahead of the blackout period before the next Fed meeting.

However, there are no such concerns for key European Equity Indices, which continue to climb from March lows.

DAX

The DAX, traded above 16,000 for the first time in 15 months, continuing to be supported by decelerating inflation and firm growth. However, some cracks emerged overnight.

The April ZEW business survey showed that Germany's current business conditions rose from -46.5 to -32.5. The forward-looking expectations index fell to 4.1 vs consensus expectations of 15.6. A second month of declines reflects uncertainty around the European banking system and credit availability.

The release on Friday night of flash Eurozone PMIs is expected to show a slight fall in the composite index to 53.4 from 53.7 in March on the back of banking concerns and strikes.

The UK

In the UK, the overnight release of the labour market report for the quarter to February showed the unemployment rate increased to 3.8% from 3.7%, a sign of rebalancing in the labour market. Concerningly, Average Weekly Earnings rose 5.9% YoY for the quarter to February, above the market forecast of 5.1%.

Attention now turns to the release this afternoon (4.00pm AEST) of UK inflation data for March, which is expected to show headline inflation fell to 9.8% from 10.4%.

Unfortunately, this is not enough of a fall to stop the Bank of England from raising rates by another 25bp at its meeting in May.

DAX technical analysis

Well, at the risk of sounding like a broken record, the view remains that the DAX is in the process of forming a top supported by signs of bearish divergence.

However, a sustained break back below the support at 15,700/600 (coming from the band of highs in February and March) is needed to confirm that a deeper pullback is underway towards an uptrend and horizontal support at 15,200.

Until then, allow the rally to extend towards 16,400.

DAX daily chart

FTSE technical analysis

The FTSE has gained in 14 of the past 15 sessions, rallying much further than anticipated.

While the FTSE is approaching overbought territory, there are no signs of divergence which means we can’t rule out a test and break of the year-to-date 8047 high before a retracement back towards support at 7700 commences.

FTSE daily chart

1. TradingView: the figures stated are as of April 19, 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.