Germany

European Stocks Jump Ahead of FOMC Meeting

Monday, 9 Aug 2010 12:36 EDT by CFDTrading Analyst · Leave a Comment 

Europe Session Key Developments
• German Trade Data Shows Bump in Exports
• Euro-Zone Sentix Investor Confidence Surges
European Stocks Jump Ahead of FOMC Meeting
European equity markets gained on Monday as trade data from Europe’s largest economic state boosted recovery optimism. German Trade Balance figures from June showed a further increase in the surplus, edging up to €14.1 billion from €9.8 billion in May. While Imports increased over the same period, Exports increased by a greater amount, up by 3.8 percent. In what was a particularly quiet day for newsworthy data releases, the Euro-zone Sentix Investor Confidence reading for August surged to 8.5 from -1.3 in July, outpacing a Bloomberg forecast of 1.6. As the results of the CEBS Banks’ Stress Tests have fully begun to sink in, it appears that sentiment has gathered that the health of the European financial sector is strong enough to hold off a ‘double-dip recession,’ despite continued problems that excess sovereign debt might pose to the economic union. Overall, all five major European equity markets were up over 1.2 percent, with the French exchange gaining the most, up 1.65 percent.
Looking forward to Tuesday, there are several events which pose risk to market volatility. Early in the European session, German inflation data will be released, with the Consumer Price Index for July expected to rise 1.1 percent as ECB key interest rates remained on hold. Both French Manufacturing and Industrial Production are expected to increase from June in the previous year, though month-over-month data remains muddled. The British Trade Balance is expected to improve, from -£8062 million in May to -£7800 million in June. Finally, what could prove to be market moving later in the session, U.S. Wholesale inventories figures for June is expected to increase by 0.4 percent; high Wholesale Inventories indicate that unsold goods are piling up, suggesting that retailers are facing lagging consumer demand and unwilling to purchase goods.
FTSE 100                      5410.52                   +78.13               +1.47%
The FTSE 100 finished up 78.13 points, or 1.47 percent, breaking through the 5400 level before closing at 5410.52. The British index now sits just 0.04 percent lower year-to-date. Though the recovery from May’s ‘flash crash’ has been relatively steady thusfar, the FTSE has failed to hold on to any upside momentum beyond 5400. During today’s trading session, all ten of the sectors that comprise the FTSE 100 finished higher; the consumer goods and financials sectors were the top performers, gaining 1.84 and 1.73 percent, respectively. Barclays PLC, one of the nation’s largest banking institutions, saw its share price add 3.20 percent to close at 335.00. Shares of embattled oil giant BP posted a 1.74 percent increase to close at 432.75 in London.
CAC 40                     3,776.33                  +60.28                 +1.62%
The CAC 40 index opened nearly 50 points higher on Monday, and then proceeded to float within a tight range of 3760-3780 before closing near the upper bound at 3777.37. The 60.28 point (1.62 percent) increase was a stark turnaround from the near 50 point selloff on Friday. While all ten of its sectors gained, the French index was pushed higher by its financials and oil & gas sectors, which gained 1.97 percent and 1.91 percent, respectively. Shares of BNP Paribas, the country’s largest bank, closed 2.24 percent higher at 56.96. Total S.A. (FP), an international leader in oil & gas exploration, benefitted from the improvement in investor sentiment. The company’s share price posted a 2.00 percent gain to close at 40.81.
DAX 30                        6351.60                    +91.97           +1.47%
After dropped almost 74 points on Friday, the DAX 30 index more than retraced its decline by posting a 91.97 point, or 1.47 percent, increase today. The German index now sits 6.62 percent higher in 2010, making it the top performing European equity index and the only one to remain positive on a year-to-date basis. The DAX seems poised to re-test the critical 6380 level, which has served as resistance since early April. Though all nine of the index’s sectors finished higher Monday, the industrials sector fare especially well, adding 2.19 percent during intraday trading. Siemens AG, one of Germany’s largest manufacturers, gained 2.76 percent to close at 78.45, just below its 52-week high of 79.65.
IBEX 35                     10812.60                   +161.50                +1.52%
The IBEX 35 gained 161.50 points, or 1.52 percent, during intraday trading to finish at 10812.60. The Spanish index opened nearly 150 points higher, which almost completely retraced the index’s loss on Friday following the disappointing U.S. Non-Farm Payrolls report. On Monday, all ten of the IBEX’s sectors gained; the consumer goods and industrials sectors were the top performers, posting a 1.98 percent and 1.92 percent increase, respectively. Gamesa Corporacion Technologica (GAM SQ), a manufacturer of wind turbines, was the only company listed on the IBEX whose share price declined; it finished at 6.44, down 0.39 percent.
S&P/MIB                        21341.62                   +257.15                  +1.22%
The S&P/MIB posted a remarkable 257.15 point, or 1.22 percent, gain on Monday, finishing the trading session at 21341. Despite falling nearly 100 points at the beginning of the US session, the Italian index managed to re-assert itself and hold on to its gains from earlier in the session.
Written by Jay B. Steinberg and Christopher Vecchio, CFD Trading Analysts
For Questions/Comments, please contact him at JSteinberg@fxcm.com

Europe Session Key Developments

• German Trade Data Shows Bump in Exports
• Euro-Zone Sentix Investor Confidence Surges

European Stocks Jump Ahead of FOMC Meeting

European equity markets gained on Monday as trade data from Europe’s largest economic state boosted recovery optimism. German Trade Balance figures from June showed a further increase in the surplus, edging up to €14.1 billion from €9.8 billion in May. While Imports increased over the same period, Exports increased by a greater amount, up by 3.8 percent. In what was a particularly quiet day for newsworthy data releases, the Euro-zone Sentix Investor Confidence reading for August surged to 8.5 from -1.3 in July, outpacing a Bloomberg forecast of 1.6. As the results of the CEBS Banks’ Stress Tests have fully begun to sink in, it appears that sentiment has gathered that the health of the European financial sector is strong enough to hold off a ‘double-dip recession,’ despite continued problems that excess sovereign debt might pose to the economic union. Overall, all five major European equity markets were up over 1.2 percent, with the French exchange gaining the most, up 1.65 percent.

Looking forward to Tuesday, there are several events which pose risk to market volatility. Early in the European session, German inflation data will be released, with the Consumer Price Index for July expected to rise 1.1 percent as ECB key interest rates remained on hold. Both French Manufacturing and Industrial Production are expected to increase from June in the previous year, though month-over-month data remains muddled. The British Trade Balance is expected to improve, from -£8062 million in May to -£7800 million in June. Finally, what could prove to be market moving later in the session, U.S. Wholesale inventories figures for June is expected to increase by 0.4 percent; high Wholesale Inventories indicate that unsold goods are piling up, suggesting that retailers are facing lagging consumer demand and unwilling to purchase goods.

FTSE 100                      5410.52                   +78.13               +1.47%

The FTSE 100 finished up 78.13 points, or 1.47 percent, breaking through the 5400 level before closing at 5410.52. The British index now sits just 0.04 percent lower year-to-date. Though the recovery from May’s ‘flash crash’ has been relatively steady thusfar, the FTSE has failed to hold on to any upside momentum beyond 5400. During today’s trading session, all ten of the sectors that comprise the FTSE 100 finished higher; the consumer goods and financials sectors were the top performers, gaining 1.84 and 1.73 percent, respectively. Barclays PLC, one of the nation’s largest banking institutions, saw its share price add 3.20 percent to close at 335.00. Shares of embattled oil giant BP posted a 1.74 percent increase to close at 432.75 in London.

ftse-2

CAC 40                       3,776.33                  +60.28                 +1.62%

The CAC 40 index opened nearly 50 points higher on Monday, and then proceeded to float within a tight range of 3760-3780 before closing near the upper bound at 3777.37. The 60.28 point (1.62 percent) increase was a stark turnaround from the near 50 point selloff on Friday. While all ten of its sectors gained, the French index was pushed higher by its financials and oil & gas sectors, which gained 1.97 percent and 1.91 percent, respectively. Shares of BNP Paribas, the country’s largest bank, closed 2.24 percent higher at 56.96. Total S.A. (FP), an international leader in oil & gas exploration, benefitted from the improvement in investor sentiment. The company’s share price posted a 2.00 percent gain to close at 40.81.

DAX 30                        6351.60                    +91.97           +1.47%

After dropped almost 74 points on Friday, the DAX 30 index more than retraced its decline by posting a 91.97 point, or 1.47 percent, increase today. The German index now sits 6.62 percent higher in 2010, making it the top performing European equity index and the only one to remain positive on a year-to-date basis. The DAX seems poised to re-test the critical 6380 level, which has served as resistance since early April. Though all nine of the index’s sectors finished higher Monday, the industrials sector fare especially well, adding 2.19 percent during intraday trading. Siemens AG, one of Germany’s largest manufacturers, gained 2.76 percent to close at 78.45, just below its 52-week high of 79.65.

IBEX 35                     10812.60                   +161.50                +1.52%

The IBEX 35 gained 161.50 points, or 1.52 percent, during intraday trading to finish at 10812.60. The Spanish index opened nearly 150 points higher, which almost completely retraced the index’s loss on Friday following the disappointing U.S. Non-Farm Payrolls report. On Monday, all ten of the IBEX’s sectors gained; the consumer goods and industrials sectors were the top performers, posting a 1.98 percent and 1.92 percent increase, respectively. Gamesa Corporacion Technologica (GAM SQ), a manufacturer of wind turbines, was the only company listed on the IBEX whose share price declined; it finished at 6.44, down 0.39 percent.

S&P/MIB                  21341.62                   +257.15                  +1.22%

The S&P/MIB posted a remarkable 257.15 point, or 1.22 percent, gain on Monday, finishing the trading session at 21341. Despite falling nearly 100 points at the beginning of the US session, the Italian index managed to re-assert itself and hold on to its gains from earlier in the session.

Written by Jay B. Steinberg and Christopher Vecchio, CFD Trading Analysts
For Questions/Comments, please contact him at JSteinberg@fxcm.com

Filed Under: European Markets, Fundamentals
Tagged: , , , , , , , , , , ,
Germany

Major European Indices Finished Mixed Despite Thursday’s Notable Event Risk

Thursday, 5 Aug 2010 12:51 EDT by CFDTrading Analyst · Leave a Comment 

Europe Session Key Developments
• Encouraging German Factory Orders Fail to Move Markets
• ECB, BoE Keep Overnight Lending Rates Steady
Major European Indices Finished Mixed Despite Thursday’s Notable Event Risk
European equity markets finished Thursday relatively unchanged despite major event risk throughout the session. Early in the session, German Factory Orders for June outpaced analysts’ forecasts, expanding by 3.2 percent against a predicted 1.4 percent gain. Following the surprising data, German Bund yields dropped across the board. Unsurprisingly, both the Bank of England and European Central Bank held their interest rates at 0.50 percent and 1.00 percent, respectively. The Bank of England also announced that it would retain its Asset Purchase Target at £200 billion. While ECB President Trichet declared that there would be “no chance” of a “double-dip” recession thus rendering the current rate appropriate, he did note that the ECB will do whatever is necessary to halt any further backlash from the sovereign debt crisis. Despite this positive sentiment, investors were unimpressed with the news and equity markets barely moved. The FTSE, IBEX, and S&P/MIB all fell less than 0.8 percent, while both the CAC and DAX crept up by less than 0.1 percent each.
Looking ahead to tomorrow, significant data coming from across Europe and the United States could prove to be market moving. British Industrial Production data for June is expected to show 0.1 percent expansion while the Producer Price Index for July is forecasted to drop by 0.5 percent. Additionally in Europe, German Industrial Production data for June and Italian Gross Domestic Product for the second quarter will be released as well. However, in what will likely be the most important data released on Friday, U.S. Non-farm Payroll data, as well as the Unemployment Rate, for July will be released in the second half of the European trading session. With Payrolls expected to drop, and the Unemployment Rate forecasted to increase to 9.6 percent in the United States, Friday could prove to be a volatile trading day across equity markets and currencies.
FTSE 100                      5365.78                   -20.38               -0.38%
Continuing yesterday’s decline, the FTSE 100 gave back another 20.38 points, or 0.38 percent, to finish at 5365.78 after Thursday’s trading session. The British index now sits down 0.87 percent year-to-date after managing to turn positive last week.  Today’s price action was guided by a disappointing performance by the FTSE’s consumer goods sector, which dropped 2.10 percent. Unilever PLC (ULVR LN), one of the U.K.’s largest manufacturers of branded and packaged consumer goods,  lost 5.19 percent. Also noteworthy was Barclays PLC, which dropped 4.66 percent to finish at 324.00 in London.
CAC 40                     3,764.19                  +3.47                 +0.09%
The CAC 40 managed to finish up 3.47 points, or 0.09 percent, to close at 3764.19. Despite testing the psychologically significant 3800 level during intraday trading, the French index retraced following the central bank announcements discussed above. Out of the index’s ten sectors, five finished higher.  The industrial sector benefitted from the encouraging German Factory Orders figure, adding 0.96 percent. The sector’s top performer was EAAD FP, an airplane and military equipment manufacturer; the company’s share price gained 2.95 percent to close at 18.68. Following up from yesterday, Electricite de France (EDF) retraced part of Wednesday’s gains, giving back 1.02 percent. Recall that French Finance Minister Christine Lagarde announced that power rates in the country will rise by 3 percent for households and 4-5.5 percent for companies on August 15th
DAX 30                        6333.58                    +2.25           +0.04%
On Thursday, the DAX 30 again tested the 6380 level, which has served as significant resistance since this April. After reaching an intraday high of 6382.56, the DAX retreated late in the session and closed at 6333.58, just 2.25 points, or 0.04 percent, higher. The DAX 30 as a whole was unable to hold onto its early gains following the encouraging domestic Factory Orders report, but the industrials and basic materials managed to lock in substantial gains (1.05 percent and 1.00 percent, respectively). Siemens AG led the industrial sector, finishing up 1.46 percent to close just below its 52-week high at 78.00. Deutsche Telekom dragged the broader index lower, losing 2.76 percent to end the trading session at 10.21.
IBEX 35                     10840.30                   -3.30                -0.03%
Like its European counterparts, the IBEX 35 finished nearly even after Thursday’s trading session. Despite trading 100 points higher at 11:00 GMT, the Spanish index gave back a modest 3.30 points, or 0.03 percent, to close at 10840.30. The index’s financial sector, which accounts for over 40 percent of the broader IBEX’s weight, finished up 0.09 percent. Banco Santander, the nation’s largest bank and the index’s largest holding, gained 0.29 percent to close at 10.38. Both the utilities sector and the consumer services sector weighed on the index, losing over 0.30 percent each.
S&P/MIB                        21302.97                    -163.47                  -0.76%
After trading above the 21550 mark intraday, the Italian index lost over 163 points, or 0.76 percent, to close at 21302.97. The MIB may soon surpass the IBEX 35 as the worst performing major European index year-to-date; it is currently down 8.37 percent in 2010.
Written by Jay B. Steinberg and Christopher Vecchio, CFD Trading Analysts
For Questions/Comments, please contact him at JSteinberg@fxcm.com

Europe Session Key Developments

• Encouraging German Factory Orders Fail to Move Markets
• ECB, BoE Keep Overnight Lending Rates Steady

Major European Indices Finished Mixed Despite Thursday’s Notable Event Risk

European equity markets finished Thursday relatively unchanged despite major event risk throughout the session. Early in the session, German Factory Orders for June outpaced analysts’ forecasts, expanding by 3.2 percent against a predicted 1.4 percent gain. Following the surprising data, German Bund yields dropped across the board. Unsurprisingly, both the Bank of England and European Central Bank held their interest rates at 0.50 percent and 1.00 percent, respectively. The Bank of England also announced that it would retain its Asset Purchase Target at £200 billion. While ECB President Trichet declared that there would be “no chance” of a “double-dip” recession thus rendering the current rate appropriate, he did note that the ECB will do whatever is necessary to halt any further backlash from the sovereign debt crisis. Despite this positive sentiment, investors were unimpressed with the news and equity markets barely moved. The FTSE, IBEX, and S&P/MIB all fell less than 0.8 percent, while both the CAC and DAX crept up by less than 0.1 percent each.

Looking ahead to tomorrow, significant data coming from across Europe and the United States could prove to be market moving. British Industrial Production data for June is expected to show 0.1 percent expansion while the Producer Price Index for July is forecasted to drop by 0.5 percent. Additionally in Europe, German Industrial Production data for June and Italian Gross Domestic Product for the second quarter will be released as well. However, in what will likely be the most important data released on Friday, U.S. Non-farm Payroll data, as well as the Unemployment Rate, for July will be released in the second half of the European trading session. With Payrolls expected to drop, and the Unemployment Rate forecasted to increase to 9.6 percent in the United States, Friday could prove to be a volatile trading day across equity markets and currencies.

FTSE 100                      5365.78                   -20.38               -0.38%

Continuing yesterday’s decline, the FTSE 100 gave back another 20.38 points, or 0.38 percent, to finish at 5365.78 after Thursday’s trading session. The British index now sits down 0.87 percent year-to-date after managing to turn positive last week.  Today’s price action was guided by a disappointing performance by the FTSE’s consumer goods sector, which dropped 2.10 percent. Unilever PLC (ULVR LN), one of the U.K.’s largest manufacturers of branded and packaged consumer goods,  lost 5.19 percent. Also noteworthy was Barclays PLC, which dropped 4.66 percent to finish at 324.00 in London.

CAC 40                     3,764.19                  +3.47                 +0.09%

The CAC 40 managed to finish up 3.47 points, or 0.09 percent, to close at 3764.19. Despite testing the psychologically significant 3800 level during intraday trading, the French index retraced following the central bank announcements discussed above. Out of the index’s ten sectors, five finished higher.  The industrial sector benefitted from the encouraging German Factory Orders figure, adding 0.96 percent. The sector’s top performer was EAAD FP, an airplane and military equipment manufacturer; the company’s share price gained 2.95 percent to close at 18.68. Following up from yesterday, Electricite de France (EDF) retraced part of Wednesday’s gains, giving back 1.02 percent. Recall that French Finance Minister Christine Lagarde announced that power rates in the country will rise by 3 percent for households and 4-5.5 percent for companies on August 15th

DAX 30                        6333.58                    +2.25           +0.04%

On Thursday, the DAX 30 again tested the 6380 level, which has served as significant resistance since this April. After reaching an intraday high of 6382.56, the DAX retreated late in the session and closed at 6333.58, just 2.25 points, or 0.04 percent, higher. The DAX 30 as a whole was unable to hold onto its early gains following the encouraging domestic Factory Orders report, but the industrials and basic materials managed to lock in substantial gains (1.05 percent and 1.00 percent, respectively). Siemens AG led the industrial sector, finishing up 1.46 percent to close just below its 52-week high at 78.00. Deutsche Telekom dragged the broader index lower, losing 2.76 percent to end the trading session at 10.21.

IBEX 35                     10840.30                   -3.30                -0.03%

Like its European counterparts, the IBEX 35 finished nearly even after Thursday’s trading session. Despite trading 100 points higher at 11:00 GMT, the Spanish index gave back a modest 3.30 points, or 0.03 percent, to close at 10840.30. The index’s financial sector, which accounts for over 40 percent of the broader IBEX’s weight, finished up 0.09 percent. Banco Santander, the nation’s largest bank and the index’s largest holding, gained 0.29 percent to close at 10.38. Both the utilities sector and the consumer services sector weighed on the index, losing over 0.30 percent each.

S&P/MIB                        21302.97                    -163.47                  -0.76%

After trading above the 21550 mark intraday, the Italian index lost over 163 points, or 0.76 percent, to close at 21302.97. The MIB may soon surpass the IBEX 35 as the worst performing major European index year-to-date; it is currently down 8.37 percent in 2010.

Written by Jay B. Steinberg and Christopher Vecchio, CFD Trading Analysts
For Questions/Comments, please contact him at JSteinberg@fxcm.com

Filed Under: Uncategorized
Tagged: , , , , , , , , , , , ,
Germany

Perspective on Greece

Monday, 10 May 2010 12:03 EDT by CFDTrading Analyst · Leave a Comment 

Perspective on Greece
As the Greece debacle unfolds, the EU and the IMF have agreed to provide Athens with a “bailout” package valued at 110 billion Euros (80 by EU and EUR 30 by IMF). With wage cuts, a freeze on pensions and a hike in sales tax set as preconditions for the aid package, Greece will find itself in a tougher situation than before the crises erupted.  To label the funding option as a “bail out” is a bit misguided as most of the funds will be used to service Greece’s debt.   The aid package going forward will buy Greece time but will not solve its fiscal problems, as past attempts by Greece have only produced marginal results.
To further put this into perspective, France and Germany’s banking sectors together account for roughly half of all European banks and have $900 billion worth of exposure to Greece.  If Athens were to default, it would essentially start a banking crisis spreading throughout Europe triggering defaults in Ireland, Spain, Portugal and Italy.  The 110 billion Euro package will be used for debt servicing; paying off or “bailing out” Greece’s creditors, more so the financial system of the European Union.
It would be naïve to think that the aid package could solve decades of Greece’s fiscal irresponsibility. The question lingers of whether or not Athens will be able to successfully implement its tough measures to stabilize the country’s finances given strong public backlash.  The government is already forecasting a 4% GDP contraction in 2010 and a 2.6% in 2011. Falling wages and prices are needed (and will be seen) in Greece in the absence of an exchange rate adjustment.   The best five year fiscal adjustment over the last 30 years by Greece has been 8.5 percentage points of GDP over the years 1994-1998.   Having said that, real GDP growth averaged 2.7% per annum during that period, while inflation averaged 7.5% per annum, meaning that nominal GDP was growing over 10% per annum.  That, of course helps reduce the deficit/GDP ratios as the denominator is expanding robustly.  Historically, countries have made fiscal adjustments, such as the case was with Ireland, which reduced its deficit to 9.9% from 1987-1989 while New Zealand’s deficits declined by 7.3 percentage points from 1993-1995. What is noteworthy is that these incredible tightening measures were taken during periods of strong growth and moderately high inflation.  Both Ireland and New Zealand had strong growth which boosted revenues and higher inflation boosted nominal GDP.  Back in 1999-1997, countries that were hit hard by the Asian Financial Crises saw their fiscal deficits deteriorate as they plunged into recession. It was only after the combination of sharply weaker currencies and a booming world economy that the deficits began to improve from 2000.
As of now the Euro has been unable to capitalize on Greek aid package announcement. It has been pushed below $1.3000 and is approaching the $1.2600, its next likely target is $ 1.25.  The risk of a deepening contraction and deflation is haunting Greece and the Euro.  It is easy to see why the markets are skeptical of the proposed fiscal adjustments and question how Greece can meet such a stringent adjustment path in the budget deficit.

As the Greece debacle unfolds, the EU and the IMF have agreed to provide Athens with a “bailout” package valued at 110 billion Euros (80 by EU and EUR 30 by IMF). With wage cuts, a freeze on pensions and a hike in sales tax set as preconditions for the aid package, Greece will find itself in a tougher situation than before the crises erupted.  To label the funding option as a “bail out” is a bit misguided as most of the funds will be used to service Greece’s debt.   The aid package going forward will buy Greece time but will not solve its fiscal problems, as past attempts by Greece have only produced marginal results.

To further put this into perspective, France and Germany’s banking sectors together account for roughly half of all European banks and have $900 billion worth of exposure to Greece.  If Athens were to default, it would essentially start a banking crisis spreading throughout Europe triggering defaults in Ireland, Spain, Portugal and Italy.  The 110 billion Euro package will be used for debt servicing; paying off or “bailing out” Greece’s creditors, more so the financial system of the European Union.

It would be naïve to think that the aid package could solve decades of Greece’s fiscal irresponsibility. The question lingers of whether or not Athens will be able to successfully implement its tough measures to stabilize the country’s finances given strong public backlash.  The government is already forecasting a 4% GDP contraction in 2010 and a 2.6% in 2011. Falling wages and prices are needed (and will be seen) in Greece in the absence of an exchange rate adjustment.   The best five year fiscal adjustment over the last 30 years by Greece has been 8.5 percentage points of GDP over the years 1994-1998.   Having said that, real GDP growth averaged 2.7% per annum during that period, while inflation averaged 7.5% per annum, meaning that nominal GDP was growing over 10% per annum.  That, of course helps reduce the deficit/GDP ratios as the denominator is expanding robustly.  Historically, countries have made fiscal adjustments, such as the case was with Ireland, which reduced its deficit to 9.9% from 1987-1989 while New Zealand’s deficits declined by 7.3 percentage points from 1993-1995. What is noteworthy is that these incredible tightening measures were taken during periods of strong growth and moderately high inflation.  Both Ireland and New Zealand had strong growth which boosted revenues and higher inflation boosted nominal GDP.  Back in 1999-1997, countries that were hit hard by the Asian Financial Crises saw their fiscal deficits deteriorate as they plunged into recession. It was only after the combination of sharply weaker currencies and a booming world economy that the deficits began to improve from 2000.

As of now the Euro has been unable to capitalize on Greek aid package announcement. It has been pushed below $1.3000 and is approaching the $1.2600, its next likely target is $ 1.25.  The risk of a deepening contraction and deflation is haunting Greece and the Euro.  It is easy to see why the markets are skeptical of the proposed fiscal adjustments and question how Greece can meet such a stringent adjustment path in the budget deficit.

Written by Rab Jafri, CFDTrading Research

Questions? Email :  rjafri@fxcm.com

Filed Under: Strategy Report
Tagged: , , , , , , ,
Germany

European Stocks Validate Bearish Bias, Break Past Key Support

Wednesday, 2 Sep 2009 1:37 EDT by Ilya Spivak · Leave a Comment 

Weekly Strategy

1

FTSE 100

Long-Term Technical Outlook

3

There are 2 levels that most likely produce a top.  The first level, 4751, has been reached and is where the rally from 4096 is equal to 61.8% of the 3461-4521 rally.  The next level is 5156, which is where the 2 bull legs would be equal.

Short-Term Technical Outlook

1

The FTSE has broken out of the Rising Wedge that we identified earlier this week, with prices now positioned to test the 38.2% Fibonacci retracement level at 4816.64. A break beyond that will target the 50% Fib at 4777.25.

DAX

Long-Term Technical Outlook

5

There are 2 levels that most likely produce a top.  The first level, 5506, has nearly been reached and is where the rally from 4524 is equal to 61.8% of the 3589-5176 rally.  The next level is 6113, which is where the 2 bull legs would be equal.


Short-Term Technical Outlook

2

The German benchmark index has sold off as expected and is now positioned above the 61.8% Fibonacci retracement level at 53198. A break lower targets the 76.4% level at 52587.

CAC 40

Long-Term Technical Outlook

7

There are 2 levels that most likely produce a top.  The first level, 3535, has been reached and is where the rally from 2958 is equal to 61.8% of the 2466-3400 rally.  The next level is 3892, which is where the 2 bull legs would be equal.

Short-Term Technical Outlook

3

Our bearish forecast for the French equities has been validated: prices fell through the bottom of a rising wedge formation and taken out the 38.2% Fibonacci retracement level at 3599.14. From here, the bears will look to take the index to the 50% Fib at 3560.47.

IBEX 35

Long-Term Technical Outlook

9

There are 2 levels that most likely produce a top.  The first level, 1124, has nearly been reached and is where the rally from 925 is equal to 61.8% of the 670-993 rally.  The next level is 1247, which is where the 2 bull legs would be equal.

Short-Term Technical Outlook

4

As with most other European exchanges, Spanish shares sold off to break beyond the Rising Wedge we identified at the beginning of the week. Prices now target the 38.2% Fibonacci retracement level at 1113.66.

FTSE MIB

Long-Term Technical Outlook

11

There are 2 levels that most likely produce a top and neither has been reached.  The first level, 22798, is where the rally from 17626 is equal to 61.8% of the 12332-20702 rally.  The next level is 25996, which is where the 2 bull legs would be equal.

Short-Term Technical Outlook

5

The FTSE/MIB looks essentially the same as other European benchmark indexes: prices validated our bearish scenario, breaking below Rising Wedge support to challenge resistance-turned-support at 21981.13. A move lower from here would target the 21947.83 – 21762.62 congestion region.

2

Filed Under: European Markets, Technicals, Uncategorized
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Germany

European Stock Exchanges Position to Reverse Lower

Monday, 31 Aug 2009 1:08 EDT by Ilya Spivak · Leave a Comment 

Weekly Strategy

1

FTSE 100

Long-Term Technical Outlook

3

There are 2 levels that most likely produce a top.  The first level, 4751, has been reached and is where the rally from 4096 is equal to 61.8% of the 3461-4521 rally.  The next level is 5156, which is where the 2 bull legs would be equal.

Short-Term Technical Outlook

1

The FTSE is setting up a Rising Wedge chart formation indicative of a bearish reversal ahead. Negative divergence on the RSI oscillator bolsters the downward bias. Near-term support is seen at 4888.90.

DAX

Long-Term Technical Outlook

5

There are 2 levels that most likely produce a top.  The first level, 5506, has nearly been reached and is where the rally from 4524 is equal to 61.8% of the 3589-5176 rally.  The next level is 6113, which is where the 2 bull legs would be equal.


Short-Term Technical Outlook

2
As with the FTSE, the German benchmark index is showing a bearish Rising Wedge with negative RSI divergence. A break of support at 55023 opens the door for a move to resistance-turned-support at 54420.

CAC 40

Long-Term Technical Outlook

7

There are 2 levels that most likely produce a top.  The first level, 3535, has been reached and is where the rally from 2958 is equal to 61.8% of the 2466-3400 rally.  The next level is 3892, which is where the 2 bull legs would be equal.

Short-Term Technical Outlook

3

Another rising wedge is seen on the CAC 40, again with negative RSI divergence. Near-term support is seen at 3668.40. A break below this will likely see a test of the psychologically significant 3600.00 handle.

IBEX 35

Long-Term Technical Outlook

9

There are 2 levels that most likely produce a top.  The first level, 1124, has nearly been reached and is where the rally from 925 is equal to 61.8% of the 670-993 rally.  The next level is 1247, which is where the 2 bull legs would be equal.

Short-Term Technical Outlook

4

Spanish shares fit in with positioning noted on other key exchanges: a Rising Wedge points to a bearish bias, and negative RSI divergence offers confirmation. A break below the wedge bottom at 1141.81 opens the door for a move to the 23.6% Fibonacci retracement level (1128.42).

FTSE MIB

Long-Term Technical Outlook

11

There are 2 levels that most likely produce a top and neither has been reached.  The first level, 22798, is where the rally from 17626 is equal to 61.8% of the 12332-20702 rally.  The next level is 25996, which is where the 2 bull legs would be equal.

Short-Term Technical Outlook

5

The FTSE/MIB looks essentially the same as other European benchmarks, with a Rising Wedge and negative RSI divergence clearly in place. A move below the wedge bottom at 22609.38 will aim below the 22500.00 handle.

2

Filed Under: European Markets, Technicals
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Germany

European Stock Exchanges Extend Gains But Momentum Slowing

Thursday, 16 Jul 2009 10:41 EDT by Ilya Spivak · Leave a Comment 

Weekly Strategy

1

FTSE 100

Long-Term Technical Outlook

07-08-09 2

The FTSE rally from 3461 most likely completed wave 4 within a 5 wave decline from the 2007 high.  Expectations are for wave 5 to drawn the index to a new low (below 3461).

Short-Term Technical Outlook

1

The FTSE has rebounded from support at the 100-day moving average, breaking out of a falling and taking out resistance at the 61.8% Fibonacci retracement level (4349.34). Prices now aim at the 76.4% Fib at 4409.17.

DAX

Long-Term Technical Outlook

07-08-09 4

The DAX pattern is the same as that of the FTSE 100.  The rally from the March low counts well as wave 4 within the 5 wave decline from the 2007 high.  Moreover, the decline from 5178 (on short term charts) unfolded as an impulse (5 waves).


Short-Term Technical Outlook

2

The DAX 30 gapped above resistance at a falling channel top and has surpassed resistance at the 61.8% Fibonacci retracement level. Prices are now testing the last layer of Fib resistance at the 76.4% level (50229), with a break higher to challenge the 06/02 high at 51780.

CAC 40

Long-Term Technical Outlook

07-08-09 6

I’ve made a change to the labeling for the CAC 40. The change brings the count in line with that of the DAX and FTSE counts.  The rally from 2465 was wave 4 of (3).  Wave 5 of (3) is considered underway towards a new low as long as 3400 remains intact.

Short-Term Technical Outlook

3

The French benchmark index has broken out above a falling channel that had guided prices lower since the swing top in late May. Near-term resistance now stands at 3230.83, the 61.8% Fibonacci retracement level.

IBEX 35

Long-Term Technical Outlook

07-08-09 8

The IBEX 35 appears to have already completed 5 waves down from its 2007 high.  However, the decline could extend (like the CAC 40 appears to be doing).  The continued divergence with RSI at the recent high also favors weakness going forward.

Short-Term Technical Outlook

4

Spanish shares have broken above 99294, the 07/01 high. From here, the door is open for a move to test support-turned-resistance at 99976. That said, negative divergence on the RSI oscillator continues to point to ebbing conviction behind bullish momentum.

FTSE MIB

Long-Term Technical Outlook

07-08-09 10

The rally from the March low in the FTSE / MIB index was a 4th wave.  In line with other European indexes, the Milan index is expected to drop to a new low (below 12343).

Short-Term Technical Outlook

5

Italian shares have found support at the 100-daysimple moving average and rebounded higher, taking out support-turned-resistance in the 18459.31 – 18752.00 congestion region. Prices now aim to test the 14.6% Fibonacci retracement at 19479.98.

2

Filed Under: European Markets, Technicals
Tagged: , , , , , , , , , ,
Germany

European Stocks Rebound Tentatively Higher – Where to From Here?

Tuesday, 14 Jul 2009 1:23 EDT by Ilya Spivak · Leave a Comment 

Weekly Strategy

1

FTSE 100

Long-Term Technical Outlook

07-08-09 2

The FTSE rally from 3461 most likely completed wave 4 within a 5 wave decline from the 2007 high.  Expectations are for wave 5 to drawn the index to a new low (below 3461).

Short-Term Technical Outlook

3

The FTSE has rebounded from significant support at the intersection of the 100-day moving average and the 38.2% Fibonacci retracement level. Near-term resistance is seen at 4279.63, a falling channel top.

DAX

Long-Term Technical Outlook

07-08-09 4

The DAX pattern is the same as that of the FTSE 100.  The rally from the March low counts well as wave 4 within the 5 wave decline from the 2007 high.  Moreover, the decline from 5178 (on short term charts) unfolded as an impulse (5 waves).


Short-Term Technical Outlook

4

German shares have rebounded from near-term support at the intersection of the 38.2% Fibonacci retracement level and the lower boundary of a falling channel. Initial resistance is seen at 48497, the channel top.

CAC 40

Long-Term Technical Outlook

07-08-09 6

I’ve made a change to the labeling for the CAC 40. The change brings the count in line with that of the DAX and FTSE counts.  The rally from 2465 was wave 4 of (3).  Wave 5 of (3) is considered underway towards a new low as long as 3400 remains intact.

Short-Term Technical Outlook

5

The French benchmark index has rebounded from the lower boundary of a falling channel to meet support-turned-resistance at the 38.2% Fibonacci retracement level. A break higher will aim to challenge the channel top, now at 3134.

IBEX 35

Long-Term Technical Outlook

07-08-09 8

The IBEX 35 appears to have already completed 5 waves down from its 2007 high.  However, the decline could extend (like the CAC 40 appears to be doing).  The continued divergence with RSI at the recent high also favors weakness going forward.

Short-Term Technical Outlook

5

Spanish shares are positioned above support at the 23.6% Fibonacci retracement level (91848), with negative divergence on the RSI oscillator hinting at a bearish bias. Near-term resistance is seen at 99294, the 07/01 high.

FTSE MIB

Long-Term Technical Outlook

07-08-09 10

The rally from the March low in the FTSE / MIB index was a 4th wave.  In line with other European indexes, the Milan index is expected to drop to a new low (below 12343).

Short-Term Technical Outlook

6

Italian shares have found support at the 100-daysimple moving average. Initial resistance is seen in the 18459.31 – 18752.00 congestion region, an area that previously served as support.

2

Filed Under: European Markets, Technicals
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Germany

European Stocks to Accelerate Lower as Prices Breach Key Support Levels

Wednesday, 8 Jul 2009 1:37 EDT by Ilya Spivak · Leave a Comment 

07-08-09 1

FTSE 100

Long-Term Technical Outlook

07-08-09 2

The FTSE rally from 3461 most likely completed wave 4 within a 5 wave decline from the 2007 high.  Expectations are for wave 5 to drawn the index to a new low (below 3461).

Short-Term Technical Outlook

07-08-09 3

The FTSE has broken below support at 4225.52, the 61.8% Fibonacci retracement level. From here, prices aim to challenge 100-day moving average, now at 4117.47.

DAX

Long-Term Technical Outlook

07-08-09 4

The DAX pattern is the same as that of the FTSE 100.  The rally from the March low counts well as wave 4 within the 5 wave decline from the 2007 high.  Moreover, the decline from 5178 (on short term charts) unfolded as an impulse (5 waves). 


Short-Term Technical Outlook

07-08-09 5

German shares have extended lower after breaking support at a rising trend line, meeting near-term support at the 38.2% Fibonacci retracement level (45803). A break lower will target 43957, the 50% Fib.

CAC 40

Long-Term Technical Outlook

07-08-09 6

I’ve made a change to the labeling for the CAC 40. The change brings the count in line with that of the DAX and FTSE counts.  The rally from 2465 was wave 4 of (3).  Wave 5 of (3) is considered underway towards a new low as long as 3400 remains intact.

Short-Term Technical Outlook

07-08-09 7

The French benchmark index has been confined to a narrow falling channel after breaking below support at a rising trend line that had guided the CAC since early March. The next leg of the down move sees initial support at the 100-day moving average.

IBEX 35

Long-Term Technical Outlook

07-08-09 8

The IBEX 35 appears to have already completed 5 waves down from its 2007 high.  However, the decline could extend (like the CAC 40 appears to be doing).  The continued divergence with RSI at the recent high also favors weakness going forward.    

Short-Term Technical Outlook

07-08-09 9

The breakout above double top resistance at 97447 looks to have been a head-fake, with prices reversing sharply lower to close below this juncture. From here, price aim to challenge support at 91678, the 23.6% Fibonacci retracement level.

FTSE MIB

Long-Term Technical Outlook

07-08-09 10

The rally from the March low in the FTSE / MIB index was a 4th wave.  In line with other European indexes, the Milan index is expected to drop to a new low (below 12343).

Short-Term Technical Outlook

07-08-09 11

Italian shares have overcome support in the 18442.00-18752.00 congestion region, the next level support at the 100-day simple moving average (now at 17792.95). This juncture is reinforced by the 38.2% Fibonacci retracement level at 17504.66.

Filed Under: European Markets, Technicals
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Germany

European Stocks to Extend Losses as Support Disintegrates

Tuesday, 23 Jun 2009 12:28 EDT by Ilya Spivak · Leave a Comment 

FTSE 100

Long-Term Technical Outlook

1

The FTSE is at risk of at least a pullback if not an outright reversal as daily RSI has rolled over from overbought territory. The rally from 3461 is likely to extend much higher over the summer months. But, will the advance carry more or less in a straight shot from current levels or will a pullback occur before the next advance? Remaining above 4295 keeps the FTSE 100 on a path towards 5106-5495 (50% and 61.8% of previous decline). A drop below 4295 would lead to a deeper decline in what is probably a B wave.

Short-Term Technical Outlook

06-23-09-1

The FTSE has broken below support at 4270.63, the 23.6% Fibonacci retracement level. The UK benchmark index now targets the intersection of the 50% Fib and the 100-day moving average.

DAX

Long-Term Technical Outlook

3

The DAX pattern is the same as that of the FTSE 100. Staying above 4653 keeps the index headed higher towards 5870-6409. These levels are defined by the 50% and 61.8% retracements of the decline from the 2007 high. The 100% extension of the first leg of the advance (wave A, from 3589-4980) is in this zone at 6045.

Short-Term Technical Outlook

06-23-09-2

German shares have surpassed support at 48066, the 23.6% Fibonacci retracement level. From here, prices target the 38.2% Fib at 45759.

CAC 40

Long-Term Technical Outlook

5

The decline from the 2007 high in the CAC 40 is in 5 waves and either wave 1 or 5 is extended. It seems more probably that wave 5 is the extended wave because if wave 1 were extended then wave 2 would be uncommonly small. Either way, the index is most likely headed significantly higher over the next several months. The target zone is the former 4th wave, which is 441-5142. The 61.8% is in the middle of this zone at 4754. Near term, staying above 3115 keeps the trend pointed up. Coming under there would lead to a deeper decline in what is probably a B wave.

Short-Term Technical Outlook

06-23-09-3

The French benchmark index looks to have broken below resistance-turned-support at 313490. Bearish momentum now looks to extend to test the 100-day moving average at 301610.

IBEX 35

Long-Term Technical Outlook

7

Same story with the IBEX 35. The rally from the low (6703) is corrective but has more room to run. Staying above 8829 keeps wave C headed higher towards 1137-1247. This zone is defined by the 50%-61.8% retracements of the decline from the 2007 high. Wave C would equal wave A near the lower end of this zone at 1159.

Short-Term Technical Outlook

06-23-09-4

The IBEX 35 reversed sharply lower on a re-test of broken support at the bottom of a rising channel. The bears now look to overcome the 14.6% Fibonacci retracement to expose the 23.6% level at 90279.

S&P/MIB

Long-Term Technical Outlook

9

The FTSE MIB (Milan) index took the same structure as the CAC 40 on the way down from its 2007 high. The index is currently testing the 200 day SMA, which should give way as the target zone for the index is not until 30062-34711 (former 4th wave….wave 5 is extended). Remaining above 18752 keeps the trend pointed higher. Coming below there would lead to a deeper decline (next support would be 17133) before the next leg up.

Short-Term Technical Outlook

06-23-09-5

Italian shares gapped below support at 18726.68, the 23.6% Fibonacci retracement level. From here the MIB targets the 38.2% Fib at 17504.66.

Filed Under: European Markets, Technicals
Tagged: , , , , , , , , , , , , , , , ,
Germany

European Stocks Find Near-Term Support, Stage Shallow Rebound

Monday, 22 Jun 2009 1:25 EDT by Ilya Spivak · Leave a Comment 

FTSE 100

Long-Term Technical Outlook

1

The FTSE is at risk of at least a pullback if not an outright reversal as daily RSI has rolled over from overbought territory. The rally from 3461 is likely to extend much higher over the summer months. But, will the advance carry more or less in a straight shot from current levels or will a pullback occur before the next advance? Remaining above 4295 keeps the FTSE 100 on a path towards 5106-5495 (50% and 61.8% of previous decline). A drop below 4295 would lead to a deeper decline in what is probably a B wave.

Short-Term Technical Outlook

111

The FTSE has found tentative support at 4270.63, the 23.6% Fibonacci retracement level. A break lower targets the intersection of the 50% Fib and the 100-day moving average.

DAX

Long-Term Technical Outlook

3

The DAX pattern is the same as that of the FTSE 100. Staying above 4653 keeps the index headed higher towards 5870-6409. These levels are defined by the 50% and 61.8% retracements of the decline from the 2007 high. The 100% extension of the first leg of the advance (wave A, from 3589-4980) is in this zone at 6045.

Short-Term Technical Outlook

25

German shares have surpassed support at the bottom of a rising channel and are now testing 48066, the 23.6% Fibonacci retracement level. A break lower will target the 38.2% Fib at 45759.

CAC 40

Long-Term Technical Outlook

5

The decline from the 2007 high in the CAC 40 is in 5 waves and either wave 1 or 5 is extended. It seems more probably that wave 5 is the extended wave because if wave 1 were extended then wave 2 would be uncommonly small. Either way, the index is most likely headed significantly higher over the next several months. The target zone is the former 4th wave, which is 441-5142. The 61.8% is in the middle of this zone at 4754. Near term, staying above 3115 keeps the trend pointed up. Coming under there would lead to a deeper decline in what is probably a B wave.

Short-Term Technical Outlook

35

The French benchmark index has broken below the lower boundary of a rising channel. Prices now testing support / resistance at 313490, with a break lower targeting the 100-day moving average at 301057.

IBEX 35

Long-Term Technical Outlook

7

Same story with the IBEX 35. The rally from the low (6703) is corrective but has more room to run. Staying above 8829 keeps wave C headed higher towards 1137-1247. This zone is defined by the 50%-61.8% retracements of the decline from the 2007 high. Wave C would equal wave A near the lower end of this zone at 1159.

Short-Term Technical Outlook

44

The IBEX 35 has confirmed a double top at 97240 with a break below support at the bottom of a rising channel. Prices found near-term support at the 14.6% Fibonacci retracement and rebounded to re-test the broken channel’s lower boundary. A resumption of bearish momentum from here aims at the 23.6% Fibonacci retracement level (90279).

S&P/MIB

Long-Term Technical Outlook

9

The FTSE MIB (Milan) index took the same structure as the CAC 40 on the way down from its 2007 high. The index is currently testing the 200 day SMA, which should give way as the target zone for the index is not until 30062-34711 (former 4th wave….wave 5 is extended). Remaining above 18752 keeps the trend pointed higher. Coming below there would lead to a deeper decline (next support would be 17133) before the next leg up.

Short-Term Technical Outlook

55

Italian shares have broken below support at 19479.98, the 14.6% Fibonacci retracement level, to pause at the 23.6% Fib mark. A break lower from here targets the 38.2% Fib at 17504.66.

Filed Under: European Markets, Technicals
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