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FTSE, DAX benefits from optimism over easing Chinese restrictions


FTSE, DAX News and Analysis

  • European indices rise as optimism surrounding China’s collapse rekindles short-term risk appetite
  • Key FTSE Technical Levels Analyze
  • DAX symmetrical triangle threatens to erupt upside down

Risk sentiment eased along with China’s restrictions

Shanghai reported three consecutive days with no new cases of coronavirus, suggesting that strict restrictions could be lifted soon or somewhat alleviated. Earlier this week, Shanghai officials viewed the 1st of June as an appropriate time to start returning to normalcy, however, one might think that the situation could change if there is a sudden increase in new cases, as China follows a zero-Covid strategy.

It was a rather rough few weeks for stocks, especially the Nasdaq and S & P500, which led markets to welcome the positive news, leading to an increase in sentiment and overall index prices. European indices are marching higher as the FTSE 100 and Germany’s DAX index rise this morning.

If we look at the FTSE index, all sectors except the pharmaceutical sector have progressed as basic materials and finance are the forerunner in the London AM session. Rising inflation and optimism about China’s renewed demand for commodities supported increases in oil and metals (silver, gold and copper). Notable mentions include Imperial Brands, Fresnillo and Prudential as the biggest drivers, while Unilever, Ocado and Next PLC are among some of the stocks trading lower this morning.

FTSE Winners vs Losers This Morning

Source: Refinitive

FTSE 100 Technical Analysis

The FTSE 100 index has completed a strong reversal since the 7220 level was rejected. Energy stocks have benefited from oil’s recent rise, while mining stocks have benefited from the bullish reversal in metal prices.

7565 appears as short-term resistance, followed by the previous high at 7615, before the annual high of 7687. Support comes in at 7400 followed by 7285.

FTSE 100 Index Daily Chart

FTSE, DAX benefits from optimism over easing Chinese restrictions

Source: TradingView, prepared by Richard Snow

In the current global macro environment of runaway inflation, aggressive rate hikes cycles and a rising dollar; shares remain in a difficult place. Despite the FTSE’s strong relative performance due to a heavy weight in energy and mining stocks, UK stocks may only rise to attractive levels before we see a steady decline in line with the ‘sell rally’ -sentiment. Falling growth forecasts for the UK also pose risks for the downside after March GDP data showed a month-on-month contraction.

DAX Technical Analysis

The DAX reveals a very interesting symmetrical triangle pattern that apparently forms for a breakout at the top. To avoid a falsification scenario, any break above the declining trend line resistance may retest the same trend line before advancing to 14600. Support appears at 13910, which is likely to testify to price action trading within the triangle in the event of a failure to break out.

DAX Continuous Futures Daily Chart

FTSE, DAX benefits from optimism over easing Chinese restrictions

Source: TradingView, prepared by Richard Snow

— Written by Richard Snow for techlives.in

Contact and follow Richard on Twitter: @RichardSaowFX

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