Record Breaking Run for EU STOXX, FTSE Rises to Pre-Pandemic Levels

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European Equities Talking Points:

  • European and British stocks continue to benefit during the summer months buoyed by strong corporate earnings and accommodative monetary policy
  • FTSE rises to pre-Covid levels while EU Stoxx continues impressive near-perfect bullish advance,

Equities Push Forward as US Inflation Data Settles

The summer months have been kind to major European equity markets particularly from a corporate earnings perspective. The re-opening of the economic bloc and unwavering support from the ultra-bearish ECB – maintaining interest rates at significantly low levels – has allowed firms to operate effectively.

In fact, its not just European stocks that are thriving if you take a look at global equity performance using the MSCI World Equity Index as a benchmark. The index trades around all-time highs but with increasing talk around Fed tapering towards the end of this year or possibly the beginning of 2022, how much longer will equities thrive in the current low interest rate environment?

Tapering talk has been cooled somewhat this week as US core inflation was as expected (4.3%) while the CPI figure came in at 5.4%, slightly above estimates of 5.3%

MSCI World Equity Index

MSCI world equity index

Chart prepared by Richard Snow, Source:Refinitiv

Risk Events on the Horizon

Mid-way through next week we will see both Eurozone and UK specific inflation data. The Eurozone still trails behind in terms of inflation but a UK print above last month’s 2.3% could reignite tapering talks among members of the UK Monetary Policy Committee (MPC)

economic calendar

For all market-moving data releases and events see the DailyFX Economic Calendar

Find out how interest rates effect the stock market by reading our article: The Relationship Between Interest Rates and Stock Prices

EU Stoxx and FTSE Key Technical Levels

The broader EU STOXX 600 Index 600 is on track to post gains for a record tenth straight session with the smaller index, the EU STOXX 50, continuing to trade in a similar direction.

The EU STOXX 50 Index tracks the performance of the top 50 European stocks, recently surpassed the yearly high on the way to making new highs as it heads towards 4300. However, signs of possible exhaustion are beginning to show as the RSI moves into overbought territory. A subsequent retracement could find support at the recent high of 4170 with a deeper move bringing the 4133 level into focus.

EU STOXX 50 Daily Chart

EU Stoxx daily chart

Chart prepared by Richard Snow, IG

The FTSE 100 index has completed a sharp V-shaped recovery since concern over the increase in infections of the Delta variant sent the index tumbling last month. FTSE trades around the yearly high, near 7220 with ample room to run to the upside.

A rejection of the 7220 level would bring the 7170 and 7120 levels into focus as the nearest relevant levels of support.

The FTSE 100 Index Daily Chart

FTSE daily chart

Chart prepared by Richard Snow, IG

— Written by Richard Snow for DailyFX.com

Contact and follow Richard on Twitter: @RichardSnowFX

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