The following 24 hours will be crucial for the near-future pricing of global stocks, specifically indices. US indices during yesterday’s trading saw mixed price movement, with the NASDAQ declining, SNP500 remaining unchanged, and the Dow Jones barely rising. Market participants were experiencing a similar price movement in Europe. The German DAX was down -0.11%, and the French CAC and UK FTSE100 remained unchanged. However, this will not likely be the case for the next 24 hours. Due to the scheduled earning reports, the stock market is expected to experience higher volatility and direction.
UK investors have had a series of negative economic data over the past week, with the latest coming from the Morgan McKinley report this morning. Morgan McKinley, one of the world’s largest recruitment agencies, releases a quarterly report. The report confirms that the number of vacancies in London declined by over 30% in the first quarter of 2023. In addition to this, the report also advised the number of individuals seeking employment increased.
However, traders should note that the news has yet to negatively impact the Pound or the FTSE100. This will change if the data shows within the UK’s Gross Domestic Product and Employment Data.
German DAX - High Volatility to Continue
The DAX’s price movement shows signs of buying dominance as the index forms its fifth consecutive bullish week. In addition, the index has formed two straight days of price increases. However, the momentum has been declining since April 17th, and investors are also cautious that the price is hovering around the previous resistance level and an all-time high. This level is a strong psychological price for investors, requiring positive earnings and investor confidence to push higher.
Investors were reassured recently by the German Business Climate Index and the accompanying report. Clemens Fuest advised that German business concerns are easing, but the main issue for investors is that the German economy lacks strong growth and momentum. According to the monthly report from the German Federal Bank, conditions are improving thanks to the recovery in industrial production, falling energy prices, the elimination of supply disruptions, and growth in the German car industry.
German inflation is also declining, according to the latest reports. Inflation has dropped to a 7-month low, measuring 7.4%. The German preliminary Consumer Price Index will be released on Friday. If economists predict the inflation rate to continue declining, the data can support the DAX further. At the same time, a higher inflation rate would lead to higher interest rates and pressure all EU indices, including the DAX.
Lastly, the DAX will also be influenced by the global earnings season, including the DAX’s components and large US companies. For example, there are five major earning reports from US companies today. These companies are not components of the DAX. However, these large company reports can change the sentiment towards the global stock market. SAP is the most important stock within the DAX, which has disappointed within the past four quarters. However, the stock increased by almost 2% yesterday and 6% in the past week. The most influential companies within the DAX are SAP, Siemens, Allianz, Deutsche Telekom, and Airbus.
The price movements, indicators, and price action signal a downward price movement. However, traders should be cautious of support levels at €15,744, which previously brought about a surge in buyers. A clear resistance level can also be seen at €15,946.
Dow Jones - A Crucial 24-Hours
The Dow Jones was one of the few assets that could avoid a decline during yesterday’s trading session. The NASDAQ showed a decline measuring 0.24%, the SNP500 remained unchanged, and the Dow Jones slightly rose by 0.24%. However, the increase was not necessarily significant enough to grab traders' attention and still shows signs of pressure. Initially, the price declined to a 12-day low before forming a solid impulse wave upward.
The asset this morning is again experiencing significant strong bearish price movement, measuring 0.43%. Investors are contemplating whether buyers will join the market after the opening of the US trading session, similar to yesterday’s price actions. However, this will depend on this morning’s earnings reports from McDonald's and PepsiCo. Investors will specifically focus on McDonald's, the 4th most influential stock on the Dow Jones.
Wall Street expects McDonald's to report revenue and earnings per share slightly lower than the previous quarter. The Revenue is expected to read $5.59 billion, and earnings per share of $2.30. Negative earning data can negatively impact McDonald's stocks and the Dow Jones. McDonald's stocks have increased by 7% over the past 30 days.
Lastly, in addition to this, investors will also be monitoring the US Gross Domestic Product on Thursday and the PCE Price Index on Friday. The market expects the GDP to show 2%, the lowest in more than six months, and the PCE Price Index to read 0.3%, similar to the previous month.
Traders looking to short the asset will be looking for adverse earning reports and for the price to decline below the current support level of $33,660.
Summary:
- Global indices struggled on Monday and strongly declined during this morning’s Asian session.
- German business concerns are easing, but the main issue for investors is that the German economy lacks strong growth and momentum.
- The Morgan McKinley report confirms vacancies in London were down over 30% in the first quarter of 2023.
- Investors hold their breaths ahead of major earning reports, including McDonald’s, Alphabet, and Microsoft.
