European stocks ended marginally down this Wednesday following higher-than-expected inflation reported by the UK, while the German DAX index closed the day less than one point lower. Reopening optimism has pushed stock markets in the last several weeks, but Britain’s annual inflation for June exceeded the Bank of England’s 2% target, which hit investor confidence.
DAX index continues to trade in a bull market, and as long the DAX is above 15,500 points, there is no risk of the positive trend reversal. Eurozone business growth accelerated in June at its fastest pace in 15 years; still, the ECB’s President Christine Lagarde said that the ultra-loose monetary policy would remain in place, and it is too early to discuss tapering.
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According to estimates, corporate earnings should post excellent results for the second quarter of 2021, and Christian Stocker, an equity strategist at UniCredit Bank, said that European stocks could advance in the upcoming weeks. The German Economy Ministry announced this week that Germany’s economic recovery from the pandemic is in full swing, and the outlook for the industry remains positive.
“The German economy is recovering strongly and is expected to return to its pre-crisis level in the third quarter. The supply bottlenecks for intermediate products … have a dampening effect; however, they do not impair the positive underlying dynamic of the overall economy,” German Economy Ministry reported.
German Economy Ministry warned that inflation could advance above 3% in the second half of 2021 due to the government’s stimulus program, but inflation will ease significantly in 2022. The German central bank expects that the German economy could grow 3.7% this year and reach pre-pandemic levels before the third quarter.
Delta variant of the coronavirus still represents an issue, but investors’ focus will turn on the second-quarter earnings season.
Technical analysis: DAX index could reach 16,000 points
DAX index continues to trade near its record highs, and if the price jumps above 15,850 points, the next target could be around 15,900 or even 16,000. It is important to say that 15,500 points represent the current support level, and as long the price is above this support, there is no indication of the positive trend reversal.
German DAX index continues to trade near record highs despite the concerns that the recovery in the German economy could be hit by the fast-spreading Delta variant of the coronavirus. Delta is now the dominant variant in Germany and accounts for more than 50% of positive COVID-19 samples, which signals that the battle against the coronavirus continues. The focus of investors will turn on the second-quarter earnings season, and according to estimates, European corporate earnings are expected to have more than doubled. DAX index is trading only 212 points below 16,000 resistance, and for now, everything indicates that it could reach 16,000 points in the upcoming days or weeks.
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