Euro Stoxx 50, IBEX 35, ECB, Federal Reserve, Inflation – Talking Points
- Euro Stoxx 50 gains 0.53%, but finds resistance at a key pivot zone
- IBEX 35 shrugs off 4% increase in Spanish consumer prices, gains 1.25%
- US Treasury yields cool slightly, lifting sentiment across global markets
European equities rebounded on Wednesday as market participants came to grips with the recent rise in US Treasury yields. The sell-off in bonds saw global investors trim tech equity holdings, with tech-heavy indices feeling the most pain on Tuesday. Sentiment across global markets has soured recently, as investors have had to digest surging commodity prices, the Evergrande situation, and now a potential US default.
On Tuesday, Federal Reserve Chair Jerome Powell highlighted during testimony in front of Congress that inflation “may remain elevated for some time, before moderating.” These comments sparked a robust rally in US Treasury yields, with the 10-year reaching a high of 1.57%. Equities have struggled lately as market participants fear elevated inflation could cause central banks to become more hawkish to curb rising prices. During a forum held by the European Central Bank (ECB), ECB President Christine Lagarde stated that the central bank would not be prematurely reacting to temporary spikes in inflation.
Euro Stoxx 50 1 Hour Chart
Chart created with TradingView
The Euro Stoxx 50 struggled to retrace Tuesday’s losses during Wednesday’s session, rising by just 0.53%. Following Tuesday’s sharp decline, the Euro Stoxx 50 found strong resistance at the bottom of a key pivot zone near 4,100. With modest relative strength, and a growing amount of uncertainty around the globe, price may remain continue to gyrate as market participants trade headline to headline. Near-term direction may also depend heavily on economic data as investors grow fearful of rising prices across the continent. Eurozone inflation data will be released on Friday, with analysts expecting a reading of 3.3%.
IBEX 35 1 Hour Chart
Chart created with TradingView
The IBEX 35 rose by 1.25% on Wednesday, partly retracing substantial loss seen during Tuesday’s rout. While continental data is slated to drop Friday, Spanish inflation data released on Wednesday showed domestic prices rose by 4% in September, which may have held the index back from further gains. Multiple times during Wednesday’s session, the index found resistance at the 50-hour moving average, with no meaningful break occurring. The IBEX 35 did gyrate around a key pivot zone near 8,840 before ultimately closing above this key area.
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— Written by Brendan Fagan, Intern
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