European indices continue their declines from recent days. Index valuations are under pressure from the European defense sector and the American technology sector, which has experienced a noticeable correction since the beginning of this week.
Since the beginning of the week, we have observed small yet consistent declines in European indices. This is due to partial market disappointment with peace conferences involving the U.S. President, weakening macroeconomic prospects, and recently, the depreciation of companies in the defense sector.
The defense industry anticipates a drop in orders if peace negotiations succeed. Additionally, the situation for European indices is worsened by economic data and information from across the ocean. In Germany, producer prices fell by 1.5% year-on-year, signaling a weakening industry, while the UK is grappling with rising inflation at 3.8%. This is an increase from the previous month's reading of 3.6% and exceeds expectations, which were at 3.7%.
Another factor contributing to the decline in the European market is yesterday's sell-off in the U.S. technology sector, which may signal a shift in investor sentiment. During yesterday's session, NVIDIA lost 3.5%, Palantir over 9%. Microsoft, Tesla, and Apple also lost value, key companies from the Magnificent 7 group.
DE40(D1)
The narrowing consolidation channel is approaching its closure. Within a week, the market should decide on the further direction for the valuation of the German index. In the case of declines, the first support role will be played by the 24,000 level, where the EMA50 and the upward trend line are located. The next very strong support zone will be around 23,500, where the EMA100 and the upper limits of the previous consolidation are found. If the market finds a reason to rise, resistance for the price will be at the level of the all-time high at 24,757.
Company News:
Continuation of the depreciation of defense companies - Markets see a real prospect of ending the war in Ukraine. This poses a threat to the valuations of companies in the defense sector. Rheinmetall (RHM.DE) is down 1.5%. The company has already lost about 20% of its value since May.
TAG Immobilien (TEG.DE) - The company conducted an issuance of 12.5 million new shares, resulting in a 3% drop in price.
K+S (SDF.DE) - A negative recommendation from Berenberg causes the price to fall by over 4%.
Stellantis (STLAM.IT) - Bernstein lowers the target price for the company's shares to $11.70. The share price drops by about 1%.
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