European indices drop as Macron relief rally never arrives

• European indices drop at the start of a new week

• China concerns outweigh Macron victory

• A look at DE30, FRA40 and UK100

European stock markets are trading lower at the beginning of a new week. An expected relief rally related to Macron's win in the French presidential elections did not arrive as the deteriorating pandemic situation in China intensified concerns over global economic slowdown. European indices trade over 1.5% lowertoday with some Western indices dropping more than 2%.

Economic calendar for today is empty therefore markets are likely to be driven by overnight sentiment in absence of any other major events. German Ifo indices were the only noteworthy reading of the day. In spite of an expected drop, the actual report showed the business climate index jumping from 90.8 to 91.8 pts in April (exp. 88.2). Expectations subindex jumped from 85.1 to 86.7 (exp. 83.5) while current conditions subindex jumped from 97.0 to 97.2 (exp. 95.9) Ifo economists said that the German economy is robust in spite of uncertainties but three quarters of companies note supply chain issues.

DE30

DE30 managed to break above 100-period EMA at H4 interval at the end of the previous week. However, advance was halted by the neckline of the previously broken head and shoulders pattern. Index resumed downward move and a drop towards the textbook range of the aforementioned pattern - 14,700 pts area - cannot be ruled out. Zone ranging below 13,800 pts may offer some support. However, a break below would pave the way for a drop to 13,330 pts support - the lowest level since early March.

Source: xStation5

FRA40

In spite of Macron's win in presidential elections, an outcome that was by many seen as market-positive, French stock market index CAC40 (FRA40) is taking a heavy hit today. Index trades 2% lower at press time and is testing the neckline of a head and shoulders pattern below 6,400 pts area. If bears succeed in breaking below, downward move may accelerate. A textbook range of downside breakout from the aforementioned pattern hints at a possibility of dropping to as low as 6,030 pts. In order to make the outlook more bullish, buyers would have not only to defend the neckline but also push the price back above 38.2% retracement in 6,425 pts area.

Source: xStation5

UK100

Last but not least, let's take a look at UK FTSE 100 index (UK100). Index delivered a downside breakout from a recent short-term trading range and with today's drop a textbook range of the breakout was executed. However, declines did not stop there and index continued to move lower. 7,285 pts support zone, marked with 38.2% retracement of the upward move launch in early-March is a key near-term support to watch for now.

Source: xStation5