European indices erased early losses on Tuesday following another set of dovish comments from ECB president Lagarde. In the morning indices from the Old Continent took a hit as pandemic-induced sell-off in Chinese equities rattled global markets, adding to lingering concerns over the war in Ukraine. Also, weak economic data from Germany weighed on market sentiment. Nevertheless Lagarde once again managed to calm the markets by saying that the economy should still grow robustly in 2022.
Key remarks from her speech:
- ECB expects inflation to decrease progressively despite sanctions and settled at levels around our 2% inflation target in 2024,
- Lagarde admitted that uncertainty around the outlook has increased significantly
- If the medium-term inflation outlook shifts and financing conditions become incompatible with further progress toward our 2% target, the central bank is prepared to revise net purchases schedule in terms of size.
- If the incoming data support expectation that the medium-term inflation outlook will not weaken even after the end of net purchases, we will conclude net purchases in the third quarter
- War would lower growth and raise inflation via higher energy and commodity prices
DE30 bounced off the upward trendline and is currently approaching local resistance at 14097 pts. Should a break higher occur, the next target for buyers is located at 14408 pts and is marked with 38.2% Fibonacci retracement of the upward wave launched in November 2020. On the other hand, if sellers manage to halt advances, the nearest support to watch lies at 13825 pts. Source: xStation5
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