DE30: European stocks plunge as risk appetite disappears

Summary:

• Stocks in Europe sink as Trump threats China with new levies
• DAX (DE30) falls to its crucial support area, euro poised, dollar gathers pace
• Thyssenkrupp (TKA.DE) among largest losers due to trade war concerns

Several days ago European equity investors cheered when the DE30 war running close to its local peak placed nearby 13200 points. This move was predominantly steered by receding odds as far as the first ECB deposit rate increase is concerned which dragged the shared currency heavily down. Since then a lot has changed, and mounting trade risks have dented investors’ moods again pushing major indices much lower. As a result, the German stock market has dipped to its relevant support in the vicinity of 12550 points, the place which might be encouraging to enter a long, risks need to be taken into account though.

The DE30 plunged in the morning after further trade war escalation. Source: xStation5

Technically speaking the German stock market seems to be doomed to failure, albeit the second glance might offer some hopes for buyers too. Notice that the price has yet to break through a support at 12550 points - a critical one from a daily chart standpoint - hence a bullish reversal cannot be ruled out. Secondly, today’s session has begun with a tremendous bearish gap, and these kind of gaps are often closed. If so, one may look for a pick-up at least toward 12900 points, but a daily close below 12550 points might herald more pain for bulls.

Getting back to a trade war one needs to mention that China reiterated in the morning that it did not want a full-blown trade war, but it was afraid of one urging the US to stop damaging words and deeds. In terms of market reactions it’s worth singling out the US 10Y yield being trading lower in the morning as investors look for safe haven assets to park their cash. It’s been a bit supportive of the greenback so far while the common currency has been delicately poised, and the Japanese currency keeps rising the most. In turn, moods across Asian stock market did get sour at the end of the day with the Shanghai Composite plunging as much as 4.8%, the deepest daily declines since 2016.

Thyssenkrupp (TKA.DE) is among the worst stocks during Tuesday’s trading. Source: xStation5

Spirits across financial markets have already deteriorated appreciably, but should traders still batten down the hatches? One may suspect that until the overall outlook clarifies, any long-lived improvement in the most afflicted markets might be hard to achieve barring short-lived jumps caused by speculative investors. Why is Thyssenkrupp performing so bad? The group is one of the largest companies of the steel and mining sector in Europe, and if new tariffs are implemented the company may take the brunt of these measures once US imports of steel-made products slump.