European equities yesterday saw dovish price action in all its major stock exchanges. This dovish price action was influenced by multiple factors such as uncertainties surrounding Brexit, court ruling against German Pharmaceutical giant Bayer which caused its stocks to decline over 9% resulting in pharma sector shares across European markets. In response to UK PM May’s request for the deadline extension, EU’s Juncker stated that the UK would need to participate in EU parliament elections as vacating UK’s seat before Brexit would cause a lot of problems in EU elections. Further, risk-averse cues from Asian market and caution ahead of US FOMC added to dovish investor sentiment resulting in a sharp decline in all major equity indices and shares in the European stock market.
EU Leaders Summit Eyed For Directional Cues
Frankfurt stock exchange also saw sharp declines with all major benchmark indices closing in red at the end of yesterday’s trading session. The German market is often viewed as an indicator of overall sentiment and market performance in European markets. This was clearly visible in yesterday’s price action in the German equity market. All three most followed indices DAX, MDAX & TECDAX were down by 1.57%, 1.24% and 0.96% on the day. As per data on the performance of sectoral indices from Frankfurt stock exchange, 15 out of 18 sectoral indices closed in red at end of the trading session with Pharma and healthcare sectoral index down by more than 4% on the day. Of the 778 stocks trading in Frankfurt stock exchange, 511 closed in red while 64 stocks closed unchanged at end of trading session.
Asian equities today saw positive price action as risk appetite improved following dovish Fed forward guidance update. Risk appetite seems high in the Asian market but the European market is likely to take on a cautious note as investors watch out for Bank of England’s MPC update on interest rate decision and forward guidance data and update. Also, there is the EU leaders summit which will see the participation of representatives from all 27 member nations as they are set to vote on UK’s request for article 50 deadline extensions. These factors are likely to result in subdued/rangebound price action ahead of updates from above-mentioned events as the outcome will decide directional bias for short to medium term price action. DAX futures in the international market was up by 0.40% ahead of European market hours and cues from Wall Street are dovish as major indices closed in red on dovish Fed update. This supports the possibility of rangebound price action in DAX index and German equities during European market hours.
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This article was originally posted on FX Empire
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