EU Stoxx 50 Index at Danger as COVID-19 Second Wave Fuels Volatility

EU Stoxx 50 Index, Covid-19 ‘Second Wave’, Volatility, VDAX – Speaking Factors:

• The haven-associated US Greenback and Japanese Yen prolonged their latest restoration as Covid-19 ‘second wave’ issues notably soured investor sentiment.
• EU Stoxx 50 index prone to additional losses after plunging over 4% in gentle of tightening coronavirus restrictions in a number of European nations.

Asia-Pacific Recap

Fairness markets continued to slip decrease throughout Asia-Pacific commerce as Covid-19 ‘second wave’ issues and the dearth of progress in Congressional stimulus negotiations notably soured traders’ sentiment.

The haven-associated US Greenback and Japanese Yen prolonged their respective climbs towards their main counterparts, whereas the risk-sensitive Australian Greenback plunged again beneath the 0.72 degree after Reserve Financial institution of Australia Deputy Governor Man Debelle flagged the potential provision of extra financial stimulus.

Gold and silver slid decrease alongside US 10-year Treasuries yields, as a resurgent Buck dragged on commodity costs.

Wanting forward, Federal Reserve Chair Jerome Powell’s semi-annual testimony earlier than the Senate Committee on Banking, Housing, and City Affairs headlines the financial docket alongside US present residence gross sales for July.

DailyFX Financial Calendar

Covid-19 Second Wave Sapping Danger Urge for food

The compelled reimposition of coronavirus restrictions in a number of European nations is threatening to upend the Euro-area’s nascent financial restoration and should outcome within the marked discounting of regional danger property, if the worrying surge in Covid-19 circumstances continues to go unchecked.

Regardless of the variety of infections considerably rising over the past 6 weeks in France, Germany, Spain and Italy, regional governments have desperately tried to keep away from tightening restrictions to nurture their respective economies again to well being.

Nevertheless, with the World Well being Group’s regional director for Europe – Hans Kluge – warning that “we’ve got a critical state of affairs unfolding [and] the September case numbers ought to function a wakeup name for all of us”, it appears virtually a foregone conclusion that economically devastating restrictions must be enforced.

Supply – Worldometer

In reality, native authorities within the Spanish capital of Madrid and the southern French metropolis of Good have moved to restrict gatherings and prohibit entry to parks and public areas to suppress the extremely infectious virus.

This noticeable tightening of restrictions seems to have coincided with the VDAX Index’s – the DAX 30 Volatility Index – surge away from the February breakaway hole on September 16 and is indicative of souring market sentiment.

With that in thoughts, deteriorating well being outcomes might proceed to stoke volatility and in flip considerably hamper the efficiency of regional danger property within the short-term.

VDAX Index Day by day Chart

VDAX index each day chart created utilizing TradingView

EU Stoxx 50 Index Day by day Chart – Ascending Triangle Break Ominous for Bulls

The European benchmark EU Stoxx 50 index’s 4.24% plunge via key help on the 61.8% Fibonacci (3243) may very well be indicative of a shift in total market sentiment, as value sits precariously atop the psychologically pivotal 3100 degree.

With value travelling beneath the 21-, 50- and 200-day shifting averages and the RSI drifting in direction of oversold situations, an extension of the autumn from the post-crisis excessive (3445) seems within the offing.

That being stated, sellers have been unable to drive value beneath the July low (3139), which suggests a near-term restoration again in direction of the 61.8% Fibonacci (3243) may very well be on the playing cards.

However, with the MACD indicator crossing beneath its impartial midpoint into damaging territory and above-average quantity confirming the latest draw back transfer, a continued push decrease seems the extra seemingly state of affairs.

To that finish, a each day shut beneath yesterday’s low (3137) would in all probability validate the draw back break of Ascending Triangle consolidation, and will see value fall again to help on the April excessive (3020).

EU Stoxx 50 index each day chart created utilizing TradingView

— Written by Daniel Moss, Analyst for DailyFX

Comply with me on Twitter @DanielGMoss