European Shares

European shares continue to fall, alongside US futures, as market sentiment remains weighed down after the latest US CPI release. Investors waiting for a positive surprise were left disappointed yesterday following another inflation print showing a fresh 40-year record high at 9.1%. This number isn’t well perceived at all by the market as it paves the way for more monetary tightening from the Fed, especially as the pressure brought by rising prices isn’t showing any sign of a peak or slowdown to come. Traders are now bracing for a complicated summer for riskier assets, even now pricing a 1% rate hike for the upcoming FOMC meeting at the end of the month, while all eyes are already on next year’s likely recession. The US-Dollar is now hovering towards a two-year high while treasury yields edged higher, which doesn’t provide the best set-up for stock markets today as it highlights “fear trading” moves from investors. More volatility may be spotted later in the afternoon with the US initial jobless claims and PPI release, even if no significant changes are expected on these fronts. Most sectors are in the red today, with utilities and real estate shares registering the worst European performances so far. However, the STOXX-50 index is still trading above its major support zone between 3,380 pts and 3,425 pts, as bull traders continue to defend this area.

Pierre Veyret– Technical analyst, ActivTrades

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