European technology stocks fell sharply on Friday as investors sold growth stocks amid concerns about an aggressive Federal Reserve tightening and mounting tensions in Ukraine.
The U.S. central bank signaled interest rate hikes starting in March while tensions between Russia and the U.S. over former Soviet country Ukraine also sent investors looking for safer assets.
Germany’s DAX index has advanced again above 15,300 points as investors looked forward to the U.K. and European central bank meetings amid worries over policy tightening, soaring inflation, and geopolitical tensions.
Results from many big companies provided a solid start to fourth-quarter earnings, and investors’ focus will remain on the fourth-quarter earnings season because many companies have yet to publish their reports.
Corporate earnings keep the market in a positive mood for now, but the rising inflation, covid pandemic, and the world’s supply chains crisis create nervousness.
According to preliminary estimates, German inflation is set to stay close to 5% in January, which confirms that inflation had spread more than previously expected and that the risk of persistent inflation has risen.
Germany also continues to fight with high numbers of new daily infections, leading to staffing issues across industries; investors have seen that the virus still can disrupt business.
European Central Bank will have a monetary policy meeting on Thursday, and ECB is widely anticipated to maintain its current monetary policy unchanged.
President Christine Lagarde explicitly said that a rate hike this year is very unlikely, and the European Central Bank would maintain its accommodative policy for as long as necessary.
Despite the fact what Christine Lagarde said, Deutsche Bank expects a 25 basis point rate liftoff in December 2022. Deutsche Bank reported:
European Central Bank will probably hike rates by 25 basis points as early as December 2022 and by June 2023 at the latest, compared to a previous expectation of 10 bps in December 2023. The deposit rate, currently at -0.50%, will be hiked 25 bps per quarter until reaching 0.50% in September 2023.
The degree of ECB’s concern about the economic situation will significantly influence stock markets in the near term.
15,000 points represent strong support
Data source: tradingview.com DAX index continues to trade above 15,300 points, and if the price jumps above 15,500 points, the next target could be at 15,700 points.
On the other side, if the price falls below strong support that stands at 15,000 points, it would be a strong “sell” signal, and the next target could be around 14,500 points.
SummaryEuropean Central Bank will have a monetary policy meeting on Thursday, and ECB is widely anticipated to maintain its current monetary policy unchanged. Investors will also continue to pay close attention to the fourth-quarter earnings reports to determine if the rising inflation, covid pandemic, and the world’s supply chains will crimp profit margins.
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