Growth hit the DAX, RBNZ rate decision due later
DAX => The index falls towards 12700
PepsiCo => The stock trades 2.3% higher this month
NZD/USD => The kiwi falls to a 2-year low
Dax falls on energy fears, German ZEW economic sentiment next
The DAX closed 1.4% lower in the previous session as the Nord Stream 1 pipeline was switched off for annual maintenance work, but concerns grow over whether the Russian gas supply will e switched back on after the planned ten-day period. If not, Germany could be forced the start rationing gas supply to industry which would hurt demand for German assets such as the DAX. Attention will now turn to German ZEW economic sentiment, which is expected to show that economic confidence plunged lower still in July. While the data will be in focus, the energy situation will be the most important factor in play.
| Ger. ZEW economic sentiment | Expected: -38 (10) | Previous: -28 |
Where next for DAX?
The DAX has rebounded off the 2022 low of 12385 before running into resistance at the 20 sma at 13000.
Failure to retake this level combined with the bearish RSI keeps sellers optimistic about the further downside. Sellers need to break below 12630 the June low to test 12385, with a break below here creating a lower low. Should the price retake the 20 sma, the next hurdle can be seen at 13450, the June 21 high ahead of 13700, the 50 sma.
PepsiCo Q2 earnings
Pepsico has had an impressive run, beating earnings for the past 13 straight quarters, which sets a buoyant mood ahead of Q2 earnings today.
Heading into the earnings, the share price has been a relative winner in 2022, given its perceived pricing power and stable business. This earnings report will be watched closely for signs that consumers are starting to be more cautious with their spending, as noted by other consumer-facing companies.
Wall Street expects organic revenue will grow 7.5% in the April to June period and revenue to rise 1.5%. Core EPS is expected to come in at $1.74, up 1% from the same period last year, as margins are squeezed.
RBNZ rate decision
The risk-sensitive NZD/USD fell 1.2% yesterday, hitting a two-year low, after COVID cases in China rose, boosting fears of more lockdown restrictions and slower global growth.
Today the pair is falling further as attention turns to the RBNZ monetary policy decision, where the central bank is expected to hike rates by 50 basis points, taking the lending rate to 2.5%, a level was last seen in 2016. The RBNZ started hiking rates in October last year, which will mark the sixth straight hike. The central bank has set taming inflation as its number one priority. While it would prefer to avoid slowing growth too much, it would be unlikely to change course, even if this means tipping the economy into recession.
Support can be found at 0.61 (round number) and 0.60 (psychological level).
Resistance for the pair can be seen at 0.62 (June low) and 0.6250 (20 sma).
