Risk aversion sends stocks lower and boosts the USD
GDAX => The index tumbles towards 13900
Coca-Cola => The stock trades 10% higher this year
GBP/USD => The pair falls below 1.28
DAX falls, German IFO business sentiment due
The DAX closed 0.15% lower across the previous week after tumbling 2.5% on Friday amid rising fears over a recession in Europe owing to the cost-of-living crisis and a much more aggressive Federal Reserve. These fears overshadowed stronger than expected business activity in Germany in April. Today the index is falling as investors digest Macron’s win in the French elections and the latest developments in the Russian war, which has entered its third month, which no sign of a cease-fire in sight. Looking ahead, the release of the latest German IFO business sentiment will be in focus. Expectations are for morale to decline as inflation rises amid the fallout from the Russian war.
| Ger. composite PMI
Ger. IFO business sentiment |
Actual: 54.5% (0.6)
Expected: 89.1 (1.7) |
Previous: 55.1
Previous: 90.8 |
Where next for DAX?
The DAX is extending its decline from 14950 reached in late March. The index trades below its 100 sma and has fallen below its 50 sma. The RSI supports further downside. Sellers will look for a break below 13010, last week’s low, in order to extend the selloff towards 13580, the March 16 low, and 13280, the March 11 low. Any recovery in the price will need to recapture the 50 sma at 14250 ahead of falling trendline support at 14540.
Coca-Cola Q1 earnings preview
Coca-Cola is due to report Q1 earnings as the share price has increased 25% over the last year and 10% the year to date. KO is expected to report a 5.5% increase in Q1 adjusted EPS to $0.58 on revenue of $9.91 billion. A rise in the number of social events, restaurants back at full-scale operations, and people getting out and about is expected to boost Q1 beverages sales. That said, it is worth keeping in mind that Omicron could have slowed sales growth at the start of the year. Coca-Cola also said that it halted operations in Russia, which would impact international sales. Costs are expected to rise, but demand is also likely to remain strong.
GBP/USD falls on recession fears
GBP/USD declined 1.5% across last week amid growing expectations for a more hawkish Federal Reserve and as the UK economy showed signs of strain. Consumer confidence, retail sales, and activity in the service sector slowed, raising concerns over the outlook for growth. BoE’s Andrew Bailey warned about the risks of rising inflation and the likelihood of a recession. Fears that if the BoE raised interest rates again, it might tip the UK economy into recession dragged on the pound. Meanwhile, the USD rallied on the prospect of a faster pace to hiking interest rates, shrugging off slower than forecast growth. There is no high impacting UK or US data due to be released today.
| UK retail sales MoM March
UK Services PMI |
Actual: -1.4% (1.1%)
Actual: 58.3 (4.3) |
Previous: -0.3%
Previous: 62.6 |
Support can be found at 1.28 (round number) and 1.2770 (November ’19 low).
Resistance for the pair can be seen at 1.29 (round number) and 1.2980 (April ’19 low).
