European indices dip as investors eye Ukraine peace talks and the Jackson Hole symposium

Caution grips European markets before key geopolitical talks

European indices closed mostly lower overnight as investors adopted a cautious stance ahead of the latest Ukraine peace talks between President Trump and European leaders, as well as the upcoming Jackson Hole symposium.

Progress and challenges in Ukraine peace talks

The Ukraine peace talks held in the United States (US), which concluded early this morning Sydney time, appear to have made progress, though specific details are limited. European leaders, including those from Germany, France, the United Kingdom (UK), Italy, Finland, and the North Atlantic Treaty Organization (NATO), emphasised unity and the need for robust security guarantees for Ukraine, explicitly stating that no territorial concessions were discussed.

The US has committed to supporting security guarantees, potentially modelled on NATO’s Article 5, to ensure Ukraine’s long-term defence against future aggression. A bilateral meeting between Presidents Zelensky and Putin is planned, to be followed by a trilateral meeting including President Trump, though the location and timing are yet to be finalised.

While optimism surrounds the talks - which, if successful, would likely lead to lower energy prices and planning around a rebuilding phase in Ukraine - concerns about Russia’s commitment to lasting peace are bound to linger.

UK: Inflation

Date: Tuesday, 20 August at 4.00pm AEST

For June, annual headline inflation climbed to 3.6%, a seven-month high, up from 3.4% in May. Core inflation unexpectedly lifted to 3.7%, exceeding forecasts of 3.5%. The uptick was driven by consumer price index (CPI) goods inflation rising to 2.4% (from 2.0%), while CPI services inflation held firm at 4.7%.

For July, markets expect annual headline inflation to rise to 3.7%, below the Bank of England’s (BoE) revised third quarter (Q3) 2025 peak forecast, up from 3.5% previously. Core inflation is expected to edge up to 3.8%, reflecting persistent price pressures.

Presuming these forecasts are correct, and following the BoE’s hawkish 25 basis point (bp) rate cut last week, it is likely that the BoE will stay on hold in September at 4.0%, before a 25 bp rate cut to 3.75% in December.

UK core inflation chart

FTSE technical analysis

From its record high of 8908 in March, the FTSE 100 fell 1364 points to a low of 7544 in early April, before completing its remarkable recovery which resulted in a fresh record high of 9222 last Friday.

The 9222 high was accompanied by increasing signs of bearish divergence on the relative strength index (RSI) indicator. Bearish RSI divergence occurs when the price makes a new high, but the RSI fails to do so, warning that the trend is maturing and that a correction may be looming.

With this in mind, a break below the support at 9000 would likely see a deeper pullback initially towards support at 8900 coming from the highs of March and June, with a break there then opening the way for a deeper decline towards support at 8750 - 8700.

Conversely, if the FTSE holds above 9000 and then breaks above resistance at 9200 - 9220, it could see the FTSE head towards the next upside target at 9350 - 9400.

FTSE daily chart

DAX technical analysis

In mid-May, the Germany 40 (DAX) burst above the double top at 23,746 from March this year, before hitting a record high of 24,639 in mid-July.

Since then, the DAX has spent the past four weeks consolidating its gains mostly between 24,500 and 23,900, excluding its brief dip to 23,380 to test the support coming from the double top earlier this year around the 23,450 area.

From here, a rally above resistance at 24,550 - 24,650 would signal the uptrend has resumed, opening the way for a push higher towards 25,000.

If the resistance at 24,550 - 24,650 holds firm and is followed by a sustained break of support around the 23,380 area, it would open the way for a deeper decline back to the June low at 23,051.

DAX daily chart

• _{Source: TradingView. The figures stated are as of 19 August 2025. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.}