European stocks make a shaky start to 2014

Despite strong manufacturing purchasing managers index (PMI) figures across the region, eurozone stocks have lost ground due to profit-taking.

On the new year’s first day of trading, the German equity benchmark was in positive territory shortly after the open. However, investors decided to take their profits off the table, as 2013 had been a great year for equities.

There is some life flowing back into the financial markets today, but volumes and liquidity remain low. It is possible we will not see activity return to normal until next week.

Looking at the fundamentals, the eurozone has had a good start to the year. Manufacturing PMI for the region in December was 52.7, which was unchanged on the month and in line with expectations, and figures for Germany, Spain and Italy all exceeded forecasts.

We are not expecting any more economic updates from the eurozone today, but the US will announce the initial jobless claims report at 1.30pm (London time). The consensus is for a drop of 4000. If the report exceeds this figure, it may have a positive impact on eurozone stocks.

The DAX is in an upward trend, and if it remains above the 9425 level we could see it head towards the 9600 mark. However, it if drops below 9425 the 9000 mark could be the next target.

Germany 30 chart

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