Will European markets continue to
rise following UK-EU agreement?

European markets extend winning streak

European equity markets commenced the new week with a third consecutive session of gains, bolstered by strong corporate earnings and a landmark agreement between the United Kingdom (UK) and the European Union (EU).

This agreement aims to reset relations between the UK and the EU five years after Brexit. By addressing crucial issues such as trade, energy, defence security, travel, and fisheries. The agreement offers optimism for more stable and cooperative future interactions between the two parties.

Perhaps dampening some enthusiasm ahead of today's session, President Trump's two-hour call overnight with Russian President Putin to discuss a ceasefire has failed to deliver a concrete deal. However, Russia and Ukraine have agreed to start another round of ceasefire talks.

Economic data in focus

Looking ahead, key economic data releases this week include:

• Flash UK and EU purchasing managers' indices (PMI) on Thursday, 22 May 2025
• UK inflation report for April on Wednesday, 21 May 2025. 

The headline measure of inflation is expected to rise to 3.3% year-on-year (YoY) in April from 2.6% YoY, and the core measure is expected to rise to 3.6% YoY from 3.4% prior. This outcome is expected to see the Bank of England (BoE) keep interest rates on hold until it delivers another 25 basis point (bp) rate cut in September.

On the trade front, United States (US) President Trump indicated towards the end of last week that the US and EU have initiated 'serious trade talks' as the 9 July deadline to end the reciprocal tariff pause approaches.

FTSE 100 technical analysis

From its record high of 8908, the FTSE 100 fell 1364 points to a low of 7544 in early April, before its impressive rebound, which at last night's high took it to within 209 points or approximately 2.3% below its record 8908 high of March this year.

A high conviction view of what comes next in the medium term remains elusive. However, in the short term, and given the overbought nature of the rally, the FTSE 100 appears due for some consolidation.

Dip buyers will likely be operating near the 200-day moving average (MA) at 8369, and provided it holds, they will be looking for a retest and break of the 8908 record high.

FTSE 100 daily chart

Germany 40 technical analysis

The Germany 40 (DAX 40) broke above the double top at 23,746 and hit a fresh record high of 23,935 overnight. Chasing it from a buying perspective appears unwise at these levels. Equally, standing in its way seems imprudent given the appeal of the 25,000 milestone.

As such, a sideline position with a preference towards buying a corrective pullback appears prudent.

Germany 40 daily chart

• _{Source: TradingView. The figures stated are as of 20 May 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.}