Respite for the beleaguered EU Stocks 50

Like most of the equity indices in Europe the EU Stocks 50 has bounced following a dreadful previous week.

Mario Draghi
Source: Bloomberg

The tail end of last week saw the EU Stocks 50 move into oversold territory and on an intraday basis dip below the 200-day moving average. Looking at a twelve-month chart of the index shows it is once again bouncing off the very strong bullish trend.

Sentiment so far today has very much been of the ‘buy on dip’ variety in all of the major European equity markets, as traders are conscious that we are now in the US reporting season and markets have had some of the froth taken off the top.

Last week saw Alcoa kick off the US reporting season with better-than-expected results along with Friday’s Wells Fargo Q2 figures. It is too early to tell but if this form is replicated throughout the week then a swift return to previous momentum could be in order.

Tonight will see the European Central Bank president Mario Draghi speaking and it is anticipated that another effort to talk the euro down will ensue. To date, his rhetoric has become increasingly less successful.

The wild card in the equation is that history tells us the equity index of the winning team in the World Cup tends to go on a bit of a run, so many in the eurozone will be keeping their fingers crossed that Germany maintains this tradition.

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