EU comments weigh on equities

The European Commission’s outlook for the eurozone has soured investor confidence in the region.

Stocks in mainland Europe are underperforming compared to their UK equivalents. This round of selling was brought on after Brussels predicted that the region would have a high jobless rate for the next two years. The current rate of unemployment in the eurozone is 12.2% and the Commission foresees this falling only to 11.8% by 2015; still stubbornly high.

While the eurozone emerged from recession in the second quarter of this year, the Commission has now revised its original growth forecast for 2014 from 1.2% down to 1.1%. This could leave the door open for further forecast trims.

The Spanish equity benchmark is off 1.25% after the number of people out of work jumped by 87,000 in October; much higher than 31,000 analysts had predicted. 

News from the eurozone isn’t all bad, however, as Sky Deutschland is up 5.7% after posting a 57% rise in earnings before tax. This compares well with the rest of the German index which is trading just below the 9000 mark, 0.4% lower on the day.

The weekly chart on the DAX tends to suggest that a correction may be in the offing. Having reached all-time highs over the past week, the index is finding it difficult to keep a toehold above the 9000 level. With price action trading some 10% above the 50-week moving average, a mild correction would not necessarily upset the overall medium-term trend. The doji candle from last week, along with the overbought signal on the 10-week RSI, indicates that traders should keep a close eye on any weekly close below the 8950 level. 

DAX weekly chart

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