- In European markets, the two standouts, for opposites, were Italy that outperformed due to ‘positive’ progress on a budget agreement with the EU while for the UK, Brexit continued to create just about enough angst in government concerns to send the FTSE lower that was also weighed by some pretty shocking services data.
- In France, the CAC 40 continues to be troubled by political challenges and public unrest, despite Macron caving in under the pressures and backing down on the gas tax.
European markets are still feeling the heat following a switch up in sentient surrounding global growth prospects and global trade relations. At the same time, the political environment is as uncertain as ever, on both mainland Europe and Britain. While there may have been some clarity found today over legalities over Article 50, it still does not bode well for UK politics and the future of the Conservative party.
Closing percentage changes for European indexes
- UK FTSE 100 -1.44%
- German DAX -1.19%
- French CAC -1.36%
- Italy MIB -0.1%
- Spain IBEX -0.55%
Germany stocks were in the doldrums again on Wednesday with the Technology, Insurance and Software sectors weighing on Frankfurt’s major index. The DAX dropped 1.19% with the worst of the index coming from Wirecard AG which dropped 2.67% or by 3.700 points to trade at 134.850 by the end of the session. Infineon Technologies AG NA O.N.fell 2.39% or 0.450 points to end at 18.355 and Fresenius Medical Care KGAA ST dropped 2.18% or 1.600 points to 71.720. Helping to support the index was Heidelbergcement AG O.N. which added 0.46% or 0.260 points to trade at 57.360 and Bayer AG NA also rose 0.43% or by 0.28 points to finish the day at 65.61. RWE AG ST O.N. added 0.41% or 0.080 points to 19.390 by the close.
Brexit draws most attention
The main news came from London on Wednesday. UK multinationals shares were weighed by a strong pound while the FTSE 100 was down 1.1% at 6,943.23 as Brexit angst continues to linger despite some positives have come of recent legal advice which could mean that Brexit may not happen at all. As for shares, housebuilders rallied, with Berkeley, Barratt Developments, Persimmon and Taylor Wimpey the top four performing stocks on the FTSE 100 as the prospect of a second referendum became more real.
UK P May’s the government was defeated on two contempt of Parliament motions for not publishing the full legal advice on the withdrawal agreement. Backbenchers approved an amendment which gives them a greater say if the Brexit proposal is defeated in next week’s meaningful vote.
Should parliament not support any deal before the Article 50 window expires, the chances of leaving without a deal are greatly reduced. It also raises the prospect of the UK not leaving at all should the public vote against it this time around in a second referendum. JPMorgan upped its odds on the possibility of Britain remaining in the EU to 40% from 20% and said it now sees the chances of a no-deal Brexit at 10%, reduced from 20%, and an orderly Brexit at 50% now versus 60% before. Comments from pro-Brexit International Trade Secretary Liam Fox also provided a boost, as he told a parliamentary committee that no Brexit was now a possibility.
As for the performers, Berkeley Group Holdings (The) (BKG) 3,485.00p 7.89%. Barratt Developments (BDEV) 479.90p 6.46% and Persimmon (PSN) 1,978.46p 6.14%. The non-performers were Ashtead Group (AHT) 1,683.50p -5.21%. Reckitt Benckiser Group (RB.) 6,401.00p -3.32%. Hargreaves Lansdown (HL.) 1,914.00p -3.28%
UK Services data shocker
Activity in the UK’s services sector for November was reported to have softened to its weakest level for more than two years in November. Confidence levels also slumped due to Brexit angst. IHS Markit/CIPS UK services purchasing managers’ index dropped from October’s reading of 52.2 to 50.4, the lowest since July 2016. A reading below 50 indicates a contraction – A number of services sector companies said Brexit had prompted clients to delay investment decision, and there had been a slowdown in new business growth. There has now been a slowdown in new business growth for three consecutive months. Confidence for the year ahead showed the weakest degree of positive sentiment since July 2016.
Technical levels
FTSE:
The FTSE is negative on the charts with long bodied candlesticks that point to further downside as the bears remain in control will little in the way coming in from the bulls at this stage of the week, so far. The price is testing the barrier s of the daily Bollinger bands and the prior November lows, which could bring in some support. However, daily RSI has room to go until overbought conditions might encourage a buy-in or paring of shorts on profit taking and the next target is the S1 pivot point located at 6888. A break there opens YTD lows of 6850 and then S2 at 6820 and S3 at 6715. On the flipside, the pivot point is located at 6993 and above the daily high of 6977. 7016 was a prior low with the confluence of the 50-4hr SMA which guards the 21-4hr SMA at 7022. R1 is located at 7061 and the 2018 range 23.6% level is located at 7100. The 38.2% Fibo of 2018’s range at 7262 is the primary objective thereafter.
DAX:
We have a bearish bias on the charts still with the index consolidating below the gap after yesterday’s drop. The index is in the lower end of the Bollinger bands and below the descending 21-D SMA now located at 11344. A break of the recent lows of 11141 leaves scope for a run to the 11007 level as the 19th Nov low. 10860 comes as the 2016 Aug-Nov level as the critical downside target. Bulls need to get back above the 50-D SMA at 11559 ahead of the 23.6% Fibo target at 11617.
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