Euro Stoxx 50 and IBEX 35 partially retrace Tuesday’s losses, Eurozone inflation data in sight

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Euro Stoxx 50, IBEX 35, ECB, Federal Reserve, Inflation – Talking Points

  • Euro Stoxx 50 gains 0.53%, but finds resistance to a key pivot area
  • IBEX 35 ignores 4% rise in Spanish consumer prices and gains 1.25%
  • US Treasury Yields Cool Slightly, Boosting Sentiment in Global Markets

European stocks rebounded on Wednesday as market participants grappled with the recent rise in US Treasury yields. The massive bond sell-off saw global investors shrink their holdings of tech stocks, with tech-heavy indexes being the hardest hit on Tuesday. Sentiment in global markets has deteriorated recently as investors had to digest soaring commodity prices, the Evergrande situation and now a potential US default.

On Tuesday, Federal Reserve Chairman Jerome Powell said in testimony to Congress that inflation “could stay high for a while, before moderating.” The comments sparked a sharp rally in US Treasury yields, with the 10-year reaching a high of 1.57%. Stocks have struggled in recent times as market participants fear that high inflation could push central banks to become more hawkish to curb price increases. At a forum hosted by the European Central Bank (ECB), ECB President Christine Lagarde said the central bank would not react prematurely to temporary spikes in inflation.

Euro Stoxx 50 1 hour chart

Chart created with TradingView

The Euro Stoxx 50 struggled to retrace Tuesday’s losses in Wednesday’s session, rising only 0.53%. After Tuesday’s sharp decline, the Euro Stoxx 50 found strong resistance at the bottom of a key pivot area near 4,100. With modest relative strength and increasing uncertainty around the world, prices may continue to turn as market participants negotiate security after security. The short-term direction may also depend heavily on economic data, as investors increasingly fear rising prices across the continent. Eurozone inflation data will be released on Friday, with analysts expecting a reading of 3.3%.

IBEX 35 card 1 hour

Euro Stoxx 50 & IBEX 35 partially retrace Tuesday's losses, Eurozone inflation data in sight

Chart created with TradingView

The IBEX 35 rose 1.25% on Wednesday, partially retrace substantial loss observed during the rout on Tuesday. While continental data is expected to drop on Friday, Spanish inflation data released on Wednesday showed domestic prices rose 4% in September, which may have kept the index from rising further. Several times during Wednesday’s session, the index found resistance to the 50-hour moving average, with no significant breakouts occurring. The IBEX 35 circled around a key pivot area near 8,840 before finally closing above that key area.

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— Written by Brendan Fagan, intern

Contact Brendan, use the comments section below or @BrendanFaganFX on Twitter

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