Dax Prices Beaten Down by Technical Headwinds
Despite bullish momentum sparked by the bullish breakout in Dax prices, futures have struggled to hold gains and price action is firmly below major technical support. As the hourly chart shows, Dax futures retraced below yesterday’s peak of 15500 and are now trading down around 1.64% for the day (at the time of writing).
Headwinds Still Affecting European Stock Markets
The FTSE 100, German Dax and French CAC 40 all slipped on Wednesday as investors weighed some healthy growth and profit signals against worries that inflation trends could take an unfavorable turn. Analysts said a number of forecast-beating results from blue chip companies could be positive for European stocks, including Publicis and Lanxess, whose first-quarter core profit is expected to rise.
But trade tensions with China pushed down energy and technology stocks as oil slipped 6.6 percent on rising oil supplies and concerns that global economic growth might slow. Those stocks are also weighed down by expectations that the Federal Reserve will raise interest rates more aggressively than previously expected, a risk that could drive a further drop in crude oil prices.
Europe’s Purchasing Managers Index showed business growth weakened in September, largely due to supply chain problems and inflationary pressures. The IHS Markit composite PMI reading slipped to 56.2 from 59.0, but a recent survey of companies in the region still showed growth at a nine-month high.
Tech Stocks Are Slaughtered as New National Security Rules Limit Exports of Machine Learning, Quantum Computing and Artificial Intelligence Products
Investors pounced on tech companies Monday after the Trump administration proposed new national security regulations that could limit exports of high-tech products in fields such as quantum computing, machine learning and artificial intelligence. Shares in the largest technology companies fell, and retailers and energy companies retreated as well as oil tumbling 6.6 percent.
In the face of growing global trade risks, investors are increasingly playing it safe and looking for opportunities in beaten-down equities that can deliver a bounce. Old school market pros use the term “buying low and selling high” to describe a strategy that allows them to profit from weaker prices without taking on too much risk.
The tech sector is a prime example of this concept, with analysts urging investors to consider buying shares in firms that are still gaining traction on Wall Street even though they have lost their previous all-time highs. Two beaten-down stocks that analysts are tipping for a rebound are Hyve, which is up 19% after receiving a preliminary and conditional approach from Providence Equity LLP to buy its shares for 105 pence per share, and Icahn-owned Techopedia, which has a ‘Strong Buy’ consensus rating from research firm TipRanks.