European Stocks Drop as Yields Tick Higher, EU Stocks, DAX


EU Stocks 50, DAX Analysis:

  • Uptick in US -2 year yield has EU equities trading lower – in lead up to Fed meeting next week
  • Euro Stoxx Index weighed down by tech, real estate and financial sectors
  • DAX, EU Stocks technical analysis and key near-term levels to watch

European stocks followed the Asian market lower in early trade on Tuesday, as higher, short to medium term yields in the US and Germany reinforced the market expectation of a ‘hawkish’ Fed and multiple rate hikes in 2022.

The big mover was the US 2 year (most responsive to near term rate expectations) as it surpassed the 1% mark for the first time since the start of the pandemic. In fact, the US 2 year yield last traded around the 1% handle in February of 2020, just before the start of the global lockdowns. The German 10 year bund trades slightly lower this morning around -0.03 but largely continues on its upward path towards zero.

US Bond Yields (2 year. 10 year and 20 year)

Source: Tradingview, prepared by Richard Snow

Elsewhere, in the Euro Stoxx 50 Index, sectors such as tech, real estate and financials trade in the red this morning with the one unsurprising standout being the energy sector, trading up by nearly 0.5% on the day.

Euro Stoxx 50 Sector Summary

European Stocks Drop as Yields Tick Higher, EU Stocks, DAX

Source: Refinitiv, prepared by Richard Snow

EU Stocks 50 Technical Analysis

The broad-based equity sell-off thus far looks rather tame for the time being. There has already been a sizeable pullback from the daily low as it failed to break and hold below the zone of support (4245 – 4255) however, the daily close will ultimately reveal whether a bounce or break is most favored.

Support: (4245 – 4255), 4195, 4135

Resistance: 4322

Euro Stocks 50 Daily Chart

European Stocks Drop as Yields Tick Higher, EU Stocks, DAX

Source: IG, prepared by Richard Snow

Germany 40 (DAX) Technical Analysis

The DAX witnessed a bounce off the 200 day SMA earlier today and currently tests the 15770 zone of support. Failure to break and hold below the 15770 level and 200 SMA, may suggest that the sell-off is a temporary response to the uptick in rates and represents an opportunity to rejoin the bull trend as opposed to a deep pullback.

Support: 200 day SMA, 15770, 15430

Resistance: 16032, 16300

Germany 40(DAX) Daily Chart

European Stocks Drop as Yields Tick Higher, EU Stocks, DAX

Source: IG, prepared by Richard Snow

— Written by Richard Snow for DailyFX.com

Contact and follow Richard on Twitter: @RichardSnowFX





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