Yesterday stock markets made some nice gains, with Dax30 and UK FTSE 100 increasing more than 1%. But, today we are seeing a reversal despite risk currencies continuing to climb higher. The German index DAX is down by -0.5%, while the FTSE 100 is down by -0.7% at the London close, with the ECB lower the inflation expectations.

ECB Inflation Expectations Survey

Earlier today the European Central Bank released the results of the Inflation Expectations Survey, which came lower. The downward revision in inflation expectations, particularly for the upcoming year, suggests a more subdued outlook for price pressures. This trend aligns with the ECB’s intentions to implement a rate decrease, expected to occur in the following week.

However, while reducing costs may be relatively straightforward, achieving sustainable inflation levels in line with the ECB’s target of 2% poses a more significant challenge. The shift in inflation expectations likely contributed to the bearish sentiment observed in European stocks, as reflected in the negative performance of major indices such as the German DAX , UK FTSE 100, French CAC, Italy MIB, and Spain IBEX. Despite an initial uptick during the early hours of the European session, stocks reversed course and ended the day lower, forming a bearish engulfing candle on the daily chart.

Dax Index Chart H4 – The retreat Stopped at the 50 SMA

European Stock Market Close:

• UK FTSE 100: -0.7%
• German DAX: -0.5%
• Stoxx 600: -0.6%
• French CAC: -0.9%
• Italy MIB: -0.2%
• Spain IBEX: -0.5%

Remarks by ECB Policymaker, Mario Centeno

German Index Dax 30 Live Chart