Trading Desk – Trading the European Market Rally

Trading Desk – Trading the European Market Rally

Equities 6 minutes to read
Saxo Be Invested
APAC Research

Europe Indices
YTD performance (%): DAX Index (turquoise), IBEX Index (blue), Euro Stoxx 50 (orange), CAC 40 (purple), S&P 500 (yellow) and Nasdaq 100 (red), Source: Bloomberg


What's happening in Europe?

Germany is poised to transition from fiscal conservatism, with plans to invest €500 billion in infrastructure alongside a substantial increase in defence spending. This will be facilitated by amending the constitution to exempt defence expenditures exceeding 1% of GDP from the debt brake. Such strategic investment is anticipated to bolster industrial sectors, including Siemens Energy, Heidelberg Materials, and Rheinmetall, which have already experienced significant rallies. 

Conversely, the United States is scaling back fiscal expenditures through the DOGE initiative, with efforts underway to implement Federal government cuts and target a reduction of the fiscal deficit to 3% of GDP. These fundamental shifts in fiscal policy are contributing to divergent market performances between Europe and the US, with European equities increasingly attracting investor interest. For a comprehensive analysis, please review the articles “Make Europe Great Again?” and "Is U.S. Exceptionalism Fading?” authored by our Chief Investment Strategist Charu Chanana. 

Performance YTD relative to US

Year-to-date, European markets have experienced strong gains, with Germany's DAX leading the way at +15.45%, showcasing robust performance. France's CAC 40 has also seen solid growth at +9.90%. On the contrary, S&P 500 has fallen 4.26% this year, while Nasdaq 100 has lost 6.87% within the same period. 

excel perf

How can you participate?

DAX broke out of the ascending channel and trading at all-time highs, first short-term resistance at the last highs of 23,480, trading above this level would likely see further buying pressure. On the downside, the support level looks to be around 22,000 which is near the upper channel and also the 50-day EMA which seems to be holding as support. 

DAX

CAC 40 looks to still be trading within a range. The first big resistance level would be at 8,250 where price has reversed for the 3rd time. If price can break out of the 8,250 level, we could see further upside from here. On the downside, support levels look to be around 7,900/ 7,950, breaking these levels could see further selling pressure. 

CAC40

IBEX Spain trading at all-time highs and broke out of the ascending channel with the first immediate support at around 13,000. Longer-term support level looks to be around 12,000  where price seems to be bouncing off the 50-week EMA. 

ibex

Euro Stoxx 50 also traded to all-time highs and broke out of the resistance level roughly at 5,120. This level should hold as support if price does return to this level. This is also close to the 250 EMA where price has found support and bounced off previously. 

 stox50

How to express your views?

  • Index CFDs - DAX (GER40.I), EU STOXX 50 (EU50.I), France CAC 40 (FRA40.I), Germany Mid-Cap 50 (GER50 MID.I), Spain IBEX (SPAIN35.I)
  • Index Futures – DAX Index futures (FDXH5), EURO STOXX 50 Index (FESXH5), CAC 40 Index (FCEH5)
  • Index ETFs – Amundi Dax III (Acc) UCITS ETF (DAXX), Global X DAX Germany ETF (DAX), Amundi Stoxx Europe 600 UCITS ETF (MEUD), Vanguard FTSE Europe ETF (VGK), iShares STOXX Europe 600 UCITS ETF (EDM6), iShares MSCI France ETF (EWQ), Amundi MSCI France UCITS ETF (CF1) 

Quarterly Outlook

01 /

  • Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    Quarterly Outlook

    Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    John J. Hardy

    Global Head of Macro Strategy

  • Equity Outlook: The ride just got rougher

    Quarterly Outlook

    Equity Outlook: The ride just got rougher

    Charu Chanana

    Chief Investment Strategist

  • China Outlook: The choice between retaliation or de-escalation

    Quarterly Outlook

    China Outlook: The choice between retaliation or de-escalation

    Charu Chanana

    Chief Investment Strategist

  • Commodity Outlook: A bumpy road ahead calls for diversification

    Quarterly Outlook

    Commodity Outlook: A bumpy road ahead calls for diversification

    Ole Hansen

    Head of Commodity Strategy

  • FX outlook: Tariffs drive USD strength, until...?

    Quarterly Outlook

    FX outlook: Tariffs drive USD strength, until...?

    John J. Hardy

    Global Head of Macro Strategy

  • Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Quarterly Outlook

    Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Althea Spinozzi

    Head of Fixed Income Strategy

  • Equity Outlook: Will lower rates lift all boats in equities?

    Quarterly Outlook

    Equity Outlook: Will lower rates lift all boats in equities?

    Peter Garnry

    Chief Investment Strategist

    After a period of historically high equity index concentration driven by the 'Magnificent Seven' sto...
  • Commodity Outlook: Gold and silver continue to shine bright

    Quarterly Outlook

    Commodity Outlook: Gold and silver continue to shine bright

    Ole Hansen

    Head of Commodity Strategy

  • Macro Outlook: The US rate cut cycle has begun

    Quarterly Outlook

    Macro Outlook: The US rate cut cycle has begun

    Peter Garnry

    Chief Investment Strategist

    The Fed started the US rate cut cycle in Q3 and in this macro outlook we will explore how the rate c...
  • FX Outlook: USD in limbo amid political and policy jitters

    Quarterly Outlook

    FX Outlook: USD in limbo amid political and policy jitters

    Charu Chanana

    Chief Investment Strategist

    As we enter the final quarter of 2024, currency markets are set for heightened turbulence due to US ...

Disclaimer

The Saxo Group entities each provide execution-only service, and access to analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Inspiration Disclaimer and (v) Notices applying to Trade Inspiration, Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular, no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Trading in financial instruments carries risk, and may not be suitable for you. Past performance is not indicative of future performance. Please read our disclaimers:
Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
Full disclaimer (https://www.home.saxo/en-sg/legal/disclaimer/saxo-disclaimer)

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Markets or its affiliates.

Saxo Markets
88 Market Street
CapitaSpring #31-01
Singapore 048948

Contact Saxo

Select region

Singapore
Singapore

Saxo Capital Markets Pte Ltd ('Saxo Markets') is a company authorised and regulated by the Monetary Authority of Singapore (MAS) [Co. Reg. No.: 200601141M ] and is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms & Risk Warning to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products such as Margin FX products may result in your losses exceeding your initial deposits. Saxo Markets does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Markets does not take into account an individual’s needs, objectives or financial situation.

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-sg/about-us/awards.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website are not intended for residents of the United States, Malaysia and Japan. Please click here to view our full disclaimer.

This advertisement has not been reviewed by the Monetary Authority of Singapore.

Apple and the Apple logo are trademarks of Apple Inc, registered in the US and other countries and regions. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.