The Euro Stoxx 50 Index has been in a strong bull run this year and is hovering near its all-time high. It was trading at €5,675, a few points below the record high of €5,696, and 25% above the lowest level this year.
Euro Stoxx 50 Index to react to ECB decision
The Euro Stoxx 50 Index continued its strong rally this month as demand for European stocks continued rising. This rally could continue this week as the European Central Bank (ECB) delivers its interest rate decision.
This decision will come a few hours after Eurostat publishes the latest European GDP data. Economists expect the report to show that the economy to maintain the minimal 0.1% expansion it managed in the three months through June this year.
Most importantly, the ECB will likely leave interest rates unchanged now that it has achieved the 2% inflation target. Also, forecasts show that the bloc’s economy will likely rebound in the next quarter now that private sector activity jumped to the highest level since May last year.
The Euro Stoxx 50 and other European indices do well when the ECB is either cutting interest rates or when it embraces a dovish tone.
Earnings season continues
The Stoxx 50 and Stoxx 600 indices have jumped recently as some key companies publishes their financial results. ASML, one of the biggest technology groups in Europe, published strong numbers as the AI demand remained at an elevated level.
Luxury goods companies like LVMH and Kering also released strong numbers. LVMH, in particular, resumed to growth in the third quarter after shedding assets in the previous two quarters. Kering also reported strong earnings as the Gucci revival gained steam.
Other Stoxx companies that published strong results this month were SAP, UniCredit, and Adidas. L’Oreal published relatively weak results and announced the purchase of Kering’s beauty business.
Many Stoxx 50 Index companies will publish their results this week. The most notable ones are Airbus, Deutsche Bank, Santander, TotalEnergies, AB InBev, Deutsche Boerse, Mercedes-Benz Group, Iberdrola, and Deutsche Telekom.
The Euro Stoxx 50 Index will also react to the upcoming big-tech earnings in the United States. Some of the top firms to watch will be Microsoft, Apple, and Amazon.
US and China trade deal
The other key catalyst for the Euro Stoxx 50 Index is the new US-China trade deal. After two days of intense negotiations, the two countries came up with the outline for a deal.
While details remain muted, the deal means that China will resume buying American soybeans and that it will not impose any restrictions on rare earth materials to the United States for at least for one year.
The deal removes one of the main headwinds facing the market this year and is a good thing for European stocks.
Additionally, the index will react to the upcoming Federal Reserve interest rate decision on Wednesday. Unlike the ECB, economists expect the Fed to deliver its second interest rate cut of the year.
Stoxx 50 Index analysis
The daily timeframe chart shows that the Stoxx 50 Index has been in a strong uptrend in the past few months, moving from a low of €4,542 in April to a record high of €5,696.
It has moved above the important resistance level at €5,568, its highest level on March 3.
The index remains above the 50-day and 100-day Exponential Moving Averages (EMA), while the Relative Strength Index and the MACD indicators have continued to rise.
Therefore, the most likely scenario is where the index continues rising, with the next key target being at €6,000. A move above that level will point to more gains in the near term.
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