Two Eurozone Stock Markets To Watch

The technical outlook for Spanish and German stocks could hold the key to the medium-term macro and market direction for the eurozone.

While we remain broadly neutral towards Spanish stocks, which have been in a downtrend for the past five years, we believe a break above resistance at 8,400 for the IBEX index could signal an important change in investor sentiment towards Spain. On the other hand, a failure to break through would imply that investors’ fears over the country’s perilous macroeconomic position are still significant.

In similar fashion, German equities are signalling that the country’s economy could be facing a key inflection point, but we are not yet clear in what direction the next major move would be. Over the last month or so, the DAX has flirted with long-term resistance around 8,000, a break of which would send the index to record highs and represent a strong bullish signal for Germany’s medium-term growth and export story. However, the DAX may also be forming a triple-top formation pattern, which, if it plays, out would send it back towards 7,200 in the first instance, with plenty of potential for a move even lower. On balance we believe the story for a move lower is the most compelling, although we do not yet rule out the bullish scenario.

This Week’s Trivia Question

Last week’s question was fairly straightforward. We asked, which city’s police force recently added a Lamborghini to its patrol car fleet? Hint: it is a generally wealthy place currently recovering from a major property market-induced financial crisis a few years ago. And, which country was the previous one to add a Lamborghini to its police car fleet? The answer to the first part is of course Dubai, which has also just added a Ferrari to its police force. The answer to the second part is Italy. Unfortunately, the Lamborghini had to be written off after a collision.

Our question this week is as follows: which historical figure’s lock of hair was sold for EUR13,720 at an auction house in Vienna this week?

This blog is tagged to:
Sector: Country Risk, Financial Markets
Geography: Germany, Spain

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