Summary:

  • European stock markets are rising as the ECB decision looms
  • German DAX (DE30 on xStatino5) makes a big breakout
  • Two possible scenarios during the Draghi’s press conference

Even as there are some simmering concerns with regard to the European Central Bank decision, stock markets have been unimpressed thus far. Moreover, the upbeat performance seen there along with the rising shared currency (the second best in the G10 basket) suggests that investors are at odds with what ECB’s Chairman could deliver.

link do file download linkThe DE30 has smashed a key resistance level and is approaching another one. Source: xStation5

Technically, the DE30 has taken a huge step towards returning to a bull market. An impressive candlestick was drawn yesterday and was sparked by not concrete revelations. What’s more, the euro remained quite little changed. Being a few hours before the ECB’s decision it’s worth considering two possible scenarios. The first one assumes a bullish tone which could see the DE30 losing steam just ahead of a subsequent resistance placed at 12320 points. If Draghi does not mention the euro’s strength and inflation forecasts are cut just slightly (as yesterday’s leaks suggested), it could be seen as a warning sing for bulls on the German index bring the DE30 possibly towards 12165 points or even lower.

On the flip side, the DE30 could gain a foothold amid quite dovish references included in the statement. It appears that the second scenario might be more probable given what has happened on the euro since the latest meeting. Thus, remarks pointing to October as the date when the QE decision is unlikely to be made (let us point out that yesterday leaks said so) along with sharper cuts in inflation forecasts could send a signal toward market participants that the euro’s pass-through effect on price dynamics is very relevant. That scenario could make the euro declining quite noticeably which could cause a durable breakout of 12320 points seen in the DE30.

link do file download linkStock investors seem to be not afraid of the ECB’s decision. Source: Bloomberg

Taking a look at the Asian session there were quite limited swings. The largest loses turned out to be the Shanghai Composite (CHNComp) which slid 0.6%. On top of that, moves were much less impressive. Namely, the NIKKEI (JAP225) closed higher 0.2%, the Hang Seng (HKComp) moved down 0.3% while the Australian ASX200 (AUS200) was unchanged even as the data from Australia disappointed.

In Europe, moods seem to be much rosier with the DE30 leading the gains increasing 0.6%. The CAC40 (FRA40) is edging up 0.35%, the EuroStoxx50 (EU50) is going up 0.4% and the FTSE100 (UK100) is hovering just a notch above the breakeven line.

Company news

Having looked into the breakdown of the DE30 one could notice RWE (RWE.DE) being the best stock and rising as much as 3%. Rises may be attributed to the report that the company is going to return its gas plant for flexible winter operations from November 1 to March 31. The gas plant has been temporarily closed since at least start of this year.

Besides, BMW (BMW.DE) is rising more or less 1.5% after the BMW X7 concept leak ahead of the motor show in Frankfurt when the official debut was planned.