{"id":58318,"date":"2023-09-08T01:19:19","date_gmt":"2023-09-08T05:19:19","guid":{"rendered":"https:\/\/ifintechworld.com\/news\/stocks-face-risk-of-further-falls\/"},"modified":"2023-09-08T01:19:22","modified_gmt":"2023-09-08T05:19:22","slug":"stocks-face-risk-of-further-falls","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=58318","title":{"rendered":"Stocks Face Risk Of Further Falls"},"content":{"rendered":"
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By Fawad Razaqzada<\/em><\/p>\n

At the time of writing in Thursday mid-morning European trade, the German DAX was among several European markets to turn slightly positive on the session, recovering from a weak start.<\/em><\/p>\n

However, sentiment remained cagey with US index futures still showing losses across the board, with Nasdaq futures being off about 0.5%. Overnight saw Chinese markets fall quite noticeably, and the selling has continued in the futures market.<\/span><\/p>\n

Thus, the slight recovery in European indices can be attributed to an oversold technical bounce, meaning we could see the selling pressure resume once again. There is a risk that things could get worse before stock prices become attractive again in these tough economic times.<\/p>\n

So, What\u2019s Driving the Markets Right Now?<\/strong><\/h2>\n

There appear to be two major sources of concern for investors right now: Weak growth in the eurozone and China, and interest rates remaining higher for longer in the US.<\/span><\/p>\n

On the latter front, we saw bond yields pressed higher in the aftermath of a strong ISM PMI report on Wednesday, which also sent the dollar sharply higher across the board and pressurized gold.<\/p>\n

Those moves have reversed somewhat, with yields dipping slightly and XAUUSD rising as a result. But it remains to be seen whether there will be any momentum behind the recovery in bond and gold prices.<\/p>\n

With government bonds offering high yields, many investors are finding it difficult to justify holding growth stocks with stretched valuations on Wall Street.<\/p>\n

Yet, given the past strength of the stock market this year, despite surging interest rates and other concerns, investors are also not in a panic mode as this phase of weakness could also turn out to be temporary.<\/p>\n

The higher-for-longer narrative got another boost as crude oil surged higher this week after Saudi extended its supply cuts through to the end of the year.<\/p>\n

Some concerns are that rising oil prices could give rise to another round of inflation and keep bond yields underpinned as a result. That in turn could hurt growth stocks and weigh on tech-heavy indices like the Nasdaq and Germany\u2019s DAX.<\/p>\n

Stocks Weighed Down by Soft Data From Eurozone and China<\/strong><\/h2>\n

Another day, another set of disappointing data from the Eurozone caused the EUR\/USD to drop near 1.0700, thus losing its entire gains made so far this year.<\/p>\n

This time, German industrial production came in at -0.8% month-over-month versus -0.4% expected and -1.5% last, adding to a growing list of data misses of late for the Eurozone\u2019s largest economy.<\/p>\n

From the Eurozone as a whole, the news was not good either as GDP was unexpectedly revised to show a modest 0.1% quarter-over-quarter \u2018growth\u2019 compared to initial estimates of 0.3%. The day before, we saw German factory orders come in at -11.7% for July, more than losing the +7.6% gain in the previous month.<\/p>\n

The outlook for Germany’s industrial output doesn\u2019t look great, given that last week the manufacturing PMI fell to 39.1 in August, marking the second-lowest reading since May 2020 and highlighting the extent of the weakness in the sector.<\/p>\n

In a clear sign of a struggling consumer, Eurozone retail sales have either fallen or stagnated in each of the past six months. After falling 0.3% in June, sales fell by an additional 0.2% in July, as we found out yesterday, once again disappointing expectations.<\/p>\n

Meanwhile, China’s trade data was not as bad as expected, although with exports declining 8.8% and imports falling 7.3% year over year, adding to their sharp falls from the month before, unsurprisingly this failed to offer much support to Asian markets overnight.<\/p>\n

China\u2019s services PMI slumped to its slowest pace of growth in eight months, according to the private Caixin survey released the day before.<\/p>\n

Against a backdrop of weakening Eurozone and Chinese data, the DAX outlook doesn\u2019t look too great right now.<\/p>\n

DAX: Cracks Starting to Appear for German Index<\/strong><\/h2>\n

The German DAX index has managed to bounce off its earlier lows, but at the time of writing it was testing resistance at 15795, a previous support level. The bears will need to hold their ground here if they want to see lower levels.<\/p>\n

With the bullish trend line broken, the path of least resistance appears to be to the downside. So, watch out below. A move below support at 15700 could pave the way for the July low at 15450. And if we break that level decisively, then we could be in for a volatile period in the markets.<\/p>\n

Given that several short-term support levels have already broken down, a bit of a bounce back from current levels would not be enough to appease the bulls.<\/p>\n

As mentioned, Thursday morning\u2019s bounce could easily fade given the growing macro risks. So, patience is the key word if you are bullish on the German index.<\/p>\n

A clear move back above the key 16,000 resistance level is needed to tip the balance back in the bulls\u2019 favor, although we would prefer a healthy correction before entertaining the long side again.<\/p>\n

Originally published on MoneyShow.com<\/em><\/p>\n

Editor’s Note:<\/strong> The summary bullets for this article were chosen by Seeking Alpha editors.<\/p>\n

Editor’s Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.<\/p>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

By Fawad Razaqzada At the time of writing in Thursday mid-morning European trade, the German DAX was among several European markets to turn slightly positive on the session, recovering from a weak start. However, sentiment remained cagey with US index futures still showing losses across the board, with Nasdaq futures being off about 0.5%. 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