FTSE, DAX are optimistic about easing the blockades in China

News and analysis FTSE, DAX

• European indices rise as optimism over China’s blockade restores short-term risk appetite
• The key FTSE analyzed technical levels
• DAX a symmetrical triangle that threatens to break up

Risk sentiment is easing along with the blockade in China

Shanghai reported three consecutive days without new cases of coronavirus, suggesting that strict blockades could soon be lifted or somewhat eased. Earlier this week, Shanghai officials looked closely at 1street June is a good time to return to normal life, however, one would imagine that the situation could change if there is a sudden rise in new cases where China pursues a zero-covid strategy.

It’s been a pretty tough few weeks for stocks, especially for stocks Nasdaq and S & P500, causing markets to welcome positive news, which has led to higher sentiment and overall index prices. European indices are higher, as this morning the FTSE 100 and the German DAX index are rising.

Looking at the FTSE index, all sectors except the pharmaceutical sector have advanced as key materials and financial performance lead at the London AM session. Rising inflation and optimism around China’s renewed demand for commodities have supported growth in oil and metals (silver, gold and copper). Notable mentions include Imperial Brands, Fresnillo and Prudential as the biggest engines, while Unilever, Ocado and Next PLC are some of the stocks that are trading lower this morning.

FTSE winners against the losers this morning

Source: Refinitiv

FTSE 100 Technical Analysis

The FTSE 100 index completed a strong turn after deviating from the 7220 level. Energy reserves won oilRecent growth while mining stocks will benefit from a bullish turn in metal prices.

7565 looks like a short-term resistance, followed by a previous high of 7615, ahead of an annual high of 7687. Support comes at 7400 and then 7285.

Daily chart of the FTSE 100 index

Source: TradingView, prepared Richard Snow

In the current global macro environment of fuzzy inflation, aggressive interest rate cycles and dollar growth; stocks remain in a difficult position. Despite FTSE’s strong relative performance due to its high weight in energy and mining stocks, UK stocks may simply rise to attractive levels before we witness a further decline in line with “sell rally” sentiment. Declining growth forecasts for the UK also pose a risk of declining after March GDP data showed a monthly decline.

DAX technical analysis

DAX shows a very interesting image of a symmetrical triangle that seems to be formed for a breakout from above. To avoid a false scenario, any break above the resistance of the downward trend line can re-test the same trend line before advancing to 14600. Support is at 13910, which is likely to witness price trading inside the triangle in the event of a breakout failure.

Daily chart of continuous DAX futures

Source: TradingView, prepared Richard Snow

— Written by Richard Snow for DailyFX.com

Contact and follow Richard on Twitter: @RichardSnowFX