Stocks have fallen sharply in Europe with the DAX taking a plunge this morning and US index futures also weakening ahead of Apple’s earnings results tonight. The sell-off is a combination of renewed US-China trade concerns, pre-Fed caution, European earnings disappointment (e.g. Lufthansa) and ongoing worries about the health of the Eurozone economy all weighing on sentiment, particularly on mainland European markets.
Investors are wondering whether the Fed’s expected 25 basis rate cut would be enough to keep the markets supported given that some people have been calling for a deeper rate cut at this meeting. This comes on the back of disappointment that Mario Draghi, the European Central Bank President, was not as dovish as the market had expected last week.
In addition, US President Donald Trump has raised concerns the US-China trade talks could be stalling again. In a tweet, he said that the “problem with China [is that] they just don't come through" and "always changes the deal to their benefit." This doesn’t bode well for the US-China trade talks which will resume tomorrow.
But could Apple come to the rescue? As my colleague Ken Odeluga will write in his preview later, “a solid Q2 sets Apple up for a turnaround year, especially with worst-case trade risks fading.” Sales are forecast to be flat at $53.35bn, which would be an improvement on the 5% fall of Q2. EPS is seen 8.9% lower on the year at $2.10. If Apple beats, then we could see the indices stage a bit of a recovery tonight.
Today’s sell-off has pushed the DAX down to the bullish trend line around 12140ish. This level needs to hold for the bulls to maintain control. However, a potential closing break below here could pave the way for further losses in the days ahead.
Source: Trading View and City Index. Please note this product may not be available to trade in all regions.