This Week: EU50 could move 100 index points

Since posting its highest-ever intraday price of 5142.3 in early April, the EU50 has been stuck between the 4900 – 5100 range, with prices forming a double top.

This sideways channel is confirmed by the convergence of its 21-day and 50-day simple moving averages (SMAs), with these technical indicators exerting a strong gravitational pull and keeping EU50 in the middle of its 2-month sideways range.

Over the longer term, this benchmark index for European stocks is projected to rise another 12% to eventually cross above 5600 within the next 12 months. 

However, for this week, there are enough events on either side of the Atlantic that could move the EU50 by 100 index points within the range.

Events Watchlist:
 

• Wednesday, May 29: Germany May consumer price index (CPI)

Economists predict the CPI to have risen 2.4% year-on-year (May 2024 vs. May 2023), and 0.2% month-on-month (May 2024 vs. April 2024).

Higher-than-expected inflation out of the Eurozone’s largest economy could sow doubt within the European Central Bank (ECB) with its intended rate cuts may drag this EU50 lower; and vice versa.
 

• Friday, May 31: Eurozone May consumer price index (CPI)

Economists predict the CPI saw faster growth year-on-year for both headline (2.5%) and core CPIs (2.8%).

The month-on-month CPI likely eased from 0.6% to 0.2%.

While Germany’s CPI earlier in the week tends to trigger the bigger reaction in the EU50, the Eurozone’s CPI will be used to firm up expectations for ECB rate cuts.
 

• Friday, May 31: US April PCE Deflators

Economists predict that the numbers from the Fed’s preferred inflation gauge remained unchanged from March’s prints, underscoring proof that US inflation remains stubborn.

Despite the data being about the US economy, it’s important enough to rock global financial markets, including the EU50.

Over the past one year, the US PCE Deflators have triggered upside moves as much as 0.5%, or declines of 0.3% for the EU50 stock index.

Here’s a comprehensive list of other key economic data and events due this week:
 

Monday, May 27

• CNH: China April industrial profits
   
• GER40 index: Germany May IFO business climate
   
• US, UK markets closed
   

Tuesday, May 28

• AUD: Australia retail sales
   
• US30 index: US May consumer confidence; speeches by Cleveland Fed President Loretta Mester, Minneapolis Fed President Neel Kashkari
   

Wednesday, May 29

• EUR: Germany May CPI
   
• ZAR: South Africa election
   
• US400 index: Fed Beige Book; New York Fed President John Williams speech
   

Thursday, May 30

• TWN index: Taiwan 1Q GDP
   
• USDZAR: South African Reserve Bank rate decision
   
• EU50 index: Eurozone May economic confidence; April unemployment rate
   
• US2000 index: US weekly initial jobless claims; 1Q GDP (second estimate); speeches by New York Fed President John Williams and Dallas Fed President Lorie Logan
   

Friday, May 31

• CN50 index: China May PMIs
   
• JPY: Japan May Tokyo CPI; April jobless rate, industrial production, retail sales
   
• EUR: Eurozone May CPI
   
• CAD: Canada 1Q GDP
   
• USDInd: US April PCE Deflators, consumer income and spending; speech by Atlanta Fed President Raphael Bostic