The Stoxx 600 index will be in the spotlight this week as the European Central Bank (ECB) delivers its second interest rate decision of the year. The index, which tracks the biggest European companies, surged to a record high of €497, which was about 30% above its lowest point in December 2022.
ECB interest rate decision aheadThe biggest forex and stock market news this week will be the latest decision by the ECB, which is set for Thursday.
Economists polled by Reuters expect that the bank will leave rates unchanged at 4.0% as it has done in the past few months.
However, there is a likelihood that the bank will point to a rate cut in the coming months since the European economy is slowing.
Key countries like Germany have already moved into a recession. Others like France are staring at a technical recession as liquidity dries.
At the same time, European inflation has moved down at a faster pace than expected. A report published last showed that the bloc’s inflation dropped from its pandemic peak of 10.6% to 2.6% and is moving in the right direction.
Like in most developed countries, the key challenge for the bloc is that services inflation has remained stubbornly high. Services inflation remained sticky at 3.4%.
ECB and Federal Reserve decisions have an impact on the Euro Stoxx 600 index constituent companies. In most cases, these indices tend to do well when the two banks have a dovish tone.
The Euro Stoxx index will also react to several important earnings from key component companies. Some of the most notable ones will be Bayer, Thales, Deutsche Post, Pirelli, Teleperformance, Merck, and Vivendi.
Most constituent companies of the Stoxx 600 index have jumped sharply this year. The most notable gainers are companies like Rheinmetall, Leonardo, Indivior, Daimler Truck, and Lonza Group.
Euro Stoxx 600 index forecast
Stoxx 600 chart by TradingView
The Stoxx 600 index has been in a strong upward trend in the past few months. It has crossed the important resistance point at €495.57, its highest swing on January 3rd. The index has invalidated the double-top pattern that has been forming recently.
It has also moved above the 50-week and 100-week Exponential Moving Averages (EMA). Further, the Relative Strength Index (RSI) and the MACD have all pointed upwards. Therefore, the outlook for the index is bullish, with the next point to watch being at €525.
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