Long
IBEX 35: Turnaround and Chinese assets flooding threat
By Ion Jauregui - ActivTrades Analyst
The IBEX 35 starts today's trading day in an environment in which two major scenarios converge that will set the course of European markets. On the one hand, expectations regarding the statements of the President of the European Central Bank, Christine Lagarde, and the continuity of the corporate results season in the US, which influence global sentiment, stand out. On the other hand, Europe faces the risk of becoming the new destination of a massive flood of Chinese goods, which are exported at rock-bottom prices. This already happened in Spain a decade ago with the arrival of the large Chinese exporters, but this fear seems to be spreading to the rest of the EU countries.
Technical Analysis IBEX 35
The Spanish selective opens the session trying to consolidate the rebound registered in previous days. There is intense activity at technical levels near 12,320 and 12,555 points, key areas that represent Fibonacci retracements against recent highs. Volatility reigns in the short term, reminding us of the adage of the novice's fear of trading market closes. This caution is reinforced by the imminent intervention of Lagarde, whose stance on monetary policy could have a direct impact on risk perception and the performance of the euro against the dollar.
If we review the two strong trading zones of the IBEX at the moment we can see that the control point is located above 13,297 points near the highs and 12,055 points in the area of the last impulse. In 1 day position chart presents us with the range zone between 12,235 and 11,235 slightly above the support of 11,196 points with its middle zone at 11,600 zone that has contacted twice this week to bounce in the current direction. If we look at the movements of the last few days, the area has been clearly defined as support. Today the market seems to be generating a crossover of the 50-average over the 100-average which indicates the possible return towards 12,760 in the early hours of the morning. This could reinforce the idea of an IBEX regaining directionality if it reaches its previous trading zone highs.
Simultaneously, the start of the earnings season on Wall Street - with important presentations by financial giants - adds an extra layer of uncertainty. The results of large banks, together with the movements of indices such as the S&P 500, Nasdaq and Dow Jones, will act as a thermometer of global sentiment, also impacting the mood of investors in Europe.
Europe, the new destination for Chinese goods at rock-bottom prices
In a context in which the United States is tightening its tariff policy against China, the Asian giant is forced to seek alternative markets for its trade surplus. Europe, with characteristics similar in size and consumption patterns to the U.S. market, is now positioned as the next natural port for Chinese ships loaded with cheap goods. This redirection follows the imposition of trade barriers that have sapped Chinese exports to the U.S. and forced Beijing to resort to extremely aggressive pricing to offload its excess capacity.
Signs of a deflationary environment in China-reflected in declines in the Consumer Price Index and the Producer Price Index-indicate that Chinese manufacturers are willing to cut margins further. The result is a flood of products at rock-bottom prices which, while it may immediately benefit the European consumer's pocketbook, also poses a serious risk to the competitiveness of local industry. The consequence could be an erosion of market shares and greater internal tensions, in a scenario in which the European Union is forced to act to protect strategic sectors.
Integrated perspective and risk management
On the one hand, optimism in the IBEX 35 is fueled by expectations for a less restrictive monetary policy, backed by Lagarde's statements and the dynamism of global markets which, despite corrections in Wall Street and Asia, invite us to consider new opportunities. Today's session becomes a real battlefield where risk management is fundamental, as “headlines move fast and facts define them”.
On the other hand, the threat of an avalanche of Chinese goods represents a structural change that could alter the balance of the European market in the medium term. While lower prices increase consumer purchasing power, the massive influx of low-cost products poses serious challenges for local manufacturers, which could see their competitive capacity threatened. Brussels' response could take the form of safeguard measures and new tariffs to curb the entry of these goods, with the risk of generating additional friction in the relationship with China.
Conclusion
The IBEX 35 is at a crossroads where opportunities from a potentially more benign monetary environment and the uncertainty of the global trade impact converge. Today's trading day requires investors to adopt a strategy based on constant observation of macroeconomic data, statements from monetary policymakers and developments in international markets. In short, while the stock market moves on headlines and facts, the structural risk of a flood of Chinese assets adds a complex nuance that requires meticulous risk management and alertness to abrupt changes in the economic and trade scenario.
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The information provided does not constitute investment research. The material has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and such should be considered a marketing communication.
All information has been prepared by ActivTrades ("AT"). The information does not contain a record of AT's prices, or an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information.
Any material provided does not have regard to the specific investment objective and financial situation of any person who may receive it. Past performance is not reliable indicator of future performance. AT provides an execution-only service. Consequently, any person acting on the information provided does so at their own risk.
The IBEX 35 starts today's trading day in an environment in which two major scenarios converge that will set the course of European markets. On the one hand, expectations regarding the statements of the President of the European Central Bank, Christine Lagarde, and the continuity of the corporate results season in the US, which influence global sentiment, stand out. On the other hand, Europe faces the risk of becoming the new destination of a massive flood of Chinese goods, which are exported at rock-bottom prices. This already happened in Spain a decade ago with the arrival of the large Chinese exporters, but this fear seems to be spreading to the rest of the EU countries.
Technical Analysis IBEX 35
The Spanish selective opens the session trying to consolidate the rebound registered in previous days. There is intense activity at technical levels near 12,320 and 12,555 points, key areas that represent Fibonacci retracements against recent highs. Volatility reigns in the short term, reminding us of the adage of the novice's fear of trading market closes. This caution is reinforced by the imminent intervention of Lagarde, whose stance on monetary policy could have a direct impact on risk perception and the performance of the euro against the dollar.
If we review the two strong trading zones of the IBEX at the moment we can see that the control point is located above 13,297 points near the highs and 12,055 points in the area of the last impulse. In 1 day position chart presents us with the range zone between 12,235 and 11,235 slightly above the support of 11,196 points with its middle zone at 11,600 zone that has contacted twice this week to bounce in the current direction. If we look at the movements of the last few days, the area has been clearly defined as support. Today the market seems to be generating a crossover of the 50-average over the 100-average which indicates the possible return towards 12,760 in the early hours of the morning. This could reinforce the idea of an IBEX regaining directionality if it reaches its previous trading zone highs.
Simultaneously, the start of the earnings season on Wall Street - with important presentations by financial giants - adds an extra layer of uncertainty. The results of large banks, together with the movements of indices such as the S&P 500, Nasdaq and Dow Jones, will act as a thermometer of global sentiment, also impacting the mood of investors in Europe.
Europe, the new destination for Chinese goods at rock-bottom prices
In a context in which the United States is tightening its tariff policy against China, the Asian giant is forced to seek alternative markets for its trade surplus. Europe, with characteristics similar in size and consumption patterns to the U.S. market, is now positioned as the next natural port for Chinese ships loaded with cheap goods. This redirection follows the imposition of trade barriers that have sapped Chinese exports to the U.S. and forced Beijing to resort to extremely aggressive pricing to offload its excess capacity.
Signs of a deflationary environment in China-reflected in declines in the Consumer Price Index and the Producer Price Index-indicate that Chinese manufacturers are willing to cut margins further. The result is a flood of products at rock-bottom prices which, while it may immediately benefit the European consumer's pocketbook, also poses a serious risk to the competitiveness of local industry. The consequence could be an erosion of market shares and greater internal tensions, in a scenario in which the European Union is forced to act to protect strategic sectors.
Integrated perspective and risk management
On the one hand, optimism in the IBEX 35 is fueled by expectations for a less restrictive monetary policy, backed by Lagarde's statements and the dynamism of global markets which, despite corrections in Wall Street and Asia, invite us to consider new opportunities. Today's session becomes a real battlefield where risk management is fundamental, as “headlines move fast and facts define them”.
On the other hand, the threat of an avalanche of Chinese goods represents a structural change that could alter the balance of the European market in the medium term. While lower prices increase consumer purchasing power, the massive influx of low-cost products poses serious challenges for local manufacturers, which could see their competitive capacity threatened. Brussels' response could take the form of safeguard measures and new tariffs to curb the entry of these goods, with the risk of generating additional friction in the relationship with China.
Conclusion
The IBEX 35 is at a crossroads where opportunities from a potentially more benign monetary environment and the uncertainty of the global trade impact converge. Today's trading day requires investors to adopt a strategy based on constant observation of macroeconomic data, statements from monetary policymakers and developments in international markets. In short, while the stock market moves on headlines and facts, the structural risk of a flood of Chinese assets adds a complex nuance that requires meticulous risk management and alertness to abrupt changes in the economic and trade scenario.
*******************************************************************************************
The information provided does not constitute investment research. The material has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and such should be considered a marketing communication.
All information has been prepared by ActivTrades ("AT"). The information does not contain a record of AT's prices, or an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information.
Any material provided does not have regard to the specific investment objective and financial situation of any person who may receive it. Past performance is not reliable indicator of future performance. AT provides an execution-only service. Consequently, any person acting on the information provided does so at their own risk.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.