European Stock Markets: Predictions between Earnings and Potential Interest Rate Cuts

Outlook for the Second Half of the Year

Looking ahead to the second half of the year, the arrival of the second-quarter earnings season and the potential decrease in interest rates scheduled for September continue to paint a positive picture.
Inflation in many Eurozone countries seems to be gradually approaching the 2% target set by the European Central Bank, paving the way for a possible rate cut.
Despite this, the EU50 index remains on a downward trend, nearing the support level of 4,800 points and approaching the 200-day moving average.
Market participants are closely watching how the European index price reacts to these technical levels, considering the upcoming earnings season and the ECB rate decision as crucial events to gauge the growth prospects of European markets.

Expectations for the Earnings Season

The second half of 2024 earnings season is expected to be positive for both Europe and the United States.
In Europe, analysts predict a continued growth in earnings, supported by a strong economic recovery and decreasing inflation.
Companies in the STOXX Europe 50 are poised to benefit from this economic stability and improving macroeconomic conditions.
According to the latest report by Morgan Stanley on the second half of 2024, equities and fixed-income securities are expected to find support in the latter half of 2024 due to steady growth, declining inflation, and interest rate cuts.

Similarly, in the United States, earnings growth for the second half of 2024 is forecasted around 8.6%, with a particularly strong performance expected in the technology and transportation sectors.

BCE’s Actions in July – A Look at Interest Rate Trends

The European Central Bank (ECB) appears inclined to pause rate hikes in July, with a possible delay in rate cuts until after September.
This decision comes amid contrasting circumstances: recent data have shown a decline in inflation in Germany, France, and Spain.
However, the European futures market currently seems rather distracted by other variables influencing European bond yields, such as increased political risk, notably stemming from the new instabilities related to the French government.

Technical Analysis of the Euro Stoxx 50 Index

The Euro Stoxx 50, representing the major companies in the Eurozone, has displayed technical strength signals in recent weeks.
The key support level is around 4,800 points, with the primary resistance at approximately 5,000 points.
The index is slowly approaching its 200-day moving average, indicating a potential bottoming point.
Nonetheless, monitoring economic developments and ECB decisions will be critical to confirm this trend.