Author: Deepashree MC

Yesterday,

• European markets declined for a third consecutive session. Investors braced the risk of a hung parliament leading to a prolonged potential political uncertainty in France after Sunday’s surprise election result, in which left-wing New Popular Front won the largest number of seats in the final round of voting. Although the alliance failed to secure an absolute majority, future legislation would be harder to pass with an expected coalition government.
• Sectoral performance had been broadly negative in the past week. Oil & Gas (-238bps) led the decline, followed by Mining (-175bps) and Chemicals (-135bps). Travel and Leisure (+108bps), Health Care (+113bps), and Telecommunication (+71bps) were the bright spots during the week.
• Most sectors are trading above their 100-DMA. Chemical, Autos, Travel and Leisure, and Oil & Gas are testing support at their 200-DMA, trading 1.1%, 47bps, 68bps, and 1.5% above the long-term moving average, respectively. Food and Beverage stocks are lagging, trading below all their key moving averages and facing stiff resistance from their declining 10-DMA.
• The Stoxx 600 declined 90bps on higher volume. The index breached its 10- and 21-DMA (514.8) intraday. Immediate support is at its 100-DMA (510.5; -0.2%). We continue to recommend that investors remain selective while adding positions. Trim positions in stocks that have breached their logical levels of support.
• Among notable stock moves, shares of BP (BP.GB; BP/:LN), the British oil and gas giant, fell more than 4% after the company announced an expected impairment of $2B in Q2 due to lower refining margins. Shares of Novo Nordisk (NON.DK; NOVOB:DC) declined ~2% after an analysis indicated that its rival Eli Lilly’s treatment led to greater weight loss.
• Among major indices, France’s CAC 40 slipped more than 1.5% on higher volume, breaching key support levels of its 21-DMA (7,626.8) and its 10-DMA (7,585.3). Next support is at its June 28 closing price (7,479.4; -0.4%). Germany’s DAX 30 was down more than 1.3%, closing below its converging 10- and 21-DMA (18,262.7) on higher volume. Next support is at its 100-DMA (18,159.3; -0.4%). The U.K.’s FTSE 100 closed 66bps lower. The index breached its short-term moving averages on higher volume.
• The Stoxx 600 and the Netherlands recorded their sixth distribution day each, while Belgium logged in its second. Denmark was shifted to a Downtrend from an Uptrend Under Pressure, while the Netherlands was shifted to an Uptrend Under Pressure from a Confirmed Uptrend as both indices breached all their key support levels.
• Finland and Sweden were shifted back to a Downtrend as both indices breached Day 1 low of their Rally Attempt.
• All the 16 indices we track closed in the red. Five markets are in an Uptrend Under Pressure, eight in a Rally Attempt, and three in a Downtrend. The average distribution day count stood at 4.6.
• Actionable names in the Focus List include ASML Holding (ASML.NL; ASML:NA), Be Semiconductor Industries (BESI.NL; BESI:NA), Vat Group (VACN.CH; VACN:SW), Relx (REL.GB; REL:LN), Technogym (TGYM.IT; TGYM:IM), Siegfried ‘R’ (SFZN.CH; SFZN:SW), Saab B (SAAB.SE; SAABB:SS), and Hermes International (RMS.FR; RMS:FP).EXSA.DE)