IBEX 35, Euro Stoxx 50, Delta COVID-19 Variant Talking Points: Despite declines in other European benchmarks, the Euro Stoxx 50 retains key technical levels. As Spain implements new travel restrictions for the United Kingdom, the IBEX 35 falls below the critical 9,000 mark. As governments begin to take precautions against the delta version of COVID-19, fears are growing.
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Concerns over the spread of the Delta variant of COVID-19 have caused European equity indices to take a breather in the second half of June. Despite widespread vaccine distribution, European officials remain apprehensive of the mounting threat. Following allegations that the Delta strain is spreading the United Kingdom, Portugal and Malta put restrictions on unvaccinated UK passengers this week. After reaching a new post-pandemic high of 9,310 on June 15, the Spanish IBEX 35 has fallen below 9,000 in recent sessions. After a dismal Monday, when the IBEX 35 fell over 2%, the index closed Tuesday with a 0.02 percent gain. Investors in the Spanish index will be looking for a short-term test of the 9,000 psychological level to evaluate emotion and momentum after the index quickly dropped from its yearly highs. Should virus-related headwinds persist, the index may aim to the 0.786 percent Fibonacci level at 8,672 for support, having already gone below the ascending February trendline and the 50-day Simple Moving Average (SMA). TradingView was used to build the IBEX 35 Daily ChartChart. The Euro Stoxx 50, unlike the IBEX 35, has maintained above key technical milestones, signaling a more positive outlook. The European index has shrugged off inflation and virus fears, and is now only 1.4 percent below its all-time highs. The large-cap index has done well, as many of its constituents have benefited from Europe’s economic openness and reflationary attitude. The 50-day SMA and the ascending trendline originating from the March 2020 epidemic low provide support for the Euro Stoxx 50 index, which has been treading water in recent weeks. A retest of all-time highs above 4,100 if ECB dovishness continues and virus-related headwinds fade. TradingView was used to build the Euro Stoxx 50 Daily ChartChart. European equities may see more difficulties in the near future. Major benchmarks may continue to reflect the shifting landscape as countries pursue diverse pathways when it comes to immunization. Growing fears about the Delta form have already resulted in new travel restrictions across Europe, with more likely to follow as the virus spreads across the continent. Additional lockdowns and restrictions may jeopardize efforts to reopen major cities and tourism destinations. Despite rising vaccination rates and a highly dovish ECB, European indexes may continue to sway. —- Brendan Fagan is a DailyFX intern who wrote this piece. Brendan can be reached via the comments area below or on Twitter at @BrendanFaganFX.
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