Euro Stoxx 50 Futures Index Pares ECB Interest Rate Hike Inspired Gains And Edges Lower Below €41300.00s

• European Stoxx 50 futures index witnessed some selling in the mid-Asian trading session and edged lower below €41300.00s level
• European Central Bank hikes rates despite market mayhem, pledges support if needed
• BMW lifts margin forecast, expecting higher deliveries as it ramps up the electric rollout
• Adyen (AMS: ADYEN) heads the list of top gainers this week, while Vonovia (Berlin: VNAN) headed a list of top losers

The Pan-European Stoxx 50 Index futures edged slightly lower on Friday during the second part of the Tokyo session extending its overnight rebound from the vicinity of $4151.6 level in the aftermath of the latest ECB Interest Rate Decision. As per press time, the Euro Stoxx 50 index is down 0.29%/ at $4139.4 after rising by 1.43%/58.5 points to close at 4151.6 after the European Central Bank raised its benchmark rate by 50bps despite market mayhem and pledged support if needed.

The European Central Bank on Thursday announced a further rate hike of 50 basis points, signalling it is ready to supply liquidity to banks if needed, amid recent turmoil in the banking sector that saw European stock markets fall sharply on Wednesday, with banking stocks deep in negative territory.

"Inflation is projected to remain too high for too long. Therefore, the Governing Council today decided to increase the three key ECB interest rates by 50 basis points," the ECB said in a statement. One basis point is equal to 0.01%. This latest move brings the bank's main rate to 3%. It was in negative territory before July last year.

"The Governing Council is monitoring current market tensions closely and stands ready to respond as necessary to preserve price stability and financial stability in the euro area. The euro area banking sector is resilient, with strong capital and liquidity positions," the central bank said in the same statement. Market participants had questioned whether President Christine Lagarde would still go ahead with the move, given recent shocks in the banking sector, which had rattled global financial markets. Credit Suisse, one of the world's 'systemically important' banks, saw its shares tumble on Tuesday after it revealed that it had identified "certain material weaknesses in their internal control over financial reporting" for 2021 and 2022. This came days after the collapse of two other regional banks in the U.S.: Silicon Valley Bank and Signature Bank. Both were casualties of poor management in the face of eight interest rate hikes by the Federal Reserve in the last 12 months.

Following this week's banking sector turmoil, European officials were keen to stress that the situation in Europe differs from that in the United States. Overall, there is less deposit concentration — SVB was an essential lender to the tech and healthcare sectors — deposit flows seem stable. European banks have been well-capitalized since the regulatory transformation that followed the global financial crisis of 2008.

That said, the ECB on Thursday also revised its inflation expectations. It now sees headline inflation averaging 5.3% this year, followed by 2.9% in 2024. In December, the bank had projected a 6.3% inflation figure for 2023 and a 3.4% rate in 2024. Lagarde said the ECB remains committed to bringing down inflation. "We are determined to return inflation back to 2% in the medium term, that should not be doubted, the determination is intact," she said. BMW lifts margin forecast, expecting higher deliveries as it ramps up the electric rollout.

According to a report by cnbc.com, German carmaker BMW (BMWG) on Wednesday said it expects an EBIT (earnings before interest and taxes) margin of 8-10% for its automotive range in 2023, with deliveries set to rise slightly from 2022. Selling prices are targeted to remain at a "stable" level. The company reaffirmed the full-year 2022 results reported last week, including an EBIT of 10.6 billion euros ($11.4 billion) for its automotive segment, which had an 8.6% margin last year. BMW is carrying out an extensive rollout of battery-electric vehicles and anticipates reaching more than 50% BEV share well ahead of 2030. The company's BEV share is slated to reach 15% in 2023.

TOP Gainers and Losers for the week

Here are this week's top Euro Stoxx 50 index movers, a week in which the index is set to close in modest losses.

Top Gainers

• Adyen (AMS: ADYEN): The Dutch payments company's shares were up 7.59%/504 points this week to trade at €1431.00 after it announced on Wednesday that it had further advanced its digital authentication solution, with ongoing pilots realizing a conversion uplift of up to 7%.
• L'oreal (Paris: OREP): The France-based cosmetic company shares rose 2.26%/192 points this week to trade at €383.70 after it announced on Wednesday that In conjunction with the opening of its new boutique in Palo Alto, California, it had partnered with the Aura Blockchain Consortium, the first global blockchain dedicated to the luxury industry, created in 2021. The Aura Blockchain Consortium's technology makes it possible to digitally certify the authenticity and traceability of The Gift of Kings® wool products.
• Inditex (Madrid: ITX): The Spain Textile company's shares were up 3.94%/1.09 points this week to trade at €28.770 after it announced on Wednesday stronger than expected Full 2022 FY results with Sales reaching €32.6 billion (+17.5% versus 2021). In 2022, EBITDA increased by 20% to €8.6 billion and EBIT by 29% to €5.5 billion. PBT increased 28% to €5.4 billion. Net income had risen by 27% to €4.1 billion.

Top Losers

• Vonovia (Berlin: VNAN): The German Real Estate company lost 5.32%/218 points this week to trade at €19.440 after it announced on Wednesday that it expects sales to side in 2023 at a slower rate. The group expects sales of between 6.4 billion and 7.2 billion euros ($6.8-$7.6 billion), compared with 6.26 billion euros in 2022.
• Eni SPA (Milan: ENI): The Italian oil and gas company lost 9.35%/624 points this week to trade at €12.096 after it said on Thursday it would propose a 2.2 billion euros new shares buyback programme to shareholders. The group plans to start the shares buyback programme this year and may increase the amount to 3.5 billion euros in case of upside scenarios. 

Technical Outlook: Four-Hour Euro Stoxx 50 Index Price Chart

From a technical perspective, the price's ability to break above the key resistance level is plotted by a downward-sloping trendline extending from the early March 2023 swing high, supported bets for additional gains. The price, however, rebounded from the vicinity of $4151.6 level and edged lower towards the aforementioned barrier, now turned support level. If the price manages to weaken further in the coming sessions and convincingly breaks below the support level, downside pressure could accelerate.

All the technical Oscillators on the chart are in the bearish territory, with both the RSI (14) and MACD crossover below their signal lines, pointing further to the bearish sign for price action today. The bearish outlook is further validated by accepting a price below the technically strong 200 EMA level at 4192.4.

If dip-buyers and tactical traders jump in and trigger a bullish reversal, the price will face resistance at the key supply zone ranging from 4171.4 - 4187.5 levels en route to the 200 EMA level. If buyers manage to breach these barriers, upside pressure could accelerate further upward, paving the way for additional gains around the Pan-European Stoxx 50 Index.