Stock Market Week Ahead: S&P 500 & DAX 40 Forecast

By Justin McQueen of DailyFX

Sunday, July 10, 2022 1:20 PM EST

Stock, Trading, Monitor, Business, Finance, Exchange

Image source: Pixabay

S&P 500: All or Nothing on US CPI

Equity markets have kicked off H2 on the front foot, with the S&P 500 on course to record a 3% weekly gain at the time of writing. This is arguably a rather sanguine affair for equities given the rather chaotic price action in Forex, with the euro heading to parity and oil prices briefly breaking below $100/bbl.

That said, better-than-expected ISM Non-Manufacturing PMI and NFP data have done enough to ease the recent recession fear trade and thus keep equities underperformed. Looking ahead, the big data to watch next week is the latest US CPI print.

A reminder that the S&P 500 has yet to rise above the pre-CPI level at 4014. However, should we witness a miss on the downside for CPI next week, we would likely see a return to 4000.

S&P 500 Chart: Hourly Time Frame

Stock Market Week Ahead: S&P 500 & DAX 40 Forecast

Source: IG Charts

CHANGE IN	LONGS	SHORTS	OI
DAILY	-8%	1%	-4%
WEEKLY	-7%	9%	-1%

US S&P 500 Sentiment: Bullish. Data provided by IG.

DAX 40: Concerns Over Russia Turning Back on Gas Flows

Next week, gas flows from Russia to Germany via the Nord Stream pipeline will stop completely for a planned 10-day annual maintenance. However, in light of the current backdrop and with gas flows already falling to 40% capacity, the risk is whether Russia turns back the taps on after the maintenance period.

If not, Germany would have to resort to rationing remaining gas supplies, an outcome that will weigh heavily on European assets, including the DAX. As such, while key US data will be in focus, the energy situation is perhaps the biggest factor at play for markets, even more so now that Germany has reported its first trade deficit since 1991.