European shares held on to yesterday’s gains after sources close to the trade talks confirmed Washington and Beijing were moving closer to a deal. This sudden change in the tone of the negotiations has shifted market sentiment towards riskier assets, like shares, as it weakens the threat of higher tariffs. The likelihood of a trade deal is now back on track and a “Christmas rally” may finally take place despite recent tensions over Hong Kong and Xinjiang.
Most European benchmarks have enough room for an extended bullish run before the end of the year, although they will have to clear major technical resistance to register higher tops. The DAX-30 Index is trading just below its first available resistance at 13,160pts, which is the top of its 55-period exponential moving average. A clearing of this zone could lead prices back to 13,300pts, around the 23.6% Fibonacci extension.
