Impact of Fed Rate hike on European Stock market

• Jannet Yellen has finally ended its zero -interest rate policy yesterday by hiking 25bpbs.The US Federal Open Market Committee (FOMC) said that any future rate hikes will be "gradual" after Wednesday's initial move.
   
• The forecast for the Fed funds rate from the Individual FOMC participants is at 1.375% at end of 2016 that implies four 0.25% hikes next year.
   
• The Fed rate hike is expected to have positive impact on Euro zone economy. The Euro zone recovery remains on track as manufacturing activity (PMI) in the single currency bloc rising to a 20-month high in December and also improving in both Germany and France.
   
• Manufacturing activity rose at its fastest pace for more than a year and-a-half due to weaker Euro is benefiting regions exporters.
   
• So Fed rate hike is expected to be positive for Euro stocks as it likely to widen the spreads between short term US and Euro bonds. The Currency pair (EUR/USD) is also expected to decline further on policy divergence between US Fed and ECB.
   
• US 2 year bond yield has risen above 1% for the first time in more than five years after Fed hikes short term interest rates. So short term bonds yield spread between Euro and US  is expected to increase further in coming months .

Technicals

DAX:

• DAX has recovered till 10650 after making a low of 10121. Overall trend is still bullish as long as support 10000 holds.
   
• On the higher side the index is facing major resistance around 10690 (55 day EMA) and break above confirms minor trend reversal a jump till 11050 (200 day MA)/11400 is possible.
   
• The index minor support is around 10400 and break below targets 10179/10000.

It is good to buy at dips 10400-450 with SL around 10179 for the TP of 10700/11050

UK FTSE 100:

• FTSE 100 has broken major resistance 6020 and jumped till 6150. Short term trend is slightly bullish as long as support 6040 holds.
   
• On the higher side major resistance is around 6180 and any break above 6180 will take the index till 6230/6300
   
• The pair's major support is around 6040 and break below targets 5970/5900.

It is good to buy at dips around 6100 with SL around 6040 for the TP of 6180/6230/6300

France CAC Index:

• CAC has broken major resistance 4640 and jumped till 4712 from that level.. It has closed around 4699.
   
• On the higher side minor resistance is around 4766 and any break above 4766 will take the index to next level 4805/ trend reversal only above 4890.
   
• The index support is at 4635 and below that level will target 4460/4380.

It is good to buy at dips 4640-45 with SL around 4570 for the TP of 4760/4805.