FTSE MIB approaches key resistance as investors await EU windfall

Italian stocks rose today as investors reacted to the stimulus package unveiled by the European Commission yesterday. The benchmark, FTSE MIB rose by more than 1.17%, becoming one of the best-performing indices in Europe. In comparison, the DAX index, FTSE 100, and CAC 40 rose by less than a percentage point.

Italy a key beneficiary of stimulus

Italy is one of the key beneficiaries of the $826 billion stimulus package that was unveiled by the European Commission yesterday. The country will receive grants worth more than 81 billion euros followed by Spain that will receive about 77 billion euros. Other big winners will be France, Poland, and Germany.

As a result, investors believe that most companies in the FTSE MIB index will be beneficiaries of these funds. These funds will help the highly indebted country deal with the virus crisis. This is at a time when its budget deficit and debt are surging. It also comes at a time when Italian business confidence is at a record low. Data released today showed that confidence declined to 71.2 in April from the previous 87.2

The rally in the FTSE MIB index comes at a time when other global stocks are rallying. For example, the index has moved from a YTD low of €14,175 to the current €18221.

Best and worst performers in the FTSE MIB

Most companies in the FTSE MIB index rose today. The best-performing was Salvatore Ferragamo, the luxury brand, whose share rose by more than 12%. It was followed by Diasorin, the biotech company, whose shares rose by more than 4%. Other top performers were Saipem, Campari, and Azimut Holdings. On the other hand, the worst-performers were companies like Eni, Exor, A2a, Intesa Sanpaolo, and Hera. These shares declined by less than 50 basis points.

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FTSE MIB technical outlook

On the daily chart, FTSE MIB shares are along the 50-day exponential moving average and inches away from the 38.2% Fibonacci retracement level at €18,533. Therefore, I expect the upward momentum to continue as bulls attempt to pass this 38.2% Fib level. But they will need to defend the first resistance of €18,279, which is the highest swing made on April 30.

On the flip side, a move below €16,877 will invalidate this trend. This price is along the 23.6% retracement level and is also along an important support area.

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