International markets analysis and insights – European equity markets under pressure
Despite the euphoria on Wall Street, European markets are struggling to gain momentum.
European equities are under pressure this morning, with the German index down almost 1 per cent on the day.
Few market participants believe that we will see another full lockdown in Europe.
Nevertheless, the rising number of coronavirus cases are a reason for concern, and investors on this side of the Atlantic do not seem to share the optimism felt on Wall Street.
The rising Euro could prove to be another headache in the near-term. The outlook for the currency has turned positive, and a breakout above $1.20 appears to be imminent.
The common currency is set to benefit from the falling Dollar and increased trust in the European Union due to the coordinated response to the corona crisis.
Party on Wall Street continues
Meanwhile, the party on Wall Street is likely to continue. US Fed Chair Jerome Powell signalled yesterday that the central bank will move away from its traditional 2 per cent inflation target to an asymmetrical inflation target.
The Fed could, therefore, allow inflation to run above 2 per cent for a prolonged period of time. Furthermore, the QE program is unlikely to end any time soon. With the flood gates open, stocks will remain attractive to investors, despite the numerous uncertainties.
Gold lost its shine recently but could bounce back fast following Powell´s speech yesterday. The weak Dollar, rising uncertainties and major central banks flooding the markets with cheap money seem like the perfect cocktail that could push the precious metal back to record highs.
European equity markets under pressure