Investors Increasingly Encouraged
The European surge isn’t rubbing off on Wall Street yet, with US futures pointing to a flat open after two strong days for stock markets on that side of the pond.
Here in Europe, we’re probably seeing a little carry over momentum from the afternoon US session on Wednesday, where stock markets thrashed out new records. And not only was the rally not driven by tech, many of the big names actually sat this one out with Apple falling 2% after being down more than 5% at one stage and Tesla dropping 6.6%, an improvement on the 15.42% plunge earlier in the session.
The broad based nature of the latest rally is encouraging and suggests there’s more to it than just pandemic-proof tech firms asserting their dominance over US indices. The more broad based this becomes, the more it signals a turning of the tide as far as the economic outlook is concerned, at least among those on Wall Street.
Europe buoyed by stimulus
Europe has suffered a number of setbacks in recent weeks as a rise in Covid cases across the continent has led to renewed travel restrictions and taken the wind out of the sails of the economic recovery, which until then had exceeded expectations.
The recovery fund agreed by the 27 member bloc gave cause for optimism over the summer and this is now being compounded by national stimulus efforts, with France looking to relaunch its economy with a €100 billion package and Germany backing plans for further extraordinary deficit spending next year, having already extended its employment subsidies to the end of 2021. Countries are not taking this pandemic lightly and the latest spikes are just a reminder of the damage it will continue to cause.
This was evident in the PMIs this morning, with countries like Spain and Italy that have suffered significant spikes seeing a contraction in the services sector once again. Combined with the inflation data, which went negative earlier this week, there’s a growing case for more stimulus from the ECB in the coming months.
For a look at all of today’s economic events, check out our economic calendar.
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