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Notes from the Trading Desk – Europe

The next two weeks could be key for setting the tone into year end. There are several central bank meetings this week, including the Reserve Bank of Australia, Fed, Norges Bank and Bank of England. Wednesday’s Fed interest-rate decision and statement will likely be the key event of the week.

Notes from the Trading Desk – Europe

Despite the strength in the market overall, a number of headwinds persist for European corporates, and one area of focus is the Rhine river water level, which continues to drop. This could have the potential to restrict the transportation of goods through central Europe, at a time when the continent is already suffering the worst energy crisis in decades.

Notes from the Trading Desk – Europe

It is well known that the pain from the gas price moves is significant, particularly for Germany and Italy. The Italian government has said it is reviewing options, including reopening shuttered coal plants. In Germany, the government is reported to be considering delaying the phasing out of nuclear power.

Notes from the Trading Desk – Europe

It’s been a tough start to the week for European equities as they catch up with the US move lower on Friday. Looking ahead, all eyes will be on the Fed meeting on Wednesday and a number of bellwether corporate earnings reports in the United States.

Notes from the Trading Desk – Europe

News of the COVID-19 variant that emerged in South Africa (named Omicron) shook sentiment late last week prompting sharp declines. Looking ahead, it will be important to watch how this latest COVID news feeds into central bank thinking, with money markets already repriced the timeline for potential interest rate hikes further out.

Notes from the Trading Desk – Europe

A dovish tone from several central banks has helped support equity markets, alongside positive news on a Pfizer COVID-19 treatment. Earnings season continues to be supportive, with more companies beating than missing on earnings metrics.

Notes from the Trading Desk – Europe

Investor focus has been on inflationary pressures and the impact on bond markets as many government bond yields continue to widen. Intertwined with these issues is how central banks react and adapt to this environment.

Notes from the Trading Desk – Europe

It was encouraging to see equity markets stabilise last week, but as we move towards the fourth quarter, it does feel like investor sentiment is somewhat brittle. We did see retail investors stepping in and "buying the dip" last week. This remains an important market dynamic to watch.

Notes from the Trading Desk – Europe

Fears of peak growth and central bank hawkishness as well as recent tax hikes to pay for the impact of COVID-19 stimulus measures have all contributed to recent market bearishness.

Notes from the Trading Desk – Europe

Last week, markets appeared to be on the lookout for negatives. Whilst there wasn’t one overarching driver behind the weakness, a number of factors contributed.

Notes from the Trading Desk – Europe

It seems the adage of “never be short a quiet market” held true recently as European equities saw their tenth consecutive all-time high, their longest run of record high sessions since 1990.

Notes from the Trading Desk – Europe

Global equities traded weaker overall last week with much of the focus on the latest round of corporate earnings releases, which look good so far and were surprisingly positive. It was also a week where China widened its regulatory net on big technology companies, which weighed on market sentiment.