European Stock Markets Slip After a Strong Monday Rally

European stock market futures are pointing a decline in Tuesday trading as investors focus turned towards second-quarter earnings and increasing coronavirus cases in some parts of the world. The trade war with China is among the factors that contributed to bearish sentiments.

The markets across Europe have generated gains in Monday trade, with the pan-European STOXX index jumped 1%, thanks to robust gains from banks, technology companies, and miners. The German DAX, French CAC 40, and U.K. FTSE 100 also gained more than 1% value in Monday trade.

“Even though the pandemic is getting worse, stocks in Asia drove higher and the feel-good factor spilled over to this part of the world,” said David Madden, market analyst at CMC Markets U.K.

The Monday gains were also backed by the sentiments that vaccines will come out sooner. “The sooner a vaccine comes out the more confident economies can get about opening up completely and start to get on the road to recovery,” said Michael Baker, an analyst at ETX Capital in London.

The earnings season could dent investor’s sentiments, according to analysts. This is because companies listed on the STOXX 600 are likely to generate above 60% decline in second-quarter profit while US-listed companies are expected to report a drop of 44% in earnings.

Despite the threat of big profit falls, earnings season kicked off in a positive way, with Nordic bank topped earnings expectations, while G4S has also successfully surpassed expectations.

The traders are likely to capitalize on the recovery plan European leaders are likely to unveil at the end of this week. European leaders plan to discuss details on their $750 billion euro recovery fund this week.

What does it Mean for markets?

• US stock futures are in red on Tuesday.
• Euro rallied against USD and other currencies on Monday.
• Oil price dropped ahead of OPEC meeting and oil production restoration plans.
• Polls are showing Joe Biden will win over Donald Trump