European Stocks Under Pressure Amid Monetary Policy
European stock markets have been under pressure since US Federal Reserve announced to keep interest rates in zero range, with the strategy of increasing inflation and improving the employment level.
Some market analysts say the stock market gains were supported by cheap central bank monetary policy. For instance, independent analyst Timo Emden in Frankfurt said cheap central bank money is likely to support the stock markets in the coming days.
“Monetary policy will be highly stimulative for a long, long time. Indeed, (it is) music to the stock market’s ears,” said Stephen Innes at AxiCorp.
Indeed, some analysts expect the interest rates to stand at a lower level for a longer time. Stephen Innes says the US will repeat its financial crisis strategy. The US had slashed interest rates in 2007 and kept them at a low level for the next eight years.
US stock markets, on the other hand, are hitting fresh records amid economic recovery prospects. Oil prices also bounced back due to improving demand. The oil price has hit five months high on Monday. Brent crude has generated gains in the past five straight months while US oil grew in the past four successive months.
“With demand gradually recovering, this will allow the market to better absorb the inventory glut from earlier this year,” OCBC’s economist Howie Lee said.
Improving European economic outlook and robust Chinese manufacturing and service data is adding to investor’s sentiments. China’s official manufacturing Purchasing Manager’s Index (PMI) came in at 51.0 in August, down slightly from 51.1 in the previous month, according to the National Bureau of Statistics.
What Does it Mean for Investors?
- US dollar extended weak performance.
- Euro remains strong against the greenback.
- European stock market futures are mixed.
- US stock futures are in red on Tuesday.
- The gold price soared to the $1990 level.