European Stocks Underperformed in the Third Quarter, Here’s What to Expect in Q4
European stocks remained volatile throughout the third quarter this year as a stronger Euro as well as concerns over the second coronavirus wave negatively impacted trader’s sentiments. European stocks also underperformed compared to US stock indices.
S&P 500 jumped more than 8% during the third quarter despite a lack of stimulus measures. European stocks ended the third quarter with a gain of only 0.2%.
Although stocks begin the fourth quarter with gains, concerns are high over the rising coronavirus infections.
Several European countries have started imposing new restrictions on businesses and social activities as virus infections grew sharply in the past few weeks. Spain has suggested public service and retail businesses limit their capacity by 50%. France and Netherland are also seeking to reinforce social distancing policies.
US and European stock markets reported gains in the first trading session of the fourth quarter as investors anticipate that the US is set to launch a new stimulus program.
“While the two camps are still some distance apart on the price tag, with the Democrats at $2.2 trillion and the White House around $1.6 trillion, there is talk of an ‘escalator clause’ that could be the magic card that bridges this gap,” said Marios Hadjikyriacos, investment analyst at XM.
The energy sector posted losses in the past few straight trading sessions as commodity prices dropped sharply amid economic recovery growth prospects. Oil prices fell below the $40 a barrel while copper price reported the biggest decline since March 18.
On the economic front, data is still pointing strong economic recovery. The final September manufacturing PMI reading came in at 53.7 for the eurozone, which is in line with analysts’ expectations. The robust growth is driven by stronger factory activity. The US dollar value dropped slightly as investors are focusing on the stimulus package.