European Stocks Extends Gains into New Week; Here’s What to Expect

European stocks are in green after posting their largest weekly gains since early last month as STOXX Europe 600 index jumped 1.67% last week. Easing social distancing policies along with robust economic data has been adding to investor’s sentiments.

The UK has reported that its GDP grew more than 6.6% in July, up almost 50% from the previous month.

The European Central Bank also boosted investor’s sentiments last week as the bank indicated that economic contraction will be less than previous expectations. The bank has also left the interest rates unchanged, with expectations that inflation will increase slightly during the second half of the year.

Although Brexit related trade talks weighed in on trader’s sentiments last week, the EU and the U.K. are currently seeking to reach an agreement before the end of the transition period on December 31. European stocks traded in a narrow range over the last month.

“The market remains highly sensitive in the short term and prone to unexpected and negative news,” Donner & Reuschel Privatbank technical analyst Martin Utschneider said. “This was also the case with yesterday’s ECB press conference. Hedges — stop-loss or profit-taking — should therefore continue to be strictly maintained or adjusted.”

Wall Street, on the other hand, bounced back sharply after experiencing a strong selloff early in the week. Tech stocks recovered sharply in the last two trading sessions amid hopes of economic recovery. All three US stock market indices ended the week in the green. In addition, US stock futures are higher on Monday, indicating the extension of last week’s momentum.
What Does it Mean for Investors?

• European stock market analysts believe stronger euro could negatively impact upside momentum.
• Euro continues to trade around $1.18 level. The common currency has recently hit two years high of $1.20 level.
• Gold moved above $1950 an ounce on the back of stock market gains.