European Equities Talking Points:
- European and British stocks continue to benefit during the summer months buoyed by strong corporate earnings and accommodative monetary policy
- FTSE[1] rises to pre-Covid levels while EU Stoxx[2] continues impressive near-perfect bullish advance,
Equities Push Forward as US Inflation Data Settles
The summer months have been kind to major European equity markets particularly from a corporate earnings perspective. The re-opening of the economic bloc and unwavering support from the ultra-bearish ECB[3] - maintaining interest rates at significantly low levels - has allowed firms to operate effectively.
In fact, its not just European stocks that are thriving if you take a look at global equity performance using the MSCI World Equity Index as a benchmark. The index trades around all-time highs but with increasing talk around Fed[4] tapering towards the end of this year or possibly the beginning of 2022, how much longer will equities thrive in the current low interest rate environment?
Tapering talk has been cooled somewhat this week as US core inflation was as expected (4.3%) while the CPI figure came in at 5.4%, slightly above estimates of 5.3%
MSCI World Equity Index
Chart prepared by Richard Snow[5], Source:Refinitiv
Risk Events on the Horizon
Mid-way through next week we will see both Eurozone and UK specific inflation data. The Eurozone still trails behind in terms of inflation but a UK print above last month’s 2.3% could reignite tapering talks among members of the UK Monetary Policy Committee (MPC)
For all market-moving data releases and events see the DailyFX Economic Calendar[6]
Find out how interest rates effect the stock market by reading our article: The Relationship Between Interest Rates and Stock Prices[7]
