It’s looking rough out there at the open again as equities are being hammered lower. Investors are seeking shelter amid the US-Iran conflict and the favoured play right now looks to be the dollar. The greenback is once again higher across the board with European currencies in particular struggling.
In Europe, natural gas prices are soaring as Qatar remains closed for business and that’s going to have spillovers to energy prices in the region again. Think back to the impact of the Russia-Ukraine conflict but likely to be on a smaller scale. However, the aftermath is likely to be the same as households and businesses have to deal with the reverberations of a temporary spike – a massive one at that – in energy prices.
In the equities space, we’re seeing European stocks struggle hard in digesting the latest developments. The lack of a tech carry anchor isn’t helping, which was what saved Wall Street yesterday. But even today, US futures are also having it rough in the early stages.
- Eurostoxx -2.0%
- Germany DAX -2.1%
- France CAC 40 -1.7%
- UK FTSE -1.4%
- Spain IBEX -1.9%
- Italy FTSE MIB -2.3%
What is notable about the latest drop is that it has taken away a lot of the optimism in European stocks to start the new year.
The drop this week has effectively wiped out the year-to-date gains for the DAX. Meanwhile, the rest of the CAC 40, IBEX, and FTSE MIB have seen year-to-date gains cancelled out to just barely 1% now. Pain.
And the bleeding could get worse if we see Wall Street fold over later in the day. US stocks recovered well in trading yesterday, with the S&P 500 once again defending its 100-day moving average. But if that gives way, expect stops to be triggered and the downside pressure to intensify in the short-term.
We might be set for more pain before things become better in the equities space, with the US-Iran conflict being a timely trigger for a corrective move to last year’s stirring momentum.
This article was written by Justin Low at investinglive.com.
