European Markets Slide More Than 1% as Sentiment Darkens

19 Jul 2021 · 3rd Party Analysis

European Markets Slide More Than 1% as Sentiment Darkens

WRITTEN BY ThorFX

In Summary

  • European stocks sell off as market nervousness dampens the positive outlook
  • US futures pressured, Dow futures sank nearly 250 points

Share in European bourses slid over 1% on Monday, prompted by increased investor fears over the risks that threaten the economic recovery. The moderate sell-off that started in the initial moments of the session today was largely driven by weakening market sentiment given the backdrop of a surge in Delta virus cases across the continent.

The pan-European Stoxx 600 nosedived about 6 points, or 1.30%, to 448.60 in the first hour of trading. Major country-focused indexes are also sharply in the red today. Spain’s IBEX traded 1.50% to the downside after the opening bell, while France’s CAC40 and Germany’s DAX were lower by 1.40%, and 1.25%, respectively.

UK’s FTSE100 also turned sour as investors increased their selling momentum from last week. The major UK stock gauge declined about 1.30% earlier today. The UK has become the third highest-ranked country by daily Covid-19 cases. Recently, the number of confirmed infections in England has surged to roughly 50,000 a day. On that note, starting today, Prime Minister Boris Johnson has ordered almost all restrictions to be removed to allow the economy to revitalize and progress to higher levels of activity.

The final lifting of restrictions today is expected to add fresh momentum to the economic expansion. Health experts, however, warn that the surge in cases could erase a large part of the progress on curbing the virus.

The Delta Variant Threatens European Tourism

Infections have soared in many of the European countries. Governments and businesses are struggling to contain the rapidly rising numbers to save the economy from dipping into another recession. France, Portugal, Spain, and Greece are facing increased pressure to deal with a sharp climb in virus cases.

Travel and leisure markets are on the frontline of getting hammered by the virus threat. Moreover, many businesses, including hospitality, could struggle to operate at full capacity given that their workers could have to go into self-isolation if they caught the virus or came in contact with someone who has.

For the past few months, companies have been optimistic that the gradual relaxation of pandemic restrictions and vaccine progress would stamp out the spread of the virus. Now, the Delta variant is casting a shadow over the summer tourism, consumer spending, and the overall upbeat outlook.

Meanwhile, US markets performed to the downside last week. Ending three weeks of steady gains, major stock averages posted their worst weekly result in more than a month. Inflation pressures have translated to choppy sessions as investors digested the latest consumer price report. Inflation for June, according to the Consumer Price Index, jumped 5.4% over the last 12 months. The number challenged the Federal Reserve’s view that inflation is transitory.

On Monday, futures tied to the Dow Jones traded lower by roughly 250 points. S&P futures declined by nearly half a percent. And Nasdaq futures traded fairly negative, down about 0.10%.

In cryptocurrency market action, major digital assets maintain their unchanged prices from over the weekend. Presently, bitcoin is changing hands at around $31,700, virtually flat on the day. Ether is also flat, trading at $1,900 per coin.

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