European Markets Slide, US Futures Mostly Lower

14 Jul 2021 · 3rd Party Analysis

European Markets Slide, US Futures Mostly Lower

WRITTEN BY ThorFX

In Summary

  • Stocks in Europe under pressure for a second day as inflation and virus cases pose threats
  • Europe and the US struggle to contain the rapid spread of the Delta strain of coronavirus

Shares in Europe declined at the start of Wednesday’s trading pressured by increased uncertainty over the continued economic expansion and renewed coronavirus fears. The pan-continental Stoxx Europe 600 slipped moderately in the initial moments of the session, extending its decline to a second straight day.

European stocks wobble this week as investors try to price in higher inflation prints, coupled with worrying trends of rising Covid-19 cases in Europe and the US. The region-wide European index ended Tuesday’s session little changed after hitting a record high during regular trading.

European Central Bank President Christine Lagarde on Tuesday reiterated the central bank will maintain its monetary policy for as long as it takes until the economy is back on its feet. Ms. Lagarde also commented the ECB will not tighten its policy too early.

“The use of ‘persistent’ (in the ECB’s new strategy) is an indication that there cannot be premature monetary tightening as we have seen it in the past,” Lagarde told the Financial Times.

On the inflation topic, the US Labor Department yesterday announced consumer prices for June spiked 5.4% for the 12 months, the fastest price growth in 13 years. Earlier today, the UK also published its inflation numbers. The consumer price index in the UK arrived hotter than expected at 2.5%, versus 2.2% projected.

Restrictions Make a Comeback in Europe

Meanwhile, US futures remained under pressure ahead of the opening bell on Wednesday. Returning concerns over the Delta variant are threatening to slow down the ongoing recovery in the US economy. The new strain is already the dominant variant of coronavirus in the states, accounting for more than 51% of total new cases. New infections continue to rise as they averaged more than 23,000 a day yesterday, or double the seven-day average less than a month ago.

In Europe, the rapid rise in Covid-19 cases has prompted some European economies to reimpose curbs aimed to prevent the virus from spreading. France has issued the reintroduction of restrictions as the country has seen a sharp pick up in daily cases. Starting August 1, only vaccinated people or those recently tested negative for Covid-19 will be allowed in restaurants, bars, and malls.

France’s cases have more than doubled, reaching more than 4,000 a day, threatening to undo recent progress that pushed daily infections to less than 2,000 from more than 42,000. “If we do not act today, the number of cases will continue to increase strength and will inevitably lead to an increase in hospitalizations as soon as the month of August,” President Macron said in a televised address on Monday.

The Netherlands, Greece, and Spain joined France in announcing restrictions on Monday as they are struggling to beat back the virus from spreading. In sharp contrast, UK’s Prime Minister Boris Johnson decided to press ahead with lifting virtually all remaining Covid-19 restrictions despite his projections that the infection rate will continue to rise.

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