After two consecutive days of strong rises, the major European and US stock indices made a “halt on the road” YESTERDAY, with some investors taking advantage of recent appreciations in many stocks to make a profit. However, despite this, the aforementioned indices ended the session in a mixed fashion, without great variations.
The Ibex-35, which in recent weeks has been one of the indices that has performed the best, fell slightly from this general trend, closing the day with a decline somewhat higher than the rest of the European indices. The fall in the shares of the large Spanish banks had a lot to do with this, especially BBVA shares, whose purchase of the Sabadell (SAB) was not entirely well received by investors who, on the other hand, they rewarded the shares of the Catalan entity with strong increases.
It should be noted, however, that in the short term the macro scenario continues to become very complicated both in Europe and in the US, as a result of the pandemic and the measures that different governments are adopting to combat it. Thus, politicians continue to bet on the massive confinement of citizens and the closure of some business activities and, in addition, there are already governments such as the British, French or German that have announced the prolongation of measures of this type over time already in force-. All of this, as both the president of the ECB, Lagarde, and the president of the Federal Reserve (Fed), Powell, recognized in both conferences, is going to have an important and very negative impact on the performance of the European and American economies, delaying their recovery -see section on Economy and Markets-. For this reason, both of them committed to continue supporting the economies of their respective regions, and it is very likely that new unconventional monetary policy measures will be announced in the coming weeks. In fact, that’s what the European and US financial markets heavily discount.
On the other hand, it should be noted that YESTERDAY, two highly relevant political news were released in Europe: i) regarding Brexit, everything seems to indicate that an agreement will be reached, probably early next week. -see section on Economy and Markets-; and, as feared, ii) the governments of Hungary and Poland have blocked the approval of the European Union (EU) budget by rejecting the clause that links financing with compliance with the rule of law in the bloc, which It will probably cause a delay in the distribution of emergency funds to combat the impact that the health crisis has caused in many countries of the Euro Zone, funds that governments such as Spain have to try to balance their accounts for the year 2021. We do not know how this new political crisis will evolve within the European Union (EU) but, if it does not have a “happy ending”, it could delay the recovery of the economies most affected by the pandemic. At the moment it does not seem that either of these two factors is impacting for the better, in the first case, or for the worse, in the second, on the performance of the European stock markets, but it is a matter of time before they do.
TODAY we expect that the negative evolution of the pandemic in almost the entire developed world and the certain impact that it will have in the short term on the economic recovery will weigh on investors’ spirits, causing a slightly downward opening of the European stock markets. However, and being feasible that, after the recent rises that the western stock markets have experienced in recent weeks, especially the European ones, these markets suffer some cuts, as a result of the taking of profits, we continue to think that it is very unlikely that this will occur. a new correction in them, at least in the short term. In this sense, it should be noted that we are convinced that the flow of news about the development and commercialization of vaccines against Covid-19; the more than probable agreement for an orderly Brexit; the injection into the system of huge volumes of liquidity by central banks; and the approval in the US of a new massive plan of fiscal aid for those affected by the pandemic, which will come sooner or later, will act as supports for the stock markets and, probably, as catalysts for further increases in them between now and the end of year. Thus, and for the moment, investors seem willing to ignore the current situation, which is very negative, to focus on the future, which is presented, vaccines involved, much more favorable.