As the coronavirus pandemic has started to attack the world once again, most of the European countries are taking new measures against it and try to make already existing policies stricter. New cases set records in much of Europe and as a result, countries took immediate actions. For example, in Belgium, which currently is a leader with the cases after the Czech Republic, the government already implemented new restrictions Also, it’s announced that in Switzerland everyone will require masks in public indoor places and more than 15 people-gatherings will be restricted. And in Britain, Prime Minister, Boris Johnson said that he has no choice, but to impose the strictest restrictions on Manchester, unless the mayor surrenders and agrees with him.
European Stock Market during the Pandemic
Forcing new harsh restrictions is pretty bad news for the economic recovery which barely began in most parts of Europe. As a result of tightening social measures, the whole stock market of Europe is expected to face a major decrease in the third quarter of the year. The news is pretty disappointing considering the fact that a huge boost has been reported recently. The brand new range of limits on gatherings and curfews in major countries like France, the UK, and Germany fuelled worries about the feasibility of the recovery. According to Reuters, European stocks are still experiencing a decrease of 11% in 2020, which is a lot less than the 40% decrease in March. But still, there’s no time for optimism because it’s not likely that the region’s stock markets will break out from the situation they have been stuck in for months now.
Most of the analysts say that we should expect about a 40% drop in the third quarter of 2020, which is still a better forecast than last quarter’s rate. Particularly, a drop in the European market profit in the second quarter was 51% which is much higher than nowadays rate, but the situation is still not acceptable. However, hopefully, in the third quarter, it’s expected that the corporate profits will recover. As a result, the investors started to watch the outlook statement closely to see how the potential failure of the European Union and the United Kingdom’s free trade agreement will influence the overall economy.
The situation is more hopeful regarding the foreign exchange market. According to T1Markets broker, taking the market volatility into account, which has been hugely affected by the pandemic, there have been moments of optimism. This means then taking part in trading Forex can be more favorable than taking part in the stock market nowadays. As new data suggests, there has been a boom in FX trading in the last few months, and in fact, the market increased by 300% during the coronavirus pandemic.
Stocks in Europe
Recently major European countries started to tighten pandemic-related measures. For now, Paris has imposed an overnight curfew, while in London the situation is even worse and people are restricted to meet indoors. Stocks in London, Paris, and two leading German cities, Milan and Frankfurt sold off sharply, meaning that the markets aren’t yet shut down as in March, but the quick climate change can cause a lot of problems shortly.
However, some analysts are more optimistic about Europe’s third-quarter earnings season. They anticipated that a short-term recovery in global trading, rising wholesale prices, and a decrease in the energy costs would benefit the corporate bottom lines. And therefore, earnings in the following quarter will be much higher, than in the previous one. Indeed, the Stoxx Europe 600 Index has already risen from its pandemic rates, despite the growing number of coronavirus cases which will probably start to curb daily activities again. Now investors need to see further increases in earnings to take hazardous steps and bid prices even higher. For this, hearing optimistic comments about the upcoming year is a must.
But it’s not only Europe whose financial sector is in front of possible dangers. The United States is also faced with huge challenges and lockdowns in Europe are essential warning signs for the country. The economists of the Bank of America assume that it’s hard to ensure how big was the economic impact of the new measures, especially in countries like the UK, where certain places such as Liverpool face even harsh rules that the capital of the city. In the United States, the one-week average daily cases exceeded 50 000 in recent months. Although the economy of the US had an important growth after the previous lockdown and the situation in the economic sector slowly changed for good, likely, this recovery won’t stay for long. The overall situation has worsened in the US as well, as there are more and more cases every day that exceed the rates of the previous lockdown. And Europe is a great example for them as it demonstrates how quickly the situation can go into reverse.
But despite the overall worsened situation, there is still some hope for the US. First of all, it is believed that by the end of the year we will have a COVID-19 vaccine developed which truly brings hope, and also, they rely on a US stimulus package before the presidential election takes place in November.
However, for Europe, things are much more complicated and with the rising numbers of new cases, reviving stock markets and the economy, in general, is less likely in the third quarter of the current year.