Re­bound may be close af­ter dif­fi­cult week for Euro­pean eq­ui­ties

Malta Independent - - BUSINESS & FINANCE -

Euro­pean stocks have fallen so much that they reached a tech­ni­cal level sig­nal­ing a re­bound may be around the corner.

This week was par­tic­u­larly bru­tal, with con­cerns about the out­come of the U.S. pres­i­den­tial elec­tion send­ing the gauge to its worst plunge since the Fe­bru­ary rout. But the losses might just have gone too far: The Stoxx 600’s rel­a­tive strength in­dex hit a level that an­a­lysts call over­sold, in­di­cat­ing that in­vestors could have bailed on shares too ea­gerly.

The 3.5 per­cent slump this week has sent the Stoxx 600 to a four-month low. On Fri­day, all its in­dus­try groups de­clined. No west­ern-Euro­pean mar­ket was spared, and the U.K.’s FTSE 100 In­dex posted the big­gest drop among ma­jor gauges amid a strength­en­ing of the pound. Its 4.3 per­cent weekly slump was its worst since Jan­uary.

Anx­i­ety over polls show­ing Hil­lary Clin­ton’s lead over Don­ald Trump has nar­rowed added to con­cerns over the strength of Europe’s eco­nomic re­cov­ery and the will­ing­ness of cen­tral banks to keep pol­icy ac­com­moda­tive. A mea­sure of eu­roarea stock volatil­ity rose for a 10th straight day, its long­est run since 2011.

Earn­ings re­main in fo­cus. About 60 per­cent of Stoxx 600 com­pa­nies that have re­ported so far this sea­son have beaten profit pro­jec­tions, while al­most 50 per­cent topped sales es­ti­mates. An­a­lysts fore­cast a 4.1 per­cent con­trac­tion in net in­come this year.

Eco­nomic mo­men­tum in the euro area ac­cel­er­ated less than fore­cast in Oc­to­ber amid weaker growth in French ser­vices, high­light­ing the risks to the re­gion’s re­cov­ery.

Asian stocks headed for the first back-to-back weekly drop in two months amid a global sell­off as in­vestors grew in­creas­ingly anx­ious be­fore next week’s U.S. pres­i­den­tial elec­tion and Tokyo shares sank for a se­cond day. The MSCI Asia Pa­cific In­dex was set for a 1.5 per­cent de­cline this week. For the week, the Nikkei tum­bled 3.1 per­cent, the big­gest weekly drop in four months.

This ar­ti­cle was com­piled byVal­letta Fund Man­age­ment Lim­ited, a mem­ber of the BOV Group.Val­letta Fund Man­age­ment,TG Com­plex, Suite 2, Level 3, Brew­ery Str., Mriehel BKR 3000 Freep­hone: 80072344. E-mail: in­fovfm@bov.com. Web­site: www.vfm.com.mt. Val­letta Fund Man­age­ment Lim­ited is li­censed by the MFSA.

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