Rebound may be close after difficult week for European equities
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.