EUROSTOXX50: World Stock Indices are Declining
With the opening of today’s trading day global stock indices have been declining. Risk aversion among investors was caused by the decline in oil prices and uncertainty of the economic situation in the world, which increased demand for gold and the Yen.
Futures for S&P500 fell by 0.7%. Japanese stock index Nikkey fell by 2.4% amid strengthening in the Yen against the USD and concern about possibility of the negative interest rate.
German index DAX fell by 2.3% after unexpected decline in number of industrial orders in Germany. StoxxEurope600 fell by 1.5% at the beginning of European trading session. By now the index has lost over 30 points approaching the level of 2890.0 (Fibonacci 23.6% to the wave of decline since December 2015 from the level of 3515.0).
Disappointing macro-economic data of Eurozone and Germany have increased investors’ concern about stability of economic recovery in Eurozone.
Markit index of business activity in the manufacturing and service sectors in Eurozone, which was released today, was below expectations. Production orders in Germany fell by -1.2% in February against the forecast of the rise by 0.2%).
Amid weak economic recovery of the European economy and due to deflation, ECB introduced new measures of monetary policy easing at the meeting in March. SECB reduced interest rate on deposits to до -0.4%, from the record low. Starting from April 1, bond purchase program has been expanded to 80 billion euro per month from the previous 60 billion euro.
However, the effect of new incentive measures has been reduces after the statement made by Mario Draghi at the press-conference that further decline in the interest rates was not expected. The pair EUR/USD sharply went up after this statement while European indices fell.
Next meeting of ECB will be held on 21 April and 2 June. It is likely that ECB will not change monetary policy at these meetings. However, two leading economists of ECB, one of which is Peter Pratt, said that if the prospects of economic growth deteriorate, the interest rate might be declined. It seems that the rates have not reached the “bottom” yet; however, it is unlikely that they would be lowered before June.
Therefore, European stock indices including EuroStoxx50 will be under pressure until the meeting of ECB on 2 June.