While markets in America may be cautious from the pending Trump presidency, Euro zone stocks are already making an uphill climb. Only a couple days into the new year, Euro zone stocks have moved upwards to their highest rating in more than a year. This comes on the heels of data demonstrating that manufacturers in that currency bloc have increased activity, which is now at its fastest pace in at least five year.
Of course, trade was thin over the New Year holiday weekend—with Asian markets and Britain, Switzerland, and European exchanges all closed—so that could rupture stability a bit. Still, the blue-chip Euro-zone index—the Euro STOXX 50 index—rose a half a percent last month, to reach its highest rating since December of 2015, after the Euro-zone factory purchasing managers’ index hit 54.9. That is significantly higher than the 50 rating it was expected to reach.
Indeed, the euro took a bit of a hit—slipping just 0.4 percent—falling to under $1.05 after making a decent climb to $1.07 from a quick surge in low activity through the Asian markets, at the end of last week.
Analysts are saying that this stagger was mostly caused by a resumption of a previous up-trend in the dollar, which saw it reach 14-year highs last month (most likely because of the expectation that the US Federal Reserve will hike interest rates as many as three separate times in 2017). Also, many expect the Donald Trump administration to stoke both growth and inflation in a new federal fiscal expansion program.
The dollar index measures the greenback against six major international currency rivals and it climbed about a half a percent too, after hitting a two-week low, on Friday.
As such, Commerzbank currency strategies Esther Reichelt, of Frankfurt, comments, “In the last days of 2016 we saw the dollar retreat somewhat, and there might be some sense of a correction from Europe this morning. I don’t see any fundamental drivers for the moves.”
All this in mind, Chief economist Koen De Leus remarks: “It’s nice to see some good economic numbers on the first trading day of the new year. It has improved sentiment and could help the market to set new highs in the coming months. However, the road ahead looks bumpy because of several political risks in Europe. Overall, I am positive on European stocks this year as valuations are quite attractive compared to the United States and company margins are slowly improving, helped as well by the cheap euro.”