European stock indices seem to be following their counterparts from Asia and the United States, where yesterday there were quite sharp falls. They may have been due to fears of another wave of COVID-19 infections worldwide and the possibility of further US closures.
The California State Governor Gavin Newsom announced on Monday that restrictions were being reintroduced, including the closure of bars, restaurants, churches, gyms, and hairdressing salons. Some of the restrictions apply to the entire state and some of the individual counties that are in the worst situation.
Moreover, tensions seem to be increasing between Beijing and Washington at the same time. The U.S. administration has rejected Beijing's claims on resources that are located off the coast of the South China Sea. This is another possible hotspot between the US and China, which has not yet resolved trade disputes. All this was enough to spoil the mood in the financial markets in the short term. This may not be a lasting reaction for the time being, as there is no continuation of the decline today and the markets can wait for the next events scheduled for this week.
We are talking about the European Central Bank's decision on interest rates on Thursday. It will be taken together with additional measures against the negative economic impact of the pandemic. Later in the week, there will be a summit of the European Union, where politicians will debate the 750 billion euro joint recovery plan for the European economy and the long-term budget.
Meanwhile, in Poland, according to Bloomberg agency, almost zero interest rates are to be maintained at Tuesday's meeting of the Monetary Policy Council, despite a strong increase in inflation, especially core inflation. CPI inflation is also high and contrary to the MPC's earlier opinion, there can be no question of deflation in Poland. The zloty remains stable to the US dollar, being in the region of 3.95, but weakens to the euro. The EUR/PLN exchange rate is now at its highest since late May, reaching around PLN 4.50.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
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