Investors don't seem to be bothered by the specter of a possible US interest rate hike in 2022 or 2023 and still seem to be buying US stocks, with the indices hitting record highs. In Europe, on the other hand, a weak euro and the announcement of a no rate hike could push stocks higher.
European stock markets posted slight gains on Friday, with Germany's DAX and France's CAC 40 hitting new record highs, as optimism over the economic recovery coupled with a strong earnings season so far offset concerns over the prospect of rising inflation or a possible slowdown related to possible restrictions. On the data front, UK retail sales rose faster than expected in October helped by early Christmas shopping, while German producer prices rose 3.8% m/m last month, also beating market forecasts. On the pandemic front, Germany and Greece became the latest countries to impose COVID-19 restrictions on the unvaccinated population, limiting access to closed facilities and mass gatherings as the continent faces another wave of the virus. Meanwhile, the Italian government is considering a merger of the country's largest and most strategically important arms companies, state-controlled Leonardo and Fincantieri, to scale up operations.
The German DAX is in the 16200 point region before noon today, while the Euro Stoxx 50 is at the 4400 point level. Meanwhile, S&P 500 futures are settling at 4720 points and Nasdaq 100 futures are above 16550 points.
In the aforementioned United States, the records were led by a bull market in technology companies. It was the sector that lifted the S&P 500 and Nasdaq Composite indices to new highs as strong earnings outweighed inflation concerns. Nvidia led the gains in the technology sector, gaining 8.25 percent on the back of solid third-quarter results, followed by Apple (2.85 percent), Taiwan Semiconductor (3.64 percent), and Advanced Micro Devices (2.43 percent), among others. Thus, the bull market in the U.S. continues, and investors may be waiting to hear who will become the new FOMC chairman or chairwoman. This, in turn, may have an impact on the shape of the conduct of monetary policy in the US and, in a way, on the stock market.
Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Forex service)
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