The European stock exchange indices continue to decline on Monday and the German DAX seems to be at its lowest level in four months. Indices in France or Italy are also falling, and the scale of the falls exceeds 1 percent. Only in the US futures contracts are traded above yesterday's closing.
On Tuesday, the European stock exchange indices are shining in red and the main German stock exchange index DAX reached 12133 points, which is the lowest level achieved during the session since July 1. Investors still seem to fear a growing wave of coronavirus infection on the European continent, and with it growing opposition to stricter economic restrictions. German Chancellor Angela Merkel will talk to local authorities about whether to introduce additional restrictions. Spain and Italy have already extended the restrictions last weekend.
According to the Bloomberg agency, France reported the biggest jump in hospitalization since April. Norway tightened the restrictions for households and the Czech Republic introduced a national curfew. Meanwhile, the German Bundesbank reported that the economy will continue to grow in the last quarter of this year, but the pace of recovery will be much slower than previously assumed.
The US dollar market is relatively calm, given the rise of the VIX fear index or the recent deterioration in stock market sentiment. The dollar index rose slightly, reaching 93.1 points on Tuesday and the EUR/USD exchange rate dropped again to 1.1800. The United States, Russia and France are breaking daily records for viral infections and the number of deaths in the US exceeded 225 thousand. Meanwhile, hopes for a new fiscal stimulation law even before the presidential election next week have been further reduced when White House economic advisor Larry Kudlow said that the differences between the two sides have decreased, but the more they decrease, the more conditions appear on the other side. The election is already on November 3.
Emotions are not diminishing on the Turkish lira market. The USD/TRY exchange rate exceeded 8.1 USD for the first time in history, continuing the long-standing trend of weakening the Turkish currency. Investors still seem to be concerned about the way the country is managed and geopolitical tensions. Last week, the central bank of Turkey left interest rates unchanged, while the markets expected an increase of 175 bps due to concerns about high inflation and a sharp drop in foreign exchange reserves. At the same time, tensions between Washington and Ankara intensified, as Turkey confirmed on Friday when testing the S-400 air defense systems it bought from Russia. The dispute between Turkey and Greece over maritime rights and the Nagorno-Karabakh conflict also worried investors. The anti-European attitude of President Tayyip Erdogan, the launch of personal criticism of French President Emmanuel Macron at the weekend and the boycott of French products could also contribute to the further sale of TRY by foreign investors. Since the beginning of the year, the lira has lost more than 30 percent.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
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