European stock markets went higher on Tuesday, trying to recover from heavy losses in the previous session.
The British FTSE 100 was up 0.3 percent, the French CAC 40 was up 0.4 percent and the German DAX was up 0.7 percent at the time of writing.
Manufacturing orders in Germany fell 1.1% in July compared to June and are down for the fifth straight month, reflecting the trend in European manufacturing since Russia began its invasion of Ukraine.
The main potential economic trigger this week will be the European Central Bank meeting on Thursday, where a tangible interest rate hike to fight inflation is expected, possibly causing European economies to stagnate.
The S&P 500 index fell to a low of July 18, while the Nasdaq 100 index was not so weak. The yield on 10-year bonds rose more than 3.3%. The Japanese yen rebounded to a 24-year low.
U.S. stocks continue to lose ground after it became clear that the Fed continued its tightening policies. The rapidly expanding U.S. services sector has only strengthened market bets on the upside.
Matt Maley of Miller Tabak thinks that any rally in stocks at this moment should be taken as short-term and on the defensive.
Solita Marcelli, chief investment officer for the Americas at UBS Global Wealth Management, advises against “taking big market challenges. To cope with this uncertainty, investors need to keep their assets closer to their long-term strategic benchmarks. We also recommend gradually tilting portfolios toward higher quality and more defensive assets, which should perform better in a variety of scenarios.”
Strategist Mike Wilson said the slowing economy will now be a bigger problem for stocks. His prediction is a 3% decline in earnings even in the absence of a recession.
Deutsche Bank AG strategists believe investors are acting on their equity positions as they would during a recession. Because the usually strong correlation between the risks of investing in stocks of ordinary investors and the ISM manufacturing index is reduced to a minimum.
Asian stocks traded mixed at the open on Tuesday, awaiting the Reserve Bank of Australia’s interest rate decision.
Japan’s Nikkei 225 was down 0.17% and the Topics index was down 0.3%. At the same time, South Korea’s Kospi index rose 0.14 percent.
The MSCI Asia-Pacific Stock Index rose 0.11%
Potential triggers on the week’s economic calendar:
- Apple event on new iPhones, watches, Wednesday
- Bank of England Governor Andrew Bailey before the Treasury Committee, Wednesday
- Cleveland Fed President Loretta Mester will speak Wednesday
- European Central Bank interest rate decision, Thursday
- Fed Chairman Jerome Powell will speak Thursday
- EU energy ministers meeting on emergency intervention in electricity markets, Friday
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