The European Central Bank (ECB) is about to turbo charge the European economies. At the beginning of the week, European equities were moving in a positive direction. Analysts anticipate that the disinflationary effects of former President Trump’s trade policies will provide the ECB with room to maneuver and support economic growth. US equities fell hard on first news as inflation expectations increased. That created serious worries about what would be the effective end of Federal Reserve support.
On the first day that markets opened this week, European equities were up slightly across the board, a sign of relief from investors. Of course, the ECB’s expected moves are certainly important, as they touch directly on the economic wellbeing of European economies. Climate policy aside, Trump’s trade protectionism has had a disinflationary effect. This would allow the ECB to take heat out of monetary policy, providing more flexibility in dealing with quickly rising inflation.
The US economy is starting to burn under the wrong inflation dynamics. Perceived lack of Fed support as inflation expectations continue to rise has investors on the edge. This new situation has created alarm in US markets. Needless to say, investors are on pins and needles as some of the most indicative economic data is about to hit. The next month’s jobs report and GDP data are sure to be crucial in further determining outlooks. Furthermore, Euro inflation figures will be important to judging both areas.
Gold and gold mining stocks still have considerable lure legislators. Their popularity is still increasing, despite a very impressive rally of greater than 40% since mid-August of last year. This trend is indicative of a deepening appeal for safe-haven assets in the face of ever-changing economic conditions.
Takeaways Major European banks will soon unveil their results. Meanwhile, US Big Tech and Big Oil companies too will finally start redistributing their windfall profits. Look for these reports to shed more light on the role of corporate health in our growing economic trends.
At the same time, investors are facing perhaps the most challenging economic conditions in memory. For their impact on economic recovery at home, they will be scrutinizing ECB’s policy moves. The tension between US and European economic currents still reverberates, influencing market sentiment and investment strategy.